Trust Validity Flashcards
What is a trust?
A fiduciary relationship in which a trustee holds legal title to specific property under a fiduciary duty to manage, invest, safeguard, and administer the trust assets and income for the benefit of designated beneficiaries, who hold equitable title
What are the 3 key duties of a trustee?
1) must deal with property with reasonable care
2) must maintain utmost loyalty
3) Personally responsible if conduct falls below required standards
What is a settlor?
Person who causes trust to come into existence by supply initial trust property
What is required for 2) identifiable corpus?
Property that settlor can transfer or actually owns
What are the basic types of trusts?
Express (private; charitable)
Operation of Law (resulting trusts; constructive trusts)
What are the 5 key elements of a valid (express) trust?
1) intent
2) identifiable corpus
3) ascertainable beneficiaries
4) proper purpose
5) mechanics & formalities
What is required for 1) present intention to create trust?
Settlor must intend to split the legal and equitable title and to impose enforceable duties on the holder of legal title
T or F: Sole trustee may also be sole beneficiary
False: equitable and legal titles must stay separate
What is required for 3) ascertainable beneficiary?
Someone who can enforce trust (unless charitable or honorary)
What is a qualified beneficiary?
Beneficiary who, on date qualification determined, is:
1) current beneficiary, OR
2) first-line remainderman
A beneficiary may disclaim an interest by subject to what 3 key considerations?
1) Time: usually required w/i 9 months of when interest formed
2) Estoppel: can’t disclaim if have already exercised dominion or control over interest OR accepted any benefits
3) Disclaimant’s creditors: since disclaimer relates back to date of transfer, can defeat creditors (but not fed tax liens)
Are class gifts sufficient to meet the ascertainable beneficiary requirement?
Yes (so long as beneficiaries ascertainable when they are to benefit)
Definitie beneficiaries are required for ________.
private trusts (NOT charitable trusts)
When must beneficiaries be ascertainable by?
The time their interests are to come into enjoyment
What happens if a trust fails for lack of a beneficiary?
A resulting trust in favor of the settlor (& their successors) presumed
How might a trust purpose be contrary to public policy?
- induce others to commit crimes/torts
-encourage immorality
-induce person to neglect parental, familial, or civic duties
What happens if a condition is found to be against public policy?
1) settlor’s alternative desire controls if expressed; 2) if condition subsequent, condition invalidated but trust valid; 3) if condition precedent, interest likely valid unless other evidence
For 4) proper purpose, a settlor may create a trust for any purpose subject to what 4 key limitations?
1) purpose illegal
2) contrary to public policy
3) impossible to achieve
4) intended to defraud settlor’s creditors or based on illegal consideration
T or F: While trustee required at time trust formed, trustee’s subsequent death, refusal, or resignation will not destroy trust
True
How can a court remove a trustee?
1) serious breach of trust
2) serious lack of cooperation among co-trustees
3) unfitness, unwillingness, or persistent failure to administer
4) substantial change in circumstances
How can a trustee resign?
By either 1) giving 20 days’ notice to qualified beneficiaries, settlor, and co-trustees OR 2) obtaining court approval
What is a pour-over gift from will to trust?
Settlor can make gifts by will to trust established during their lifetime (must be clearly identified from language in will)
What are the 3 key methods for trust creation per 5) mechanics & formalities?
1) inter vivos transfer
2) inter vivos declaration of trust
3) by will (testamentary trust)
