Trusts Flashcards
What is a trust
A fiduciary relationship wherein one (trustee) is given legal title/interest by the
creator (settlor) to hold and protect the property for the benefit of another (beneficiary) who takes the
equitable title/interest and therefore possesses the power to enforce the trust
Express trusts
Private or charitable
Implied trusts
resulting or constructive
What is the UTC and applicability
Uniform Trust Code, adopted in a majority of states
UTC v. Traditional rule re: revocability
Under UTC: trusts are presumed to be revocable
Under traditional rule: trusts are presumed to be irrevocable
Settlor
creator of the trust
Trustee
must have capacity to acquire and hold property and administer the trust
Intent
- Settlor must intend to make a gift in trust, using words like “for the benefit of”
- Must be present intent to create the trust
Valid trust purpose
cannot be illegal or against public policy, must be possible to achieve
Inter Vivos (living trust)
lifetime transfers in trust
Pour over gift from will
will directs property to be distributed to a trust upon the happening
of an event; allows probate to be avoided because it is funded by the will
Requirements for pour-over gift from will
- trust must be in writing and identified in the will
- trust may be revocable but if it is revoked, the pour-over provision fails
Testamentary trust
- created according to the terms of a will; funded independently of the will
Three kinds of testamentary trusts
- In the terms of the will
- Incorporation by reference
- Secret trust
Secret trust
- what appears to be an outright gift in a will is actually based upon a promise by the devisee (trustee) to the testator (settlor) to hold the property for another’s
benefit
Secret trust: burden of proof and remedy
- Clear and convincing evidence
- Constructive trust to avoid unjust enrichment to the secret trustee
Semi-secret trust
a will directs a gift be held in trust without naming a beneficiary
Semi-secret trust, common law
Gift fails because extrinsic evidence is prevented to prove the trust
Semi-secret trust: remedy
- resulting trust in favor of the testator’s heirs
- modern trend: would impose
a constructive trust in favor of the intended beneficiary, if known
Charitable trust
a trust created for a charitable purpose benefiting the community
Charitable purpose: elements
- Charitable purpose
- Large class of unidentifiable beneficiaries
Examples of charitable purposes
advancement of health, education
religion, government, relief of
poverty, or other purpose benefiting the community at large or a particular segment
RAP re: charitable trusts v. other trusts
Does not apply to charitable trusts but to other trusts
Cy Pres Doctrine
- Allows the court to modify the terms of a charitable trust when it cannot be performed as
written, so long as consistent with settlor’s intent; UTC allows even if intent unknown - court will seek a similar charitable purpose if the original purpose becomes illegal,
impracticable or impossible to perform
Honorary trust
one without a charitable purpose and without a definite human
beneficiary to enforce the trust (e.g., to care for a pet or tend to a grave)
Income beneficiaries
Receive income from the trust
Remainder beneficiaries
entitled to the trust principal upon termination of the trust
Court’s treatment of charitable trust with specific intent v. general intent
Specific intent? –> Court may not modify the trust, it will be terminated and become a resulting trust
General intent? –> court will substitute a similar charity
Resulting trust
trust fails in some way so the holder of the property is required to return it to the settlor or the settlor’s estate
General principal re: beneficiary’s creditors
A beneficiary’s creditor’s may reach trust principal or income only when those amounts become payable to the beneficiary or are subject to their demand
Alienation re: trusts
A beneficiary’s equitable interest in trust property is freely alienable, it can be sold or used for collateral for a loan unless limited by statute or trust instrument
