Most Frequent Trust Rules Flashcards
What is a class gift?
A class gift is a gift to a group of persons described collectively (usually in terms of their familial relationship). Under the common law, the words of a testator/settlor were given their legal meaning. However modern courts are more likely to consider the testator/settlor's intent. The terms "children" and "issue" are interpreted in accordance with intestate succession rules. An adopted child inherits the same as a natural child when the natural child is not the relative of the adopting parent. This applies to inheritance rights not only of the adopting parent, but the adopting parents family. Therefore if a class gift is made to the issue or children of an adopting parent, the adoptive child will share in that gift as would a natural child of that parent. Class gifts generally close at the death of the testator/settlor. Under the Rule of Convenience the class is closed when any member of the class is entitled to possession of the gift. When a gift to a class is involved, whether the gift to a predeceased member of the class will go to the residuary estate or be divided amongst the other class members depends on whether a group of persons is named (i.e. "my children") or whether individual members of the class are specifically named (i.e. "Tom, Mary, and Joe"). When the class is specifically named, the gift will and fall into the residuary estate unless an anti-lapse statute applies. When the class members are named as a group, the predeceased member's share will be divided amongst the other members, unless there is a provision in the will to the contrary or an anti-lapse statute applies. A class gift may be based on a contingency. If so, remaindermen are entitled only to the gift if the specified conditions are satisfied.
What are the elements required for the valid formation of a trust?
A valid express trust requires: (i) a definitive beneficiary (the beneficiary can be ascertained now or in the future); (ii) a settlor with capacity; (iii) an intent to create a trust; (iv) a trustee; (v) a valid trust purpose; (vi) trust property (the res); AND (vii) compliance with any State formalities (i.e. signed in front of a notary). The execution formalities required for a will (i.e. two witnesses) are NOT required to create or amend a trust. Under the Uniform Trust Code (UTC) no execution formalities are required.
Beneficiaries can be natural persons, corporations, or other organizations.
Intent to create a trust may be established by a promise that creates enforceable rights in a person who (immediately or later) holds these rights as a trustee. An oral promise supported by consideration is sufficient to create enforceable rights, unless the State requires certain trust formalities or the statute of frauds applies.
The trustee must have duties to perform, and the same person CANNOT be the sole trustee and sole beneficiary. Although a trust must have a named trustee, the trust will NOT fail solely because that person refuses to act as trustee, dies, is removed, or resigns. In such instance, the court will appoint a new trustee.
A trust is not created until it receives valid property. The property interest does not need to be substantial, and does not have to be transferred contemporaneously with the signing of the trust instrument. A trust instrument signed during the settlor’s lifetime is valid even if the property was transferred to the trustee at a much later date, including after the settlor’s death (i.e. through a pour-over provision in a will).
What is the Cy Pres Doctrine?
Cy pres is an equitable doctrine that applies to charitable bequests and charitable trusts. Courts will apply cy pres to modify a charitable trust to be consistent with and “as near as possible” with the settlor’s or testator’s intent, if the purpose of the trust or bequest is frustrated (the trust becomes unlawful, impracticable, impossible, or wasteful). The cy pres doctrine only applies if the testator had a general charitable intent.
