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July Bar > trusts > Flashcards

trusts Flashcards

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1
Q

what is a private express trust

A

a fiduciary relationship with respect to property where the trustee, holds legal title for the benefit of another, the beneficiary, and which arises out of manifestation of intent to create it for a legal purpose.

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2
Q

what are the elements of a private express trust?

A
  1. present existing interest in property
  2. ascertainable person or group
  3. manifestation of present intent
  4. Legal Purpose
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3
Q

can the beneficiary be a corporation or unincorporated association?

A

yes those are legal persons. as long as ascertainable.

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4
Q

what happens if a trustee refuses to serve?

A

the trust does not fail and the court appoints a new trustee.

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5
Q

are precatory words sufficient to create a trust?

A

no has to be mandatory, not words of wish or desire.

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6
Q

do trusts of personal property have to be in writing?

A

No.

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7
Q

what are the two ways trusts are created?

A
  1. trust created to take effect at settlor’s death

2. or during lifetime.

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8
Q

what happens if the trust is for an illegal purpose?

A

you try to excise the part that is illegal. if not can allow trustee to keep property or settler to keep property.

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9
Q

what happens if the trust is illegal after creation?

A

a resulting trust. goes back to settlor and if hes dead it goes back to his estate.

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10
Q

what is a charitable trust?

A

any trust which confers a substantial benefit upon society.

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11
Q

whats the difference between a charitable trust and a private express trust?

A

charitable trust is doesnt have an ascertainable beneficiary.

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12
Q

whats the significance of a charitable trust?

A

not affected by rule against perpetuities and cy pres.

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13
Q

what does cy pres mean?

A

as nearly as possible?

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14
Q

how do we apply the cy pres doctrine to charitable trusts?

A

if its impossible to effectuate settlor’s GENERAL intent, we will try effectuate the settlors general intent as nearly as possible.

Can use extrinsic and intrinsic evidence to ascertain settlor’s intent.

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15
Q

what happens when the cy pres doctrine does not apply to a specific intent?

A

we have a resulting trust.

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16
Q

who invokes cy pres?

A

only the court

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17
Q

what is a pour over will?

A

there is an intervivos trust, with a provision in the will devising the rest of estate to the trustee of the trust.

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18
Q

how is a pour over will validated?

A
  1. incorporation by reference
  2. facts of independant significance
  3. UTATTA
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19
Q

What is an honorary trust?

A

a will that has no ascertainable beneficiary and confers no substantial benefit on society.

goal of settlor.

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20
Q

must a trustee carry out a settlor’s honorary trust?

A

no may refuse to carry out and trust fails =ing resulting trust.

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21
Q

what problem does an honorary trust give rise to?

A

they always violate the rule against perpetutities.

court is allowed to strike it down, or allow it to endure for 21 years.

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22
Q

what is a tottent trust?

A

where beneficiary takes whatever is left in the bank account.

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23
Q

what is a spendthrift trust?

A

beneficiary cannot transfer his right to future payments and creditors cannot attach beneficiaries right to future payments.

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24
Q

what are the exceptions to a spendthrift trust?

A

preferred creditors can attach the beneficiary’s right to future payment. (government creditors)

there is also a rule in may jurisdictions that any creditor has the right to attach surplus.

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25
Q

what is surplus measured by the beneficiaries station in life?

A

subjective view

what ever the beneficiary needs to maintain station in life and how much she gets.

26
Q

can the settlor ever create a spendthrift trust for himself?

A

some jurisdictions yes, some no.

policy to protect him from himself.
policy dont want to protect him from creditors

27
Q

what is a support trust?

A

the trustee is required to use only so much of the income or principal as is necessary for the beneficiaries health, support, maintenance, or education

28
Q

can beneficiary ever voluntarily alienate or transfer right to future payments?

A

No, would defeat the purpose of the trust and violate settlor’s intent.

29
Q

can creditors attach the beneficiaries right to future payments?

A

same as spendthrift trusts. (preferred creditors, surplus)

30
Q

can settlor ever create a support trust for himself?

A

same as spendthrift trust. some yes, some no.

31
Q

what is a discretionary trust??

A

trustee is given sole and absolute discretion in determining how much to pay beneficiary and to pay benficiary if ever.

32
Q

can beneficiary voluntary transfer his rights under a discretionary trust.

A

no, because what exactly is the beneficiary getting.

yes, if there is an assignment, trustee must pay assignment if has notice of the assignment. if not he is personally liable.

33
Q

can creditors ever attach the beneficiary’s right to future payments under a discretionary trust?

A

no, because you cannot attach right to future payments because there is nothing to attach.

yes, if trustee has notice of debt and the creditors judgment. if not, he will be held personally liable.

