Trusts Flashcards
Trustee Powers
Trustee has all powers enumerated in Trust
AND
Implied powers to carry out trust purpose
E.g. sell res, incur expenses, lease, encumber
Spendthrift OR Support OR Discretionary Trust for Settlor
- Majority view on involuntary alienation: Trust is valid but provisions are not recognized
- Minority view on involuntary alienation: recognized and may insulate from creditors
Support Trusts
Trustee MUST use res but ONLY so much of the income or principal as is NECESSARY for Ben’s Health, Education, Maintenance, Support (HEMS) as opposed to just reasonable comfort.
- MUST expressly state in Trust e.g. “Trustee must use only so much of income/principal as necessary for Ben’s HEMS”
- Ben cannot transfer interest AND creditors cannot attach even if Ben has present right to mandatory distribution
- Exceptions: certain creditors can attach
CL creditors: Gov creditor (e.g. IRS), creditor provides necessities of life to Ben, Child support, Spousal support, Alimony, Tort judgment
Modern: ANY creditor may attach BUT only surplus as measured by Ben’s station in life (subjective std)
Private Express Trust
A fiduciary relationship w/respect to property whereby the Trustee holds legal title for the benefit of the Ben and which arises out of a manifestation of intent to create it for legal purpose
Who hold title in a trust?
- Settlor transfers legal title of Real Prop to Trustee (MUST satisfy SoF)
- Settlor must deliver personal prop to Trustee
- Settlor may be trustee:
For Real Prop must have SOME writing to satisfy SoF but no transfer or legal title is executed
For Personal Prop: no delivery required
Cy Pres doctrine
If Charitable Trust of general intent + not enough money (trust prop) to achieve trust purpose, Ct may
1) deem a resulting trust: res is returned to settlor or settlor’s estate (residuary, if any, or intestate)
OR
2) apply Cy Pres: Ct modifies mechanism to effecutates Settlor’s general charitable intent (intrinsic and extrinsic evidence allowed to determine intent)
- DO NOT apply Cy pres if Settlor has specific charitable intent
- RAP does not apply to charitable trusts
Alienation of Trust property
- Voluntary: Ben may alienate interest
- Involuntary: creditors may involuntarily alienate Ben’s interest by attachment or seizure
Charitable Trusts
Same elements as a private express trust:
1) Writing
2) Present manifestation of intent
3) Trust prop
4) BUT no ascertainable Ben (for benefit of Society as a group)
5) Charitable purpose: Confers a substantial benefit upon society
E.g. help the poor, advance edu, help sick, promote religion
- Cy pres (as nearly as possible): if not enough res + Settlor has General charitable intent: Ct applies resulting trust OR Cy Pres (mods mechanism to effectuate Settlor’s general charitable intent
- DO NOT apply Cy pres if Settlor has specific charitable intent
- RAP does not apply to charitable trusts
Termination of Trusts
Revocable Trusts
- Majority: Settlor MUST expressly reserve the power in the trust
- Minority (CA): Settlor HAS the power to revoke UNLESS expressly made irrevocable
Irrevocable Trusts
- Settlor and ALL Bens (including contingent remainders through guardian ad litem) agree to terminate
- ALL Bens (including contingent remainders w/guardian) agree to terminate AND all material purposes have been accomplished
- By Operation of Law: Trustee has not active duties (Trust is passive)
Discretionary Trust
Trustee is given SOLE and ABSOLUTE discretion in determining how much to pay Ben, if anything, AND when to pay Ben, if ever
- MUST expressly state in Trust e.g. “Trustee shall have full, sole, absolute discretion in determining to pay Ben”
- Ben cannot transfer interest because res may never be paid BUT if Ben assigns interest, assignee steps in Ben’s shoes
- Creditors cannot attach because res may never get paid BUT if Trustee is has notice of debt, when Trustee decides to pay, it MUST pay creditor or held personally liable
- Exceptions: certain creditors can attach
CL creditors: Gov creditor (e.g. IRS), creditor provides necessities of life to Ben, Child support, Spousal support, Alimony, Tort judgment
Modern: ANY creditor may attach BUT only surplus as measured by Ben’s station in life (subjective std)
Spendthrift Trust
Because Ben can voluntarily alienate interest in trust prop and creditors can involuntarily alienate Ben’s interest (attach or seize), Settlor can set up a ST
- MUST expressly state in Trust e.g. “Ben’s interest in income and/or principal is not subject to voluntary or involuntary transfer,”
- Ben cannot transfer interest AND creditors cannot attach even if Ben has present right to mandatory distribution
- Exceptions: certain creditors can attach
CL creditors: Gov creditor (e.g. IRS), creditor provides necessities of life to Ben, Child support, Spousal support, Alimony, Tort judgment
Modern: ANY creditor may attach BUT only surplus as measured by Ben’s station in life (subjective std)
Mix Discretionary and Support Trust
If Trust creates a mix between discretionary + support (e.g. Trustee has sole discretion to pay for Ben’s HEMS) then analyze under BOTH theories
Testamentary Trust
Trust created to take effect at Settlor’s death
MUST comply w/CA Probate Code
Powers of Co-Trustees
Must act by majority decision because powers are NOT personal to the trustee named
Resulting Trust
Resulting Trust: returns res to Settlor or Settlor’s Estate
Apply to
- Private express trust ends on its own terms
- Private express trust fails because no Ben
- Private express trust fails because illegality
- Charitable trust ends because impossibility or impracticability
- Semi-secret trust (gift to an unnamed Ben)
- For secret trusts: Will gift to A w/oral promise to be Trustee for Ben, apply parol evidence to establish Ben’s ID
