Remedial Trusts, Distributions + Creditor's Rights Flashcards
What is a remedial trust?
- an equitable remedy created by operation of law
- passive
- trustee’s only duty is to convey the property back to the beneficiary
There are two kinds: resulting trusts and constructive trusts.
When are resulting trusts used?
When a trust fails.
What does the trustee of a resulting trust do?
Return the property to the settlor or settlor’s estate.
What is the goal of a resulting trust?
To avoid unjust enrichment.
What is a purchase money resulting trust?
One person buys the item but person 2 takes title.
- Person 2 is not a natural object of person 1’s bounty.
Gift-over clause?
Prevents a failure of a trust. If there is a failure of the original trust it will gift over to someone else.
What is a constructive trust?
A remedy used to prevent unjust enrichment that would occur if a 3rd party were allowed to take advantage of a settlor by wrongful conduct.
- wrongful conduct must be the cause of the trust.
- the case for slayer situations
What are the types of trust distributions?
1) Mandatory Trusts
2) Discretionary Trusts
3) Support Trusts
What is the rule about alienability by a beneficiary?
A beneficiary’s equitable interest is freely alienable and creditors can reach the beneficiary’s equitable interest as payments are made.
What may creditors reach in a trust?
- cannot reach trust principal or income until such amounts become payable to the beneficiary or the beneficiary can demand payment.
What is a an asset protection trust?
Shields beneficiaries from creditor’s claims
Ex:
- pour over trust
- support trust
- discretionary trust
- spendthrift trust
What is a spendthrift trust?
Expressly limits beneficiary’s power to alienate her interest.
- still creditors can reach when trustee makes payment.
Which creditors can reach trust property?
- spousal or child support
- those providing basic necessities to the beneficiary
- holders of federal or state tax liens
