Trust Validity

Question 1

5 elements of a valid trust

Answer 1

1. intent
2. identifiable corpus
3. acertainable beneficiaries
4. proper purpose
5. mechanics and formalities

Question 2

Intent

trust validity (element 1)

Answer 2

the settlor must intend to split the legal and equitable title and to impose enforceable duties on the holder of the legal title

the intention to create a present trust must have been externally manifested by the settlor at the time they owned the property

must intend trust to take effect immediately (a promise to create a trust in the future is not unforceable unless binding K exists)

no formals words are required; communication to beneficiary is not required–delivery of the property to the trustee is sufficient

Question 3

Does precatory language create a trust?

Answer 3

No; precatory language (expressing a hope, wish, or mere suggestion) does not create a trust bc the settlor must impose a legal obligation (and not merely moral obligation) on the trustee.

Question 4

Can the sole trustee be the sole beneficiary

Answer 4

No!

Question 5

Identifiable corpus

trust validity (element 2)

Answer 5

Because a trust is a type of property transfer, trust property is required. The property must be ascertainable with certainty. If there is no trust property, the trust fails.

trust property must be in existing interest in existing property.

Question 6

Beneficiaries

trust validity (element 3)

Answer 6

A trust cannot exist without someone to enforce it; thus, an ascertainable beneficiary is necessary to the validity of every trust except charitable and honorary trusts.

Question 7

Who can be a beneficiary?

Answer 7

Any person or entityt capable of taking and holding title to the property; the beneficiary need not be competent

Question 8

Is notice to a beneficiary essential

Answer 8

No, notice is not essential; lack of such notice may indicate that no trust was intended.

Acceptance by the beneficiary is required, but can take place after a valid trust is created; acceptance can be express or implied and is generally presumed.

Question 9

Can a beneficiary disclaim their trust?

Answer 9

Yes, no one can be compelled to accept an interest in a trust against thir will. Beneficiary must write an instrument to the trustee.

If a valid disclaimer is made, the trust is read as thouhg the disclaimant was deceased as of the relevant date.

A disclaimer is timely if made within nine months after the beneficiary turns 21

Question 10

Can the beneficiary be estopped from making a disclaimer?

Answer 10

Yes, if they have exercised any dominion or control over the interest or accepted any benefits of the trust

Question 11

Unascertained beneficiaries

Answer 11

Beneficiaries may be “definite” even though not yet ascertained (for example, unborn children). Beneficiaries must be ascertainable by the time their interests are to come into enjoyment

Unacceptable class of beneficiaries: “friends”; this is because it is impossible to ascertain who someones friends are

Question 12

Trust purpose

trust validity (element 4)

Answer 12

The general rule is that a settloe may create a trust for any purpose. However, a trust purpose is invalid if:
1. it is illegal
2. its performance requires criminal or tortious activity
3. contrary to public policy
4. violates RAP

Question 13

Acts contrary to public policy

Answer 13

Public policy is violated if the purpose of the trust is to:
1. induce others to engage in criminal or tortious acts;
2. encourage immortality; or
3. induce a person to neglect parental, familial, or civic duties

Question 14

Trustee

trust validity (element 5)

Answer 14

Once established, a trust will not fail bc the trustee dies, refuses to accept appointment or resigns. The court will appoint a successor trustee unless it is clear that the settlor intended the trust to continue only so long as a particular trustee served.

A trustee must have duties; passive trusts are void, and the beneficiary takes legal title

Anyone who has capacity to acquire and hold property in their own benefit may be a trustee

Question 15

How to remove a trustee?

Answer 15

A court can remove a trustee or refuse to confirm an appointment. grounds for removal include:
1. serious breach of trust
2. habitual drunkeness
3. conflict of interest

Question 16

Can a beneficiary remove a trustee?

Answer 16

Absent grounds, a beneficiary cannot remove the trustee unless the power is specifically granted to them by the trust instrument.

Question 17

Can a trustee disclaim or resign?

Answer 17

Before acceptance, a trustee can disclaim or refuse appointment for any or no reason. However, a trustee cannot disclaim a trust in part.

Question 18

How can a trust be created?

Answer 18

By inter vivos trust, by inter vivos declaration of trust, or by will

Question 19

Inter vivos trust

Answer 19

Created while the settlor is still alive either by the settlor declaring themself the trustee for another or by transfer of property to another as trustee.

Present intent must be manifested by conduct or words.

Question 20

Statute of Frauds

Answer 20

Most states do not require a writing for a trust of personal property.

For a trust of land, however, a written instrument signed by the person entitled to impress the trust upon the property is commonly required under the SoF.*

*Part performance precludes SoF

Question 21

Pour-over gift from will to trust

Answer 21

A settlor can make gifts by will to a trust–even an amendable and revocable trust–established during their lifetime. The trust must be clearly identified from language in the will.

trust amendments made after the will execution are effective to govern the poured-over property bc property goes into the trust as the trust exists at the date of testator’s death.

Question 22

Testamentary trusts

Answer 22

Trusts created in the settlor’s valid will

Question 23

Formalities of testamentary trusts

Answer 23

Trust intend and the essential terms of the trust must be ascertained from the will itself, from a writing incorporated by reference into the will, or from the exercise of a power of appointment created by the will

Question 24

Secret trust

Answer 24

Absolute gift in will made in relaince on the beneficiary’s promise to hold the property in trust for another

extrinsic evidence allowed

constructive trust imposed in favor of intended beneficiary

Question 25

Semi-secret trust

Answer 25

Gift in will to a person “in trust,” but does not name trust beneficiary

extrinsic evidence not allowed

“trustee” holds on resulting trust for testator’s legatees or heirs