Trust 2 Flashcards
statute of uses
If the trustee doesn’t have duties/responsibilities no trust, legal title will vest in the beneficiary. If the trustee has a power or duty relating to trust admin the trust stays
Exceptions to SOF
Totally oral trust if its only personal property, trustee isn’t settlor or beneficiary, and there’s evidence of trust intent that was mentioned before or at the time of the transfer
Defrauding Creditors
UFTA - You can’t transfer property if you’re insolvent
Bad Trust Remedies Creditors and Other
Set aside creditor amount OR
Void the trust
1) resulting trust to S (for mistake on S)
2) T gets the property (for bad conduct on S)
3) Remove improper restriction
Prudent Investor Standard Factors
PLDC
trust purposes, trust language, distribution requirements, circumstances generally
Trustee Power Sources
Instrument, statute, equity, court
Delegation Protections (Still have liability)
Agent = affiliate, require arbitration, shorten SoL
S authorization of Breach of Loyalty
S can waive self-dealing and conflicts, but construed strictly against T
T Standards for Breach
Strictly liable for breach regardless of good faith, fairness, T not benefiting
K Liability TX
T can K if within capacity; K plaintiff can recover directly from property
Notice Duty of Plaintiff (K)
to B by registered mail within 30 days of filing and at least 31 days before judgement
T has 10 days to get P all B info if asked
Tort Liability, Notice from P
P must tell B
How do we know how to allocate? P and I
S specific instructions, Trust Code, if neither to principal.
T can have discretion if fair and reasonable - follow the code its always reasonable
Capitol Gains
Principal
Interest Earned
Income
Rent
Income
Eminent Domain/Insurance Proceeds
Principal
Cash Dividends
Income
Stock Divided
Principal
Stock Split
Principal
Stock b/c of Merger
Principal
T adjustment Power General
Allow T to ignore basic rules under certain circumstances; no notice to B in TX
T Adjustment - Factors
NPSI
Nature Purpose Settlor intent, ID of Bs
When can’t a T adjust
S says no, T=B, T would benefit, adverse tax
T compensation
50/50
Accounting Expenses
50/50
Ordinary Repairs
Income
Capitol Improvements
Principal
Debt Payment
Initial - principal, interest - income
Insurance premiums
Income
Property Tax
Income
Depreciation (who pays)
T discretion
When does T have to inform B?
When they are going to do something material and unusual
When T has to inform B can be limited
Trust revocable, B under 25, B is remote and not eligible for current or end of trust distribution
B accounting - how to ask
Written, T has 90 days, can only happen every 12 months
Accounting Limitations
Trust is revocable, B isn’t able to get current distributions or when trust ends
Statute Permission for Deviation
Purposes: fulfilled, impossible, illegal;
A change that: S didn’t know/couldn’t anticipate, Avoids waste/impairment, Achieve S’s tax objectives, not inconsistent with S intent - if all B consent
Continuing isn’t necessary to achieve material purpose of the trust and all Bs consent
When TX allows reformation
Prevent Waste, impairment of purposes
Achieve trust purposes
Correct Scrivener’s error - even if unambiguous if there’s C and C evidence of S intent
Jury trial for reformation and deviation
No
S revoking
Presumes they can do whatever unless language says it is irrevocable
In writing or by trust
T Revoking
S can grant
Division/Combo if identical terms
Cy Pres
Decanting
B revoking
Other places have Claflin
TX says this can only happen if:
Court approval, change isn’t against material purpose and all B agree
Claflin Rule
B can revoke if no material trust purpose remains unfulfilled
S & B Modification/ termination
If S is alive and all B consent
7 deadly ends of a trust
Express,
S
Uneconomical
Court
Merger
No Property left
All B dead
Uneconomical - End of trust
Discretionary
Notice to anyone who is/can get money
Value under 50k
T says purpose doesn’t justify trust going on
No adverse tax
No conservation Easement
Money Damages against T - Lost Value to Trust
No causation and no requirement that T benefited
Money Damages against T - Profit made by T
Causation required and no requirement trust had a loss
Other Money remedies against T
Lost Profits, Punitive for evil conduct, and any profit made by T even if no breach
Remedies against T Removal 4 ways
Discretion for abuse/no fiduciary duty and trust suffered materially
T becomes incompetent or insolvent
Other Cause
Consequences of T Misbehaving
No money
SOL removed - usually 4 years
Make them carry out trust
Injunction
More bond
Attorney Fees
Criminal Remedies for T
For anything above negligence
Evil act - even if T doesn’t benefit
Greater than 300k = life sentence
How can a new T be liable for an old one?
Known or should have known
Lets bad conduct keep going and doesn’t make old T fix it/sue
Remedies against B if
Dealt with property wrong
Involved in the breach
fail to repay trust for loan/over distributing
Breach of K by saying they’ll give trust their money and not doing it
How to prevent remedies
S approves in trust, mandatory arbitration, a valid release, court decree, SoL, Latches
What S can’t Waive
valid trust
restrictions on exculpatory clauses
SoL
Duty of T to account for B money (current or on end of trust)
Good faith
Duty to inform
Powers of the court
In terrorem and good faith
SOL for Trust Problem
4 years from discovery
Requirement for valid release
18 and competent
for past or future conduct
can use virtual representation
Trust Bank Account
T can add or remove money with no notice
No split of title
No duties
B can only get after T dies if they outlive them
Resulting trust fact patterns
Express trust fails
Property has nowhere to go
Purchase money resulting trust
What happens if express trust fails
S has property
STEP 1 FOR EXAM
Type of trust
STEP 2 FOR EXAM
Validity
What to look at for validity
Intent
Consideration
SoF
RAP
Purpose
Capacity
Property
T
B
STEP 3 FOR EXAM
Traits of trust
revocable
limits on B
STEP 4 FOR EXAM
Has trust been changed?
parties or court
STEP 5 FOR EXAM
Has trust been terminated?
STEP 6 FOR EXAM
T conduct
What to look at for T conduct
Powers (and did they exceed)
Effect of discretion
Delegation
Prudent Investor Standard
Respond to requests
Loyalty
3rd Parties
Allocation
Compensation
STEP 7 FOR EXAM
If T acted wrong what remedies?
What to look at for remedies against T?
Procedure - standing, venue, jurisdiction, virtual representation
Against T - money damages, removal, what you can get
More on remedies general
Against B, 3rd parties
are remedies barred?
STEP 8 FOR EXAM
Are there other trust like relationships?
trust bank account
resulting trust
constructive trust
Grounds for constructive trust
Fraud
Abuse
Promises because of Death
Evil Conduct
