Trusts as Valid Will Substitutes: Revocable Trusts and Bank Account Trusts Flashcards
What is the definition for a revocable trust?
A trust whereby provisions can be altered or canceled dependent on the grantor. During the life of the trust, income earned is distributed to the grantor, and only after death does property transfer to the beneficiaries. Also referred to as a “revocable living trust”.
Can a person be both a trustee and a beneficiary, and if so under what circumstance?
Yes - While the sole beneficiary of a trust cannot be the sole trustee, (who would sue the trustee for a breach of trust?), this rule doesn’t apply: (i) if there are two trustees, even though one of the trustees is the sole beneficiary; (ii) if there are two or more beneficiaries, even though the sole trustee is one of the beneficiaries.
Are revocable trusts valid?
Yes, by statute in some states and by case law in almost every other jurisdiction, such trusts are valid even though the settlor retains the right to revoke, alter, or amend the trust, keeps an income interest or other interests in the trust as beneficiary, retains a power of appointment over the trust corpus or retains every day control over the trust either by naming herself trustee or by retaining veto power over the trustee’s decisions.
Is the gift by will to the revocable, amendable trust valid?
Yes. Almost all states have adopted the Uniform Testamentary Additions to Trust Act or its equivalent. The only requirements are that the trust must be identified in T’s will and its terms must be set out in a written instrument. The instrument may be executed before, concurrently with, or after the will. The devised property is added to the trust as it exists at T’s death, including any amendments after the will was executed, even though the trust amendments were not executed with testamentary formalities (The purpose is to validate pour over clauses)
What happens if T revokes the trust in the will before she dies?
The gift in the will lapses
What is a “totten” trust (bank account)?
A Totten trust (also referred to as a “Payable on Death” account) is a form of trust in which one party (the settlor or “grantor” of the trust) places money in a bank account or security with instructions that upon the settlor’s death, whatever is in that account will pass to a named beneficiary.
-It is revocable during life by any manifestations of intent to revoke including withdrawals. The account is reachable by the depositor’s creditors during life, and in many states, it may also be reached after death to the extent the depositor’s probate assets are insufficient to pay his creditors. Extrinsic evidence is admissible to show a trust was not intended despite the designation on the signature card. *If the beneficiary of a totten trust predeceases the depositor than there is an automatic revocation
T places $15,000 in savings account at the First Main Bank. The signature card and passbook bear the statement, “Tom Testator, trustee for Seth Testator.” This is his only account at the bank. Over the years he draws out the interest on the account but leaves the principal amount intact. Some years later T dies, leaving a will (executed after the account was created) that provides: “I give all my property, including my bank account at First Main Bank, to my daughter, Dolly.” Who takes the $15,000?
Majority rule: A totten trust can be revoked by the depositor’s will. Thus, Dolly takes the $15,000.
-But under the UPC - No revocation by will, Seth wins
