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Trusts Flashcards

1
Q

Requirements of an express private trust

A
  1. present intent
  2. corpus
  3. beneficiaries
  4. valid purpose
  5. mechanics and formalities
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2
Q

can sole trustee be sole beneficiary

A

no, must have one other person

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3
Q

What is required for settlor capacity and present intent?

A

capacity to make will

  1. Intend trust to take effect immediately
  2. Express intent by words or conduct
    Note: Precatory expressions are insufficient; oral trusts are OK
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4
Q

Must trustee be named

A

Yes, but trust does not die if trustee does or rejects, can just appoint

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5
Q

What is required for res?

A

Property can be anything including future interest

It must be in power to convey and described with certainty

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6
Q

What is required for beneficiaries?

A

Must be ascertainable, notice not required; acceptance presumed

if class beneficiary:
CL: reasonably definite
UTC: can be indefinite

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7
Q

What is required for valid trust purpose?

A

Provision cannot be
1. illegal
2. impossible
3. contrary to public policy
4. intended to defeaud creditors

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8
Q

What is required for formalities?

A

Inter vivos: declaration (settlor is trustee) or present transfer+conveyance (s not trustee)
- no writing required unless SOF

Testamentary: essential terms must be ascertainable from will

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9
Q

What and how does a secret trust work?

A

Absolute gift made in reliance on beneficiary’s promise to hold property in trust for another; nature of trust not specified -> constructive trust

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10
Q

What and how does a semi secret trust work?

A

Gift in trust but fails to name beneficiary -> trustee holds property in trust for testator’s heirs

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11
Q

Inter vivos trust

A

Created during settlors life

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12
Q

Testamentary trust

A

Testamentary trust

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13
Q

Requirements for charitable trust

A
  1. Purpose must benefit public 2. Must have indefinite beneficiaries

Note: May be perpetual, RAP doesn’t apply unless shifting from private to charitable or vice versa

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14
Q

Who enforces charitable trusts?

A

Settlor, beneficiary, or AG

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15
Q

What is cy pres?

A

If settlor’s intended purpose is impracticable, unlawful, or wasteful, court
substitutes new charitable purpose

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16
Q

What is an honorary trust?

A

Not for charitable purpose, but no private beneficiaries who can enforce trust (e.g., trusts for pets, graves)

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17
Q

Who can enforce honorary trust? How long can enforce

A

Enforceable by someone named in the trust or appointed by court

Under UTC, enforceable for 21 years or for life of the animal

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18
Q

What is a spendthrift provision?

A

Beneficiary may not voluntarily or involuntarily transfer his interest

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19
Q

When is a spendthrift trust not enforceable?

A

Settlor also beneficiary; government or family order

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20
Q

What is a support trust?

A

A support trust directs the trustee to pay only so much of the income or principal (or both) as is necessary for the beneficiary’s support

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21
Q

Are beneficiaries equitable interest alienable? What does this mean?

A

Yes, can voluntarily transfer interest and creditors can levy on this interest

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22
Q

What is a discretionary trust? Can creditors reach?

A

Trustee has discretion to pay or withhold income or
principal

Note: before payment, creditors can’t reach interest

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23
Q

What is the standard of support for a support trust

A

Beneficiary’s accustomed standard of livingW

24
Q

Are support trusts assignable? What does this mean?

