Overview Flashcards
The legal interest is held by the
trustee. trustee has the responsibility of ownership.
What benefit does the trustee receive from legal title?
None. except possibly a fee for acting as trustee
Trustee is a fiduciary which means there are three duties:
- must deal with property with reasonable care
- must maintain utmost degree of loyalty; and
- personally responsible if conduct falls beneath required standards
Who hols the equitable or beneficial interest?
The beneficiary. Usually has little or no control over the trust or the trust property.
Who is the settlor?
the person who causes the trust to come into existence by supplying the initial trust property. (aka truster, grantor, donor)
A trust must have
trust property. (aka principal, corpus)
The settlor creates a trust by
transferring legal title to the trustee and equitable title to the beneficiary.
When is the trust terminated?
When the trustee’s duties are completed.
What are the purposes and uses of the trust? (6)
- providing for and protecting trust beneficiaries
- flexibility of asset distribution
- protection against settlor’s incompetence
- professional management of property
- probate avoidance
- tax benefits
What are the two basic kinds of trusts?
Express trusts; trusts created by operation of law.
What are two kinds of express trusts?
- private - private beneficiaries
2. charitable - charitable beneficiaries
What are two kinds of trusts created by operation of law?
- resulting trusts (attempt to carry out an implied intent)
2. constructive trusts - equitable remedy (remedy to prevent unjust enrichment)
What are the 5 main elements of a valid trust?
IIAPM
- intent
- identifiable corpus
- ascertainable beneficiaries
- proper purpose
- mechanics and formalities
What are the two elements of the intent req.?
- settlor must intend to split legal and equitable title, and
- impose enforceable (fiduciary) duties on the holder of legal title
Is communication to the beneficiary required to form a trust?
No.
The intent must be present, meaning
a promise to create a trust in the future, like a promise to make any future gift, is not enforceable unless the promise is a binging contract (supported by consideration)
Ex: father tells son, you are a good son. tomorrow, i will put 10k in trust for you. tomorrow comes and dad says nvm i’m going to spend the money on vacay instead. Son can’t enforce dad’s promise.
But once a gift is completed (an outright transfer of property occurs)
it is too late for the alleged settlor to go back and claim the transfer was really one in trust
Split of title - if the trustee and the beneficiary are the same person what happens?
Merger occurs and the trust terminates leaving this person with all legal and equitable title.
Because a trust is a property transfer, the property must be…
ascertainable with certainty
Does a beneficiary need competence?
No. anyone that can take and hold title.
What happens if beneficiaries are not ascertainable?
the property reverts to the settlor, or if the S is dead, to S’s successors in interest.
Settlors can create trusts for any purpose except for:
- illegal purpose
- require trustee to commit crime or tort
- purpose contrary to public policy
What are the two creation methods of a trust?
- inter vivos, or living trusts - created while settlor alive
- testamentary trusts - created in settlor’s valid will
What are the two methods of creation of an intervivos trust?
- declaration of trust, settlor = trustee (Nana)
2. transfer or conveyance in trust, settlor does not qual trustee.
A trustee must have the capacity to:
take, hold, and manage property.
if no trustee is named or if trustee declines, resigns, is removed, or dies, what happens/
the court will appoint a trustee
What are the two ways to transfer (or deliver) property to the trustee?
- declaration of trust (no conveyance needed as long as property is identified and segregated)
- conveyance in trust (property must be conveyed - deed or delivery)
Can a trust be oral?
Yes unless it involves real property or is contained in a will.
What is a pour over will?
a will that leaves property to a previously existing inter vivos trust.
What happens to property in a pour over will?
It goes into a trust as trust exists at the date of testator’s death
Pour over property can be the initial trust funding if:
- trust identified in will, and
2. trust executed before the testator’s death
What happens if the testamentary gift is silent about trust nature of transfer?
alleged beneficiary of trust can seek a constructive trust remedy against will beneficiary who should be serving as a trust if appropriate facts can be proven.
if a testamentary gift is “in trust” but doesn’t state beneficiaries nor state terms, then
the trust fails and the property passes through testator’s estate to successors in interest.
inter vivid secret trust - where grant of property looks outright on tis face but there is oral evidence that the grantee promised to use the property for another’ benefit.
grantee not bound unless alleged beneficiary can show evil conduct.
Unless the trust provides otherwise (which is usually the case), beneficiaries may transfer their equitable interests
just like they may transfer any other property they own
unless the trust provides otherwise (usually does) the beneficiary’s creditors
may reach the beneficiary’s interest in the trust
Unless trustee elects to make a payment, the beneficiary has no interest and no interest for creditors to attach. B merely has an _______
expectancy to be the beneficiary of a power of appointment placed into the trust
In a spend thrift trust, a beneficiary may not transfer
interest in trust. Only upon payment may the beneficiary transfer the money received.
In a spend thrift trust, creditors cannot attach the B’s
trust interest. However, once paid, the B’s creditors can reach that property.
In a spendthrift trust, can the settlor also be the beneficiary?
No. Can’t protect your own property from your own creditors.
What creditors may a spendthrift trust be ineffective against?
- support of the beneficiary’s spouse or child
2. creditors who supplied necessaries to the beneficiary
What is the effect of a “support provision” in a trust?
trustee may only use property of trust for beneficiary’s health, education, maintenance, and support.
What is the standard of support in a support trust?
If the instrument is silent, then accustomed standard of living of beneficiary.
