Trusts

Question 1

What is a Trust?

Answer 1

Fiduciary Duty concerning the specific property where one trustee holds legal title to property for the benefit of another

Question 2

Types of Trusts (3)

Answer 2

1. Express - Intention of property owner
2. Resulting Trusts - By operation of law
3. Constructive Trusts - Equitable Remedy

Question 3

Parties to a Trusts (3)

Answer 3

1. Settlor - Property owner creating the trust
2. Trustee - Legal owner of property who holds it for benefit of beneficiaries
   
   • Must have the capacity, accept the position, and may be removed if failed at duties; duty to preserve the property
3. Beneficiary - Equitable owners of property; have right to enforce terms

Question 4

General effects fo trust creation ?

Answer 4

Once created, settlor no longer owns the assets

Question 5

Elements Necessary to Create a Trust? (4)

Answer 5

Intent + Trust Property + Trust Beneficiaries + Valid Purpose = Trust

• Intent - Manifest words or condict to create trust; suggesting or hoping not sufficient; promise to create in the future not sufficient
• Trust Property - Need the Res! Can create trust, will w/execution instructions; trustee needs res
  
  • any property that is transferable constitutes trust
    
    • K rights, interest in another trust, possessory interests (not future expectations)
• Beneficiary - Definite or ascertainable beneficiaries now or at a future time (natural or artificial/corp, not animals)
  
  • may include a class if for reasonable basis, uninc corps, unborn
• Valid Purpose - any purpose except one that is illegal

Question 6

Creation of Express Inter Vivos Trusts

Answer 6

Must be signed, acknowledged, and signed by at least 1 trustee

• Doc must be notorized or executed in presence of two witnesses who mist affix a signature
• IRREVOCABLE!!! (unless specificed and reserved the right)
• Transfer is by physical, symbolic, or constructive delivery

Question 7

Creation of Testamentary Trusts

Answer 7

Created by testator’s will; doc complies w/ due execution requirements

Question 8

Totten Trusts

Answer 8

Opening a bank account

• Can be revoked/modified by withdrawing funds, writing

Question 9

Honorary Trusts

Answer 9

Trust that does not qualify as charitable bc no charitable purpose

Ex: Caring for a Pet

Question 10

Limits on Trust Duration

Answer 10

Private trusts cannot last forever (R against Per)

Question 11

Modification or termination of Trusts

Answer 11

A revocable inter vivos trusts - amended or revoked in writing w/consent of all living beneficiaries

• Chafin Doctrine - Trust terminated modified w/o settlor but w/all beneficiaries

Question 12

Charitable Trusts

Distinguishing characteristics

Answer 12

Serve Religious, Charitable, educational, or benevolent purposes

• have perpetual existence, charitable purpose, beneficiaries must be indefinite and cy pres

Question 13

Cy Pres

Answer 13

Close enough - if purpose cannot be carried out

AG has authority to sue to enforce charitable trusts operating in NY

Question 14

Source of Trustee’s Powers

Answer 14

From trust instrument and granted by statute or implied by law

• acquire assets, invest assets, maintain insurance, sell/lease, exercise stock rights

Question 15

Trustee’s Duty of Loyalty

Answer 15

Duty of utmost faith and loyalty

• prohibited from self-dealing and precluded from any personal benefit (unless agree upon)
• Must segregate trusts assets

Question 16

Affirmative Duties w/Respect to the Trust’s Assets

Answer 16

Affirmative duty to preserve and enhance! – Objective standard of care

• Prudent Investor Rule - Trustee is permitted to invest trusts assets as would a prudent investor considering both interests of lifetime B’s and remaindermen

Question 17

Termination by Settlor

Answer 17

Revocable -> Amend or revoke in writing, signed, and acknowledged or witnessed

Irrevocable -> only w/consent of all beneficiaries

Question 18

Termination by Merger

Answer 18

Sole trustee becomes the sole beneficiary

Question 19

Termination by Operation of Law

Answer 19

Purpose fully accomplished or the accomplishment of material purpose of the trust has become illegal, impossible, or impractical