A

No, cannot be assigned or reached ever

25
Who can modify a trust?
1. Settlor 2. Beneficiary 3. Court 4. Trustee
26
How can a settlor modify a trust?
UTC: trust presumed revocable and amendable unless terms expressly state otherwise Traditional tule: must reserve the right
27
When may a trustee modify a trust?
If trust property is less than 50k and insufficient to justify administration
28
How can a beneficiary modify a trust?
1. Settlor and all beneficiaries consent (even if conflicts with material purpose) OR 2. All beneficiaries consent and no material purpose would be frustrated Note: watch for remote unborn beneficiaries whose representatives need to consent
29
When may a court modify a trust?
If: 1. All beneficiaries had consented and interests of non consenting beneficiaries are protected 2. Unanticipated circumstances threaten trust purpose 3. Continuation of trust impractical, wasteful, or has too high of administrative cost compared to value
30
What are the powers of trustee?
Those: 1. expressly conferred 2. appropriate to achieve management 3. powers an individual has over property, unless limited by trust 4. powers conferred by UTC
31
What are the duties of a trustee?
1. Duty to administer the trust 2. Duty of loyalty 3. Duty to report 4. Duty to separate trust property 5. Duty to enforce claims 6. Duty to preserve property and make it productive
32
What happens if a trustee duty is breached?
Voidable by beneficiary unless transaction was authorized, SOL, or beneficiary consented
33
Can settlor waive self dealing restrictions?
Yes
34
What happens if trustee assets are commingled with trust
Losses presumed to be trustee's, gains presumed to be trust assets
35
What does the duty to preserve property and make it productive entail?
Investments must be prudent; trustee must use reasonable care and must diversify investments if prudent trustee would do so Note: if trustee has special skills, held to higher standard
36
What does the duty to administer trust entail?
Act in good faith and prudently and in accordance with trust's terms
37
What does the duty of loyalty entail?
No self dealing
38
What does the duty to report entail?
Keep beneficiaries reasonably informed
39
What does the duty to separate trust property entail?
No commingling
40
What happens if trustee commits breach of trust?
Court can order specific performance, injunction, compel money damages, or suspend
41
Mechanism that trustee liable to beneficiaries?
To restore trust property to what they should have been; or any profit
42
What are trustee's defenses to breach?
Trustee acted in reasonable reliance or beneficiary consented, released trustee from liability, or ratified transaction
43
Are exculpatory clauses allowed for trustees
Void if they relieve trustee of liability for breach committed in bad faith or reckless indifference or an abuse of relationship with settlor
44
Are trustees liable for acts of co-trustees
No if they didn't join action and exercised reasonable care in preventing breach or compelling co-trustee to redress breach
45
What act allocated receipts and expenses?
Uniform Principal and Income Act (UPAIA)
46
How does UPAIA allocate receipts?
a. Income—rental income, interest on bond or CD, money received from entity, liquidating assets and mineral rights—10% rule b. Principal—proceeds of sale of asset, eminent domain awards, capital gains, property other than money received from entity, insurance proceeds where trust is beneficiary, liquidating assets and mineral rights—90%
47
How does UPAIA allocate expenses?
a. Income—one-half trustee and consultant compensation; one-half accounting and legal expenses; ordinary expenses (interest payments on debt, ordinary repairs, taxes, insurance premiums) b. Principal—one-half trustee and consultant compensation; one-half accounting and legal expenses; principal payments on debt; environmental costs
48
What is a revocable trust?
Property goes into the trust at the date of testator's death, not upon will execution.
49
What is pour over property? How does it work?
Pour over from will to revocable trust. Majority view: may devise to a trust established or to be established during testator's lifetime Traditional view: trust must be in existence or executed at time of will's execution
50
can pour over gift be the initial trust funding?
yes if trust is identified in will and executed before testator's death
51
Are life insurance trusts allowed?
Yes
52
What is a Totten trust?
Trustee-depositor has full rights during lifetime Notes: revoked by withdrawals or any intent to revoke; automatically terminates if beneficiary predeceases depositor
53
What is a resulting trust?
A trust that follows presumed intention
54
What is a constructive trust?
A trust that provides equitable remedy
55
What are the 3 types of resulting trusts? How do they work?
Purchase money resulting -- person taking title did not supply consideration; sole duty is to convey title Failure of express - resulting trust arises with settlor as beneficiary Excess corpus - trust property remains after purpose fulfilled, resulting trust for settlor
56
When does a constructive trust arise?
Breach, theft, fraud, slaying, or breach of confidential relationship Note: must be requested by clear and convincing evidence with particularity as to D's wrongdoing
57
When does a trust arise in the future when there are no assets when executed?
If gift --> when assets come into existence, the settlor manifests anew an intention to create the trust If consideration --> no need for re-manifestation

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