Requirements for a Trust Flashcards
Which of the following are real trusts?
1) Express Trusts
2) Resulting Trusts
3) Constructive Trusts
What are the others?
Only express trusts are real trusts.
The other 2 are equitable remedies.
What is an express trust?
An express trust is 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.
(Rather than have the beneficiary manage the money by himself or herself)
What is the person that creates the trust called?
The settlor.
What are the two kinds of express trusts?
1) Lifetime Trust (or inter vivos trust) : Set up during the lifetime of the person who created the trust (settlor).
2) Testamentary Trust: A trust set up in the settlor’s will.
What are the 8 requirements for a valid trust?
- Settlor who makes a..
- Delivery of legal title to …
- Property (also called res, corpus, or principal) to a…
- Trustee who holds legal title for the benefit of a ….
- Beneficiary with…
- Intent to create a trust for a…
- Lawful Purpose…
- In a validly executed document
Is consideration required to create a trust?
No, no consideration is required to create a trust.
Who can be a settlor?
Anyone 18 or older with the capacity to enter into contracts.
How is delivery o legal title to property accomplished in creating a trust?
If the property is of the kind that requires formality in passing title, that must occur:
Cars
Houses
Stock Certificates,
etc.
This formal delivery is a required element of creation of a trust.
What type of proeprty may be in a trust?
(2 requirements)
1) The property can be almost anything, but it must be property the settlor currently owns, not just a mere expectation of property ownership in the future.
2) The property must be identified property, not property subject to future determination.
Trust property cannot be “whatever I choose to contribute to the trust over the next ten years.”
Can property expected to be acquired in the future be the basis for a trust?
No, a trust must be created with property the settlor currently owns.
Who can be a trustee for a lifetime trust?
For a testamentary trust?
Almost anyone can be a trustee of a lifetime trust, because no court involvement is needed.
For a testamentary trust, anyone except for:
- Those under 18
- Judicially declared incompetents
- Convicted Felons
- Those incapable because of drunkenness, dishonesty, want of understanding, or improvidence.
Can a non-resident alien serve as a trustee?
A non-resident alien can serve as trustee only if
1) That person is related to decedent (closely: spouse, grandparent, descendent, spouse of any of those)
AND
2) A New York resident serves as co-fiduciary
Does failure to name a trustee prevent the trust from being created?
No. Failure to name a trustee in the trust does not matter, the court an appoint someone.
What are the requirements for the named beneficiaries in a private (not charitable) trust?
The beneficiaries must be definite and ascertainable, with no ambiguity.
If ambiguous, the trustee holds in a resulting trust for the residuary beneficiary of a will (or intestate heirs in the absence of a valid will).
Exception: Listing the beneficiary as “family” or “next of kin” is considered definite and ascertainable and the trust does not fail. Consult the intestacy statutes.
Example: Steve’s will created a trust, giving $4million of IBM stock to his friend Ted, as trustee, to pay the income for life “to all my good friends, and pay the remainder to my very best friend of all.”
The residuary of Steve’s will was his sister Barbara.
Result: Ted does not keep the money, instead he holds it in resulting trust for Barbara.
What constitutes the intent element of creating a trust?
1) Settlor must intend to create an enforceable obligation (precatory language is not enough), and
2) Trustee must be given duties to perform, (if the trustee has no duties it is called a passive trust, which is no trust at all).
Precatory Language: Something like “I wish and desire the trust income to be paid to John,” or “I would like.” This does NOT create an enforceable obligation.
Note: Just using the word trust does not alone show intent to create a trust, need to look at all of the language and circumstances to determine if person wanted to create a trust. (I.e., saying I want to grant land in trust, for $1,000 a month, shows intent to create a lease, not a trust).
