Trusts (5%) Flashcards
What is a trust?
Legal title is given to trustee
Equitable title is given to beneficiary
Who is the settlor of a trust?
funds the trust with the trust property
Who is the trustee of a trust?
Gains the legal title to the trust property
Who is the beneficiary of a trust?
The person who holds the equitable title to the trust property
When can a settlor be the beneficiary of a trust?
When there is > 1 beneficiaries
What are the requirements for a trust creation?
3
- The settlor must have an intention to create a trust (surrender legal title and give equitable title to someone else)
- The settlor must have the necessary capacity
- Trusts may be in writing or by oral declaration.
A trust can be revoked or modified if?
Settlor retains power to revoke in N.C.
-Can revoke or modify by any reasonable means or the terms spell out process
When can creditors go after the assets in the trust?
- While the trust remains revocable, creditors of the settlor can force revocation.
- Even at the death of the settlor, if an estate is inadequate to satisfy the claims of the creditors, the creditors can, after exhausting the probate estate, go after the corpus of the trust.
What are testamentary trusts?
Trusts created in a will
What is a pour-over will?
- a trust is created during life;
2. the will of the settlor pours over their assets into the will
What must a trust contain?
Property; personal or real
What is the distinctive about a charitable trust?
2
- The class is not definite — there are a group of indefinite beneficiaries
- The purpose must be chairtable and not solely benefit a limited class
Cy Pres Doctrine means?
“as near as possible”
If a trust’s charitable purpose is no longer applicable, modify the trust to be as close as possible to the original purpose.
What happens when a pet is a beneficiary?
States now have statutes designating that people must protect the trust for the animal
A support trust is one in which
The trustee must spend income and principal to provide beneficiary with support
-no more and no less
A “discretionary trust” means:
Gives the trustee some ascertainable limitation to discretion to use of the property
- if no limitation, then trustee is the complete owner
- if there is a discretionary trust, then creditors cannot attack
In a spendthrift trust, a trustee is instructed to?
not to recognize any alienation of the beneficial interest by the beneficiary
- beneficiary cannot sell their interest in the trust
- Creditors cannot attach until distribution is made
What is a self-settled spendthrift trust?
When settlor creates a spend thrift trust listing himself as a beneficiary
-In N.C. you cannot create a self-settled spendthirft
How can a trust be terminated?
3
- Termination by the Terms of the Trust
- Termination by the Settlor if power to revoke
- Termination by Beneficiaries
How can a trust be terminated by the beneficiaries?
A unanimous demand of beneficiaries to terminate
+
No material purpose of the trust remains unfilled
What are the duties of a trustee?
- duty to make property productive
2. duty of impartiality (among beneficiaries)
What is the Prudent Investor Rule?
make decisions that a prudent investor would in the first place
A trustee will typically be granted a broad range of powers including:
- Power to sell
- Power to Invest and Reinvest
- Power to apportion benefit and principle
A power of appointment is
created by? received by?
Appointing someone to act upon your behalf
Created by donor and received by donee
e.g. Power of Attorney
If a power of appointment is given to someone, must they accept?
No
Power of Attorney gives the donee
The power to control property that is not their own.
A durable power of attorney is?
How to create?
a power of attorney that does not lapse if the donor became incapacitated or incompetent.
-Lasts until revoked or death
- must be registered
