Trusts Flashcards
Creation of an Express Trust
Seven Deadly Lenders Take Title (to) Blackacre; Very Evil Imps Lease (the) Premises.
(1) A Settlor (2) Delivers Legal Title to property (3) to a Trustee (4) for the benefit of Beneficiaries (6) in a Validly Executed document, (7) with the Intent to create a trust (8) for a Lawful Purpose.
Failure to name a trust in the execution
Does NOT defeat the trust; court can appoint someone
Testamentary trusts: requirements for court appointment
Anyone over 18 except judicially-declared incompetents, convicted felons, and those incapable b/c of drunkenness, dishonesty, want of understanding, or improvidence. A non-resident “alien” can serve as trustee only if (1) related to decedent; AND (2) a NY resident serves as co-fiduciary (same with inter vivos trusts).
Beneficiaries
must be definite and ascertainable to the trust document. Ambiguity results in a resulting trust for the residuary beneficiaries of a will, except where language such as “family” or “next of kin” is used, since these words are recognizable based on the intestacy statutes
Property
must be presently owned and title transferred according to law (e.g., property must be conveyed through deed)
Intent to Create a Trust
settlor must manifest his intention to create a trust by giving trustee duties to perform. Precatory, non-binding language is insufficient, and just using the word “trust” is not sufficient; must look to all of the language to determine intent.
Lawful purpose
A trust cannot call for the commission of a crime, the destruction of property, or restriction of marriage/promotion of divorce, unless the purpose is to support a single person or restrict marriage to between certain ethnic groups, which are ok.
Valid Execution of Trust
Lifetime - writing, signed by settlor and trustee, and either acknowledged by a notary or signed by two witnesses.
Testamentary - created in a will
Consideration
No consideration is required to create a trust
Revocability
Trusts are presumed irrevocable, unless the trust expressly authorizes revocation.
A revocable lifetimetrust must:
- have at least 1 B who is not the settlor;
- Settlor cannot be a B when named the sole trustee (but can be AN income B for life and trustee, as long as there is another B);
- Settlor’s estate can be the B of the principal so long as there is at least one other B.
- Settlor can retain power to terminate/end the trust
A transfer “in trust” with no trust terms
No trust arises
Gift of income with no limit and no disposition of the principal
No trust arises
Pour Over Gifts
Testamentary gifts made to an existing revocable trust are okay as long as the trust is either already in existence or executed concurrently with the will. This is valid even if the trust was unfunded or only partially funded during the settlor’s lifetime; doesn’t need to be created by the settlor. Life insurance proceeds, savings accounts, pension plans, etc., can be payable to an unfunded trust as a pour-over gift. “To the trustee named in my trust” Is OK for beneficiary of life insurance policy.
Totten Trust
In depositor’s name “as trustee for” named beneficiary. No particular words required.
- Depositors can withdraw, deposit freely during lifetime;
- Beneficiary has no legal beneficial interest during depositor’s lifetime but gets whatever was in the account at depositor’s death.
- Minor/incompetnt: If >$10,000 must be maid to legal guardian (permissive if less)
Revoking a Totten Trust
- Withdrawal of $
- Express revocation by depositor, through a writing naming the beneficiary and financial institution, notarized and delivered to the bank.
- Revocation by will: through a writing naming the beneficiary and financial institution
- Death of beneficiary revokes Totten Trust
- Change in beneficiary: same way as revocation
- Creditor of the depositor: can always reach a Totten Trust account either before or after depositor’s death
Joint Bank Accounts
Rights of survivorship unless there is clear and convincing evidence that the account was only intended for the convenience of the parties.
Each joint account holder owns 1/2 of the account, regardless of who deposited the money, and whoever draws more than 1/2 will have to return the excess.
Uniform Transfers to Minors Act
To avoid a guardianship proceeding and trust, and to qualify for a $13,000 per donee annual exclusion from gift tax, a gift can be made under the UMTA to a custodian, specifying the gift is under the NY UMTA. This is not technically a trust.
Duties of a custodian under UMTA
- Hold, manage, and invest property under prudent person standard
- Pay over to the minor, or for the minor’s needs, that part of the property the custodian deems advisable or according to terms (anything over $>50,000 requires court approval)
- Pay what is left to the minor when he turns 21 (18 if before 1/97).
Tax Consequences of UMTA
- $13,000 gift tax exclusion
- Gift not included in gross estate for purposes of estate tax, unless donor names himself as custodian.
Charitable Trusts
Must have:
- indefinite beneficiaries of a reasonably large group (NOT specific, named persons, but trust for Masses for relatives is OK).
- for a Charitable purpose
- No RAP problem; can be indefinite
- Cy Pres can be used to change if purpose of charitable trust cannot be accomplished (as near as possible)
- AG has duty of representing the beneficiaries of charitable trusts in the state. Indispensable party to any suit; standing to sue to enforce trust’s terms.
Honorary Trust
A type of non-trust where no human being is the beneficiary of a private trust. This is NOT a trust and the money will go into an estate residuary. Exceptions: pet trusts (for duration of the pet’s lifetime); cemetery trusts (classified as charitable trust).
