Trust - Creation

Question 1

Creating Trust

Answer 1

Trust is fiduciary relationship where the trustee holds legal title for the benefit of the beneficiary

Creation of valid express trust requires:
(i) property
* Settlor must have power to convey his interest in the property

(ii) trustee with duties
* Complete failure to designate trustee for may cause inter vivos trust to fail but not testamentary trust
* If trustee dies/resigns, trust will not fail for lack of trustee; court will appoint trustee
* Trustee’s acceptance of trust is presumed

(iii) definite beneficiary
* Not necessary for charitable trusts

(iv) intent to create trust by settlor with capacity
* Intent shown by words or conduct
* must intend to separate legal/equitable title and intend to impose enforceable duties on trustee
* Precatory expressions can’t create a legal obligation that settlor can impose on transferee

(v) valid trust purpose
* Purpose can’t be illegal, involve criminal/tortious act, or be contrary to public policy

Notice to beneficiary not required for trust to be valid.
* Acceptance IS required but beneficiary can accept after valid trust is created.
* Acceptance is usually presumed

Question 2

Testamentary Trust

Answer 2

Trust created in a will

Requires
* property
* beneficiary
* intent to create trust
* valid trust purpose
* trustee with duties but if there isn’t one, trust won’t fail; court will appoint trustee

Essential elements must come from:
* Terms of will
* Incorporation by reference
* Exercise of power of appointment created in will

Question 3

Charitable Trust
Cy Pres

Answer 3

For public benefit OR benefit an indefinite number of people in a public class

Cy Pres: If original charitable use no longer applicable, court decides if settlor intended that trust fail or would’ve wanted trust to continue for a similar use
* If settlor had specific intent, trust fails and becomes resulting trust (goes back to testator’s estate)
* If settlor had general charitable intent, court selects purpose as close as possible to original

Question 4

Revocable vs. Irrevocable Trust

Answer 4

Revocable: Trustee’s duties owed to settlor
* When settlor dies, the revocable trust becomes irrevocable, and the trustee will now owe duties to the beneficiaries.

Irrevocable: Trustee’s duties owed to beneficiaries

Question 5

Pour-Over from Will to Trust

Answer 5

In CA, testator can make a gift to trust in his will IF:
* Trust created/executed before, concurrently with, or within 60 days from executing will and
* Trust sufficiently dentified in will