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ube > Trusts > Flashcards

Trusts Flashcards

1
Q

settlor’s capacity

A

(1) a settlor with capacity to convey, (2) a present intent to create a trust relationship, (3) a competent trustee with duties (4) a definite beneficiary, and (5) the same person is not the sole trustee and sole beneficiary

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2
Q

present intent to create trust

A

settlor must intend to split legal and equitable title and to impose enforceable duties on holder of legal title; must intend for trust to take effect immediately

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3
Q

trustee

A

holds legal title to specific property and is under a fiduciary duty to manage, invest, guard, and administer the trust assets and income for the benefit of the designated beneficiaries, who hold equitable title

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4
Q

beneficiary’s disclaimers

A

beneficiary may disclaim an interest by filling a written instrument with the trustee

Generally, must be made within 9 months

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5
Q

anti-lapse statutes

A

everal states and UPC apply anti-lapse statutes to future interests created in trust

Trust makes alternative gift if related beneficiary does not survive testamentary settlor

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6
Q

definiteness

A

private trust; unascertainable beneficiaries must be definite at formaition of trust and ascertainable when their interests can be enjoyed

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7
Q

class gifts

A

gifts to class

common law: must be reasonably definite class

UTC: trustee may select from indefinite class
Failure to exercise power leads to trust in favor of settlor or their successors

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8
Q

trust property

A

Trust property is required for formation; property must be ascertainable with certainty
- Property = anything transferrable
-No trust property = trust fails
- Sufficient trust property: existing interest in existing property
- Remaindermen valid!

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9
Q

trust purposes

A

can be created for any purpose; invalid if purpose is illegal, contrary to public policy, impossible, intended to defraud settlors, RAP

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10
Q

Rule against perpetuities

A

nonvested property is invalid if uncertain to vest no later than 21 years after a person who was alive when trust was created
-Alternatives
–Wait-and see approach
–90 year vesting period

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11
Q

creation of trusts

A

Can be created by inter vivos transfer, inter vivos declarations, or by will

(1) intent, (2) identifiable corpus, (3) ascertainable beneficiaries, (4) proper purpose (5) mechanics and formalities

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12
Q

inter vivos trust

A

requires (1) present intent, expressed by conduct or words, (2) transfer/delivery to trustee, (3) satisfies SOF if required

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13
Q

testamentary trust

A

(1) Trust intent and essential terms must be ascertained from (2) will, from writing incorporated, or from power of appointment created in will

secret trust: settlor agrees trustee will hold property in trust for someone else, but will does not state purpose of gift (may present extrinsic evidence)

semi-secret trust: will makes gift in trust, fails to name beneficiary (gift fails)

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14
Q

oral trusts

A
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15
Q

pour over gifts from wills to trusts

A

Property goes into trust as the trust exists at the date of the testator’s death

Trust amendments made after will execution are effective to govern pour-over property

If trust revoked, trust fails

Pour-over property can be initial trust funding if: (1) Trust identified in will or (2) trust is executed before testator’s death

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16
Q

revocable trusts and irrevocable trusts

A

UTC: Settlor can revoke or amend trust unless the terms expressly state it is irrevocable
- Traditional rule: trust is irrevocable unless settlor expressly reserves the power to revoke or modify

17
Q

charitable trusts

A

indefinite beneficiaries, charitable purpose, may be indefinite (RAP doesn’t apply), cy pres doctrine

18
Q

cy pres doctrine

A

With charitable trusts, court can rewrite the trusts terms to conform with the settlor’s charitable purpose

19
Q

honorary trusts

A

Trust that is not for charitable purpose, with no private beneficiaries

Commonly established for benefit of pets or maintenance of burial places

Common law: trustee is “on honor” to respect trust (no human beneficiary)

UTC: trust is enforceable by someone named in the trust instrument or appointed by court

20
Q

spendthrift trusts

A

precludes beneficiary from voluntarily or involuntarily transferring their interests of trust; creditors cannot reach it to satisfy claims

21
Q

discretionary trusts

A

Trustee is given discretion whether to apply or withhold payments to a beneficiary

Creditor cannot reach beneficiary’s interests, as beneficiary’s interest is not assignable (nothing to assign or transfer)
Exception: court can force trustee to satisfy judgment or order against beneficiary for support or maintenance of beneficiary’s spouse, child, ex-spouse

