Trusts Flashcards
Trust creation
A valid trust is created with (1) intent by the settlor, (2) identifiable trust property, (3) one or more beneficiaries that are definite and ascertainable, and (4) a trustee
Merger
Although a trust will not fail for lack of a trustee, the sole beneficiary may not also be the sole trustee, otherwise a merger occurs and the trust is invalid.
Trust beneficiaries
Beneficiaries need not be identified at the time of trust creation, but they must be susceptible of identification by the time their interests are to come into enjoyment.
Class gifts
Beneficiaries may be a class if the class is sufficiently definite. The settlor may also allow the trustee discretion in selecting class members if it is reasonably definite. If the class is too broad, the trust (or applicable portion) may be invalid for lack of definiteness.
Trust property
Trust property must be identifiable but may arise in the future if (1) the settlor manifests anew an intent to create the trust, or (2) consideration.
Support trust
A support trust requires the trustee to pay, as is necessary, for the beneficiary’s support from the trust assets. The trustee does not have discretion to refuse to pay bills necessary for the beneficiary’s support.
Discretionary trust
A discretionary trust allows the trustee discretion to decide when to make a distribution to a beneficiary. The beneficiary cannot interfere (demand payment) with the exercise of the trustee’s discretion unless the trustee abuses his power.
Abuse of power
Generally, a court will not interfere unless the trustee has acted in bad faith or dishonesty.
Spendthrift trust
A spendthrift trust is one which the beneficiary is unable voluntarily or involuntarily to trailer his interest in the trust. He cannot sell of give away his rights to future income or capital, and creditors generally cannot collect or attach such rights.
Creditor attachment
A creditor in any case can reach only the beneficiary’s interest in a trust. Creditors generally cannot reach the interest in a spendthrift trust unless the claim is brought by (1) dependents, (2) the government, and (3) persons supplying necessities. A creditor is not prevented from income after it has be distributed to the beneficiary.
Charitable trust
A charitable trust is created for a charitable purpose. It must have a large number of not readily identifiable individuals. A charitable trust is terminated when the charitable purpose become illegal, impossible, or impractiable.
Cy pres
A court may modify or terminate the trust to be distributed to the settlor’s general charitable trust intent when (1) the purpose becomes impracticable, impossible, or illegal; (2) no alternative charity is named in the trust; (3) the court found the settlor had a general rather than specific charitable purpose.
Pourover gift
A pourover gift ….
Revocation of trust
Under the UTC, the default rule is that a trust is revocable. However, the common law reserves the power to revoke and amend with the settlor, thus trusts are presumed irrevocable unless the trust expressly states otherwise.
Termination of trust
Settolor may terminate the trust if all beneficiaries are in existence and all agree. If the settlor dies, the beneficiaries may terminate the trust if (1) all income beneficiaries and remaindermen unanimously consent and (2) if there is no material trust purpose that requires performance.