Trusts Flashcards
Trust
Trust is a relationship in which a TR gives TE right to hold legal title to P under fid duty to manage, invest and safeguard T assets for the benefit of a designated B. Valid T may be created by one of following:
(1) declaration by P owner that he holds P as TE;
(2) transfer of P during owner’s lifetime to another as TE;
(3) transfer of P by means of W taking effect upon the owner’s death;
(4) exercise of power of appt to another person as TE;
(5) enforceable promise to create a T.
Trust Requirements
Valid T reqs:
(1) SR’s intent to create the T (precatory language inadequate);
(2) T must have IDable prop, cannot be expectancy;
(3) T must have a purpose that’s not illegal or against PP;
(4) there mb ascertainable B, unless charitable T or B is discretion of TE.
TE need not be named bc ct can appoint.
Express Trust
Express T is where P is transferred from one owner to another and meets the above reqs, such that TE holds legal title for benefit of B, w/ SR having present manifestation of intent to create the T for legal purpose.
Testamentary Trust
Testamentary T is one created by W, and W contains the material prov of the T, and the T arises upon death of TR.
Pour Over Trust
Pour over T is one that’s structured to receive and dispose of assets at the SR’s death, TR can make gifts by W to a T, even a revo and amendable T, provided that the T inst was executed before, concurrently w/, or w/in 60 days after the exec of the W, and T is adequately ID’d in W.
Secret Trust
Secret T occurs when the SR leaves a gift to the B on the face of his W w/o indicating an intent to create a T in the W, but does so in reliance on a promise that the B will hold the P in T for another
Semi Secret Trust
Semi secret T occurs when the SR leaves a gift in his W to a person in T but doesn’t ID the B of T. Maj: semisecret Ts invalid and apply resulting T. Min: allow EE to prove T.
Spendthrift Trust
Spendthrift T occurs when the B cannot vol alienate his interest, such that his interest are protected from CRs unless for necessaries, alimony and child support, or gov CRs
Support Trust
Support T directs the TE to make limited dist to pay for the B;s support, health, maintenance, or ed and is not accessible by CRs to extent it should interfere w/ support.
Discretionary Trust
Discretionary T gives TE discretion to dis or withhold payments, principal, or income to the B.
Charitable Trust
Charitable T is one that’s for charitable purpose and benefits society. When objective of chari becomes impossible or impracticable to fulfill, cts apply cy pres and subst another similar charitable object that near SR’s intent.
Advancement of religion is a recognized charitable purpose.
Honorary Trust
Honorary T is one in which there’s neither a private B nor charitable purpose. Gen, these Ts are invalid, except to care for pets or maintain cemetery plots.
Totten Trust
Totten T is one where SR places money in bank acct w/ intent that the named B takes any amount left at SR’s death.
Resulting Trust
Resulting T is an implied in fact T based upon the presumed intent of the parties.
Resulting T will transfer P back to SR or his estate when purpose of T is satisfied or ends; an express T fails; a chari T ends; T is illegal; there’s excess corpus in T; purchase money resulting T results where one party pays consideration for prop but allows title to P tb taken in name of another; or there’s a semi secret T.
Constructive Trust
Constructive T is applied as a remedy to prevent unjust enrichment when there’s self dealing or breach of fid duties; fraud in inducement or UI; secret Ts are involved; or oral RE Ts are created.
Trustee’s Duties
AND I DID SLIDE
Account, Not Delegate, Impartial, Due care, Investigate, Diversity, Segregate, Loyalty, Invest, Defend, Enforce
(1) TEs have implied powers nec and app to carry out the terms of the T such as to sell/lease P, incur exp, borrow money or operate bus;
(2) duty to account to and inform the Bs w/ a stmt of income and exp of the T on regular basis, even if not req’d;
(3) not delegate his TE duties to others (traditional), modern allowed if TE exercises due care and skill when selecting agents;
(4) be impartial when dealing w/ income/remainder Bs;
(5) use due care and act as reas prudent person dealing w/ T affairs, which includes the duty to investigate any investment and duty to diversify investments;
(6) segregate and earmark T funds and not commingle T funds w/ TE’s own funds;
(7) duty of loyalty TE may not participate in self dealing and must avoid conflicts of interest;
(8) prudently invest T prop to make it productive for Bs; and
(9) defend actions that may result in loss to T and enforce claims that are part of the T prop
Trustee’s Duties
Account, Not Delegate, be Impartial, Due Care, Investigate and Diversify investments, Segregate funds, Loyalty, Invest trust property, Defend actions, Enforce claims.
AND I DID SLIDE
Resignation of Trustee
A trust needs a TE to hold title, but a T will not fail merely bc a TE refuses to serve. Ct will appoint a new TE. The fact that a TE resigns will not be suff reason to term the T. Once a TE accepts appointment, he cannot resign w/o permission of ct unless auth by the T terms or consent given by Bs.
Termination of Trust
Termination may arise by consent of all Bs, existing and potential Bs, and termination doesn’t disrupt purpose of the T.
Ct can term T if the purpose becomes frustrated or impossible or illegal, or if there are changed circumstances.
SR can term T if he reserved the power to do so.
Trustee’s Liability to Beneficiaries
TE is personally lia for vio TEs duties; Torts committed by him and agents w/in scop of supervision; and Ks made w/in scope of T supervision unless k itself provides otherwise. Trans of P to BFP cuts off B’s interest, but if transfer is not to BFP, then B can set aside the trans.
If a TE commits a breach of T, the Bs may sue TE for the amount necessary to restore the T property and distribution to what they would have been w/o the breach. This is called a surcharge, and the TE is personally lia.
Trustee’s Duty to Administer the Trust
A TE has a duty to admin the T in GF and in a prudent manner, in accordance w/ the terms and purpose of the T instrument.
TEs have implied powers nec and app to carry out the terms of the T such as to sell/lease P, incur exp, borrow money or operate bus
