Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Trusts, Wills and Estates > Trusts > Flashcards

Trusts Flashcards

1
Q

Trusts - Concept

A

Fiduciary relation in which a settler/donor/grantor/trustor intentionally places legal title to property in the hands of a trustee to keep and administer for benefit of ascertainble beneficiaries

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Trusts - Elements SITPA

A

1) Settlor/donor/grantor/trustor
2) Intent to create
3) Trustee
4) Property/”Res”
5) Ascertainable beneficiaries

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Trusts - Effect of failure to SITPA

A
  • Potential resulting or constructive trust
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Trusts - Settlor/grantor/trustor - Gral

A
  • Person who established trust
  • Person/entity who can validly transfer property
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Trusts - Intent to create trust - Requirements

A
  • Objective manifestation + present intent to create trust in the benefit of another
  • Not enough mere wish/ general intent
  • Strong indication of lack of intention when no appointment of trustor, or lack of directions on how to appoint one.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Trusts - Intent to create trust - Undue Influence / grounds, presumption, effect

A
  • Someone takes advantage of vulnerable situation to influence donative intent
  • Presumption that wihout undue influence trustor wouldnt have created trust when LOAF (large device, opportunity, active participation, fiduciary relation) / Burden on contestant
  • Effect: termination of trust and return of assets
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Trusts - Intent to create trust - Exception for when no need to actual property transfer req (2)

A

1) If intent/res/beneficiary objectively and sufficiently ID
2) When trustor/trustee are the same person

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Effect of trust with illegal purpose or requirement for beneficiary to commit crime

A
  • Not enforceable
  • violation of public policy
  • i.e. divest interest unless beneficiary marries someone form different religion, or divorce someone
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Trusts - Trustee - Gral

A
  • Fiduciary agent
  • Holds legal title / mgmt-adm authority: over res for benefit of beneficiaries
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Trusts - Trustee - Requirements (2) + spouse rights as replacement

A

1) Legally capable (includes entities as possible trustee)(of age and capable to trasnfer property)
2) Be appointed: trust rarely fails bc of it - if not replacement method after refusal to serve/resignation/disclaimer court names one (no absolute right for spouse of deceased trustee to substitute on separate property

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Trusts - Trustee - Merger rule

A

When only trustee is or becomes the sole beneficiary, the trust fails and terminates

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Trusts - Property/Res - Reqs (3)

A

1) Owner by settlor
2) Presently exists: future interests ok if vested (i.e. right to life insurance proceeds) (not ok: anticipated inheritance, potential future profits)
3) ID’d: in written deed of trust or other doc with title transferred to trustee

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Trusts - Ascertainable Beneficiaries - Gral / reqs, acceptance,”future”

A
  • Identifiable OR with definitive method of selection
  • Acceptance of beneficiary is irrelevant
  • It is ok to establish “future” (unborn) beneficiaries (i.e. all my children)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Trusts - Types of beneficiaries (4)

A

1) Class beneficiaries
2) Remainder class
3) Surviving heirs
4) Animal beneficiaries

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Trusts - Class Beneficiaries - entire/specific

A

If entire class: not too vague definition if not trust fails : i.e. “my friends”

If specific members and Trustee w/authority to select/ req :

1) well-defined class + 2) defined selection standard

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Trusts - Remainder Class Beneficiaries - Gral / when, timing, heirs

A
  • For trust with life estate - they take after income beneficairy dies
  • Class of remainder needs to be defined at time of taking
  • If beneficiary pre-deceased - heirs dont take
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Trusts - Surviving Heirs Beneficiaries - Gral

A
  • Trust with term income and her remainder
  • Beneficiary pre-deceased, benefit passes to heirs
  • i.e. “To my sister for 5 years after my death, then to my surviving children”
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Trusts - Animal Beneficiaries - Gral

A
  • Ok in many states as long as animal alive at time of taking
  • After death of last the estate will be distributed according to terms of the will, trust instrument or by intestate scheme
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Express Trust - aka “trust agreement” - SOF when (3)

A

1) Testamentary trust
2) Corpus os real estate
3) Expressly lasts > 1 year

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Express Trust - aka “trust agreement” - Gral / interpretation , controlling auhtority, content

A
  • Court looks at trustor “intent”
  • specific provision control over statute UNLESS is about waiving good faith and fair dealing duty
  • Trustee usually receives specific and binding instructions and authority.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Express Trust - Distribution to beneficiaries (beneficiary accounting distribution)

A

Good faith + reasonableness:

  • Instrument can give total discretion to trustee

OR

  • Allow trustee to distribute (“sprinkle”) among eligible member of defined benefited class
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Express Trust - Corpus Invasion

