NY Trusts Flashcards
Administrator
A person appointed by probate court as personal representative
Trust
Generally, giving gift of money with a manager.
Two basic kinds of trusts are ____.
(a) Lifetime trust
(b) Testamentary
Decedent
Person who has died with property to be distributed.
Executor
Person nominated in a testator’s will to act as personal representative and execute the will provisions.
What are the requirements of a valid trust?
(1) Settlor
(2) Delivery of legal title to…
(3) Property to a..
(4) Trustee who holds legal title for the benefit of a
(5) Beneficiary with
(6) Intent to create trust for…
(7) a Lawful purpose
(8) in a Validly executed document
True or False: Consideration is required to create a trust?
FALSE.
Federal Gift Tax Exclusion
$14,000 annual amount that can be excluded from gift tax computation for each gift made to a different recipient in a calendar year, and thereby be treated as a gift for tax purposes.
What are the names of people entitled to another’s property by intestate succession?
Heirs/Next of Kin/Intestate Beneficaries
When a decedent dies without a valid will and their estate property is distributed pursuant to a state statute.
Intestacy
True or false: Failure to name a trustee in the trust does not matter, the court can appoint someone.
TRUE.
The process of proving a will, or having it declared valid and effective following the death of the testator.
Probate
Specialty court that hears and adjusts matters concerning wills and intestate distribution, including administration of estates and other aspects of the testamentary process.
Probate Court aka Surrogate’s Court
Whatever remains in the probate estate after the payment of specifically designated gifts or items or cash.
Residuary
Rule that prohibits the creation of future interests that possibly may vest beyond the period of those lives in being at the date of its creation plus 21 years.
RAP.
This rule indirectly limits the duration of trusts by placing limits on the creation of future interests within trusts.
Language of the settlor that makes only a non-binding obligatioin.
Precatory language
Testamentary gifts
Gifts made in a will.
A person who has died leaving a valid will.
Testator
True or False: Just using the word TRUST does show the intent to create a trust.
FALSE.
Must look at all language and all the facts to determine intent.
What are the most common situations to watch for regarding trusts against public policy?
(a) restricting marriage or
(b) promoting divorce.
BUT if there is some good public policy reason (income to spouse until spouse remarries) it can be valid.
What is the main requirement regarding revocable lifetime trusts?
At least one beneficiary who is not the settlor.
Settloe cannot be the sole beneficiary when also named the sole trustee.
What are the reasons to have a revocable lifetime trust?
(a) manage assets efficiently
(b) helps plan for possible incapacity by avoiding guardianship
(c) avoids probate
What are the key drawbacks to revocable lifetime trust?
Does not avoid taxes
Testamentary gifts to an existing revocable trust called ____.
Pour-Over Gift.
Such gifts avoid will formalities in the trust
Key requirement for pour over gift to a trust to be valid?
The rust must be in existence OR executed concurrently with the will.
What is a totten trust?
Bank account trust; bank account in depositor’s name “as trustee for” a named beneficiary.
True or False: Regarding a totten trust, the depositor makes deposits and withdrawals as she wishes.
True.
Beneficiary only collects when the depositor dies
What is required for express revocation of a totten trust?
Express revocation during lifetime by despositor making a writing naming the beneficiary and financial institution AND having writing notarized AND delivered to bank.
This process can also be used to change beneficiary provided depositor names the new beneficary.
What are three reasons to make a gift to minor under the UTMA?
UTMA = Uniform transfers to minors act
(a) Avoids guardianship proceeding
(b) Avoids a trust (and related court supervision)
(c) Qualifies for the $14,0000 per donee annual exclusion from fed/state gift tax.
What is the purpose of a constructive trust?
Flexible equitable remedy designed to disgorge unjust enrichment that results from wrongful conduct.
What is the PMRT?
Purchase Money Resulting Trust – NOT RECOGNIZED IN NY.
Arises when a purchaser buys property and has title put in someone else’s name (who is not relative) later, purchaser claims no gift was intended and asks title holder for title to the property and the title holder refuses.
What are five major exceptions to spendthrift clauses?
(1) Necessities
(2) Child support and alimony
(3) Federal Tax Liens
(4) Excess Income beyond that needed for support and education
(5) 10% levy
True or false: spendthrift protection does not apple to any interest retained by the settlor.
True
True or false: Express trust is the only real trust, other concepts using “trust” are really just equitable remedies.
True.
Resulting trust and constructive trusts = equitable remedies.
What is the definition of an express trust?
A legal device that allows an owner of property to make transfers of property and to have those assets managed on behalf of someone else.
What are the two kinds of express trusts?
(1) life time - set p during the lifetime of the person who created the trust, who we call settlor of the trust.
(2) Testamentary trust - set up in settlor’s will
What are the eight requirements for a valid trust?
(1) SETTLOR who makes…
(2) DELIVERY of legal title to…
(3) PROPERTY to a…
(4) TRUSTEE who holds legal title for the benefit of a
(5) BENEFICIARY with…
(6) INTENT to create a trust for…
(7) a LAWFUL PURPOSE
(8) in a VALIDLY EXECUTED document.
True or false: Settlor must be at least 18 years old and have capacity to enter into contracts.
TRUE.
True or false: valid property for a trust can be almost anything, including property settlor has an expectancy in.
FALSE.
Settlor must own property, not just have a mere expectancy of ownership in the future.
What are the exceptions to the general rule that the potential trustee for a testamentary trust can be anyone?
EXCEPT those
(a) under 18 years old
(b) Judicially declared incompetents
(c) convicted felons
(d) those incapable bc of drunkeness, dishonesty, etc.
When can a non-resident alien serve as trustee?
ONLY IF:
(1) Related to the decedent AND
(2) a NY resident serves as co-fiduciary
True or false: If a settlor fails to name a trustee, the trust fails.
FALSE.
The court can appoint someone.
What result if the beneficiaries named in a trust are AMBIGUOUS?
The trustee holds in a resulting trust for the residuary beneficiary of a will.
Thus, beneficiaries must be definite and ascertainable, no ambiguity.
True or false: A beneficiary listed as someone’s “family” or “next of kin” is considered definite and ascertainable?
TRUE.
The trust will not fail.
Intestacy.
A decedent dies without a valid will and their estate property is distributed pursuant to a state statute.