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Trusts Flashcards

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1
Q

6 elements of a Private Express Trust

A

settlor, present intent, trustee, beneficiary, valid trust purpose, specific res

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2
Q

settlor requirements

A

“capacity to convey”; will be void for lack of capacity if undue influence (but for test), fraud, duress

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3
Q

present intent

A

oral (but beware of statute of frauds or wills), writing, conduct by delivery or naming self trustee while settlor owned property that was delivered, with intent to take immediate effect, and NO precatory language

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4
Q

trustee

A

must be 18, competent capacity to enter into K, settlor must intend to impose enforceable duties

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5
Q

trustee removal

A

requested by settlor, beneficiary, or co-trustee: court will remove if “detrimental” to trust administration for 1-breach of trust, 2-lack of co-trustee cooperation, 3-unfitness, unwillingness or persistent failure to administer, 4-substantial change in circumstances

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6
Q

trustee resignation

A

must give 30 days notice to settlor, beneficiary, co-trustee(s), OR get court approval

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7
Q

sole trustee?

A

cannot be sole beneficiary, but okay if more than one beneficiary

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8
Q

trustee pay?

A

entitled to reasonable fee and reimbursement for expenses

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9
Q

beneficiary requirements

A

must be “definite and ascertainable” (including class BENS), current BEN or “first line remainderman” by the time interests are to “come into enjoyment”

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10
Q

beneficiary misc.

A

presumed to accept unless affirmatively disclaimed; not required for charitable or honorary trusts; if trust fails for lack of a BEN-a resulting trust in favor of the settlor is created

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11
Q

specific property RES

A

no res=no trust; future interests are okay if existing K; intangible property that settlor has assignable interest is okay; res cannot be mere expectations, personal debt, unenforceable gratuities promises

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12
Q

REs when Real Property

A

statute of frauds applies; if not in writing, use constructive trust

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13
Q

Oral Trust for Personal Property

A

valid if established by clear and convincing evidence

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14
Q

INvalid trust purpose

A

invalid if its purpose is illegal, contrary to public policy, impossible to achieve, or intended to defraud settlor’s creditors or based on illegal consideration

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15
Q

Trust: if condition attached to interest is contrary to public policy

A

settlor’s alternative desire controls if expressed

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16
Q

Trust: if illegal condition subsequent

A

condition is invalidated, but remains valid

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17
Q

Trust: if illegal condition precedent

A

hold interest valid unless evidence of settlor’s desire to void entire interest if unenforceable

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18
Q

Rule Against Perpetuities for Trusts

A

Fl has a 360 year vesting period. a non-vested property is valid if 1-when the interest created is certain to vest or terminate w/n common law period of 21 yrs after the death of a life in being, or 2-it actually vests or terminates w/i 360 years. (if created prior to 12/31/00->90 yrs, not 360.

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19
Q

Creation of Express Trusts

A

1-inter vivos (during life transfer or declaration), 2-testamentary(at death, will)

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20
Q

Inter Vivos Transfer or Declaration

A

present intent manifested by conduct: delivery or naming self as trustee when trust property exists. (“I’m keeping my car for my nephew Q.”)

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21
Q

Testamentary Trust

A

must be ascertained from the will itself, incorporated by reference to will, have independent legal significance, or from exercise of a power of appointment created by the will. Must comply with the statute of wills (writing, 2 witnesses in presence of each other).

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22
Q

Secret Trust

A

constructive trust imposed for intended BEN if absolute gift made in will relied on BENS promise to hold property for another. Extrinsic evidence is permitted.

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23
Q

Semi-secret trust

A

Trustee holds resulting trust for settlor’s heirs where gift in will “in trust” but no BEN named. No extrinsic evidence permitted.

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24
Q

Charitable Trusts (differences from private trusts)

A

Indefinite beneficiaries, may be perpetual, and “cy pres” doctrine applies

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25
Q

charitable purpose

A

must benefit the public. (i.e. relief of poverty, education, religion, health, etc.)

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26
Q

Unascertainable beneficiaries (charitable trusts)

A

courts consider the community at large and a particular individual eligible for benefits to not have standing to enforce the terms. Enforcement is placed upon the state attorney general.

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27
Q

Cy Pres Doctrine

A

When a charitable purpose selected by the settlor is impractical, if the court finds that the STR had a general charitable purpose rather than a specific purpose to ONLY help the named charity, it can select an alternative charity to be the BEN. The alternative must be “as near as possible” to the STR’s intent.

