MISCELLANEOUS TRUSTS

Question 1

Honorary Trusts

Answer 1

A trust which has no ascertainable beneficiary and confers no substantial benefit upon society

The trustee is not required to carry out settlor’s goal, but has the power to carry it out.

Thus, the trustee is on his honor only to carry out settlor’s
intent.

Question 2

Examples of Honorary Trusts

Answer 2

1. A trust to further fox hunting
2. A trust to take care of settlor’s pet; a trust to care for many animals may be a charitable trust
3. A trust to advance an unusual political ideology.

Question 3

Problems with honorary trusts:

Answer 3

1. Trustee may, in an honorary trust, refuse to carry out settlor’s wishes and the trust then fails.
2. Typically there are Rule Against Perpetuities problems with honorary trusts.

Question 4

Trustee may, in an honorary trust, refuse to carry out settlor’s wishes and the trust then fails.

Answer 4

[a] Thus, with respect to an honorary trust to further fox
hunting, if trustee says, “this is the craziest thing I have
ever heard of and I won’t be a part of this,” the trust fails
and we have resulting trust in favor of the settlor, or, if
she is dead, to settlor’s estate.

[b] This failure of a trust because the trustee refuses to serve never happens with a private express trust or a charitable trust: if a trustee in these types of trusts refuses to serve, the court will appoint a new trustee.

Question 5

Typically there are Rule Against Perpetuities problems with honorary trusts.

Answer 5

[a] Without going into the Rule Against Perpetuities in
depth, suffice to say there is no measuring life for these
trusts and, consequently, they virtually always violate the Rule Against Perpetuities.

[b] Because these trusts violate the Rule Against Perpetuities some courts strike the trust at its inception, and as a consequence, we have a resulting trust.

[c] In other states, courts allow the honorary trust to endure for 21 years and then a resulting trust follows to end the trust. This is the approach of the Restatement of Trusts and the Uniform Probate Code.

Question 6

Totten Trust
[A] Defined:

Answer 6

A Totten trust is also referred to as tentative bank account
trust, whereby the named beneficiary takes whatever is left in the account at death of the owner of the account.

Question 7

But a Totten trust really is a misnomer because:

Answer 7

Its not a trust

[1] The depositor/trustee owns the account during the depositor’s lifetime and owes the named beneficiary no fiduciary duties whatsoever.
[2] It really, therefore, is just a will substitute.
[3] It is more accurate to call it a Totten account.
[4] A Totten trust or Totten account is always a type of savings account with a bank or other financial institution.

Question 8

Issue: Does the settlor/trustee in a Totten trust or Totten account do something during her lifetime to elevate this lowly Totten account with no fiduciary duties to a full-blown private express trust with the full range of fiduciary duties?

Answer 8

Answer: Look to the actions of the depositor/trustee for a
manifestation of trust intent.

Thus, if Mary Smith tells John Jones, “I have created this
trust for you,” or words to that effect, Mary has
manifested an intent to create a trust and elevated this
lowly Totten account to a full-blown private express
trust, with the full range of fiduciary duties.