Trusts Flashcards
Trusts - Creation of Express Trust - General Requirements
General Requirements = creator (“settlor”) + intent to create trust + trustee + ascertainable beneficiary + trust assets.
Trusts - Creation of Express Trust - Intent
Rule = settlor with capacity may manifest a present intent to transfer to trustee who has duties to perform for the benefit of one or more ascertainable beneficiaries for a valid purpose.
Timing = manifestation of intent must occur prior to or simultaneous with transfer of property (use of common trust terms will create presumption of intent).
No consideration required.
Trusts - Creation of Express Trust - Precatory Trust vs Intent
Precatory trust = express hope or wish that property transferred be used for the benefit of another. Must contain specific instructions to a fiduciary, and must be shown that absent imposition of a trust there would be an unnatural disposition of the donor’s property because of familial relations or history between donor and intended beneficiary.
Trusts - Creation of Express Trust - Trust Property
Requirement = trust must be funded with identifiable trust property (res); trust property must be identifiable and segregated, and must be described with reasonable certainty.
If a trust is invalid for for lack of assets but is later funded, a trust arises if the settlor re-manifests the intent to create a trust.
Trusts - Creation of Express Trust - Valid Trust Purpose
Valid purpose = any purpose, as long as it is not illegal or contrary to public policy, is possible to achieve, and is for the benefit of its beneficiaries.
If one of several terms violates public policy, alternative terms will be honored or the term will be stricken if no alternatives. Trust will not fail unless removal of the term is fatal.
Trusts - Creation of Express Trust - Ascertainable Beneficiaries
Rule = beneficiaries must be identifiable so that equitable interest can be transferred automatically by operation of law and directly benefit the person; settlor may refer to acts of independent significance to identify beneficiaries.
Exceptions = trusts for benefit of unborn children or to a reasonably definite class will be upheld, and charitable trusts do not need individual ascertainable beneficiaries.
Trusts - Private Express Trust - General Definition
Private express trust = clearly states the intention of the settlor to transfer property to a trustee for the benefit of one or more ascertainable beneficiaries.
Trusts - Creation of Express Trust - Trustee
Trustee = holds legal interest in title to the trust property; court will appoint a trustee if settlor fails to designate one or more.
Trusts - Creation of Express Trust - Beneficiary
Beneficiary = holds equitable title to trust property; a beneficiary must impliedly or expressly accept his interest.
Trusts - Inter Vivos Trust - General Definition
Intervivos trust = a revokable or irrevocable trust that allows the settlor to access the trust property while they are still alive (names self as trustee until death). Once the settlor passes away, the beneficiaries get access to the trust property, bypassing probate.
Settlor can change successor trustee and beneficiaries until death.
NB: trust property is not protected from creditors or federal estate taxation.
Trusts - Intervivos Trust - Requirements
Requirements = declaration of trust + delivery of property (if third-party trustee is named). For real property, declaration must be in writing, although court will impose a constructive trust when writing is lacking.
Parol evidence - permitted to show the settlor’s intent, only if the written agreement is ambiguous on its face.
Trusts - Intervivos Trusts - Pour-over/Totten/Life Insurance
Pour-over trust = a provision in a will that directs the distribution of property to a trust upon the happening of an event, even if the trust instrument was not executed in accordance with the Statute of Wills, as long as the trust is identified in the will and its terms are set forth in a written instrument.
Totten trust = a designation given to a bank account in a depositor’s name as trustee for a named beneficiary (no separation of legal and equitable title); can be revoked by any lifetime act manifesting the depositor’s intent to revoke, or by will.
Life-insurance trust = proceeds go to trust upon life upon insured’s death; trust is owner of policy and trust is irrevocable.
Trusts - Testamentary Trust - Definition
Testamentary trust = occurs when terms of trust are contained in writing in a will or in a document incorporated by reference to a will.
Trusts - Testamentary Trust - “Secret” Trust
Looks like a testamentary gift, but is created in reliance on the named beneficiary’s promise to hold and administer the property for another (a constructive trust is imposed on the property for the intended beneficiary).
Trusts - Testamentary Trust - “Semi-Secret” Trust
Occurs when a gift is directed in a will to be held in trust, but the testator fails to name a beneficiary or specify the terms or purpose of the trust (a resulting trust is imposed on the property to be held for the testator’s heirs).