22
Q

support trusts

A

directs trustee to pay so much of income or principal as is necessary for the beneficiary’s support

May be mandatory or discretionary

not assignable (impliedly spendthrift)

If instrument is silent, standard of support is accustomed standard of living

23
Q

modification and termination by settlor

A

UTC: Settlor can revoke or amend trust unless the terms expressly state it is irrevocable

Traditional rule: trust is irrevocable unless settlor expressly reserves the power to revoke or modify

24
Q

modification and termination by beneficiaries

A

With settlor’s consent: trust may be terminated or modified by consent of settlor and all beneficiaries (Modification valid even if conflicts with trust’s material purpose)

Without settlor’s consent: trust may also be terminated or modified on the consent of only all beneficiaries, but only if no material purpose of trust would be frustrated

UTC: court may modify trust w/o consent of all beneficiaries if (1) trust could have been terminated had all beneficiaries consent, and (2) interest of the beneficiary who does not consent would be adequately protected

25
Q

modification and termination by the court

A

Court may terminate or modify trust if (1) trust could have been modified if all beneficiaries had consented, and (2) the interests of nonconsenting parties will be adequately protected

Court may modify or terminate if:
§ Unanticipated circumstances threaten purpose of trust
§ Continuation of trust is wasteful or impracticable
§ The value of trust is insufficient to justify cost of administration or achieve tax objectives

26
Q

modification and termination by the trustee

A

Uneconomic trust: Trustee can terminate if property is less than $5ok and amount is insufficient to justify the cost of administration
Combo and division of trust: Trustee can combine several trust or divide, given that it doesn’t frustrate purpose, impair rights, or is contrary to terms of trust

27
Q

trustee powers: imperative and discretionary

A
  • Mandatory powers: trust instrument requires its exercise
    Discretionary powers: trust instrument gives trustee discretion to exercise
  • liability for abuse or failure to exercise
  • subject to judicial review
  • Grant of absolute or uncontrolled discretion is still reviewable by court
28
Q

trustee duties

A
  • duty to administer trust (good faith and prudence)
  • duty of loyalty (can’t act unfairly to beneficiaries)
  • duty to report and keep records
  • duty to keep trust property separate
  • duty to enforce claims and defend trust
  • duty to preserve trust property and make it efective
29
Q

trustee’s duty for investment

A

Standard of care: prudent investor rule: the reasonable care, skill and caution of a prudent investor
Portfolio approach: prudence assessed as to overall investment strategy (not individual components)

  • delegation ok if trustee acts prudently in agent selection, establishment of delegation terms, and periodic review of agent
30
Q

trustee liability

A

Remedies for breach of trust:
- Specific performance
- Enjoin trustee from committing breach
- Compel trustee to pay or restore property
- Suspend or remove trustee

Damages:
- Amounts necessary to restore
- Trustee’s profit from breach
- Trustee is liable to a beneficiary for any profit from administration of trust, even if there was no breach

31
Q

resulting trusts

A

Purchase money resulting trusts: where “beneficiary” furnishes consideration for acquisition of property but, with beneficiary’s consent, title is taken in name of trustee

Resulting trusts arising from failure of express trust

Resulting trust arising from incomplete dispositions of trust assets (excess corpus): where trust purpose is completely satisfied and some trust property remains

settlor is beneficiary; if settlor deceased, then settlor’s successor in interest

32
Q

constructive trusts

A

not a trust but a remedy against unjust enrichment
- Clear and convincing evidence standard
- Requires particular property
Plaintiff must be able to identify the particular property as trust corpus

bad actor holds legal title to property (trustee) and has duty to deliver legal title to settlor or settlor’s successors (beneficiaries)

  • theft or conversion
  • fraud or duress
  • breach of fiduciary duty
  • homicide (slayer statute)
  • breach of promise
33
Q

basic trust relationship

A

Trustee holds legal title to specific property and is under a fiduciary duty to manage, invest, guard, and administer the trust assets and income for the benefit of the designated beneficiaries, who hold equitable title

trustee holds legal interest

beneficiary holds beneficial interest

settlor creates trust

34
Q

material purposes of trust

A

Support of beneficiary
Spendthrift provision
Payment at certain ages
Payment at certain dates
Discretionary trust

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