Trusts Flashcards
A trust is
the separation of property ownership into legal and equitable title
The primary purposes of creating a trust are
(1) Beneficiary Protection - giving the benefits of ownership without the need to manage the property
(2) Asset Flexibility - distribution of those benefits over time and for purposes
(3) Settlor Protection - permitting a more competent individual to manage settlor’s assets
(4) Probate Avoidance - the property passes during the settlor’s lifetime without court involvement
Trusts may be created
(1) Expressly - settlor expressly intended to create trust under the UTC for private (specific ascertainable individuals) or for charitable (nonspecific or general class of people) beneficiaries.
(2) Operation of Law - the law infers a trust results from settlor’s intent (Resulting Trust) or constructs a trust to prevent unjust enrichment (Constructive Trust)
Generally, five (5) elements must be met for a valid trust, specifically
(1) Intent
(2) Identifiable Trust Corpus
(3) Ascertainable Beneficiaries
(4) Legal Purpose
(5) Mechanics and Formalities
For an express trust, there must be
(1) Settlor Legal Capacity
(2) Present Trust Intent
(3) Competent Trustee for Trust Duties
(4) Qualified Ascertainable Beneficiary - knowledge of trust irrelevant
(5) No One and The Same Trustee and Beneficiary
(6) Present Disposition of Presently Owned Property
(7) Valid Trust Purpose
(8) Identifiable Trust Corpus
Settlor Legal Capacity is
over 18 and sound mind
Present Trust Intent is
(1) External manifestation of non-precatory intent to presently split title of property presently owned, transfer legal title to another, and create enforceable duties on trustee that take effect immediately
[X] no magic words, no beneficiary knowledge
Identifiable Corpus is
The Res - presently vested and identifiable property that the settlor can unilaterally transfer for the trustee to manage.
(a) may be fractional interests, and vested future interests, but not mere expectancies
Qualified Ascertainable Beneficiaries are
those who are a current beneficiary or first-line remainderman beneficiary for a triggering date
Trust Validity
Identifiable Trust Property
Trustee (i) holds and manages for
Beneficiary (i) ascertainable (ii) definite
Revocation of Trust
UTC, inter vivos presumed revocable unless express
irrevocable still terminated / modified
by settlor if all Bs exist and agree
by Bs after death if unanimous consent income and principal and no material purpose left. Claflin
Types of Trusts
Pour Over (testamentary)
Discretionary (Jimmy)
Support (income)
Spendthrift (creditor)
Charitable (purpose)
Honorary (statute)
Differences between Types of Trusts
Duty of Loyalty
act in best interest of Bs
Duty of Care*
prudent administration
UPIA
Entire Portfolio Rule
Diversify
