Trust Creation & Termination

Question 1

What are the 7 elements to form a valid express trust?

Answer 1

1. A definitive beneficiary (can be ascertained now or in the future);
2. a settlor with capacity;
3. An intent to create a trust;
4. A trustee;
5. a valid trust purpose;
6. Trust property (the res); AND
7. Compliance with any state formalities (I.e. signed in front of notary)

NOTE: no witness requirement

Question 2

Who may be a beneficiary in a trust?

Answer 2

Natural persons, corporations, or other organizations

Question 3

How do you establish intent to create a trust?

Answer 3

A promise that creates enforceable rights in a person who holds these rights as trustee (now or later)

Question 4

Can an oral promise establish the intent to create a trust?

Answer 4

Yes IF it is supported by consideration, UNLESS the state requires certain trust formalities or the statute of frauds applies

Question 5

Does a trustee’s failure to accept or qualify defeat the trust?

Answer 5

No; court can appoint

Question 6

Prerequisites for a trustee

Answer 6

1. Can’t be sole trustee and sole beneficiary
2. Must have duties

NOTE: the settlor (person who creates trust) may be the trustee

Question 7

What type of property is adequate to create a trust?

Answer 7

• any property that the settlor actually owns (present or future interest) (must have power to convey)

Question 8

Does the property interest in a trust need to be substantial?

Answer 8

No; any property interest will do; just needs to be described with certainty

Question 9

Does the trust property have to be contemporaneously transferred with the signing of the trust instrument to be valid?

Answer 9

No; a trust instrument signed during the settlor’s lifetime is valid even if the property was transferred to the trustee at a much later date, including after the settlor’s death (I.e. through a pour-over provision in will)

Question 10

Under the UTC, a trust may be terminated in the following 8 instances:

Answer 10

1. Revoked or expires Persians to its terms;
2. The material purpose of the trust has been achieved;
3. The trust has become unlawful, contrary to public policy, or impossible to achieve;
4. The settlor and all beneficiaries consent (even if termination inconsistent with purpose of trust);
5. All beneficiaries consent and the court decides that continuance is not necessary to achieve any purpose of the trust;
6. Termination will further the purpose of the trust because of circumstances unanticipated by settlor;
7. The court applies cy pres doctrine; or
8. The court or trustee determines that value of trust property is insufficient to justify the cost of administration

Question 11

When are remaindermen entitled to receive trust property?

Answer 11

Not until the termination of the trust

Question 12

What are the two circumstances in which termination of a trust is usually permitted?

Answer 12

1. If all beneficiaries consent to termination and

2. When the termination does not interfere with a material purpose of the trust.