Trust Validity Part 2 Flashcards
Trustee - Basic Req for Trust
- once established, trust won’t fail just b/c trustee dies, refuses to accept appointment, or resigns
- court will appoint a successor trustees unless it’s clear settlor intended trust to continue only so long as particular trustee served
- absence of a trustee may cause an attempted inter vivos trust to fail for lack of delivery
Acceptance of Trusteeship
Person accepts trusteeship by:
1) signing the trust or a separate written acceptance
2) substantially complying with the acceptance terms in the trust instrument OR
3) accepting delivery of trust property, exercising powers or performing duties as trustee, or indicating acceptance
-> book says you can act to preserve the trust property w/o accepting the trusteeship, provided they send notice of rejection to settlor or qualified beneficiary
- if trusteeship not accepted w/in a reasonable time, it is presumed to be rejected
Trust Formation and Trustee Duties
- in order for trust to form, settlor must intend to impose enforceable duties on the trustee
- if duties are not spelled out in the trust instrument, court will usually imply duties if there’s an intention to create a trust, a res + an identified beneficiary
Qualifications of Trustee
- anyone who has capacity to acquire + hold property for their own benefit + has capacity to administer that property may be a trustee
-> ex: minors + insane persons can hold property but can’t administer - state statutes limit right of some persons or corporations to serve as trustee
Trustee - Compensation + Reimbursement
- trustee is entitled to reasonable comp or whatever comp is specified in the trust instrument
- trustee entitled to reimbursement for expenses incurred in trust’s administration + any other expenses that resulted in a benefit to the trust
Removal of Trustee
- court can remove a trustee on its own motion or upon request by settlor, beneficiary or co-trustee
- basic factor = whether continuation in office would be detrimental to the trust
Grounds for removal include:
1) serious breach of trust
2) serious lack of cooperation among co-trustees
3) unfitness, unwillingness or persistent failure to administer OR
4) a substantial change in circumstances
Disclaimer by Trustee
- before acceptance, trustee can disclaim or refuse appointment for any reason
- BUT trustee can’t accept trust in part and disclaim in part
- testamentary trust is treated as in existence as of the settlor’s death, + trustee’s acceptance “relates back” to that date
-> means it’s possible for trustee to be liable on tort claims arising prior to acceptance of trustee role
Trustee Resignation
- under UTC, once appointment accepted, trustee can resign by either:
1) giving 30 days’ notice to qualified beneficiaries, settlor, and co-trustees OR
2) obtaining court approval
Successor Trustees
- successor trustee succeeds to all of the rights, powers, + privileges of the original trustee and is subject to all of the original trustee’s duties, liabilities and responsibilities
Summary of Elements of A Valid Private Trust
- settlor with capacity
- present intent to create a trust (manifested by settlor’s words, writing or conduct)
- trustee (inter vivos trusts only; testamentary trust won’t fail for lack of trustee)
- definite beneficiary(ies) (bearing in mind same person can’t be sole trustee AND sole beneficiary)
- trust property
- valid trust purpose (not illegal, against pub pol, or impossible to achieve, and doesn’t violate RAP)
- book says to look for these if asked to determine if valid trust created -> APPLY TO QUESTION IF THIS COMES UP
Inter Vivos Trusts
- created when settlor alive either by settlor declaring self trustee for another or by transfer of property to another trustee
- present intent required must be manifested by conduct (delivery) or words (declaring oneself trustee)
- if present trust isn’t established b/c no trust res, trust arises when settlor subsequently acquires res + remanifests trust intent
Creation of Trust by Present Declaration
- person can declare self trustee of specific property for a beneficiary
- settlor becomes trustee + keeps legal title
Creation of Trust by Transfer/Conveyance
- settlor creates trust by transferring legal title of property to trustee
- settlor may retain or transfer equitable title, but settlor conveys legal title
Statute of Frauds
- requires writing for trusts of land
-> an otherwise invalid oral trust of land might be enforced by imposing constructive trust though - part performance precludes statute of frauds defense (ex: if holder of legal title acts as if they’re a trustee)
- parol ev - most states allow extrinsic writing where an ambiguity appears on the face of the writing
Pour-Over Gift from Will to Trust
- settlor can make gifts by will to a trust established during their lifetime
-> trust must be clearly identified from language in the will - property goes into the trust as the trust exists at date of testator death, not as it existed when will executed (trust amendments govern poured-over property)
-> if trust revoked though, gift lapses
