NY Trusts Flashcards
TRUST REQUIREMENTS
What is necessary to create a valid trust?
- Settlor who makes a
- Delivery of legal title of
- Property (res, corpus, principal) to a
- Trustee who holds legal title for the benefit of a
- Beneficiary(ies) with
- Intent to create a trust for
- A lawful purpose
Must be in writing signed by settlor & trustee, & either (1) acknowledged, or (2) signed by 2 Ws.
No consideration is required to create a trust.
TRUST REQUIREMENTS
Who can create a trust? What type of property? How is property transferred?
- Settlor can be anyone 18 or older, w/ capacity to enter Ks.
- Must be delivery of title to trustee – titled assets need a formal transfer of title – i.e. registered transfer (stocks, deed, car, etc.)
- Settlor must have a present interest in property – NOT an expectancy
- Mere promise to put unspecified property into trust is not enough – must be identified property that the settlor owns, not subject to future determination (e.g. “promise to put whatever money I may choose to contribute in the next ten years” is not enough).
TRUST REQUIREMENTS
What are the requirements for trusts beneficiaries?
- Must be definite and ascertainable - if trust fails for ambiguity the trustee holds in a resulting trust for the residuary beneficiary.
- “Family” or “Next of kin” = definite b/c can just consult intestacy statutes for persons who fit the description
TRUST REQUIREMENTS
Who can be a trustee?
- Lifetime trust – almost anyone b/c no court involvement
-
Testamentary trust – created under court supervision, anyone can be a trustee EXCEPT:
- Those under 18
- Incompetents
- Convicted felons
- Those incapable because of drunkenness, dishonesty, etc.
Non-resident aliens can serve as trustee if (1) related to decedent, and (2) a NY resident serves as co-fiduciary.
➩No trust fails for lack of a trustee – the court can appoint someone
TRUST REQUIREMENTS
Intent to create.
Settlor must intend to create an enforceable obligation – precatory language is not enough.
- “Trust income to be paid to X” = intent to create enforceable obligation
Precatory language – “would like”; “request”; “wish and desire”
Use of the word “trust” not enough – look at all the facts.
** Trustee must be given duties to perform - if no duties** = a passive trust, (i.e. no trust at all)
TRUST REQUIREMENTS
Lawful Purpose.
Trust cannot call for:
- commission of a crime
- destruction of property
- condition against public policy (e.g. promoting divorce, restricting marriage)
➩Marriage restrictions to members of a certain religion or ethnic group are valid & so are trusts that continue until a spouse remarries.
TYPES OF TRUSTS
Pour-over Gift.
Pour-over Gift
Testamentary gift to an existing revocable trust
Pour-over trust must be executed prior to or contemporaneously with the will & identified in the will.
Can be to any existing trust (even 1 created by another).
Trust need not be funded during settlor’s lifetime since will have a res at time of death.
TYPES OF TRUSTS
Revocable Lifetime Trusts
Revocable Lifetime Trust
- Must have at least one beneficiary who is not the settlor - settlor CANNOT be the only beneficiary.
- Can retain the power to terminate or amend the trust
- Creation - “to myself for life, then to Bobby upon my death”
- Principal passes directly to beneficiary & does not go through probate ever BUT a revocable trust does NOT avoid taxes - if a settlor keeps income interest or power to revoke then included in gross estate for fed. estate taxes
TYPES OF TRUSTS
Totten Trusts
The Totten Trust (Bank Account Trust) - a bank account in the depositor’s name as trustee for a named beneficiary – no particular words nec. (“Mary Smith as trustee for John Smith”)
- Beneficiary has no beneficial interest during the depositor’s lifetime but gets acct. at death.
- Change beneficiary - notarized stmt, sent to financial institution, naming old beneficiary and the new one.
4 ways to revoke:
- Withdraw all the money in the account
- Express revocation during lifetime by depositor - writing naming beneficiary, the financial institution, notarized & delivered to the bank (absolute reqs.)
- Revocation in a will (same reqs. as lifetime)
- Death of beneficiary – $ goes to depositor & not heirs of B
➩Creditors of depositor can reach the totten trust account balance before or after depositor’s death. (b/c form of revocable trust)
TYPES OF TRUSTS
How can an insured make life insurance proceeds payable to a trust?
_ Inter vivos unfunded trust_ - Insured can create an unfunded revocable insurance trust & name the trustee of the trust as policy beneficiary
Testamentary trust to receive proceeds - have the trust itself be a testamentary trust & name the “trustee named in my will as beneficiary”
➩ Proceeds of savings accounts or pension plans can be handled the same way
TYPES OF TRUSTS
Joint Bank Account
(not a trust)
Joint Bank Account
“John & Jane with right of survivorship” or “to the survivor of them”
Not a trust account, because no intent to create a trust
To block $$ from going to survivor – C&C evidence that survivorship not intended when acct. est. & was only opened as a matter of convenience to depositor (v. hard)
Each joint account holder owns ½ of the joint account no matter what.
- o If holder hastily removes all amounts right before the other’s death, they will have to return ½.
TYPES OF TRUSTS
Uniform Transfers to Minors Act (not a trust)
Gifts under UTMA must be - made to a named custodian for a named minor, & it must specify that it is **made under the NY UTMA. **
- Special statutory conservatorship where minor holds legal title – not a trust.
Duties of Custodian
- Hold, manage, & invest property under a prudent person standard
- Pay over what part of the property that the custodian deems advisable.
- Pay what is left of the property to the minor when the minor turns 21 (then custodianship ends).
Donor names himself as custodian - amt of gift is includible in gross estate for fed. & state estate taxes.
UTMA gifts can be made in a will if the nec. language is used
NON-TRUSTS
Honorary Trusts
Honorary Trusts
- Private trust must have a human beneficiary so failed honorary trust falls to residuary EXCEPT:
- Pet Trusts - a valid pet trust can last for no more than 21 years
- Cemetery Trusts - trusts for perpetual care & maintenance of cemeteries & burial plots are classified as charitable trusts & are OK (no RAP)
TYPES OF TRUSTS
Charitable Trusts
Must have indefinite beneficiaries & must be a reasonably large group
Must be for a charitable purpose (e.g. health, education, religion) BUT a trust for masses for relatives is okay.
Trust may be perpetual (not subject to RAP).
Equitable doctrine of cy pres can be used to change the trust - if stated purpose of charitable trust can no longer be accomplished, or charity goes out of existence, ct. uses this to make the trust as near as possible to what settlor wanted.
NY-AG has duty of representing the beneficiaries of charitable trusts in the state
- AG is indispensable party to any suit & AG & donor have standing to sue to enforce the trust’s form.
NON-TRUSTS
Oral Trusts
Deed of land by G’or to G’ee & claim that G’ee orally promised to hold the land in trust for G’or → NO constructive trust is imposed to give effect to any alleged oral trust UNLESS:
- Fraud in the inducement - C&C evidence that G’ee agreed to hold property in trust & at the time of agmt had no intention of carrying out the trust, then a constructive trust imposed for intended beneficiaries
-
Confidential relationship tra G’or & G’ee – C&C evidence of oral agmt
- “Confidential relationship” – family, business partner, attny-client, priest, etc.
➩Beneficiaries could still get quantum meruit for the value of services rendered.