Trusts Flashcards
Trust definition/titles
Trust is a fiduciary relationship between the trustee and beneficiaries.legal title with trustee and equitable title with beneficiary
Express v implied trusts
Express: intent and complies with formalities
Implied: created by conduct, regardless of intent
Creation of trust (6 elements)
Valid express trust:
1. Intent (NOT precatory) + capacity
2. There is trust property (res must be described with certainty or ascertainable)
3. Ascertainable beneficiaries (able to possess)
4. Trustee (May be appointed)
5. Requisite formalities (e.g SOF)
6. Purpose of trust is valid
Types of trusts
Majority - irrevocable unless expressly retains right to amend
Testamentary trust
Pour over trust - from will to previously existing trust
Charitable trust - purpose for substantial amount of social benefit (beneficiary may be undefined or class ) Cy Pres doctrine of general intent
Protective trusts
Discretionary - absolute power of discretion (good faith!)
Support - provision directing as much income necessary for beneficiaries HEMS
Pure support - obligated only HEMS
Spend thrift - beneficiary NOT permitted to sell or assign his beneficial interest, and creditors cannot reach UNLESS necessities, child/spousal support or settlor is the beneficiary
Rights of creditors trusts
Same rights as beneficiary; can attach to interest income if no spendthrift or reach once given to beneficiary regardless if spendthrift
Alien ability of trusts
Interests are alienable, devisable, and descendible unless limited by terms
Powers of invasion
Able to invade if: only one beneficiary, beneficiary will ultimately receive trust principal, significant change in circumstances (usually not used to change rights unless support primary purpose; UTC does not prohibit) OR trust grants trustee discretion
Modification of trust
Cy pres (unlawful, impossible) - UTC presumed general intent (mandatory)
Common law: Equitable Deviation - allow if purpose of trust has been satisfied, has become unlawful OR impossible; settlor did not anticipate new circumstances and compliance would impair trust purpose
UTC: court sanctioned if all B consent with court protecting charity interest
Minority - parities can revoke at will
Termination of trusts
Revoked/expired
Material purpose satisfied
Unanimous agree
All beneficiaries afree and no material purpose remain
Termination will further purpose of trust due to unforeseen circumstance OR
COURT says too low
Fiduciary duties trustee (care, loyalty, impartial)
Must act exclusively for benefit of beneficiaries and good faith
Duty of care - act as person with ORDINARY PRUDENCE as if own property. Exculpatory clauses upheld as long as not bad faith
Duty loyalty - no self dealing. Can waive BUT no bad faith
Duty impartiality - can’t favor a beneficiary
Power of appointment
Granting right to appoint or distribute property property. NO legal title. Could be general or specific
Beneficiaries in class
Must be susceptible of identification by the time their interests are to come into enjoyment. Class needs to be reasonably definite.
