Trusts Flashcards
1
Q
Trusts
- Formation
A
- Settlor must have capacity; settlor is the person who furnishes the consid for creation of a trust
- A present intent to creates a trust relationship
- A competent trustee with duties
- A definite beneficiary
- The same person is not the sole trustee and sole beneficiary.
- A valid purpose must exist for the trust
- Delivery
2
Q
Trusts
- Intent to create
A
- Intent most clearly shown by creating a fiduciary relationship by separating ownership into two parts:
- legal title in a trustee with management duties, and
- Equitable title in a beneficiary who can enforce the duties.
- settlor -trustee - when settlor is trustee and does not notify anyone, may fail intent
3
Q
Trusts
- Intent and Precatory language
A
- Language that esp0resses a hope, wish or suggestion\
- General rule - Precatory language does not create a trust.
- Exceptions - A legal obligation can be found in certain based on surrounding circumstances.
a. Directions addressed to a fiduciary such as executor.
b. Evidence showing that settlor previously supported or intended to support the intended beneficiary.
4
Q
Trust
- Beneficiaries
A
- There must be one to whom trustee owes duties.
- There must be ascertainable beneficiaries when the interests are to come into enjoyment.
- Class gifts - As long as the class for a private trust is reasonably definite, the trust may give trustee discretion to select beneficiaries.
5
Q
Trusts
- Spendthrift Trust generally
A
- Usually created by prohibiting assignment by beneficiary and stating not subject to beneficiary’s creditors.
- Requirement - If the beneficiary is given control over the trust principal or the ability to terminate along with purporting to deny creditors rights will not create a spendthrift trust.
6
Q
Trusts
- Creditors
A
- Exceptions exist for certain creditors that can reach a spendthrift trust
a. Creditors of a revocable trust settled for the sole benefit of the settlor.
b. Creditors who provide necessities (food, shelter, clothing, medical)
c. Alimony and child support obligations.
d. Claims by a state or U.S. government.
7
Q
Trusts
- Support Trusts
A
- Trust created to use trust assets as are needed for support.
- Discretion - Trustee is usually given an ascertainable standard, and must make payments for support as needed to meet the standard.
8
Q
Trusts
- Charitable Trust
A
- A charitable trust is not subject to the rule against perpetuities or accumulations.
- Requirements, unless shifts to private
a. Must be for a charitable purpose
b. Must be for a reasonably large group of beneficiaries, or specific charity - must be indefinite, unnamed and can change
c. Subject to cy pres doctrine.
9
Q
Trusts
cy pres
A
- If no specific trustee named, the court should try to determine intent and assign a trustee.
- When charitable purpose can no longer be accomplished, court should try and determine if intent was to maintain charitable trust or revert to heirs.
10
Q
Trusts
- Trustee Duty General
A
- Trustees are fiduciary and owe duty of loyalty.
- Self dealing is a breach.
1. Trustee cannot buy or sell trust assets for itself
2. Trustee cannot borrow trust funds
3. Trustee cannot sell assets from one trust to another trust.
4. Duty to invest prudently
11
Q
Trusts
- Termination or modification
A
- Beneficiaries can terminate
a. If all have capacity
b. All consent
c. No further trust purpose is to be served.
12
Q
Trusts
definition
A
- Relationship in which a trustee holds legal title to specific property under a fiduciary duty to manage, invest, safeguard, and administer the trust assets and income for the benefit of designated beneficiaries, who hold equitable title
= basically a device one manages property for benefit of others
13
Q
Trusts
Types
A
- Express - Expressed intention of owner to create relationship w/ relation to prop.
a. private - to specific persons
b. charitable - to a class of persons or public in general - Resulting - Arise from presumed intention of owner
- Constructive - do not depend on intention, rather an equitable remedy for cases involving fraud or unjust enrichment
14
Q
Trusts
Future trusts
A
- The settlor at the future time must manifest an intention to create a trust.
- if old promise supported by consideration, trust can arise in the future w/o further manifestation of intent
15
Q
Trusts
Creation despite precatory language
A
- directions are definite and precise, not vague
- directions addressed by decedent to executor or other fiduciary of will
- No trust results in unnatural disposition by testator; OR
- transferor had been supporting ben prior to the instrument and ben would not have sufficient means to support himself. shows intent to create for support
