Jd - Trusts Flashcards
Requirements to crest a trust
Present intent to create a trust; trustee; beneficiary; trust property
Settlor
Person making trust
Intent to create trust?
Present sense
Duty of care
Requires trustee to invest and manage the trusts assets as prudent invested would
Analysis of trustee investments
Should not be evaluated in isolation but in context of the portfolio as a whole and as a part of an investment strategy
Duty of loyalty
Required the trustee to administer the trust solely in the interest of the beneficiaries. Trustee may NOT engage in self dealing regarding the trust assets.
No further inquiry rule
Court will not inquire about the trustees motivation or the fairness of the action and will only seek to determine the measure of damages
Trustee transactions subject to “No Further Inquiry” rule
Personally buying or selling trust assets
Taking an opportunity belonging to the trust
Purchasing its own corporations stock
Duty to allocate property to principal and income
Dictated whether receipts earned during the administration of the trust should be allocated to the income or the principal.
Proper allocations to principal and income (PLEAD)
Money received from principal asset
Life insurance proceeds
Eminent domain awards
All property other than money recieved from an entity
Distribution of stock
Proper allocations to principal and income (RIM)
Rental income
Interest
Money
Revocabilty
UTC: an inter vivid trust is presumed to be revocable unless their instrument expressly states otherwise
If a trust is revocable …
The settlor may terminate the trust at any time.
If the trust is irrevocable…
The settlor may terminate the trust if all beneficiaries are in existence, and all agree.
After the settlor dies …
An irrevocable trust can be terminated if both the income beneficiaries and the remainder man unanimously consent, and if there is no material purpose of the trust yet to be performed
Cy press
CL doctrine that is part of utc. If 1. A particular charitable purpose has become unlawful, impracticable or impossible
2. No alternative charity is named in the trust and
3. The court finds that the settlor had a general, rather than a specific, charitable purpose, then the court may apply the doctrine of cy press and direct that the trust property be distributed in a manner consistent with the settlor’s general charitable intent.
Power appointment
Enables the beneficiary to designate who will receive specific trust or estate property.
Types of appointment
A general power and a special power
General power of appointment
provides for an unlimited class of people in favor of whom the beneficiary can exercise a power of appointment
Special or limited power of appointment
Provides for a limited class people in favor of whom the beneficiary can exercise a power of appointment
Appointments to impermissible appointees are
Invalid
Pourover will
A will makes a gift to a trust. Valid so long as the trust is identified in the will and the terms are incorporated in a writing executed before or concurrently with the execution of the will
Discretionary trust
Trustee has discretion to decide when to make a distribution to a beneficiary. Beneficiary cannot demand any disbursements. Neither can a creditor, except for child support or alimony in some states
Beneficiary right in discretionary trusts
The beneficiary cannot demand any part of the income or principal and cannot ask the court to compel a distribution unless the trustee abuses their duscretuon
Support trust
Trustee must pay what is necessary for the beneficiary’s support. “Support” is fact dependent
Spendthrift trust
Type of trust restrains both the voluntary and involuntary transfer of a beneficiary’s interest. The only creditors that can reach a beneficiary’s distribution before it reaches the beneficiary are child or spousal support creditors, a judgment creditor who has provided services for the protection of a beneficiary’s interest in the trust, the state or the US or a creditor with a claim for necessaries
Charitable trust
Created for a charitable trust. The beneficiaries must be a large number of individuals who are not readily identifiable - cy press may save trust
Settlor
Creates the trust
Beneficiary
Benefits from the trust
Trustee
Manages the trust
Testamentary trust
A trust created by a will
