Trusts Flashcards
Vocab Rapid Fire - Trustee - Res - Settlor
Trustee = the person who holds legal title Res = Property Settlor = trustor/grantor/donor = creator of the trust
Is consideration required to create a trust?
No - most trusts are created gratuitously
Trustee has a _____ duty to manage, invest, safeguard, and administer the trust assets and income for the benefit of the designated beneficiaries who hold equitable title.
What does this duy entail?
Fiduciary Duty
Entails:
1) deal with property with reasonable care
2) utmost loyalty
3) personal liability for substandard conduct
Does the trustee receive any benefits from holding legal title to the property?
No - the trustee might earn a fee but receives no benefit from legal title
Can the beneficiary exercise control over the trust assets?
No, but the trustee owes a duty to them and the beneficiary can enforce the trust
What happens when the trustee’s duties are completed?
The trust terminates and the trustee dstributes any remaining property to the remainder beneficiaries
Does a trust have to go through probate?
No - that’s a big benefit of an inter vivos trust - it passes outside of probate
Can a settlor impose conditions on a trust?
Yes, as long as the conditions don’t violate the law, public policy, or the rule against perpetuities
What are the 4 types of trust?
Express trust are created by the express intention of the settlor which can be either:
1) Express trust with private beneficiary
2) Express trust with charitable beneficiary
Trusts can also be created by operation of law…
3) Resulting Trust (arise from presumed intention of the owner of property)
4) Constructive Trust (equitable remedy to prevent unjust enrichment)
What body of law governs express trusts?
The Uniform Trust Code (UTC) in almost all states
What are the 6 requiements for an express trust?
Can I Take Back DPD
1) settlor with Capacity to convey
2) present Intent to create a trust relationship
3) competent Trustee with duties
4) definite Beneficiary
5) present Disposition of trust property owned by the settlor
6) valid Purpose
7) the same person cannot be a sole trustee and sole beneficiary (Difference)
What capacity is required to create a testamentary trust?
The same capacity as is required to make a will
Does the beneficiary need to know that they are the beneficiary of a trust?
No - Don’t have to notify the beneficiary because acceptance is presumed
Present intent is required to create a trust. What exactly do they have to intend?
Need to manifest intent to split legal and equitable title between a trustee and a beneficiary - this can be written or oral and settlor doesn’t have to use the word trust.
Need to intend to charge a trustee with legal duties
Owner transfers property as a regular outright gift. Is it too late to claim the transfer was really a transfer in trust?
Yes - can’t change the character of a completed gift
What is the effect of expressions of hope, wish, suggestion as to how property should be used?
What kind of evidence indicates intent to create a trust rather than just make suggestions?
No effect becaue these are only precatory. A trust is not created because only moral obligations (not legal ones) are created.
BUT the following overcome the inference that no trust is created:
- Definite precise directions
- Directions are addressed to a fiduciary
- an unnatural disposition of property would result absent the trust (e.g. a close relative would take nothing)
- Extrinsic evidence showing the settlor previously supported the beneficiary
What happens if there is a sole trustee and a sole beneficiary which are the same person?
The legal and equitable title merge and the trust terminates
Can there be a trust without property?
What kind of property counts?
No - no property, no trust. A trust is a method of conveying property
Any kind of property counts but the settlor actually has to own it and be able to transfer/assign it. Can’t be a mere expectancy of future ownership (but future interests count because they are presently owned - just become possessory in the future)
Insurance policies/contract interests count, vested or contingent interests count, real or personal property counts
Can a person X hold their own debt in trust?
No - but person Y can hold X’s debt in trust
Is an ascertainable beneficiary always required to create a trust?
Who can be a beneficiary?
Yes an ascertainable beneficiary is required unless charitable or honorary
Any person/entity capable of owning property can be a beneficiary of a trust - do not have to be “competent”
An ascertainable beneficiary is usually required for a trust. What is an ascertainable beneficiary?
Must a beneficiary must be ascertainable by the time their interests are to come into enjoyment So generic descriptions ("children of X") are OK as long as they are ascertainable when they are to benefit. Can also authorize the trustee to use their discretion to determine which members of a class should receive (at common law a "reasonably ascertainable" class is required but UTC allows unlimited discretion)
What happens if there is no ascertainable beneficiaries?
The trust fails. The trustee should give legal title back to the settlor.
What are the different types of beneficiaries?
Qualified Beneficiary = current beneficiary or first-line remainderman (one contingency away from benefitting). Usually have additional enforcement rights
Incidential/Indirect Beneficiary = unintended beneficiary like an attorney designated by the trust instrument
Is acceptance of a trust required?
Yes, but acceptance is presumed and a trust can be accepted after it is created.