Trusts Flashcards
Trust Relationship
A trust is a fiduciary relationship with respect to property in which the trustee holds legal title to specific property with a fiduciary duty to manage the property for the benefit of designated beneficiaries who hold equitable title.
Express Trust
A valid express trust is created when settlor has intent to create a trust, there is trust property, an ascertainable beneficiary exists, the trust has a trustee, and all parties comply with the requisite formalities. A trust will not fail for lack of an appointed trustee.
Trust Revocation
Under the UTC, a trust is presumably revocable unless the trust instrument states otherwise.
Termination
An irrevocable trust may be terminated if the settlor and all beneficiaries unanimously agree. It may also be terminated after settlor’s death if all beneficiaries agree and no material purpose remains.
Trust Modification
Trustees and beneficiaries can request equitable deviation from administrative provisions in the trust if the purpose of the trust has been satisfied, becomes unlawful, or impossible to carry out.
Pour-Over Provision
A pour-over provision in a will devises property to a previously existing trust under the terms of that trust. A pour-over provision does not create a trust.
Discretionary Trust
A discretionary trust grants the trustee absolute power and discretion to make good faith determinations regarding when and how much of the trust property should be distributed to the beneficiaries of the trust.
Support Trust
A support trust is a trust that contains a provision directing the trustee to pay the beneficiary as much of the income or principal as is necessary for the beneficiary’s education and support.
Spendthrift Trust
A spendthrift trust is designed to protect the carelessness of beneficiaries. A spendthrift trust prevents beneficiary from transferring any interest and creditors from attaching to any interest unless an exception applies.
Charitable Trust
A charitable trust is a trust that has the purpose of accomplishing a substantial amount of social benefit to the public at large. This usually includes relief of poverty, advancement of education, advancement of religion, etc.
Cy Pres Doctrine
Under the cy pres doctrine, the court may select an alternative charitable purpose that is “as near as possible” to the settlor’s original intent if the original intent is impracticable, unlawful, wasteful, or impossible to achieve. The court must find that settlor had general charitable intent.
Honorary Trust
A honorary trust is intended to take care of a thing for a non-charitable purpose, such as a burial site or caring for a pet. Under the UTC, this may not be enforced for more than 21 years.
Trustee’s Duty of Loyalty
The trustee owes a duty of loyalty to the beneficiaries where the trustee may not obtain any person gain from administering the trust. Self-dealing is per se breach.
Trustee’s
Duty of Impartiality
The trustee owes a duty to be impartial with respect to all of the beneficiaries of the trust when managing, investing, and distributing the trust property.
Trustee’s
Duty of Care
The trustee possesses a duty to exercise the degree of care, skill, and caution as a person of ordinary prudence would exercise.
Trustee’s Investment and Management Decisions
A trustee’s investment and management decisions should be evaluated in the context of the portfolio as a whole as part of an overall investment strategy. Trustee also has a duty to diversify the portfolio.
Settlor’s
Appointment Powers
A settlor can give beneficiaries a power of appointment enabling the beneficiaries to designate who will receive specific property.
Class Gifts
Under the UTC, each living beneficiary will take their share and the deceased beneficiary’s share will pass to the surviving descendants when a settlor makes a class gift. A class gift is one made to a group.