A
  • allowed for trustee to take a portion of corpus/ppal under certain circumstances
  • i.e. maintain trustor’s wife lifestyle and health
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Implied Trust - Types (2)

A

1) Resulting: unsuccessful and good faith effort to create trust (created by court to satisfy settlor intent)
2) Constructive: created by court to mitigate inequity and/or avoid unjust enrichment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Implied Trust - Constructive Trust - situations

A
  • When wrong-doing in acquiring property interest with fraud/theft/deception/duress/breach of fiduciary duty.
  • When trust is oral or secret: needs to show clear and convincing intent
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Utility of trust - 4 purposes

A

1) Reduce estate taxes
2) Use of living trusts
3) Protect Assets beyond reach of creditors/govt/beneficiaries (“spendthrift restriction”)
4) Avoid Probate administration

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Utility of trust - Reduce estate taxes

A
  • Assets gifted valued at time of gift and not at time of death - Hence, not taxation to appreciation btwn time of git and death
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Utility of trust - Use of “living trust”

A

To avoid inheritance issue regarding assets in mx states or will being contested

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Utility of trust - Avoid Probate adm

A

More privacy and less delay in property distribution

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

Trust formation - Rules about promise to create future trust

A
  • Gral rule: Unenforceable
  • UNLESS: promise supported with consideration sufficient to form contract (pre nuptial agreement)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Trust formation - Types of formation (2)

A

1) Intervivos
2) Testamentary

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

Trust formation - Intervivos - Gral / when, revocability, conflicting provision

A
  • Grantor alive with immediate effect
  • Irrevocable upon grantor’s death
  • Provisions control over will w/inconsistent designation
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

Trust formation - Testamentary - Gral/ effective, reqs

A
  • Take effect only upon death of grantor
  • Created by will
  • Needs to satisfy SITMA and SITPA
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

Trusts - Revocation / Modification - Types (4)

A

1) By trustor (CL vs UTC rules)
2) By agreement btwn trustor and all beneficiaries (if it doesnt defeat material purpose of trust)
3) By petition for judicial procedure
4) Equitable deviation doctrine (by court)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

Trust Revocability (CL vs UTC)

A
  • CL: irrevocable unless express reservation by donor of power to revoke/amend/substitute
  • UCT: revocable unless expressly provided otherwise - creation of “grantor’s trust” where settlor can withdraw assets at any time
35
Q

Trust - Petition for court’s trust modification - standing, notice, E + interpretation / ADR

A
  • any party with interest (PR, trustee, settlor, beneficiary + attorney general for charitable trusts)
  • All interested parties notified
  • Court will hear all evidence/assert intent of trustor/effect on creditors and heirs: decide to direct trustee to act or refrain from acting

(Usually avoided by ADR provision in trust)

36
Q

Trust - Modification by Court - Equitable Deviation Doctrine

A

Allows court to modify trust provisions on equity when unanticipated change of circumstances

37
Q

Trust - Uniform Transfer Minors Act - gral - Minors’ custodian

A
  • Irrevocable custodian trusts for minor beneficiaries
  • Ownership vested in minor but control/mgmt/investment on custodian/trustee (even donor himself)
  • Minor can request trustee removal for a cause
  • Minor’s creditors usually able to reach assets in trust
38
Q

Trust - Minors’ custodian - personal liability

A
  • Contractual liability: Custodian no personal liability to 3rd parties in the contract, UNLESS concealment of custodian quality
  • Tort liability only w/personal fault
39
Q

Trust - Minors’ custodian - Termination

A
  • Minor comes to age + - Receives corpus
40
Q

Trusts - RAP for wills and trusts - Gral

A

Non-vested property interest invalid UNLESS at time of creation there is certainty of vesting/termination within 21 years from death of individual then alive (measuring life) or 90 years after creation

41
Q

Trusts - RAP - General Scope of application (4)

A

1) Executory interest
2) Open Class Remainder
3) Contingent Remainder
4) Non-charitable trusts (in most states)

42
Q

Trusts - RAP - Time - Legal Effects / start time, effects (2)

A
  • Clock starts for intervivos irrevocable transfer once property delivered to trustee OR revocable at time of death of settlor

Effects:

1) Court strikes down portion of conveyance
2) If conveyance as fee simple subject to condition subsequent (“but if”) or if fee simple determinable (“so long as”) = then trust will be deemed as fee simple absolute

43
Q

Trusts - RAP - Rule for charitable trusts

A

Doesn’t apply when all vested interests are charitable

-it might when first (income) interest was not, but remainder one was charitable

44
Q

Trusts - RAP - Wait and See Rule

A

Trust is not declared invalid upon creation, but its allowed to operate until last possible minute for a possible vesting

45
Q

Trustee - Duties/Liabilities - PINCALL (7)

