Trusts Flashcards
What is a trust?
A trust is a management device for holding and managing property whose central feature is a bifurcated transfer of title.
What is a revocable trust?
A revocable trust is a trust that can be revoked at any time during the settlor’s life (must be stated in the trust document)
What are the four elements for the creation of an express trust?
- Intent 2. Trust Res 3. Trust Purpose 4. Ascertainable beneficiaries
What are some types of express trust distributions?
There are various types of express trusts including mandatory trusts, discretionary trusts, support trusts, and spendthrift trusts?
What are remedial trusts?
A remedial trust is an equitable remedy created by operation of law
What are the two types of remedial trusts?
- Resulting Trust 2. Consulting Trust
When is a remedial trust imposed?
A remedial trust is imposed when a trust fails, to return the trust res to the settlor, or the settlor’s estate. The goal is to avoid unjust enrichment.
When is a constructive trust imposed?
A constructive trust is imposed to prevent unjust enrichment through fraud, or other wrongful conduct. The wrongful conduct must be directed toward the settlor and be the cause of the creation of the trust.
What is the basic rule for determining the ability of a trust beneficiary to alienate and for a creditor to reach trust property?
A beneficiary’s interest in a trust is presumed to be alienable, but cannot be reached by creditors until such amounts become payable to the beneficiary, or may be demanded by the beneficiary to be paid.
What is the Claflin Doctrine?
The Claflin doctrine states that the trustee of a trust may block the dissolution of a trust if it is still serving some unfulfilled material purpose.
When can a trustee be removed?
A trustee may be removed when the trustee has breached a fiduciary duty, or has grossly mismanaged the property.
Which fiduciary duties are owed by the trustee to the trust?
The trustee owes two general fiduciary duties to the trust: 1. Loyalty: The duty of loyalty is an objective standard and can be thought of as a two-fold duty including a duty of good faith. Self dealing is a per-se breach of the duty of loyalty. 2. Care: The duty of care is also objective, the trustee must take the care that a reasonably prudent person would practice in the care of his own estate. Note that if the trustee has special skills, he or she will be held to a heightened standard
What is the prudent investor rule?
The prudent investor rule is the modern rule regarding how a trustee may manage trust property. The prudent investor rule replaced the common law system where trustees were limited to specific lists of investments and allows a trustee to diversify and spread risk.
When is a trustee liable to third parties?
A trustee is liable to third parties for contracts entered into and for tortious acts committed while acting as trustee; can seek indemnification from trust if acting witihn the scope of his/her duties
What requirements are there for the beneficiary of a charitable trust?
A charitable trust neednt have directly ascertainable beneficiaries. The beneficiaries may be indefinite.