34
Q

on bar exam can we have a hybrid support/ discretionary trust?

A

yes, bring up both.

35
Q

what is a resulting trust?

A

trustee has to transfer property back to settlor if alive, and if not alive to the settlor’s estate.

36
Q

when do resulting trusts arise?

A
  1. when a private express trust ends by its own terms, and there is no provision for what happens next.
  2. when a private express trust fails, because there is no beneficiary.
  3. when a charitable trust ends because of impossibility and cy pres cannot be used.
  4. when private express trust becomes illegal after creation.
  5. when there is excess corpus in a private trust.
  6. purchase money resulting trust
  7. semi secret trust
37
Q

what is a semi-secret trust?

A

a semi-secret trust arises when the will makes a gift to a person to hold as a trustee, but does not name the beneficiary.

38
Q

what is a constructive trust?

A

when trustee’s only duty is to deliver property to the intended beneficiary.

39
Q

what is a constructive trust a remedy for?

A

to prevent fraud or unjust enrichment.

self dealing

secret trust.

oral real estate

40
Q

what is a secret trust

A

when settlor devises property to trustee but gift is based on oral promise to use for the benefit of another.

allowed to use parol evidence.

41
Q

whats the difference between a semi secret trust and a secret trust?

A

semi-secret: resulting trust

secret: constructive trust allowed to use parole evidence.

42
Q

what is a oral real estate trust?

A

when settlor has oral agreement to give A land to hold for B, but it appears on the document that A has a fee simple free of any trust.

43
Q

When is an oral real estate trust considered a constructive trust?

A
  1. fiduciary relationship
  2. fraud in the inducement
  3. detrimental reliance
44
Q

what powers does trustee have?

A
  1. all enumerated powers

2. all implied powers: helpful and appropriate to carry out the trust purpose.

45
Q

what are the trustee duties owed to the beneficiaries?

A
  1. Loyalty
  2. Invest
  3. Earmark
  4. Segregate
  5. Not to Delegate
  6. Diversify
  7. Account
  8. Due Care
46
Q

what is the duty of loyalty for a trustee?

A

Requires that the trustee administer the trust for the benefit of the beneficiaries, having no other consideration in mind.

must be impartial, no self dealing.

47
Q

what are the consequences of finding breach of the duty of loyalty or self dealing?

A
  1. if a loss, trustee is surcharged, has to make good the loss.
  2. if profits, becomes constructive trust.
48
Q

what is the duty to invest?

A
  1. State List. Good investments in these jurisdictions are federal bonds, first deeds, never invest in a new business, never invest in second deeds.
  2. common law prudent person test: act as a reasonably prudent person investing his own proper. each investment is scrutinized. never invest in second deeds or in a new business.
  3. Uniform Prudent Investor Act: invest as a prudent investor. Considere the entire portfolio.
49
Q

under the duty to invest, is there a duty to diversify?

A

yes, so if there is a loss, the entire portfolio will not be wiped out.

50
Q

what if there is a loss and profits under breach of duty to invest?

A

they are not netted, settlor liable for loss and must affirm profits to beneficiary.

51
Q

what is the duty to earmark?

A

requires that trustee label trust property as trust property.

52
Q

is a trustee personally liable for failure to earmark even if not related to loss (stock market crash)

A

yep under common law.

under majority no.

53
Q

What is the duty to segregate?

A

cannot comingle own funds with trust funds. Also can’t mix funds from trust a to trust b.

54
Q

what is the duty to delegate?

A

trustee cannot delegate decision making authority to advisors. has to make decisions.

common law: cannot delegate to another trustee, trustees must act unanimously.

modern law: trustees can act by majority decision.

55
Q

what is the duty to account?

A

requires trustee on a regular basis to give beneficiaries a statement of income and expenses of the trust.

56
Q

what is the duty of due care?

A

must act as a reasonably prudent person dealing with his own affairs.

57
Q

if plaintiff sues trustee under breach of contract, is trustee personally liable?

A

no if he knows trustee is entering into the contract in his representative capacity.

58
Q

can a trustee be personally liable for tort?

A

only if he is personally at fault.

59
Q

when does the settlor have to power to modify trust?

A

when he has the power to revoke or if he expressly reserves the power.

60
Q

when can court uses its deviation power?

A

unforeseen circumstances
necessity

can only change management provisions.

61
Q

when does the settlor have the power to revoke trust?

A

must reserve the power in the rust instrument.

62
Q

when can you terminate an irrevocable trust?

A
  1. settlor and beneficiaries agree.
  2. all beneficiaries agree to terminate and all the material purposes have been accomplished. (includes remainder man)
  3. truste has no active duties. (Statute of Uses)

July Bar (11 decks)

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