Trust Validity Flashcards
5 elements of a valid trust
- intent
- identifiable corpus
- acertainable beneficiaries
- proper purpose
- mechanics and formalities
Intent
trust validity (element 1)
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
Does precatory language create a trust?
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.
Can the sole trustee be the sole beneficiary
No!
Identifiable corpus
trust validity (element 2)
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.
Beneficiaries
trust validity (element 3)
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.
Who can be a beneficiary?
Any person or entityt capable of taking and holding title to the property; the beneficiary need not be competent
Is notice to a beneficiary essential
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.
Can a beneficiary disclaim their trust?
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
Can the beneficiary be estopped from making a disclaimer?
Yes, if they have exercised any dominion or control over the interest or accepted any benefits of the trust
Unascertained beneficiaries
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
Trust purpose
trust validity (element 4)
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
Acts contrary to public policy
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
Trustee
trust validity (element 5)
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
How to remove a trustee?
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
Can a beneficiary remove a trustee?
Absent grounds, a beneficiary cannot remove the trustee unless the power is specifically granted to them by the trust instrument.
Can a trustee disclaim or resign?
Before acceptance, a trustee can disclaim or refuse appointment for any or no reason. However, a trustee cannot disclaim a trust in part.
How can a trust be created?
By inter vivos trust, by inter vivos declaration of trust, or by will
Inter vivos trust
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.
Statute of Frauds
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
Pour-over gift from will to trust
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.
Testamentary trusts
Trusts created in the settlor’s valid will
Formalities of testamentary trusts
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
Secret trust
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
Semi-secret trust
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
