NINTH CONCEPT: MODIFICATION AND TERMINATION OF TRUSTS Flashcards
When can the settlor modify the terms of a trust?
settlor can modify the trust if settler expressly reserves the power to modify the trust.
If the settlor has the power to revoke the trust do they also have the power to modify the trust?
Yes
What is deviation power?
When the court exercises its deviation power, the court changes the administrative or management provisions of the trust.
2 elements must be established for the court to use its deviation power, what are they?
[a] Unforeseen circumstances on the part of the settlor, and
[b] Necessity (deviation needed to preserve the trust).
Settlor creates a valid private express trust, providing that the trustee can invest only in bonds and cannot invest in stocks. The trust was created during the Great Depression, when the stock market collapsed. In 1955, after the stock market rebounded and during a time of high inflation, the trustee petitions the court to allow investing in stocks because without such investing, within 20 years inflation will outpace the investments presently authorized to the point where the trust will not be able to pay trust expenses, let alone pay income to the beneficiaries. Will the court under these circumstances allow deviation to allow investment in stocks? (what do we need to show?)
Show that the settlor could not foresee the rate of inflation and the resurgence of the stock market. And
without deviation, the trust will go broke
When does the settlor have the power to revoke under the majority rule?
to retain the power to revoke the settler must expressly reserve the power in the trust instrument.
When does the settlor have the power to revoke under the minority rule?
Settlor has the power to revoke, unless the trust is expressly made irrevocable.
What are the 3 wyas an irrevocable trust can be revoked prematurely?
- Settlor and all the beneficiaries agree to terminate
- All the beneficiaries agree to terminate and all the material purposes have been accomplished.
- By operation of law: passive trusts and the Statute of Uses
“All the beneficiaries” means you must account for who?
contingent remaindermen.
Who need to be appointed if parties to a suit who are incapacitated by infancy or otherwise for the termination of an irrevocable trust?
A guardian ad litem
If all the beneficiaries agree to terminate and all the material purposes have been accomplished.an irrevocable trust can be revoked, what happens to minor purposes that have yet to be accomplished?
The court will make certain that sufficient assets are set aside to accomplish these purposes
What is the statute of uses come into play?
when you have a private express trust with a corpus of real property, and the trust is passive (the trustee has no active duties and is just holding bare legal title).
under the Statute of Uses what happens when you have a private express trust with a corpus of real property, and the trust is passive?
the beneficiaries get legal title by operation of law, and thus the trust terminates.
Do all jurisdictions recognize the statute of uses?
No
Does the statue of uses apply to passive trusts o personal property?
No, but, by analogy, the principles of the Statute of Uses should apply because equity should not see a useless act done.
