Trust Requirements Flashcards
What is an express trust?
A legal device that allows an owner of property to make transfer of property & to have those assets managed on behalf of someone else = the ONLY REAL trust
Settlor = Person who CREATES a trust
Trustee = Person who MANAGES assets on behalf of beneficiaries; has legal title
Beneficiaries = have equitable title to enjoy the distributions from the trust
What are the types of equitable trusts?
1) Lifetime (inter vivos) trust = set up during the lifetime of the settlor
2) Testamentary trust = set up in the settlor’s will
What are the elements of a valid trust?
1) Settlor makes a…
2) Delivery of legal title of…
3) Property (res, corpus or principal) to a…
4) Trustee who holds legal title for the benefit of a….
5) Beneficiary (or beneficiaries) with…
6) The intent to create a trust for…
7) A lawful purpose…
8) In a validly executed document
NOTE: NO consideration is needed!
Who can be a settlor (of property into a trust)?
ANYONE who…
1) Is ≥ 18; AND
2) Has CAPACITY to enter into contracts
What is necessary for delivery (for trust purposes) to be valid?
Titled assets must be FORMALLY transferred to the trustee e.g. stock certificates must be re-registered in trustee’s name
What can constitute trust property?
Res/corpus/principal = Almost anything, BUT must be the property that the SETTLOR OWNS (not just the mere expectancy of ownership in future)
It must be IDENTIFIED property, not subject to future determination (e.g. NOT “whatever property that I may choose to contribute to the trust over X years”)
Who can be a trustee for a lifetime trust?
Almost ANYONE can be a trustee (since no court involvement is needed for such trust)
NOTE: failure to name a trustee does NOT matter (the court can appoint someone)
Who can be a trustee for a testamentary trust?
ANYONE, except…
1) Those UNDER 18
2) Judicially declared incompetents
3) Convicted felons
4) Those INCAPABLE because of drunkeness, dishonesty, want of understanding, or improvidence
5) Non-resident aliens NOT related to the decedant (spouse, grandparent, etc)
** NOTE: if a non-resident alien IS related to decedent, a NY resident must serve as CO-FIDUCIARY
NOTE: failure to name a trustee does NOT matter (the court can appoint someone)
Who can be a trust beneficiary?
Beneficiaries must be DEFINITE and ASCERTAINABLE (i.e. NO ambiguity)
If ambiguous, the trustee holds in a RESULTING trust for the residuary beneficary of a will (or intestate heirs in absence of a valid will)
EXCEPTION: a beneficiary listed as someone’s “family” or “next of kin” IS considered definite and ascertainable and the trust does NOT fail (must consult the intestacy statutes)
What is the necessary form of intent to form a trust?
Settlor must intend to create an enforecable obligation
** Precatory (i.e. suggestive), non-binding language is NOT enough
** Trustee MUST be given duties to perform (if trustee has NO duties, then it’s a “passive” trust, which is NOT a trust)
** NOTE: just using the word “trust” does NOT show intent to creat a trust (must look at ALL of the language/facts to determine)
In creating a trust, what CAN’T be the purpose of a trust?
A trust CANNOT…
1) call for the commission of a crime
2) call for the DESTRUCTION of property
3) have a condition against public policy (e.g. trusts restricting marriage OR promoting divorce)
NOTE: marriage restrictions to members of a certain RELIGION or ETHNIC GROUP are valid as permissible partial restraints on marriage
BUT, if a (ANY) purpose can be found that is NOT offensive to public policy, then it IS valid (e.g. a trust that gives income to a spouse until that remarries is OK)
What is needed to validly execute a trust document (execution ceremony)?
1) Instrument must be in writing & signed by settlor AND trustee
2) Acknowledged by a notary public OR signed by 2 witnesses
