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Cal Bar Review > Trusts > Flashcards

Trusts Flashcards

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1
Q

Trust Categories

A

-express
-resulting
-constructive

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2
Q

Types of express trusts

A

-private
-honorary
-charitable

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3
Q

Types of resulting trusts

A

-purchase money resulting trusts
-resulting trusts arising on failure of an express trust
-resulting trusts arising from an incomplete disposition of trust assets (that is, excess corpus)

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4
Q

Types of constructive trusts

A

-constructive trust arising from theft or conversion
-constructive trust arising from fraud, duress, etc.
-constructive trust arising from breach of fiduciary duty
-constructive trust arising from homicide
-constructive trust arising from breach of promise

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5
Q

What is a trust?

A

a fiduciary relationship in which a trustee holds legal title to specific property under a fiduciary duty to manage, invest, safeguard, and administer the trust assets and income for the benefit of designated beneficiaries, who hold equitable title

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6
Q

What is an express trust?

A

a trust that arises from the expressed intention of the owner of property to create the relationship with respect to the property

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7
Q

What is a resulting trust?

A

a trust that arises from the presumed intention of the owner of property

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8
Q

What is a constructive trust?

A

an equitable remedy in cases involving wrongful conduct and unjust enrichment

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9
Q

What is a purchase money resulting trust?

A
  1. domestic partnership
  2. domestic property is purchased by both partners
  3. but the title is only in the name of one partner
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10
Q

What is a resulting trust on failure of an express trust?

A

a trust fails for lack of a beneficiary = a resulting trust in favor of the settlor or his successors is presumed

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11
Q

What is an excess corpus trust?

A
  1. a person has created an express intentional trust
  2. # the express trust does not completely dispose of the trust property.the undisposed property goes back to the settlor in a resulting trust
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12
Q

Valid trust elements

A
  1. Intent
  2. Identifiable corpus ascertainable with certainty
  3. Ascertainable beneficiaries (not a required element for a charitable express trust)
  4. Proper purpose
  5. Mechanics and formalities
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13
Q

What is the requisite intent to create a trust?

A

The settlor must intend to split the legal and equitable title and to impose enforceable duties on the holder of the legal title

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14
Q

What is a proper trust purpose?

A

Any purpose EXCEPT:
-something illegal
-Its performance requires a criminal or tortious act
-It is otherwise contrary to public policy
-It violates the Rule Against Perpetuities (except for a charitable express trust)

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15
Q

What satisfies trust mechanics and formalities?

A
  1. inter vivos transfer, inter vivos declaration of trust, or will (testamentary trust)
  2. statute of frauds (if trust is of land)
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16
Q

Mechanics and formalities for an inter vivos transfer.

A

delivery (placing the trust’s property in the settlor’s control)

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17
Q

Mechanics and formalities for an inter vivos declaration of trust.

A

declaring oneself trustee

18
Q

What is the cy pres doctrine?

A

Where it is impossible to give the settlor of a charitable express trust’s intention effect (e.g., the designated charity goes out of existence), the court may redirect the trust to a purpose “as near as possible” to the charitable endeavor initially designated by the settlor

19
Q

What is an honorary express trust?

A

a trust that is not for charitable purposes and has no private beneficiaries

20
Q

What is a discretionary trust?

A

Any type of trust where the trustee is given discretion whether to apply or withhold payments of income or principal (or both) to a beneficiary

21
Q

What is a support trust?

A

Any type of trust where the trustee is required to pay or apply only so much of the income or principal (or both) as is necessary for the support of the beneficiary

22
Q

What is a revocable inter vivos trust?

A

A will in which an interest passes to the beneficiary during the settlor’s life; it merely becomes possessory on the settlor’s death

23
Q

What is a contingent beneficiary trust?

A

A type of private express trust that arises where W, owner and insured under a life insurance policy, designates the policy beneficiary as one person, H; and if H does not survive W, to B to hold in trust for X

24
Q

What is an assignment of policies trust?

