Requirements for a Trust

Question 1

Def: Express Trust

Answer 1

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)

Question 2

Settlor

Answer 2

person who creates the trust; can be anyone 18 or older with capacity

Question 3

Trustee

Answer 3

Person given legal title by the settlor to manage the money

Question 4

Beneficiaries

Answer 4

those who have equitable title to enjoy the distributions from the trust

Question 5

8 Requirements for a valid trust

Answer 5

(1) SETTLOR makes a
(2) DELIVERY of legal title to
(3) PROPERTY (res, corpus, principal) 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

NOTE: no consideration is required to create a trust!

Question 6

How do you properly deliver titled assets?

Answer 6

Titled assets must be formally transferred for delivery to be valid. [aka formal transfer of title]

Question 7

Property (Res) requirement

Answer 7

• The property can be almost anything, but must be property that the settlor owns, not just a mere expectancy of ownership in the future
• it must be identified property, not subject to future determination

Question 8

TRUSTEE:

who can be one for an inter vivos trust?
for a testamentary trust?

Answer 8

• inter vivos = almost anyone over 18 w/ capacity
• testamentary = anyone EXCEPT under 18, judicially declared incompetent, convicted felons, and those incapable b/c of drunkenness/dishonesty/want of understanding/improvidence

Question 9

Can a non-resident aliene be a trustee?

Answer 9

ONLY IF related to decedent and a NY resident serves as a co-fiduciary

Question 10

Beneficiaries Requirement

Answer 10

• must be definite and ascertainable
• if ambiguous, trustee holds in a resulting trust for the residuary beneficiary of a will or intestate heirs if no will
• EXCEPTION- “family” or “next of kin” is considered definite and ascertainable

Question 11

What is the requisite intent to form a trust?

Answer 11

• settlor must intend to create an ENFORCEABLE obligation giving the trustee real duties
• PRECATORY language is not enough

ex- precatory language = i would like, i wish, it is my desire that

Question 12

Lawful Purpose Requirement

Answer 12

TRUST CANNOT

• call for commission of a crime
• call for the destruction of property
• have a condition against public policy (ex- restricting marriage or promoting divorce)

NOTE- if any purpose can be found that is not offensive to public policy then the trust is valid (ex- gives income to a spouse until that spouse gets married –> purpose of support OK)

Question 13

Are restrictions against marital religion okay?

Answer 13

marriage restrictions to members of a certain religion or ethnic group are valid as permissible partial restraints on marriage b/c they leave a fairly wide choice.

Question 14

NOTE: ALL TRUSTS ARE PRESUMED TO BE IRREVOCABLE UNLESS . . .

Answer 14

THE TRUST EXPLICITLY AUTHORIZES REVOCATION