Trusts Flashcards
Creation of Trust
Clearly states intention of settlor To transfer property to trustee for Benefit of one or more ascertainable bennys Majority: trust presumed irrevocable UTC and CA: trust presumed revocable
Req of Trust
Intent Trust Property Proper Purpose Ascertainable Benny Trustee
Intent Creation of Trust
Evid intent to create trust Looking for precatory language Spicer test Exact wording used such As words of obligation Specificity of language & writing Contained in document, and Whether description of use of Property objective or subjective
Trust Property Creation of Trust
Cannot be expectancy
Proper Purpose Creation of Trust
Cannot be illegal or against public policy
Must comply w/ RAP
Ascertainable Benny Creation of Trust
Must sufficiently describe bennys
Trustee Creation of Trust
Not necessary to be valid
Court will appoint if one not named
Invalidation of Trust
Ineffective if procured by duress,
Menace, fraud, or undue influence
Types of Trusts
Intervivos Testamentary Pour Over Will Secret/Semi-Secret Charitable Spendthrift Support Discretionary Purchase Money Resulting Trust Resulting Constructive
Intervivos Trust
Created during lifetime of settlor
Must comply w/ SoF for real prop
May be oral for personal prop
Testamentary Trust
Created at death of settlor and irrevocable
Must comply w/ Statute of Wills
Pour Over Will
Regular will leaves residuary to trust
Must be in existence at time will made
Must be identified in will
May be modified in the future
Secret/Semi-Secret Trust
Appears to be trust but
Details known only to settlor and tee
Makes outright gift to tee
Secret Trust
Leaves money and extrinsic evid
Showing money was for particular purpose
But vague in its term
Semi-Secret Trust
Leaves money and says “They know what to do with it” and Extrinsic evid showing money was for Particular purpose but vague Majority: invalid and resulting trust Minority: Extrinsic evid to prove trust
Charitable Trust
Set up for charitable purposes and
Benefits society
Cy Pres
Objective becomes impossible or Impracticable to fulfill, courts Substitute similar charitable Object near as possible to original Fails, creates a resulting trust
Spendthrift Trust
Benny cannot voluntarily or involuntarily
Alienate his interest
Protected from own irresponsibility and
Cannot transfer interest and most creditors
Cannot reach to satisfy claims
Exceptions of Spendthrift Trust
Creditors for necessities
Alimony and child support or
Government liens
Support Trust
Directs tee to make limited distributions
To pay for benny’s support, health, etc. and
Not accessible by creditors if interferes
Discretionary Trust
Tee discretion to distribute payments to benny
Purchase Money Resulting Trust
Benny pays consideration for property but
Allows title to prop to be taken in name of another
Resulting Trust
Implied-in-fact trust based upon Presumed intent of parties and will Transfer trust property back to settlor if: Purpose of trust satisfied Express trust fails Cy pres doctrine fails Trust is illegal, or Semi-secret will
Constructive Trust
Remedy to prevent unjust enrichment if Self-dealing or breach of fiduciary duties Fraud in inducement or undue influence Secret trusts involved or Oral real estate trusts created
Remedial Trust
Equitable remedy by operation of law Not subject to creation requirements or Statue of Wills or Frauds Passive in sole duty of tee to convey Trust prop to benny, then terminates
Settlor Modification
May modify if trust revocable
Irrevocable Trust Modification by Bennys
If bennys agree, can petition for
Modification unless continuance
Necessary to carry out material purpose
Settlor and Bennys Modification
Written consent of settlor and all bennys
W/out court approval
If one benny does not agree,
Court may modify if settlor consents and
Interests of benny not substantially impaired
Trustee Termination
No power to terminate
Settlor Termination
If reserved power
Irrevocable Trust Termination by Bennys
If bennys agree, can petition for
Termination unless continuance
Necessary to carry out material purpose
Settlor and Bennys Termination
Written consent of settlor and all bennys
W/out court approval
If one benny does not agree,
Court may partially term if settlor consents and
Interests of benny not substantially impaired
Court Termination Trust
If purpose becomes frustrated, impossible
Illegal, or if changed circumstances
Duties of Tee
Care Loyalty Administer Perform Personally Invest Prudently Diversify Act Impartially Segregate
Duty of Care Tee
Reasonable care, skill, and caution Under circumstances that Reasonably prudent person would do Acting in like capacity to accomplish Purpose of trust
Duty of Loyalty Tee
Administer trust solely for
Interest of bennys
Self-Dealing or Over Two Trusts
Self Dealing Duty of Loyalty Tee
Tee personally engages in
Transaction involving trust prop
Conflict of interest arises between
Tee’s duties and bennys
No Further Inquiry Rule
Once self-dealing established
Per se breach
Over Two Trusts Duty of Loyalty Tee
Sells, exchanges, or participates in
Sell or exchange between two
Not violation so long as fair & reasonable to bennys of both tee gives bennys notice of all material facts
Duty to Administer Tee
In good faith, in accordance w/
Terms and purposes, and in
Interests of bennys
Duty to Perform Personally Tee
Cannot delegate performance that Can be reasonably done by tee and Cannot transfer office of tee Performance delegated must be Properly supervised by tee
Duty to Invest Prudently
CL: limited to acceptable investments
ML: fiduciary held to prudent investor
Duty to Diversify
Diversify investments unless
Under circumstances prudent not to
Duty to Act Impartially
Includes balancing interests of
Present and future bennys
Duty to Segregate
Keep trust prop separate from
Other prop and no commingling
Allocate Income/Expenses Tee
Generally old rule, bennys entitled to
Income from interest income, cash dividends
Net business income, but must
Pay interest on loan debt, taxes, or
Minor repair and remaindermen
Entitled to principal from net proceeds on
Sale of asset, stock dividends, and
Profits from sale of stock, but must
Pay principal of loan debt and major repairs
Liability of Tee Breach
Ratify transaction and waive breach
Surcharge tee by suing for resulting loss
Trace and recover prop
Seek to discharge tee and replace him
Equitable Deviation
A court may modify a trust under the doctrine of equitable deviation if events that were unanticipated by the trustee have occurred, and the changes would further the purposes of the trust. To the extent possible, the modification must be made in accordance with the settlor’s probable intention, and the court need not seek beneficiary consent to make the modification.
