Trusts Flashcards
Charitable Trust
A trust will not fail for a lack of a definite beneficiary if it qualifies as a charitable trust. A charitable trust is an express trust and may be created for the relief of poverty, the advancement of education or religion, or other purposes beneficial to the general public. A charitable trust is not subject to the rule against perpetuities.
Cy Pres Doctrine
Under the Cy Pres Doctrine, a court may modify a charitable trust consistent with the settlor’s intent if its charitable purposes have become unlawful, impracticable, impossible to achieve or wasteful. – A Cy Pres action can be brought by the settlor, a trustee, a beneficiary, or the Florida Attorney General.
Pet Trust
In Florida, a settlor may create a trust for the care of an animal alive during the settlor’s lifetime. The trust terminates on the animal’s death or if the trust was created to care for more than one animal on the death of the last animal. – If an excessive amount the court can reduce the amount for the intended use of the pet.
Resulting Trust
A resulting trust can arise when a private express trust fails. Based on the settlor’s presumed intent, the court will require the trustee to return the trust property to the settlor or to the settlor’s estate.
Totten Trust
A Totten Trust is not a trust rather it is a bank account where a trustee can make deposits and withdrawals for the named beneficiary. It can be revoked at anytime by the trustee and the funds pass to the named beneficiary upon the death of the trustee.
No Contest / Exculpation Clause
No Contest Clause: In Florida, “no contest” clauses are unenforceable in all cases. (wills and trusts)
Exculpation Clause: In Florida, a trust provision cannot relieve a trustee from liability for acts performed in bad faith or reckless indifference to the beneficiary’s interests.
Secret Trust
A secret trust is created when an intended beneficiary is promised something that is not in the trust. Such a promise must be proven by clear and convincing evidence and if successful a constructive trust will be imposed on the property for the intended beneficiary.
Constructive trust is an equitable remedy to prevent unjust enrichment by a devisee.
Generally, a court will only interpret was is included in four corners of the trust document and if it is clear the court will not consider any additional evidence unless there is some ambiguity in the terms.
Spendthrift Provision
A spendthrift provision prevents voluntary and involuntary transfers of the beneficiary’s interest in the trust, this prevents the beneficiary from selling or assigning the interest in the trust and prevents creditors from seizing the beneficiary’s interest.
However, a spendthrift provision is unenforceable against a special creditor. A special creditor is the beneficiary’s child, spouse, or former spouse who has a judgment for child support or alimony. A special creditor who has provided services to protect the beneficiaries interest in the trust, and a claim by the State of Florida or US government to the extent permitted under state and federal law.
A special creditor can only break through the spendthrift provision only as a last resort upon showing that traditional methods of enforcing the claim are insufficient.
Discretionary Provision
A trust contains a discretionary provision if a trustee may make discretionary distributions to or for the beneficiary’s benefit. A beneficiary’s creditor (including special creditors) cannot compel a distribution subject to the trustee’s discretion or attach or reach the beneficiary’s interest in the trust.
Trust Validity
In Florida, the following elements must be satisfied to create a trust. Property, capacity, intent, definite beneficiaries, separation of legal and equitable title, duties of trustee, valid purpose. Also, in Florida, a trust is presumed to be revocable unless it expressly states its irrevocable.
Property
A trust can be created by transfer of property to another person during the settlor’s lifetime (living trust), by will (testamentary trust), or by declaration by the owner of the property that they hold identifiable property as trustee. Property (res) must be existing and identifiable over which the settlor has power of conveyance.
2 Exceptions: life insurance proceeds and pour-over trust both satisfy property element. — A pour-over trust provision is only valid if the trust was created before or at the same time as the will.
Capacity
The settlor must have the mental capacity to create a trust at the time the trust is created. To create a revocable or testamentary trust the settlor must have the capacity to make a will. To create an irrevocable trust the settlor must have the capacity required to make a gift and transfer property.
Intent
The settlor must have the present intent to create a trust. In doing so, the settlor must use words of direction (mandatory language) over words of request (precatory language).
Define Beneficiaries
Unless it is a charitable or pet trust, the trust must have a definite beneficiary which must be specifically named or capable of being ascertained now or in the future. When there is more than one beneficiary, the beneficiary may hold a present or future interest, and that interest may be vested or contingent.
Separation of Legal and Equitable Title
A trust can only exist if no one person is the sole trustee (legal title) and sole beneficiary (equitable title). If one person owns both legal and equitable, under the merger doctrine, they own the property in fee simple absolute.