A
  • Properly Administer - “total asset mgmt” approach (duty of care, safeguard, productivity)
  • Inform beneficiaries
  • No delegation of discretional decisions
  • Commingling of assets (w/ other trust OR trustee’s personal assets) prohibition
  • Account to beneficiaries
  • Litigate on behalf of trust (Sue/Defend)
  • Loyalty duty to trust
46
Q

Trustee duties - Properly Administer- Gral /how, duty owed to whom, 1vsmx benf, content

A
  • Follow instructions consistent with grantor’s intent
  • Fiduciary duty to trust NOT to beneficiary
  • Higher duty when only 1 beneficiary and even more if its a minor
  • Standard of care in adm + duty to safeguard corpus
47
Q

Trustee duties - Properly Administer- Standard of care

A
  • “Prudent business person when managing own affairs or investments” (higher than reasonable person) (similar to corp director)
48
Q

Trustee duties - Properly Administer- Mx trustees

A
  • 2 trustees: agree on adm decisions , if not by court when irreconciliable hostility substantially impairs adm (enough grounds for appointing new trustee)
  • 3 or more: majority controls + all potentially liable UNLESS written dissent
49
Q

Trustee duties - Properly Administer- Duty to Safeguard Corpus - Gral

A
  • may control over goal of productivity
  • special scrutiny when transactions are significant + non routine
  • Gives grounds for obtaining insurance
  • Allows for diversification of trust portfolio to reduce risk
50
Q

Trustee duties - Properly Administer- Productivty of Assets rule

A
  • Trustee duty to maximize return on ppal amount in trust
  • Limit: Not heavily invest in speculative ventures (comply with standard of care)
51
Q

Trustee duties - Properly Administer- Total Asset Mgmt Standard Rule

A

Trustee with duty to consider “overall portfolio of assets”

-i..e probable income, safety of capital, investment marketablitliy, economic condition, trust duration, liquidity, taxes

52
Q

Trustee duties - Inform Beneficiaries - Gral

A
  • Give legal notice to all benf. and other notices (unless provided differently by grantor)
  • Keep detailed records about administration of trust
  • For transaction >25% of assets, notice to all beneficiaries and to grantor
53
Q

Trustee duties - No delegation - Gral

A
  • Restriction for discretionary decisions: i.e. invest
  • No restriction for ministerial fx BUT review and supervision required
54
Q

Trustee duties - Account to Beneficiaries - Gral - What/When, liability

A
  • to each benf at least annually (+ possible request by benf) written statement of receipts/disbursements - Separately report of trustee’s compensation
  • Possible grounds for claims from class member because of breach of allocation duty bc of over-allocation of expenses or under-allocation of income.
  • i.e. sale of real property: must be done in open market or w/appraisal
55
Q

Trustee duties - Litigate on behalf of trust - JDX/venue rule (3)

A

1) “Situs of trust”

OR

2) Trustee’s regular business address

OR

3) Trustee’s residence

56
Q

Trustee duties - Loyalty duty of trust (breach of SOB) (3)

A

1) Self dealing (unless alowed)
2) Opportunity from trust (not take advantage of it when it was for trust)
3) Borrowing from trust or use assets as collateral for personal loan

57
Q

Trustee’s Liabilities - Gral Rules / Purpose, mx trustee, standing for action, trustee’s agents

A
  • Action can be brought by beneficiaries or grantor (when also beneficiary)
  • Purpose: to enforce the terms of trust
  • For co-trustees joint and several liabilities
  • For agents of trustee when: improper delegation, failure to properly select or supervise
58
Q

Trustee’s Liabilities - Legal Remedies/Effects (4)

A

1) Specific Performance
2) Injunction
3) DX
4) Removal of trustee (easier that above 3)

59
Q

Trustee’s Liabilities - Removal by Court- gral / grounds, next steps

A

For “significant cause”

  • i.e. unfitness, unwillingness to serve, PINCALL violation

Makes appointment of new trustee needed

60
Q

Trustee’s Liabilities - New appointed trustee

A

Liability for failure to pursue prior trustee inproper performance

61
Q

Trustee’s Liabilities - Defenses (3)

A

1) SOL /laches (undue dealy in seeking relief)
2) Consent by beneficiary
3) Exculpatory provision from instrument

62
Q

Trustee’s Liabilities - Defenses - Consent / req, presumption, mx benf

A
  • Knowingly by beneficiary (as estoppel)
  • Implied for those benefited from wrong act
  • Consent from one benf doesn’t bind the others
63
Q

Trustee’s Liabilities - Defenses - Exculpatory provision

A
  • Enforced by courts when breach is N + w/good faith
  • Not when breach is intentional, grossly N, w/bad faith, or extreme recklessnes
64
Q

