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Fall 24 > Trusts > Flashcards

Trusts Flashcards

1
Q

Trust Creation while S is alive - S = T

A

Self-Declaration – S declares themselves T of the property, they retain the legal title and are subject to the self-imposed fiduciary duties.

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2
Q

Trust Creation while S is alive - S isn’t T

A

Transfer in Trust – S transfers legal title to T and imposes fiduciary duties on T.

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3
Q

Consideration

A

You do not need consideration for a trust, but a trust may be a promise in a contract situation.
If S transfers only promises to a trust, they need to be enforceable to give them value, otherwise the trust fails.

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4
Q

Charitable Trust - Class and Purpose

A

Must have a sizable class of B’s as to have general public interest for which the purpose is attached. The description can be PEHRM (poverty, education, Health, Religion, Municipal)

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5
Q

Charitable Trust AG Requirements

A

Notice requirement - by certified or registered mail within 30 days of filing and at least 25 before hearing

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6
Q

SoF - Oral Trusts

A

Oral trusts must be established by clear and convincing evidence. T can’t be S or B, has to be personal property

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7
Q

Who has standing in bankruptcy?

A

Alleged T or T in bankruptcy

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8
Q

Evaluating Trust Purpose

A

Intent and effect– trust is illegal if the existence of the trust could induce another person to commit a crime even if T doesn’t have to perform an illegal act.

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9
Q

Creditors

A

cannot do something to defraud creditors. UFTA
Spendthrift – in a self-settled spendthrift – S = sole B = defrauding creditors
You can’t send property to a trust if you’re insolvent

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10
Q

Remedies for Illegal Trusts

A

Set aside the amount of the creditor’s claims
If other:
Void the trust
Resulting trust - S gets property back or
Permit T to retain property free of trust or
Remove the improper restriction and let the trust operate

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11
Q

What kind of property can go into a trust?

A

Has to be things you can transfer yourself
No future interest or something that isn’t yours

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12
Q

T Acceptance

A

How it is explicitly stated in the trust or
A written acceptance or
Performance of T duties
Excludes if you’re just helping to preserve the trust property and you give notice to S or B (if S is dead) or if potential T is just inspecting

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13
Q

Corporate T Requirements

A

Financial institutions don’t need a separate charter but trust companies do. For foreign corporations it’s about reciprocity.
If there’s a merger then we have Substitute Fiduciary Act

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14
Q

Discretionary Trust Violation Results

A

Violation can result in T removal, court orders on distributions, court scolds T and reminds them to get in line.

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15
Q

Discretionary Distribution - Community or Separate Property

A

Likely results ins separate property for B

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16
Q

B Incapacitation Stuff

A

Person who T believes is incapacitated
Official determination not needed
Can be applied without S’s express intent
Can give to guardian for HEMS or can reimburse person caring for B

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17
Q

RAP Information

A

This is really an issue with perpetual trusts.
We look at the day the trust becomes irrevocable
In Texas, the court will reform to meet S’s intent

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18
Q

Earmarking

A

labeling the property as belonging to the trust, T is responsible for a loss due to failure to earmark

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19
Q

Liability for commingling

A

Strict liability for losses due to commingling.

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20
Q

Principal distributions - Community or Separate?

A

Separate

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21
Q

Corporate T, how they can transfer trusts to trusts

A

“common trust fund” is okay and actually good. Diversification and lower costs

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22
Q

Texas K Rule

A

T can K if the K was within their capacity and a plaintiff can recover directly from trust

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23
Q

3rd Party and Trust Terms

A

3rd party is not bound by terms of a trust, put the clause in the K

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24
Q

Suing a T - Notice Requirement

A

Plaintiff has to tell B by registered mail within 30 days of filing and at least 31 before judgment. If they submit a written request T has to provide B info within 10 days

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25
Q

Liquidating/Wasting Asset Allocation

A

Something that goes down in value as it’s used (usually IP)
Income - 10% Principal - 90%

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26
Q

Oil and Gas Distribution

A

1/1/04
Before 10% income 90% principal
Now equitable
Look at when the interest was owned

27
Q

Power of T to adjust

A

UPIA says T can look at factors to potentially change allocation depending on the nature/purpose of the trust, S’s intent, and about the B
Not allowed if S prohibits, T = B, T would benefit indirect/direct, adverse tax stuff
T doesn’t require notice to B, but court can reverse if T abuse

28
Q

Disbursement Definition

A

When you’re paying for something, who pays for it?

