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Wills and Trusts > Trusts > Flashcards

Trusts Flashcards

1
Q

Private express trust

A

FD relationship w/ respect to prop whereby 1 person, ttee, holds legal title for the benefit of another, the bene, and which arises out of a manifestation of intent to create it for a legal purpose

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2
Q

Validity

A
  1. settlor
  2. ttee
  3. bene
  4. intent
  5. res
  6. valid purpose
  7. delivery
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3
Q

Settlor

A

Creator who often provides asset to create trust

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4
Q

Delivery

A

Handing over prop from settlor to ttee

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5
Q

Ttee

A

Person holding legal title to trust prop and manages assets
Trust won’t fail for lack of ttee
FD’s

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6
Q

Intent

A

Settlor must intend to create trust in the present

Precatory language, mere stmt’s of desire or hope, are insuff - however, precatory language + parol ∑ may = a trust

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7
Q

Bene

A

Persons holding equitable title and rec’g benefits of assets

Any ascertainable person or group of people

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8
Q

Res

A

Must be a presently existing prop interest

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9
Q

Valid purpose

A

Can’t violate law or public policy

Can be for any legal purpose

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10
Q

Discretionary trusts

A

Ttee has discretion to pay income or principal

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11
Q

Can bene ever xfer his interest, his rt to future payments, notwithstanding discretionary provisions?

A

No - bc bene can’t voluntarily xfer his rt to future payments bc, the Q may be asked, what exactly is bene assigning? bene might get nothing
Yes - if in fact there was an assignment, then the assignee steps into bene’s shoes - bc bene couldn’t force payment by the ttee, neither can the assignee - however, if ttee has notice of the assignment and does decide to pay, then ttee must pay assignee or be held personally liable

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12
Q

Can creditors ever attach bene’s rt to future payments, notwithstanding the discretionary provisions?

A

No - creditors can’t attach bene’s rt to future payments bc there’s nothing to attach - ttee may never allocate anything to bene - bene couldn’t force payment, neither can creditor
Yes - if ttee has notice of debt and creditor’s judgment against bene, and ttee decides to pay, he must pay creditors or be held personally liable

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13
Q

Mandatory trusts

A

Ttee lacks discretion, must pay per trust terms

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14
Q

Support trusts

A

Req’s ttee to use so much of income or principal as nec for bene’s support, health, education, or maintenance
Bene can’t voluntarily/involuntarily alienate/xfer his rt to future payments, bc to allow any type of assignment would defeat trust purpose and violate settlor’s intent
Generally, creditors can’t attach bene’s rt to future payments - however, preferred creditors can attach bene’s rt to future payment
- not typical creditors - those who provide necessities of life, gov’t creditors, child for child support, spouse for spousal support, spouse for alimony

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15
Q

Spendthrift trusts

A

Limits voluntary and involuntary alienation
Bene can’t xfer his rt to future payments of income or principal and creditors can’t attach bene’s rt to future payments of income or principal - guards against improvidence of bene and wards off creditors
Sometimes ct will recognize an assignment of future payments on the ground that bene merely has given ttee direction/order to pay the assignee
Generally, creditors can’t attach bene’s rt to future payments - however, preferred creditors can attach bene’s rt to future payment
- not typical creditors - those who provide necessities of life, gov’t creditors, child for child support, spouse for spousal support, spouse for alimony

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16
Q

Secret trusts

A

Fact of trust is secret, promise is enforceable by CT
Gift made in reliance upon ttee’s promise to hold the gift prop in trust for another will be enforced if suff proof of the agmt is produced
Will always succeed

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17
Q

Semi-secret trusts

A

Ttee named but bene’s are secret
Unenforceable
Will always fail

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18
Q

Revocable trusts

A

Settlor retains rt to amend or revoke during lifetime

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19
Q

Testamentary trusts

A

Created by way of will which is effective upon T’s death

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20
Q

Charitable trusts

A

Legal charitable purpose
Society is the bene
RAP doesn’t apply
Cy pres

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21
Q

Cy pres

A

As nearly as possible
If settlor manifests a general charitable intent, but the mechanism for effectuating that intent isn’t possible or practicable, ct can modiy the mechanism cy pres to effectuate settlor’s general charitable intent
If settlor manifests a specific charitable intent, but the mechanism for effectuating that intent isn’t possible or practicable, ct can’t modify

22
Q

Resulting trusts

A

Implied in fact, based upon presumed intent of the pty’s

If decreed by the ct, resulting ttee will xfer prop to settlor or his estate

23
Q

Resulting trusts

A

Arises when

  • private express trust ends by its own terms and there’s no provision for what happens to the corpus thereafter
  • private express trust fails bc there’s no bene or it’s illegal
  • excess corpus in private express trust
  • charitable trust ends bc of impossibility or impracticability and cy pres can’t be used
  • purchase money resulting trust
  • semi-secret trust - arises when will makes a gift to a person to hold as ttee but doesn’t name bene
24
Q

Purchase money resulting trusts

A

ex. A pays KSN to B have title to prop xferred to C, if A and C aren’t closely related then there’s a rebuttable presumption that C is holding as a purchase money resulting ttee for A’s benefit, if A and C are closely related there’s a rebuttable presumption that A simply made a gift to C