28
Q

Honorary Trusts

A

not charitable. Established for pets or maintenance of burial site. NO HUMAN beneficiaries to enforce. Trustee must carry out duties “on her honor.” If trustee fails, then a resulting trust is created; money left over is also placed in a resulting trust in favor of settlor’s estate.

29
Q

Florida Trust Code (FTC)

A

no more than 21 year enforcement duration if not for the care of animals; if for an animal, animal must have been alive during settlor’s lifetime and will terminate on death of animal.

30
Q

killers

A

treated as having predeceased STR; final judgment of conviction = conclusive evidence; if no charges or conviction, then standard is “greater weight of the evidence that killing was unlawful/intentional.

31
Q

Beneficiary lapse

A

if BEn or future interest fail to survive the STR, and BEn has surviving dependents, interests pass “per stirpes” to deceased BENs surviving descendants regardless of familial relation between the STR and the intended BEN.

32
Q

involuntary transfer

A

rights of creditors: BENs trust interest (not property) is reachable. Creditor’s remedies include judicial sale or court order of trustee to comply with payment plan until debt satisfied.
Revocable: creditors may reach property
Irrevocable: creditors may only reach distributions

33
Q

Spendthrift trusts

A

prohibits voluntary or involuntary transfer of BEN’s interest in the trust before distribution; BEN’s creditors are precluded from reaching trust to satisfy claims. But, once distributed, creditors can reach it.

34
Q

Exceptions to Spendthrift Trusts

A

Cannot protect BEN from: (1)his own creditors if BEN is also STR; (2) claims for support, alimony, and services provided to protect his interest, like an atty; (3) claims by the gov.

35
Q

Discretionary Trust

A

grants the trustee the discretion to make distributions following STR’s directions and intent. BEN cannot compel distribution. Court will order distribution only when there is an abuse of discretion.

36
Q

automatic termination

A

a trust will terminate automatically at a term specified in the instrument or when the purposes have been accomplished, become unlawful, contrary t public policy, or impossible to achieve.

37
Q

Modification or termination by STR and BENs

A

STR and ALL qualified BENs must consent

38
Q

Trustee termination of trust

A

TEE can terminate if res is less than $50k and the amount is insufficient to justify the cost of administration.

39
Q

Court modification or termination

A

petition from trustee or qualified BEN: (1) modification or termination is not consistent w/ STR’s purpose; (2) it is in best interest of BENs; 3 continuation would be uneconomical; 4 modification would achieve STR’s tax objective; 5 reformation is necessary to correct a mistake; 6 spendthift provisions do not prevent modifications or terminations.

40
Q

powers of the trustee

A

conferred expressly or implied in terms of trust, by Florida Trust Code, unmarried rights over property, for investment, management and distribution of property

41
Q

duties of the trustee

A

duty to administer; duty of loyalty; impartiality; duty to separate and earmark property; perform personally; preserve trust property and make it productive; duty to report; fiduciary duty regarding investments

42
Q

trustee duty to administer trust

A

in a GOOD FAITH and PRUDENT MANNER

43
Q

trustee duty of loyalty

A

trustee cannot represent both her personal interest and the interest of the trust. No self-dealing. Specific rules: cannot: buy or sell trust assets, buy assets from one trust to another, borrow trust funds or make loans to a trust.

44
Q

factors trustee is to consider in duty of impartiality

A

1-nature, purpose, & expected duration of trust; 2-STR’s intent; 3-ID & circumstances of BENs; 4-need for liquidity, regular income, preservation/appreciation of capital; 5-nature of assets; 6-net amount allocated to income and increase/decrease of capital assets; 7-authorization to trustee to invade principal or accumulate income; 8-actual and anticipated effect of inflation/deflation; 9-tax consequences of adjustment

45
Q

trustee’s duty to separate and earmark property

A

NO COMMINGLING. Trust assets must be physically separate from trustee’s personal assets and assets of other trusts.

46
Q

trustee’s duty to perform personally

A

trustee must perform functions that a reasonably prudent person would NOT delegate. Exception: trustee can delegate investment and management decisions as long as the trustee uses 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 compliance with terms.

47
Q

trustee’s duty to preserve trust property and make it productive

A

collect all claims due the trust, lease land and manage it, record durable documents, and invest trust funds.

48
Q

trustee’s duty to report

A

name and address to qualified BENs, notice of fiduciary-attorney-client privilege, respond to BENs requests for information, and if IRREVOCABLE, furnish annual accounting.