Trust -Beneficiaries Rights - Ownership -Quality

A
  • Absolute unless otherwise indicated AND can be transferred
65
Q

Trust -Beneficiaries Rights - Ownership - Transfer of interest / assignee rights/restrictions

A
  • When interest is vested by intervivos or testamentary
  • Grantee w/= rights as original beneficiary but w/possible alienation restrictions (ok if not against public policy)
66
Q

Trust - Beneficiary Creditors - Spendthrift Clauses

A
  • Makes “charge order” against trust assets ineffective
  • Limit assignment from beneficiary or attachment of trust assets by creditors (make charing order ineffective)
  • Doesn’t proceed when settlor is also beneficiary (“self serving trust”)
67
Q

“Support Trust”

A
  • Trustee obligated to pay support for beneficiaries out of trust fund
  • Only for “reasonable necessities”
68
Q

“Discretionary Trust”

A
  • Trustee’s sole discretion to make/withhold distribution
  • Beneficiary have no vested rights on them (cannot be attacked by his creditor)
69
Q

Beneficiary’s Creditors - Exceptions that allow for attachment of trust assets (4 + 1)

A

1) Vendor creditors for life necessities
2) Support trust: to children/spouses and even former spouses for family support owed by beneficiary
3) Beneficiaries tax liabilities
4) Self serving trusts (no spendthrift when grantor is beneficiary bc of public policy) (case law extends to trust created by another by res provided by beneficiary)

+

1) Fraudulent trasnfer of debtor into trust to limit creditor’s claim

70
Q

Beneficiary’s Creditors - Fraudulent Transfer

A
  • Debtor cant transfer to trust to hinder/delay/defraud creditor claim’s
  • Can allow for creditor recovery
71
Q

Charitable Trusts - gral / purpose, formalities, standing, RAP

A
  • To benefit public good
  • need state registration
  • Attorney Gral with standing to bring action
  • Exempt from RAP
72
Q

Charitable Trusts - Cy Pres doctrine

A
  • Court can substitute charity taker (beneficiary) WHEN purpose of trust becomes illegal/impossible/impracticable

ALSO

  • if specifically named charity as beneficiary: gift then becomes part of residuary
  • if charity is one of class, court can divide share among other class members
73
Q

3rd party claims vs Trust / grounds (2), effect

A

1) contract w/trust
2) Tort by trustee (when acting within scope)
- Potential judicial attachment of trust assets

74
Q

3rd party claims vs Trustee - Contractual -Gral Rule

A

Gral Rule: No personal liability if good faith of agent

75
Q

3rd party claims vs Trustee - Torts / personal liability grounds (3)

A
  • Personal liability for:
    a) own torts,
    b) fail to supervise,
    c) Failure to ensure property
  • Posible indemnification when tort from normal trust activties and w/o fault
76
Q

3rd party claims vs Beneficiaries

A

No rights against beneficiaries for trust/trustee actions

77
Q

3rd party liability to trust/beneficiaries

A
  • When knowingly receives trust property for less than fair/full value (trustee who authorizes also liable fro SOB breach)
78
Q

Trust - Termination Grounds (7+1)

A

1) Consolidation of mx trusts
2) Term Expiration
3) Purpose accomplished/illegal/impossible
4) Merger
5) Income Interest Terminates
6) Donor termination - unilateral if possible under agreement
7) Court Petition

+

1) Trust formed under undue influence on trustor

79
Q

Trust Termination - Consolidation

A
  • when mx trust/trustees/grantors w/the same purpose OR same beneficiaries
  • Court can consolidate them in 1 trust
80
Q

Trust Termination - Term Expiration / gral, instructions

A
  • when date specified in instrument
  • potential specific instruction to distribute assets or transfer to another entity to administer probate
81
Q

Trust Termination - Merger

A
  • All benfs + trustee become the same bc legal equitable title has merged
82
Q

Trust Termination - Income Interest Terminates / when, effects, doctrine of acceleration

A
  • Corpus distributed among remainder beneficiaries bc last of income (ppal) beneficiary dies

OR

  • Doctrine of acceleration: allow for prior distribution when there is disclaimer by income beneficiary that there is no harm caused by earlier distribution
83
Q

Trust Termination - Petition to court / standing, grounds-restrictions (2)

A
  • By all beneficiaries (guardian ad litem for minors)
  • Granted when:
    1) showing it will not defeat material purpose of trust at time of creation

OR

2) When agreement from donor and all beneficiaries even against material purpose

84
Q

Trust - Regulation

A
  • CL - Uniform Trust Code
  • UTC (2005) - updates some CL rules

Trusts, Wills and Estates (3 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions