Trusts Flashcards
Does the trustee of a constructive or resulting trust have a duty to invest the trust property and make it productive?
No, that duty is reserved for trustees of express trusts.
A constructive or resulting trust trustee’s sole duty is to convey legal title to the beneficiary.
What is a constructive trust?
flexible equitable remedy imposed by a court to prevent unjust enrichment from wrongful conduct (e.g., fraud, undue influence, or breach of a fiduciary duty).
Will a constructive trust be imposed where a party obtains property from the owner by fraud and sells it to a bona fide purchaser? Why or why not?
No, although a constructive trust could be imposed where a fraudster obtains property from the owner and conveys it to a third party who is not a BFP(the third party would be the trustee), this equitable remedy is not available when the transferee is a BFP; the owner’s recovery is limited to the fraudster.
Will a constructive trust be imposed where a thief steals property from the owner? Why or why not? What if the thief uses the stolen goods to buy other property?
No because title remains in the owner, so there is no need to imply a trust to restore title to the owner. If the thief uses the stolen goods to buy other property, the owner can have a constructive trust imposed against the other property to prevent the thief from profiting from his wrong.
Will a constructive trust be imposed where a testator bequeaths all of her property to a beneficiary in reliance on his oral promise to bequeath it to the testator’s daughter upon his death; the testator dies and the beneficiary bequeaths all of his property to his son? Why or why not?
Generally, if a grantor conveys real property to a grantee in reliance on his oral promise to hold it in trust or convey it to another person and the and that person breaks the promise, there is no constructive trust.
However, broken promises to a decedent concerning devolution of her property on death are a major exception to the rule: a constructive trust will be imposed because the promisee is dead and unable to personally seek enforcement.
What is a purchase money resulting trust?
When a buyer obtains legal title from the seller in exchange for consideration supplied by another person, courts imply a purchase money resulting trust by which the buyer is treated as a trustee whose sole duty is to convey the property to the payor-beneficiary.
Will a court order the buyer to convey the property to the payor where the payor, who is the buyer’s child, pays the purchase price to the seller, who transfers title to the buyer?
Yes, although a gift, not a trust, is presumed when a parent supplies the consideration and title is taken in the child’s name, the normal presumption of a purchase money resulting trust applies where the payor is the child and the buyer is the parent.
Will a court order the buyer to convey the property to the payor where the seller delivers the deed to the buyer in exchange for the payor’s canceling a debt owed to the payor by the seller?
Yes, a resulting trust will arise if the payor gives consideration by canceling a debt owed to him by the seller.
Will a court allow early termination by consent of the beneficiaries in the following case: “In trust for Abigail, but she is without power to assign, transfer, or sell this interest.”
No, while a trust generally may be terminated on the consent of the settlor and all beneficiaries, a court will not allow early termination of a trust where by doing so a material purpose of the settlor would be defeated. Here, there’s a spendthrift provision, which is assumed to state a material purpose.
For which claims may trust assets be reached by a beneficiary’s creditors despite a spendthrift clause?
- claims for spousal support or child support
- claims by the state or federal government
To be a charitable trust, what two things must be true of the beneficiaries?
Beneficiaries of a charitable trust must be indefinite. And beneficiaries of a single trust cannot be both charitable and noncharitable unless two trusts can be found.
To create a valid testamentary trust, can the intent and essential terms of the trust be ascertained from a trust document signed by the settlor?
No, intent and essential terms must be ascertained from the terms of the will itself, an existing writing incorporated by reference into the will, or the exercise of a power of appointment created by the will. A trust document is not necessary and would create an inter vivos trust.
What are the elements of a trust?
- Settlor with present intent required—for trust to take effect immediately while alive or on death, rather than at some future time
- Trustee
- Beneficiary
- Trust res
Does a trust in RI fail for wont of a trustee?
No, a trustee is appointed
What would occur in RI to a gift in trust to build hospital where there’s not enough money to build?
Under the cy pres doctrine, look to the intent of S—if specific, goes back to heir of S; if general charitable intent, will use cy pres to find next closest charity.
What would occur in RI to a gift in trust to a charity that no longer exists?
Under the cy pres doctrine, look to the intent of S—if specific, goes back to heir of S; if general charitable intent, will use cy pres to find next closest charity.
What is a spendthrift trust?
A trust provision that prevents beneficiary from voluntarily or involuntarily transfer trust beneficial interests
Can assets be put in trust to avoid creditors?
In RI, under the Uniform Disposition of Trusts Act, if S creates an irrevocable tr with a non family member trustee, can’t avoid current creditors but can avoid future
How many trustees are needed to take action on behalf of the trust?
Unless have majority rule provision, need trustees to be unanimous
What duties does a trustee owe to beneficiaries?
Duty of Loyalty Duty to account for trust assets Must preserve and improve property like a prudent investor
If T, in breach of a duty, sold property to a BFP, does the BFP need to return property?
No, if didn’t have knowledge of T duty.
