Trusts Flashcards
What are the requirements for a valid trust?
A trust requires:
* Settlor with capacity and intent to create a trust
* Trustee to administer the trust
* Definite Beneficiaries
* Trust Property (Res)
* Valid Trust Purpose
Charitable and honorary trusts are exceptions for definite beneficiaries.
What is the delivery requirement for a trust?
If the settlor is not the trustee, legal title to the property must be delivered to the trustee
Self-declared trusts do not require delivery.
Define an express trust.
Created by settlor’s express intent in writing, orally, or through conduct
Express trusts are a foundational type of trust.
What distinguishes a revocable trust from an irrevocable trust?
Revocable trust can be modified or revoked by the settlor; irrevocable trust cannot be modified or revoked unless allowed by law or agreement.
What is a testamentary trust?
Created by a will, taking effect upon settlor’s death.
What is the purpose of a pour-over trust?
A will transfers assets into an existing trust at death.
Define a charitable trust.
A trust for a charitable purpose, benefiting an indefinite class of people.
What is the Cy Pres Doctrine?
If the original purpose is impracticable, a court may modify the trust to achieve the settlor’s intent as closely as possible.
What is an honorary trust?
A trust for a non-human beneficiary, enforced as long as funds remain.
What is the duty of loyalty for a trustee?
Trustee must act in the best interest of beneficiaries and avoid conflicts of interest.
What does the duty of care entail for a trustee?
Trustee must manage trust assets prudently, diversify investments, and act as a reasonably prudent investor.
What is the duty of impartiality?
Trustee must treat all beneficiaries fairly, considering their interests equally.
What is the trustee’s duty to preserve and protect trust property?
Trustee must safeguard assets and ensure reasonable income generation.
What does the duty to inform and account involve?
Trustee must keep beneficiaries informed and provide periodic accountings of trust transactions.
Can a trustee delegate duties?
A trustee may delegate investment decisions but must exercise reasonable care in selecting and monitoring agents.
How can a revocable trust be modified or revoked?
A revocable trust can be modified or revoked by the settlor.
What conditions allow for modification of an irrevocable trust?
Modification requires consent from all beneficiaries and the settlor, or changed circumstances justifying modification.
Under what conditions can beneficiaries terminate a trust?
Allowed if all beneficiaries consent and the trust no longer serves a material purpose.
When can a court terminate a trust?
If unforeseen circumstances make it impossible to fulfill its purpose or if the trust has become uneconomical.
What can a trustee do if the trust has insufficient funds for administration?
A trustee may terminate a trust if allowed under the trust terms.
What remedies are available to beneficiaries for breach of trust?
Beneficiaries can:
* Compel performance of trustee’s duties
* Seek removal of trustee
* Recover damages caused by trustee’s breach
These remedies ensure accountability of trustees.
What are a trustee’s liabilities for breach of trust?
Trustee is personally liable for losses resulting from breach and for profits gained through improper conduct.
What is an exculpation clause?
Can limit trustee liability for negligence but cannot protect a trustee from intentional misconduct or bad faith.
