Trusts Flashcards
testamentary trusts
created in a will, takes effect at death. Elements: (1) intent and capacity, (2) identifiable beneficiaries, (3) name trustee (4) trust property (5) valid trust purpose (6) delivery
private express trust
clearly states intentions of settlor to transfer property to beneficiaries. Requires (1) intent, (2) trust property (3) valid trust purpose and (4) ascertainable beneficiaries
intervivos trusts
created and transferred during settlors lifetime. Elements: (1) intent and capacity, (2) identifiable beneficiaries, (3) named trustee, (4) trust property, (5) valid trust purpose (6) delivery
totten trusts
Bank account; Settlor is also trustee holding account for benefit of 3rd party. Takes effect at death
honorary trusts
provided for animals, graves, etc.
spendthrift thrust
restricts beneficiary’s power to transfer his equitable interest; creditors can’t reach assets until property has been paid out to beneficiary
- Exceptions: child support, necessities, alimony
- *Beneficiaries can’t terminate spendthrift trust
support trust
trustee is specifically directed as to what amount to pay beneficiary
discretionary trust
trustee has discretion to determine what amount is necessary to pay beneficiary
constructive trust
remedy in which places property in trust and orders person in possession to transfer property to beneficiary
pour over trust
living trust exists prior to formation of will and will contains provisions of giving assets under trust.
Elements: (1) valid trust (2) valid will (3) trust created and in existence prior to will
secret trust
will provision is totally silent as to trust language however outside will there’s an agreement of trust, parol evidence does not bar introduction since evidence of prior trust is being introduced to explain provision in will
semi-secret trust
will provision has some language as to trust but not complete and there’s an outside agreement of trust, some states will uphold trust
charitable trust
beneficiary is public at large and purpose is for charity
cy pres doctrine
if charity not in existence at time of death or property is insufficient to carry out intent of testator, courts will look at intent of testator in order to save trust. Will find “Next best thing” “Nearest to his intent
trust amendment
can’t be revoked unless right is reserved. Modifications to trusts are allowed to carry out trust purpose if it doesn’t deprive beneficiaries of an interest
purchase money resulting trust
similar to secret trust but involves a deed. Requires (1) valid deed, (2) consideration by settlor (3) named trustee and (4) agreement of trust outside deed
co-trustee
if there are 2 trustees, majority of states require them to act with unanimity absent contrary intent express in trust agreement
prudent investment rule
trustee has duty to act as a prudent investor and exercise reasonable care and skill
duty to diversify trust
the trustee must adequately diversify the assets in a way that spreads the risk of loss. While risky investments are allowed (and may be desirable due to the correlation between risk and reward), whether an investment’s risk is tolerable will depend on the size and purpose of the trust.
duty to disclose and account
A trustee has a duty to disclose to the beneficiaries complete and accurate information about the nature and extent of the trust property. A trustee must also periodically account for actions taken on behalf of the trust.
duty of loyalty and impartiality
A trustee owes a duty of loyalty to all the beneficiaries. She must balance the interests of the present and future beneficiaries by investing the property so that it produces a reasonable income while preserving the principal for the remaindermen.
trustee powers
trustees can only act pursuant to express powers given to them in trust document
termination of trust
- Trustee has no power to terminate trust unless provided otherwise or purpose accomplished
- Settlor may terminate if power is reserved
- Operation of law may terminate
- Beneficiaries may terminate if all agree
duties of trustee
duty of care, duty of loyalty, duty to separate, duty to defend
revival statutes
some jxs have revival statutes whereby prior will is revived and probated if testators intent to revive is expressed in writing and contained on face of will
simultaneous deaths
if title to property depends on priority and cant be established by clear evidence that one spouse survived, property will be treated as if one spouse survived the other. It’s deemed that a person fails to survive other if it doesn’t survive other by 120 hours
dependent relative revocation
testator who revokes will under mistaken belief has not effectively revoked will and will is revived
per capita distribution (default)
distribution starts on first line where there’s at least 1 alive
per strikes distribution
must state “per stripes”. distribution starts at first line of heirs regardless of whether they’re alive or dead.
power to revoke
Under the majority rule and the Uniform Trust Code (“UTC”), a trust is presumed to be revocable unless it expressly states otherwise.
However, a minority of states presume a trust is irrevocable unless the trust states otherwise.
Lack of Trustee
A designated trustee may decline trusteeship. If this occurs, the trust does not fail. Instead, the court will appoint a successor trustee unless the settlor expressed intent that the trust should only continue if a certain person served as trustee.
self-dealing
Under this duty, a trustee is generally prohibited from engaging in self-dealing by buying or selling trust assets because it causes a conflict of interest between the trustee’s duties to the beneficiaries and the trustee’s own personal interest.
Self-dealing raises an irrebuttable presumption that the trustee breached the duty of loyalty.
suit for damages
Beneficiaries of a trust may sue the trustee for damages for lost profits, lost interests, and other losses resulting from a breach of trust.
removal of trustee
If a trustee commits a breach of duty, the beneficiaries may seek to remove the trustee. A trust will not fail for a lack of trustee; the court will simply appoint a new one.
