Trusts Flashcards
Support trust
A trust in which the trustee is required to pay or apply so much of the trust is necessary for the support of the beneficiary. The trustee does not have discretion to refuse to pay bulls necessary for the beneficiary’s support.
Discretionary trust
The trustee is given discretion whether to apply or withhold payment of trust property to the beneficiary. The beneficiary cannot interfere with the exercise of the trustee’s discretion unless the trustee abuses her power. Generally, a court will not interfere unless the trustee has acted in bad faith or dishonesty.
Before the trustee exercises their discretion to make payments to the beneficiary, the beneficiary’s interest in not assignable and cannot be reached by their creditors.
Termination of trust by beneficiaries
Most jurisdictions permit termination of a trust by its beneficiaries only if all of the beneficiaries consent and the modification will not interfere with a material purpose of the trust.
Constructive trust
An equitable remedy used to prevent unjust enrichment resulting from wrongful conduct; not really a trust
A mere breach of a promise will not raise a constructive trust. Exceptions: fraudulent promise (promisor never intended to keep it) and breach of promise by one in a confidential relationship (which can include attorney-client, doctor-patient, business partners, family relations, and friendships)
Elements of a valid trust
Intent Identifiable corpus Ascertainable beneficiaries Proper purpose Mechanics and formalities
Elements of an express trust (private or charitable)
(1) A settlor with capacity to convey
(2) A present intent to create a trust relationship
(3) A competent trustee with duties
(4) A definite beneficiary
(5) The same person is not the sole trustee and sole beneficiary
Qualified beneficiary
A beneficiary who, on the date the beneficiary’s qualification is determined, is:
(1) a current beneficiary; or
(2) a first-line remainderman
Qualified beneficiaries may have additional rights compared to remote beneficiaries
Effect of divorce on a trust
A final decree of divorce or annulment revokes all beneficial gifts and fiduciary appointments in favor of a former spouse.
Is a writing required for a trust?
No writing needed for trust of personal property
Writing required for trust of real property (SOF)
Pour-over gift
A settlor can make gifts by will to a trust established during their lifetime.
Ways to create trusts
Inter vivos transfer
Inter vivos declaration of trust
Will (testamentary trust)
Secret trust (testamentary)
No trust nature is in the will
Constructive trust created by clear and convincing evidence (extrinsic evidence allowed)
Semi-secret trust (testamentary trust)
No beneficiary named in the will
Gift fails
No extrinsic evidence allowed
Voluntary transfers (gifts and sales)
Absent restrictions by statute or by the trust instrument, a beneficiary may freely transfer their interest in the trust.
Involuntary transfers (creditors)
Unless statute or the trust provides otherwise, the beneficiary’s creditors may reach the beneficiary’s interest in the trust.