A

A type of private express trust that arises where A, owner and insured under a life insurance policy, assigns the policy to B to hold in trust for C

25
Q

What is a payable to testamentary trustee trust?

A

A type of private express trust that arises where A, owner and insured under a life insurance policy, designates as beneficiary “the trustee named in my will.” In A’s will, she names B as trustee of her property for the benefit of C

26
Q

What is a totten trust?

A

the name given to a bank account in the depositor’s name “as trustee” for a named beneficiary (e.g., “A, trustee for B”). Under such a bank account, A, the depositor, retains the passbook and continues to make deposits and withdrawals during her lifetime. B has no beneficial interest in the account during A’s lifetime, but succeeds to whatever is on deposit at A’s death

27
Q

What are a trustee’s powers?

A

-those powers expressly conferred by: The trust instrument, State law, and Court decree
-all powers that are necessary or appropriate to carry out the terms of the trust if those powers are not expressly forbidden by the trust instrument

28
Q

What are a trustee’s duties?

A

-to administer trust
-loyalty
-to account
-separate and earmark trust property
-perform personally
-defend trust from attack
-preserve trust property and make it productive
-care
-impartiality

29
Q

Trustee’s contract liability to third parties

A

a trustee is personally liable to third parties on contracts made in the course of trust administration. A trustee is entitled to reimbursement (indemnification) from the trust, however, if the contract was within their powers and the trustee acted with reasonable prudence.

30
Q

Trustee’s tort liability to third parties

A

A trustee is personally liable for torts committed in the course of the trust administration, including those committed by the trustee’s agents. There is indemnification only if the trustee was not personally at fault and the tort occurred as a normal incident to activity in which the trustee was properly engaged. If the trustee is entitled to indemnification, creditors to whom the trustee is liable can reach trust assets to satisfy claims. Note that under the UTC, a trustee is liable only if they are personally at fault; the doctrine of respondeat superior does not apply.

31
Q

What are the methods of trust modification/termination?

A

-by terms of trust
-by the settlor
-by the beneficiaries
-by operation of law
-by the court

32
Q

What is necessary for trust modification/termination by the settlor?

A
  1. settlor revokes or amends the trust
  2. the terms do not expressly state that he can’t
33
Q

What is necessary for trust modification/termination by the beneficiaries?

A
  1. The beneficiaries agree to modify or terminate the trust if all of the following are true:
  2. All beneficiaries agree (note that the existence of unborn or unascertainable beneficiaries may make this impossible to achieve).
  3. All beneficiaries are legally competent.
  4. The settlor consents OR Modification or termination will not impair any material trust purpose (“Claflin Rule”)
34
Q

What is necessary for trust modification/termination by operation of law?

A

-the property has been exhausted
-the legal and equitable titles have merged

35
Q

When may a court modify or terminate a trust?

A

-trust’s purpose has been completed or has become illegal or impossible
-upon a change of circumstances unanticipated by the settlor

36
Q

What does the Uniform Principal and Income Act do?

A

It gives the trustee or personal representative an adjustment power to reallocate investment portfolio return. This adjustment power authorizes the trustee to characterize items such as capital gains, stock dividends, etc., as income if the trustee deems it appropriate or necessary to carry out the trust purposes.

37
Q

Must a designee accept an appointment as trustee?

A

No.

38
Q

Once a trustee, can you resign?

A

Not without:
-beneficiary’s consent
-court order
-trust authorization

39
Q

What happens if a trustee resigns?

A

-If impermissibly, they have violated their duty of loyalty to administer
-trust’s backup trustee steps in
-If no such backup trustee was set up, the court appoints a new trustee

40
Q

What is a trustee’s duty of care?

A

To exercise that degree of care, skill, and caution that a reasonably prudent person would in managing her own property?

41
Q

What is the remedy for a trustee’s breach of a duty

A

The amount necessary to restore the trust property and distribution to what it would’ve been without the breach.

42
Q

Defenses to breach of trustee’s duty

A

-equity will not enforce a trust if the beneficiaries expressly or impliedly consented to the breach
-laches
-statutes of limitations

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