Trust Creation

Question 1

What does the trustee HOLD?
What does the beneficiary HOLD?

Answer 1

Trustee holds legal title.
Beneficiary holds equitable title

Question 2

What is a private express trust?

Answer 2

A trust that clearly states the intention of the settlor to transfer property to a trustee for the benefit of one or more ascertainable beneficiaries.

Question 3

How is intent determined in an express trust?

Answer 3

If settlor had capacity, the manifestation of intent must occur prior to or simultaneously with teh transfer of the property; no consideration required.

Question 4

What is a Precatory Trust?

Answer 4

A trust that expresses a hope or wish that the property transferred be used for the benefit of another rather than creating a legal obligation.

Question 5

How is intent measured in
a precatory trust?

Answer 5

Must contain specific instructions to the fiduciary, and must be that without this trust there would be an unnatural disposition of the donor’s property because of family r/ship or history of support b/t donor and the intended beneficiary.

Question 6

When is an express trust funded with?

Answer 6

It must be funded with identifiable trust property (res); it must be described with reasonable certainity

Question 7

If a trust that is invalid for lack of assets is later funded, what is the result?

Answer 7

A trust will arise if the settlor re-manifests the intent to create a trust.

Question 8

What does it mean to have a
“valid trust purpose”?

Answer 8

Trust can be created for any purpose as long as:
* it is not illegal or contrary to public policy;
* it is possible to achieve
* it is for the benefit of the beneficiaries

Question 9

What happens if one or more terms of the trust violates public policty?

Answer 9

Alternative terms will be honored; if none then the term will be stricken

The trust will NOT fail unless the removal of the term is fatal.

Question 10

What is an ascertainable beneficiary

Answer 10

the Bene is identifiable by name so that the equitable interest can be transferred automatically by operation of law

settlor may refer to acts of independant significance to identify the Bene

Question 11

What are the exceptions to the requirement of having an ascertainable bene in the trust?

Answer 11

Trusts for benefit of unborn child or to a reasonably definite class are ok. Charitable trusts do not need individual ascertainable bene.

Question 12

What are the general rules regarding an
inter vivos trust?

Answer 12

The declaration of the trust must accompany the delivery, where the settlor parts with dominion and control over the trust; writing is only required for real property (court will impose a constructive trust if no writing), parol evidence is allowed to show the settlor’s intent if the written agreement is ambigous on its face.

Question 13

What is a pour-over trust?

Answer 13

A provision in a will that directs the distribution of property upon the happening of an event.

Even if it wasn’t executed appropriately, as long as the trust is identified in the will and its terms are set for th in a written instrument, it will be enforceable.

Question 14

What is a Totten Trust?
Can it be revoked?

Answer 14

A designation given to a bank account in a depositor’s name as trustee for a named bene (no sep of legal & equitable title);

It can be revoked during depositor’s lifetime by any act manifesting the intent to revoke.

Question 15

What is a life insurance trust and is it revocable?

Answer 15

Life insurance proceeds go to trust upon death; trust is the owner of the policy and it is irrevocable

Question 16

What is a testamentary trust?

Answer 16

It occurs when the terms of the trust are contained in writing in a will or in a document incorporated by reference into the will.

Question 17

What is a “secret” trust?

Answer 17

Looks like a testamentary gift, but it is created in reliance on the named bene’s promise to hold and administer the property for another person

Result: a constructive trust is imposed on the property for the intended bene

Question 18

What is a “semi-secret trust”?

Answer 18

occurs when a gift is declared in a will to be held in trust, but the TT fails to name a bene or specify the terms or purpose of the trust

A resulting trust is imposed to be held for the TT’s heirs.

Question 19

What is the modern trend regarding secret and semi-secret trusts?

Answer 19

To impose a constructive trust in favor of intended beneficiaries (if known) in both.

Question 20

What is the purpose of a charitable trust and who are its beneficaries?

Answer 20

Purpose must be relief of poverty, advancement of education or religion, good health, governmental purposes, and other purposes benefiting the community at large.

The beneficiaries must be the community at large (directly or indirectly).

Question 21

How does the cy pres document relate to charitable trusts?

Answer 21

It allows a court to modify a charitable trust to seek an alternative charitable purpose if the original one becomes illegal, impracticable, or impossible to perform.

Question 22

What are honorary trusts?

Answer 22

The have no private beneficiaries
Usually for pet or non-charitable purpose.

Question 23

What are remedial trusts?
Name 3 kinds of them?

Answer 23

They are an equitable remedy that is NOT subject to trust requirements.
1. Resulting Trust
2. Constructive Trust
3. Gift Over Clause

Question 24

What is a resulting trust?

Answer 24

When a trust fails, the court creates a resulting trust requiring the holder of the property to return it to the settlor or his estate to prevent unjust enrichment.

Question 25

When would a resulting trust be imposed?

Answer 25

Purchase-money resulting trust
Failure of express trust
Imcomplete disposition of trust assets due to express language in the trust.

Question 26

What is a constructive trust?

Answer 26

It is imposed when the court concludes that the person holding title to the property would profit by a wrong or be unjustly enriched

wrongful conduct is required!

Question 27

What is a gift over clause?

Answer 27

It provides for teh disposition of trust property if trust purpose fails.

Question 28

Does a beneficiary have a right to alienation of equitable interest in trust?

Answer 28

Yes, unless a statute or trust instrument limits this right.

Question 29

What is a support trust?
Can creditors reach assets?

Answer 29

directs the trustee to pay income or principal as necessary to support the trust bene and maintain lifestyle

Creditors can NOT reach - unless providing a necessity to the bene

Question 30

What is a discretionary trust?
Can creditors reach assets?

Answer 30

Trustee is given complete discretion regarding whether or not to apply payments of income or principal to the bene

Creditors have same rights as a bene if the trustee exercises discretion to pay.

Question 31

What is a mandatory trust?
Can creditors reach assets?

Answer 31

Trustee has NO discretion; the trust document explains in detail how and when trust property is to be distributed (including whether to pay creditors)

Question 32

What is a spendthrift trust?
Can creditors reach assets?

Answer 32

expressly restricts the beneficiary’s power to voluntarily or involuntarily transfer his equitable interest

Creditors usually can not reach the trust interest if the document contains a spendthrift clause (unless for child or spousal support, tax lien holders and sometimes basic necessity providers)