Trusts Flashcards
Creation of Valid Trust
(1) intent to create (2) trust property (3) beneficiares (4) trustee (5) a valid trust prupose
Settlor
must have capacity to convey
Irrevocable trust
settlor must have legal power to convey trust property
Undue Influence
contestants must establish that the product of the influence “but for” influence
Intent
must have definite terms
precatory language
does not create a trust
Trustee
trust will not due to death, removal, resignation of the trustee
Duty to Administer
in good faith and prudent manner
Duty of Loyalty
no self dealing
Specific Self-Dealing Rules
(1) cannot buy or sell trust assets (2) cannot buy assets from one trust to another (3) cannot borrow trust funds or make loans to trust
Duty of Impartiality
trustee must act for the benefit of the beneficiaries, if over 1 B then act impartially
Duty to Separate and Earmark Property
trust assets must be physically separated from trust’s personal assets of other trusts
Duty to Perform Personally
trustee must perform functions that a RPP wouldn’t delegate
Delegation of Investment and Management
OK if reasonable care, skill and caution in (1) selecting the agent (2) establishing the scope and terms of the delegation AND (3) monitors the agents performance and complies with terms
Duty to Preserve Trust Property and Make it Produce
(1) collect all claims due to trust (2) lease land and manage it (3) record recordable documents (4) invest trust funds
Remedy to Beneficiary for Violation
(1) b can ratify to accept improper conduct (2) sue for full surcharge or amount lost to trust
Removal of Trustee
court may remove if actions are detrimental to the interest of the B.
Commission of serious breach of trust
grounds for removal
Incapacity
grounds for removal
Unfitness/Drunkenness, old age, practical inability
grounds for removal
Refusal to post Bond of account
grounds for removal
Existence of a significant conflict of interest
grounds for removal
Trustee insolvency
grounds for removal
Extreme friction between trustee and beneficiaries
grounds for removal if interfere’s with proper administration of trust
Prudent Investor Rule
standard when determining priority of investments. Basic duty to invest prudently. Examine probably income and safety of preservation. Must diversify investments
Investment performance
measured by OVERALL RETURN
Trust property
where no trust property, trust fails.
Real Property trsut
must be in writing
Trust of tangle property
need not be in writing
Promise for future trust
must be supported by consideration, can arise when property is acquired w/o manifestation of intent
Beneficiaries
trust requires (1) definite (2) ascertainable beneficiaries UNLESS charitable or honorary trusts
Timing if Beneficiary Identity
not at time trust is created but when interest vests
Purpose of a Trust
trust is invalid if purpose is (1) illegal (2) contrary to public policy (3) impossible (4) intended to defraud creditor or (5) based on illegal consideration
FL RAPS
(1) must vest within 21 years after death of life in being OR (2) vests or terminates w/n 360 years
Spendthrift Trusts
B cannot transfer interest and creditors are precluded from reaching it to satisfy claims. When trust property is distributed then subject to creditor’s reach
Exception to Spendthrift Trusts
Cannot be used to shield from (1) creditors where B is settlor (2) claims for support, alimony, and services to protect his interest (3) claims by the government
Charitable Trusts
(1) identifiable beneficiaries (2) may be perpetual (3) cypress doctrine applies (4) RAPS DOES NOT APPLY
Charitable Trust Purpse
must benefit the public
Cy Pres Doctrine
applies when cannot enforce charitable trust. if settlor has general charitable purpose vs specific, court will select alt. charity to be “as near as possible” to settlor’s intent
Support Trust
provides for B’’s support: (1) housing, (2) food (3) tuition. No right for luxuries. Can be mandatory or discretionary
Discretionary Trust
grants discretion to make distributions. B cannot compel distribution. Court only orders if ABUSE.
Totten Trust
bank account where trustee cakes withdrawals during and deposits during life. B has no right until T dies
Pour Over Gift from Will to Trust
(1) trust must be in existence before or concurrent with will (2) trust may be amendable or revocable (3) gift is valid even though trust unfunded during settlor’s lifetime
Homestead Property
cannot be made into a gift or transfer title by deed unless settlor is joined by his spouse
Automatic Termination of Trust
occurs when (1) end date specified (2) purpose is accomplished (3) unlawful (4) contrary to public policy (5) becomes impossible
Can a Trust be amended or revoke?
Yes unless it expressly states its irrevocable
Continuation of trust uneconomical (under 50K)
grounds for termination
When is modiciation allowed?
(1) consistent w/purpose (2) best interest of B (3) modification achieves tax objectives (4) reformation needed to correct a mistake
Resulting Trust
express trust terminates and and settlor is B of resulting trust. conveyance of property under express trust and (1) trust is void OR (2) B is dead and can’t be located.
Resulting Trust will not be Implied when
(1) trust says what to do when trust fails (2) settle was given consideration for original transfer in trust (3) trust is illegal purpose (4) Cy Press is applicable
Constructive Trusts
prevents unjust enrichment. trustee’s only duty is to give trust property to whoever should have had it BUT FOR wrongful conduct. BOP is clear and convicing