29
Q

Income Disbursements

A

Ordinary Repairs, Insurance premiums, property taxes

30
Q

Principal Disbursements

A

Capital improvements/extraordinary repairs

31
Q

T Compensation - Distribution Source

A

50/50, but can come from one specifically

32
Q

Accounting Expenses - Distribution Source

A

50/50

33
Q

Debt Payment - Distribution Source

A

interest come from income, principal comes from principal

34
Q

Income taxes - Distribution Source

A

pay from whichever receipt you’re looking at

35
Q

Converting a P&I trust to a Unitrust

A

not in TX

36
Q

Duty to Inform B

A

Upon B request or
When T is going to take a material and unusual action
S can limit when trust is revocable, B under 25, or B is remote and not eligible for current distribution/ distribution if trust ended now

37
Q

Accounting

A

Keep good records because either S can set intervals or B can request every 12 months. Has to include trust property and its value, all receipts and disbursements, all liabilities, and the source/amount of T’s compensation.
B has to write a written demand and T has to get it to them in 90 days, B can sue if not and recover from trust or T

38
Q

Ways Court Can Modify

A

Deviation, Reformation, and Cy Pres

39
Q

Deviation can happen if:

A

Trust purposes fulfilled
Purposes are illegal now
Prevent waste
Purposes are impossible, or
Circumstances have changed in a way S wouldn’t have known and a change would still follow S’s intent.
Tax objectives and not contrary to S’s intent
Continuing the trust isn’t necessary
To achieve material purpose of the trust and
All B consent (direct, virtual rep, guardian ad litem)
A change not inconsistent with the material purpose of the trust if all B consent

40
Q

Reformation in Texas

A

To prevent waste
There’s an impairment
To achieve purposes
Correct scrivener’s error (even if unambiguous if there’s C & C of S intent)

41
Q

S Modification

A

Can do all sorts of stuff; if trust is silent it is presumed revocable and they can do it or if it’s irrevocable the trust can expressly save those powers for S

42
Q

T Modification

A

Generally no unless S gives power, there’s a division, non-judicial cy pres, or decanting

43
Q

B Modification

A

“Claflin Rule” - allowed as long as no material trust purpose is unfulfilled; but TX says all purposes have to be satisfied and you need to get court approval and need all B

44
Q

S & B Modification

A

If S is alive and all B are in an irrevocable spendthrift consent there can be modification or termination

45
Q

Family Settlement Agreement Modification

A

need genuine controversy

46
Q

Remedies Against T - Money Damages

A

Lost Value - no causation, T doesn’t have to benefit
Profit Made by the T - causation required, trust doesn’t have to have a loss
Lost Profits
Punitive Damages - the person was evil

47
Q

Remedies Against T - Removal

A

Discretionary - T has materially violated fiduciary duty and trust suffered material financial loss
T becomes Incompetent
T becomes Insolvent
Other Cause

48
Q

Court Remedies

A

Decree to Carry Out the Trust
Injunction
Appointment of Receiver
Increase Bond
Declaratory Judgement

49
Q

Barring of Remedies

A

1) S’s Approval in Trust Instrument
Can’t waive:
Valid trust
SOL
Limits on exculpatory clauses
Duty of T/ acted in good faith/ inform B
2) Prior Approval or Ratification by B
3) Court Decree
4) S.O.L.
4 years from discovery
5) Latches
6) Unreasonable delay in asserting rights to disadvantage Defendant

50
Q

Resulting Trusts - General

A

Not a real trust - we do what S would have done had S thought about writing down what was going on

51
Q

3 Situations that create a resulting trust

A

1) Failure to Create Express Trust
S still has property
2) Failure of Express trust to Dispose of All Trust Property
Something happens like B dies and trust doesn’t say where property should go after
3) Purchase Money Resulting Trust
Something like a loan situation

52
Q

Constructive Trust General

A

Equitable remedy to prevent unjust enrichment
Trust Code DOES NOT APPLY to constructive trust

53
Q

Grounds to impose constructive trust

A

Fraud
Abuse of confidential relationship
Promises made in contemplation of death
Any other evil conduct which the court finds merit the remedy

54
Q

Trust Bank Account

A

Not a trust
T/depositor has all the rights
No split of title
No imposition of duties
B only have rights after T dies and B survived them

55
Q

Subrogation

A

B gets position of the creditor T paid off

56
Q

Marshalling

A

If a creditor has the right to pull from multiple sources, they have to pull 1st from one that no one else has claim to

57
Q

Virtual Representation

A

If you bind the one who can revoke you bind everyone, bind guardian then you bind ward, unborn/unascertained bound if interests were adequately represented and the person there had a substantially identical interest

58
Q

Jurisdiction

A

Dist. Court; County court of law while estate is pending

59
Q

Trust Termination 7 ways

A

Express Terms
Revocation by S
Termination by B
Termination by B and S
Merger
Lack of Property
Uneconomic
Court Order

60
Q

Trust Termination - Uneconomic

A

under 50k, notice to all current and remainder B, no adverse tax, cost doesn’t justify continuing, NO if there’s a conservation easement

61
Q

Rights of Income B Happen when…

A

arises on a date specified in trust or the date the asset becomes subject to the trust if there’s no date.
Inter Vivos Trust - date of trust/ when it comes in
Testamentary Trust - death date

62
Q

Tort Liability

A

T can’t recover from trust/get exoneration for common incident torts, strict liability, conversion

63
Q

To recoup damages paid to a K claimant

A

T has to prove that they entered into the K for the benefit of the trust and seek reimbursement.

Fall 24 (4 decks)

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