Trusts Flashcards
Trusts: What is a Trust?
- A legal from that divides the benefits from the burdens of property between 2 people or groups.
Trusts: What does a trustee do?
Trustees have legal title and manage the property (one person or a group or people)
Trusts: What do beneficiaries do?
Beneficiaries receive benefits of ownership (a different person or group of people from the trustee.)
Trusts: What do trust do, generally?
Trusts split title to property, and simultaneously imposes duty on trustees.
Trusts: 3 uses of a trust:
1) Avoid probate and leave everything to wife easily.
2) Benefit a new wife and poor kids from marriage with ease.
3) Leave money to someone who is not responsible and ensure it won’t get blown in a year.
Trusts: What to examine to determine if something is a trust?
- Language of Document
- Extrinsic Evidence of Trust
- Identity of Beneficiary receiving property.
Degree of Specificity a Settlor used?
Trusts: Who is the settlor?
Person establishing a trust.
Trusts: What to really look out for when it is not clearly a trust?
Someone things may just be GIFTS rather than TRUSTS.
Trusts: Oral Trust: What evidence is needed?
Clear and Convincing evidence an oral trust was made.
Trusts: Oral Trust: When can a trust not be oral?
- Best practice is to put it in writing.
- Can not be an oral trust when it involves land, a trust through will, or the statute of frauds.
Trusts: The revocable trust: What is it?
A revocable trust is one where the settlor retains complete control over assets while alive, then dispenses without court supervision at death.
Trusts: Revocable Trust: When the settlor is the trustee:
Settlor may revoke at any time and get it back.
Trusts: Revocable Trust: What happens when settlor dies?
Successor trustee is named and given instructions as to what to do upon death of settlor.
Trusts: Revocable trust: What usually accompanies a revocable trust?
Revocable trusts are accompanied by “pour over” wills?
What is a pour over will?
A section in the will that provides anything not given in a will pours over to a trust.
Trusts: What is a Private Express Trust?
Enforced by beneficiaries.
Trusts: Charitable Trusts, generally:
Rule against perpetuities does not apply, Attorney General Enforces.
Trusts: Inter Vivios Trusts generally:
Set up during the creator’s lifetime.
Trusts: Testamentary Trusts generally
Set up in a will.
Trusts: Revocable Trusts generally
Gives settlor power to modify and revoke, most states presume a trust is revocable.
Trusts: Irrevocable trusts generally:
It is irrevocable.
Trusts: 7 Requirements
1) Parties
2) Intent
3) Property
4) Capacity
5) Legal Purpose
6) Writing
7) Rule Against Perpetuities
Trust: What has more formalities, a will or a trust?
Trusts have less formalities.
Trusts: Why can trusts have less formalities?
Settlor turn over property when alive, so they typically feel the tang of loss.
Trusts: (4) Capacity: What is it the same as?
Same rules for capacity as Wills.
Trusts: (5) Legal Purpose: What Can a trust not be?
A trust can not be illegal or promote an illegal purpose.
Trusts: (6) Writing: When is a writing required?
- Statute of Frauds (Land being transferred)
- Testamentary Trust (Must meet Will Formalities)
Trusts: (1) Parties: Who are the 3 parties?
Settlor
Trustee
Beneficiary
Trusts: (1) Parties: Settlor: Who are they and what must they do?
- Person who creates the trust.
- If settlor is not also the trustee then the settlor must deliver the property to trustee.
Trusts: (1) Parties: Trustee: general rules
- A trust will not fail for want of a trustee (court will appoint one)
- Elected trustees may refuse to accept.
- People often use banks but it is expensive.
- A trust is a legally separate entity from a trustee.
Trusts: (1) Parties: Trustees: What do they do (3 things):
1) Administer the Trust
2) Invest the Property
3) Administer assets to beneficiaries when appropriate.
Trusts: (1) Parties: Trustees: When do fiduciary duties kick in?
When the property is delivered and accepted by the trustee. (same for legal obligations)
Trusts: (1) Parties: Trustees: What are their fiduciary duties?
1) Duty of Loyalty
2) Duty of Prudence (care)
3) Duty of Impartiality
4) Duty to account
Trusts: (1) Parties: Beneficiaries: What do they need to know?
Need to know who trustee is so they can call them into account.
Trusts: (1) Parties: Beneficiaries: What can’t they be?
Can’t be trustee and sole beneficiary.
Trusts: (1) Parties: Beneficiaries: What if there is a group of beneficiaries?
- Need a definite group. (“Friends” is too broad). (“My relatives” may work due to intestacy)
Trusts: (1) Parties: Beneficiaries: What if no beneficiary present/named?
Plop everything back in the estate.
Trusts: (1) Parties: Beneficiaries: Animals
generally can not be beneficiaries
Trusts: Honorary Trusts: what is is?
- A specific non-capricious purpose when there is no beneficiary.
- Trustee acts on their honor.
- Judicially made.
- usually for pets and graves
Trusts: pet trusts
- Animal given to someone in care.
- Trustee named (and doles out money for pet)
- Has to be a reasonable amount left to pet.
Trusts: (1) Parties: Beneficiaries: General Rule
The same person can be settlor, trustee, and beneficiary.
- Just not the trustee and SOLE beneficiary (legal title would not be split in a meaningful way).
Trusts: (2) Intent: Does the word “trust” being present matter?
No, there is no magic formula for establishing a trust.
Trusts: (2) Intent: What is language is too broad?
it could end up being a gift.
Trusts: (2) Intent: Good evidence of intent to be a trust?
- More specific the gift = more it looks like a trust.
- If a lawyer or financial advisor gets the gift = looks like a trust.
Trusts: (2) Intent: Test
Is the settlor intending to split the burdens from the benefit of ownership?
Trusts: What is the legal term for non-specific language?
Precatory Language
(it expresses something like “desire”, “hope”, or “request”)
Trusts: (2) Intent: Is it usually clear?
Intent is usually pretty clear from the settlor, just watch out for precatory language.
Trusts: (3) Property: Blackletter law:
Property must be Ascertainable and In Existence.
Trusts: (3) Property: What does it mean to be Ascertainable?
It means the property is described with sufficient certainty.
Trusts: (3) Property: What does it mean to be In Existence.
The property has to be available.
Trusts: (3) Property: What is best practice?
Always retitle assets in the name of the trust.
Trusts: (3) Property: Are IP rights property?
yep, IP rights are property because they are in existence.
Trusts: (3) Property: Statutory Exception for the “In Existence” Requirement:
-Pour over trust (remember the pour over clause must be in the will when it is executed).
Trusts: (3) Property: Can future interests be property?
No.
Outright Gifts: Definiton
Gratuitous transfer of property from donee by donor. Donee must accept. Donor perfects the gift through delivery.
Gift Through Trust: Definition
Can be done through imposing fiduciary duties on the holder of property.
What can litigants do when a defective gift is present?
They may try to turn it into a trust.
3 types of delivery of property?
1) Actual
2) Symbolic
3) Constructive
Who came up with honorary trusts?
Peter Singer
