Trusts Flashcards
What is a trust?
A fiduciary relationship wherein one or more trustees are called upon to manage, protect, and invest in certain property and any income generated from that property for the benefit of one or more named beneficiaries, who hold equitable title.
What are the three main types of trusts?
- Express trusts
- Resulting trusts
- Constructive trusts
What is a bifurcated transfer?
When the creator (settler) of a trust transfers property to a second-party trustee to be managed for the benefit of a third-party beneficiary.
Trustee holds legal title; beneficiary holds equitable title.
No consideration required.
What is an ongoing transfer?
When a trust involves an ongoing series of transfers. The property is divided between income and principal, and the equitable interest is divided between the beneficiary holding the possessory estate and the beneficiary holding the future interest.
Are trusts revocable?
They are presumed to be revocable unless they expressly state to the contrary.
This means they can be terminated by the settlor at any time.
How can you revoke a trust?
If not spelled out in the trust, then by any action manifesting the settlor’s intent to revoke.
When does a revocation become effective?
When the action manifesting the intent occurs (not when others learn of it!).
What is a mandatory trust?
A trust that requires the turstee to distribute all trust income.
What is a discretionary trust?
A trust that gives the trustee the power to distribute income at his discretion.
What is a dynasty trust?
A trust that can continue for 100 years or longer by providing for payments to future generations while avoiding the imposition of estate or generation-skipping transfer taxes.
Who are the parties to a trust?
- Settlor (creator)
- Trustee
- Beneficiary
What property rights does a trustee have?
Legal interest or title to the trust property.
How does a trustee accept the trusteeship?
By accepting delivery of trust property or commencing to act in accordance with the terms of the trust instrument.
N.B.: Mere protection of the property will not constitute acceptance if the trustee has manifested an unwillingness to serve.
Can the sole trustee also be the sole beneficiary?
No, that’s pointless. If this happens, the title merges and the trust terminates.
What if the trustee dies, becomes disabled, resigns, or fails to accept the office within a reasonable amount of time?
The court will appoint a successsor trustee, unless the settlor expressed an intent that the trust was to continue only as long as a particular trustee served.