49
Q

trustee’s fiduciary duty re: investments

A

FL Uniform Prudent Investor Act: Prudent Investor Rule: FL applies this rule in determining the propriety of investments made by the TEE at the time of the decision. Trustee must exercise REASONABLE CARE, SKILL, and CAUTION: 1-investment is measured by OVERALL return; 2-diversification of investments; and, 3-FACTORS TO CONSIDER: general economic conditions, effect of inflation/deflation, expected tax consequences, role of individual investments in overall portfolio, expected total return from income/appreciation, and reasonable costs.

50
Q

How to examine the reasonable investor rule

A

1-investment is measured by OVERALL return; 2-diversification of investments; and, 3-FACTORS TO CONSIDER: general economic conditions, effect of inflation/deflation, expected tax consequences, role of individual investments in overall portfolio, expected total return from income/appreciation, and reasonable costs.

51
Q

liabilities of TEE & 3rd parties to trust if sued in tort or K in representative capacity

A

personally liable in K if failed to disclose representative capacity or in tort if personally at fault (no respondeat superior)

52
Q

trustee breach or impending breach of trust duties; what may court do?

A

court may: 1-enforce specific performance; 2-enjoin TEE from committing; 3-compel damages or restoration of property (damages + $ necessary to restore or profits); 4-suspend TEE.

53
Q

trustee breach or impending breach of trust duties: statute of limitations?

A

generally 4 years, but BEN must bring action w/i 6 months of receiving report disclosing breach; if no report, time does not run unless BEN has actual knowledge of breach established by clear and convincing evidence

54
Q

trustee breach or impending breach of trust duties: exculpatory clauses

A

NOT liable if TEE acted in REASONABLE RELIANCE, or BENS CONSENTED, RELEASED TEE from liability, or RATIFIED the transaction. Exculpatory clauses are VOID if: 1-relieve TEE for bad-faith, reckless indifference or 2-established due to TEE’s abuse of fiduciary or confidential relationship

55
Q

Exculpatory clauses are VOID if:

A

1-relieve TEE for bad-faith, reckless indifference or 2-established due to TEE’s abuse of fiduciary or confidential relationship

56
Q

3rd party liability to trust

A

bona fide purchaser (acquired property w/o notice of trust) cuts off BEN’s equitable interest; TEE may sue BFP; BENs may not sue unless TEE participated in breach, left jurisdiction and no successor TEE, or fails to sue

57
Q

Pour over gift from will to trust: definition

A

STR can make gifts by will to a trust, even a revocable trust, established during TEE’s lifetime

58
Q

Pour over gift from will to trust: requirements

A

1-trust must be in existence before or created concurrently with will; 2-trust may be amendable or revocable; 3-gift is valid even though trust unfunded during STR’s lifetime.

59
Q

Totten trust accounts

A

STR is TEE of bank account to be paid to BEN upon STR’s death; will must specifically mention “totten trusts.” If BEN predeceases STR/TEE-> automatic revocation. FL treats as payable on death accounts (POD).

60
Q

Totten trust revocation

A

STR/TEE may revoke by: 1-withdrawal of funds; 2-any lifetime act manifesting intent to revoke; 3-specific contradictory provision in will. If BEN predeceases STR/TEE-> automatic revocation. FL treats as payable on death accounts (POD).

61
Q

Durable Power of attorney

A

creates an agency relationship, NOT a trust

62
Q

Resulting trusts

A

involve REVERSIONARY interests; burden of proof: on BEN for clear and convincing evidence. 3 types: 1-purchase money: BEN furnishes consideration for purchase of property in TEE’s name at or before TEE takes title; 2-failure of express trust: because a-void or unenforceable or b-TEE dead or unable to locate, or c-failure of a charitable trust where cy pres is inapplicable, then express trust terminates and STR becomes BEN; 3-excess corpus: trust purpose is fully satisfied, but property remains

63
Q

3 types of resulting trusts

A

1-purchase money: BEN furnishes consideration for purchase of property in TEE’s name at or before TEE takes title; 2-failure of express trust: because a-void or unenforceable or b-TEE dead or unable to locate, or c-failure of a charitable trust where cy pres is inapplicable, then express trust terminates and STR becomes BEN; 3-excess corpus: trust purpose is fully satisfied, but property remains

64
Q

constructive trust

A

to prevent UNJUST enrichment from wrongdoing: theft fraud, duress, breach of fiduciary duty, homicide; NO constructive trust for breach of promise unless fraudulent, evidence of confidential relationship, by devise or heir; by decedent in exchange for services relied upon; or buyer at foreclosure sale. Burden of proof: clear and convincing evidence upon party seeking to establish the constructive trust

65
Q

sole duty of trustee

A

to convey legal title to beneficiaries.

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