Trust Flashcards
Trust
Definition; Types
Relationship resulting from transfer of title to property by Settlor to Trustee to be administered by him as a fiduciary for the benefit of Beneficiary
- May be Gratuitous/Onerous; and Testamentary/Inter vivos
- NOT a legal entity under LA law
Trust
Parties
Settlor: Creator of trust
Trustee: Person/entity with fiduciary duties of loyalty and prudent administration who carries out trust
* Person: (1) US resident (not citizen); (2) Full contractual capacity
* Entity:
– Financial institution or Trust Company organized under LA/US law; OR
– Private trust company of any state conditionally
* ACCEPTANCE: (1) In writing; (2) within reasonable time after creation of trust
– May be designated in trust instrument, or may be appointed by court
* Co-trustees or successive trustees permitted
Donor: Person who adds to existing trust
Beneficiary: (1) in being; (2) ascertainable on date of creation of trust
* Acceptance: Presumed
Trust Theories
PERSONAL RIGHT THEORY:
The beneficiary has a personal right against the trustee for the management and eventual conveyance of the corpus.
REAL RIGHT THEORY:
The beneficiary has a real right in the corpus.
* If corpus is immovable, the interest is an incorporeal immovable
* If corpus is movable, the interest is incorporeal movable
THIRD PARTY BENEFICIARY TRUST:
The beneficiary is a TPB of the contract between settlor and trustee.
Duration of trust
Trust instrument provides duration
NATURAL PERSONS
* STATUTORY MAXIMUM
Settlor AND Income Beneficiary
* Death of last Income Beneficiary OR 20 years after death of last Settlor
Income Beneficiary
* Death of last Income Beneficiary OR 20 years from creation of trust
Settlor
* 20 years from death of last Settlor
None
* 50 years from date of creation of trust
Duration of trust
Trust instrument silent
NATURAL PERSONS
* STATUTORY MAXIMUM
Income Beneficiary
* Death of last Income Beneficiary
Settlor
* 20 years from death of last Settlor
None
* 50 years from date of creation of trust
Creation of trust
Substantive requirements
(1) INTENT TO CREATE A TRUST
* No special language; Evidence of settlor’s intent to transfer property to trustee for benefit of beneficiary
* Ambiguous language interpreted as having created trust
(2) IDENTIFICATION OF TRUST PROPERTY
* Testamentary Trust: General by universal or general legacy
* Inter Vivos Trust: Legal property description
(3) DESIGNATION OF A BENEFICIARY
* Identified, OR Identity objectively ascertainable from trust instrument alone
creation of trust
Formal requirements
TRUST INSTRUMENT
* Testamentary Trust: Testamentary form (olographic or notarial)
* Inter Vivos Trust:
– Authentic Act; OR
– Act Under Private Signature executed in presence of two witnesses and duly acknowledged before notary by either settlor or attesting witness
CONFLICT OF LAWS: Trust instrument executed outside LA effective in LA, IF:
* Executed in conformity with law of place of execution; OR law of settlor’s domicile;
* In writing;
* Subscribed by settlor
TRUST PROPERTY: Property susceptible of private ownership, and any interest in such property, may be transferred in trust.
Trust
Legitime in trust
Requirements
(1) FH as Income Beneficiary: Annual income of HEMS
(2) FH as Principal Beneficiary
* Trustee may invade principal for benefit of income beneficiary, UNLESS that invasion would deprive a FH of all or part of legitime
(3) Duration of Trust: May not exceed life of FH, or SS
(4) Permitted Charges and Restrictions
* Spendthrift Trusts: Trust in which beneficiary’s interest is not subject to voluntary or involuntary alienation
– Exceptions: Court may permit seizure in satisfaction of debts for alimony, child support, or criminal damages
* Shifting Principal Interests IF: (1) PB died intestate; AND (2) PB died without descendants
– PB dies w/ descendants OR testate Interest shifts to PB’s descendant/successors
– PB dies w/ no descendants Interest shifts to Substitute PB
* Class Trusts: Established in favor of entire class of beneficiaries rather than specific individuals
– Limited form of common law dynasty trust
– Creation: At least one member of class must be in being at time of creation of trust
– Termination: After class “closes”, or when no more members may be added to a class
– Usufruct or Income Interest of the Surviving Spouse – FH NOT entitled to HEMS income
Trust
Charitable trust
CHARITABLE TRUST: Created when a person makes a donation in trust for:
* The relief of poverty
* The advancement of education or religion
* The promotion of health
* Governmental or municipal purposes
* Or other purposes the achievement of which is beneficial to society
Trust
Pet trust
Parties:
* Settlor
* Beneficiary (animal) – Must be in being and ascertainable at creation of trust
* Trustee
* Caregiver (responsible for car and custody of animal)
Purpose: Funds from trust can only be used for animal’s care and to pay reasonable compensation and expenses of trustee and caregiver
* When corpus exceeds amount necessary for purposes of trust, court can terminate trust as to excess
Termination: Trust terminates upon death of last animal provided for in trust instrument
* Corpus distributed to person designated in trust instrument or to settlor or settlor’s successors if no designation provided
