Other Trusts

Question 1

Discretionary Trust

Answer 1

In a discretionary trust, the trustee is given discretion whether to apply or withhold payments of income or principal to a beneficiary. The beneficiary cannot interfere with the exercise of discretion unless trustee abuses his power. Creditors can attach to the interest but cannot compel distribution. If and when trustee decides to distribute, he must pay any attached creditors directly.

Question 2

Spendthrift Trust

Answer 2

In a spendthrift trust, the beneficiary cannot transfer his interest in the trust and creditors cannot reach or attach to the interest. The purpose is to protect the beneficiary from his own improvidence. Only after the money has been paid to the beneficiary can the beneficiary transfer the property and creditors reach it.

*Cannot protect the settlor’s own property from his own creditors.

**Does not block child/spousal support orders or gov claims

Question 3

Support Trust

Answer 3

In a support trust, the trustee pays only so much of the income or principal as is necessary for the beneficiary’s support. Beneficiary’s interests are not assignable and creditors cannot reach it. The standard of support is the beneficiary’s accustomed standard of living unless otherwise stated.

Question 4

Constructive Trust

Answer 4

A constructive trust is an equitable remedy to prevent unjust enrichment resulting from wrongful conduct. Under a constructive trust, the person wronged is to receive the property they would have had if not for the wrong. Proof of facts necessary to establish the trust must be made by clear and convincing evidence.

Breach of promise typically will not lead to a constructive trust unless it was a fraudulent promise, one done in a confidential relationship, devisee’s promise to hold property for someone, or decedent’s promise to devise property to someone for services.

Question 5

Resulting Trust

Answer 5

Resulting trusts arise by implication from the settlor’s conduct; the trust property reverts to settlor/his successors in interest.

Question 6

Resulting Trust Triggers

Answer 6

-trust is void/unenforceable
-beneficiary is dead/can’t be found
-trust purpose is fully satisfied and some trust property remains
-X purchases property and (with their consent) Y takes title (X must show they paid consideration for it; Y can rebut to try to show it was a gift or loan)