Trusts Flashcards
What is a Trust
A management device, the central feature is a bifurcated transfer
What is the priciple?
The original trust property and intrest.
What is income?
The money the trust makes
Who is the setter?
The person who creates the trust.
Can a an irivocable trust be revoced?
Yes with the consent of all parties.
Is a trust presumed to be revocable or irrevocable?
At common law, it was presumed irrevocable, under CA Law and the Uniform Trust Code, it is presumed to be revocable unless specifically stated in the documents.
What is a mandatory trust?
The trustee must make distributions.
What is a discretionary trust?
No disbursements are required, sometimes, specific critieral the trustee must satisfy.
What is an equitable trust?
An equitable remedy set up for a specific purpose.
Are Trust subject to the rule against perpetuities?
Yes
Who is the Trustee?
The person who manages the trust and holds legal title. Can be a person, company, or bank.
Who is the beneficiary?
The person who receives the benefit. This person holds equitable title and can hold the trustee accountable.
Does a trustee fail for lack of a trustee?
No, not at common law
When can a revocable trust be revoced?
During the settlor’s life
What are the elements of a Private Express Trust?
Intent (must express the intent to make a gift in trust), Trust Res (trust property), valid purpose, ascertainable beneficiary,
What is a precatory trust?
Where hope or wish is expressed
What is an empty trust?
A trust without property
When is a trust purpose valid?
If its not illegal or contrary to public policy
Exceptions to ascertainable beneficiaries?
- Unborn children
- Class gifts (class must be definite)
- Charitable Trusts (must have a charitable purpose)
What is a remedial trust?
A trust created by operation of law for a specific purpose.
What is a resulting trust?
A trust where the trust fails. Trustee must return property to settlor or settlor’s estate.
What is a Constructive Trust?
Turn the transfer into a constructive turst to return property in cases such as fraud, undue influence, slayer cluase.
When can a creditor reach trust property?
Where the beneficiary’s trust is freely alienable when payable or subject to the beneficiary’s demand
Which creditors can get past a spend thrift trust?
Spouse, child support, goverment
How is an express trust terminated
Expiration, Unfofilled Material Purpose doctrine, Settlor’s unilateral termination (if permitted by trust), agreement of all parties
When can a trustee block premature termination?
Where the trust is still serving some material purpose
When can a Settlor modify trust?
When permited in docs, or where all beneficiaries agree and does not change the fundamental purpose.
What is the Uniform Principle and Income Act (UPAIA)?
The trustee is to focus on the total return of the trust portfolio when considering principle vs. income.
Must be reasonable and must consider:
1 Intent of trust (Settlor’s intent)
2. The nature, duration, and purpose of the trust
3. Identities and circumstances of beneficiaries
4. Anticipated effect of economic conditions
5. Taxes
What are the powers of the trustee?
First, check the documents
Second Statute
The modern trend is for a trustee to have the powers of a reasonably prudent person.
What are the trustee duties
Duty of loyalty and Duty of care
What is the duty of loyalty
Objective standard did the trustee act reasonably?
Self-dealing is a per see violation. - No further inquiry rule Can be authorized by trust documents but must be reasonable
Conflict of interest -
What is the duty of Care?
Reasonable prudence - The care an ordinary person would handle in the administration of the estate
If special skills higher standard
Common law no obligation, now can delegate
What are the admi dutys of a trustee
Duty to inform the benificiary
Duty of accounting - must account for activities.
What are a beneficiary’s options for a breach by the trustee?
- Ratify the transaction and waive the breach
- surcharge the trustee by suing for any resulting loss
- Trace and recover the property
- See to discharge the trustee and replace
Does Ommited child apply to a trust?
Yes, if they were omited they can reach trust assets