25
Q

CT

A

Remedy to prevent fraud or unjust enrichment
Wrongdoer has 1 obligation - xfer prop to intended bene as determined by the ct
Arises when
- ttee of private express trust or a charitable trust makes a profit bc of self-dealing
- fraud in the inducement or in the execution re a will
- secret trust - will, on its face, makes a gift outright to A, but the gift is given on the basis of an oral promise by A to use prop for B’s benefit, ct’s don’t impose CT’s for semi-secret trusts, rather impose a resulting trust

26
Q

Modification by settlor

A

Can modify the trust if he expressly reserves power to modify
Has power to modify if he has power to revoke

27
Q

Modification by ct

A

Cy pres - charitable trusts

Changed circumstances - unforeseen circumstances mean continuation in same manner would defeat trust purpose

28
Q

Modification and termination

A

If settlor and all bene’s consent, trust may be modified or terminated
- only possible when settlor is still alive
If all bene’s agre to terminate and all material purposes have been accomplished - need to acct for remaindermen

29
Q

Claflin doctrine

A

Trust can’t be modified or terminated, even if all bene’s agree, if to do so would be contrary to a material purpose of the settlor

30
Q

Ttee FD writing approach

A

Discuss ttee’s sources of power to make decisions
Isolate axn’s by ttee (circle each axn and inaxn)
ID each duty implicated
Remedies

31
Q

Ttee’s sources of powers

A 
Express/enumerated powers
Implied powers
- power to sell trust prop
- power to incur expenses
- power to lease 
- power to borrow
32
Q

FD

A

Ttee owes FD to administer trust solely in bene’s best interest
Breach can mean personal liability

33
Q

K liability

A

Ttee sued in his personal capacity
- personal assets at stake
- can get indemnification from trust if ttee acted w/in his power and wasn’t personally at fault
Ttee sued in his rep capacity
- only if K itself provided that in the event of breach by ttee
Modernly, if other person to the K knows that ttee’s entering K in his rep capacity, then ttee must be sued in his rep capacity - can’t get to personal assets

34
Q

Tort liability

A

Ttee sued in personal capacity
- if ttee was w/o personal fault, can get indemnification from trust
Modernly, if ttee sued in his personal capacity
- personally liable for torts if personally at fault

35
Q

Duty of care

A

Ttee must exercise that degree of care that a reas prudent person would exercise in managing his own prop
- includes duty to make reas decisions w/ respect to investing trust prop

36
Q

Prudent investor rule

A

Ttte has a duty to invest and manage trust assets as a prudent investor would, in light of purposes, terms, distributions req’s adn other circumstances of the trust
Ttee must exercise good faith, reas prudence, sound discretion, and care in making trust investments

37
Q

Duty of loyalty

A

Ttee owes a duty of undivided loyalty to the trust and all bene’s
Self-dealing
COI

38
Q

Self-dealing

A

Ttee can’t buy or sell trust assets for himself or spouse
Ttee can’t borrow trust funds
If he engages in self-dealing, ct’s apply the no further inquiry rule - ttee’s good faith and reasonableness are irrelevant

39
Q

Remedies for self-dealing

A 
Ratify transaxn
Surcharge ttee - sue for any resulting loss
Trace and recover prop 
- CT
- except if purchaser is BFP
40
Q

COI

A

Not acting in best interests of bene’s

Remedies include ratification and surcharge

41
Q

State lists - duty to invest

A 
Good investments
- fed gov't bonds
- fed insured cert's of deposit
- 1st deed of trust in real estate
- sometimes stocks in publicly traded corp's
Ttee can never invest
- in a new biz
- 2nd deeds of trust in real estate
No speculating allowed
42
Q

CL prudent person test - duty to invest

A 
Ttee must exercise good faith, reas prudence, sound discretion and care in making trust investments - if he holds himself out as having greater skill, then held to that standard
Each individual investment is scrutinizedGood investments
- fed gov't bonds
- fed insured cert's of deposit
- 1st deed of trust in real estate
- blue chip stocks
- mutual funds may be OK
Ttee can never invest
- in a new biz
- 2nd deeds of trust in real estate
No speculating allowed
43
Q

Uniform Prudent Investor Act - UPIA - duty to invest

A

Ttee must invest prudently

Performance is measured in context of entire trust portfolio - any individual investment isn’t per se invalid

44
Q

Duty to diversity

A

Ttee must diversify investments so that if there’s a loss, entire portfolio isn’t wiped out

45
Q

Breach of duty to invest

A

If there’s a profit, bene’s can affirm transaxn
If ttee makes 2 investments that breach duty where 1 makes a profit and the other loses $, ttee is surcharged for loss while bene’s can affirm profiting transaxn

46
Q

Duty to earmark

A

Must label trust prop as trust prop

47
Q

Duty to segregate

A

Can’t commingle personal funds w/ trust funds

48
Q

Duty not to delegate

A

Can rely on professional advisors in reaching a decision, but can’t delegate decision-making authority to these advisors

49
Q

Duty to acct

A

On a regular basis, ttee must give bene’s a stmt of income and expenses of the trust

50
Q

Remedies for breach of FD

A 
Damages
CT
Tracing and EL on prop
Ratify transaxn if good for bene's
Remove ttee
51
Q

Co-ttee

A

Liable for breach of FD’s if improperly delegated authority to co-ttee’s or neg disregarded duties of admin so as to facilitate breach by co-ttee

52
Q

Duty to deal impartially w/ all bene’s

A

Treat all bene’s fairly

Wills and Trusts (2 decks)

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