Trusts Flashcards
What is a trust?
A trust is a fiduciary relationship in which a trustee holds legal title to specific property under a duty to manage, invest, safeguard, and administer it for the benefit of designated beneficiaries, who hold equitable title.
What are the two main categories of trusts?
Express trusts: Created by the settlor’s express intention.
Implied trusts: Arise by operation of law to achieve an equitable outcome.
What are the requirements for a valid express private trust?
Certainty of intention: The settlor’s clear intent to create a trust.
Certainty of subject matter: The trust property must be identifiable.
Certainty of objects: The beneficiaries must be identifiable.
What is the difference between a fixed trust and a discretionary trust?
Fixed trust: The beneficiaries’ interests are predetermined by the settlor.
Discretionary trust: Trustees have discretion to decide how to distribute the trust property among a class of beneficiaries.
Can a trust fail if the trustee dies or refuses to act?
No, the court will appoint a successor trustee unless the trust was intended to operate only while the original trustee served.
What is a resulting trust?
A trust implied by law when:
An express trust fails, or
A person makes a voluntary transfer or purchase in another’s name without clear intent.
What is a constructive trust?
An equitable remedy imposed to prevent unjust enrichment due to wrongful conduct, such as fraud, undue influence, or breach of fiduciary duty.
What is a charitable trust?
A trust created for recognized charitable purposes, such as the advancement of education, religion, or the prevention of poverty. It must benefit the public or a section of the public.
What is a secret trust?
A trust created when the settlor’s will appears to make an outright gift, but the terms of the trust and its beneficiary are communicated to the trustee in confidence.
What is the rule in Saunders v. Vautier?
Beneficiaries can terminate a trust if they are all adults, of sound mind, and unanimously agree, provided they hold an absolute interest in the trust.
What are the fiduciary duties of trustees?
Trustees must:
Act in the best interest of beneficiaries.
Avoid conflicts of interest.
Not profit from their position (unless authorized).
Exercise reasonable care and skill in managing the trust.
Can a trustee purchase trust property?
No, a trustee cannot purchase trust property as this creates a conflict of interest, and such a transaction is voidable at the beneficiaries’ instance.
What investments can trustees make?
Trustees may invest in any property suitable for the trust and must consider diversification and obtain proper advice where necessary.
What happens if a trustee breaches the trust?
Beneficiaries can sue the trustee for losses caused by the breach.
Trustees are jointly and severally liable for losses if more than one trustee is involved.
Trustees are not liable for actions of co-trustees unless they fail to supervise them.
What is the limitation period for actions against trustees?
The general limitation period is six years, except:
No limit applies for fraud or recovering trust property.
