Trusts - Creation Flashcards
Creation Methods
2 points in time at which a trust may be created:
1) Created when you’re alive. Inter Vivos Trust / Living Trust. Can be done in 2 ways
-> Declaration of Trust: Settlor and trustee are the same person. Settlor retains legal title.
-> Conveyance in Trust: settlor and trustee are different. Settlor transfers legal title to trustee and either retains beneficial title or transfers it to someone else. That’s a conveyance or transfer in trust. Distinction is based on what settlor does with legal title.
2) Created when you’re dead. Testamentary Trust. All the terms of the trust are in the settlor’s will. A precondition to the trust being valid is the will being valid and then probated.
Designating a Trustee
Must designate a trustee: what happens if no trustee is named or the named one is unwilling to serve? Will the trust end? NO. A court will not allow a trust to fail for lack of a trustee unless the trust actually requires it to fail for that reason. You can go to court and ask the court to appoint a trustee.
Trustee must have:
1) Enforceable duties
2) Capacity to take and hold title
3) Ability to manage property
Delivery of Trust / Funding the Trust
What often causes a trust to fail is that property must be delivered to the trustee.
Need:
1) Personal property identified or physically delivered; Real property conveyed by deed. OR
2) Property devised by will to testamentary trust
Requirement of Writing
Sometimes trusts can be oral for personal property, but generally trusts must be in writing. SoF requires writing for real property.
If the person holding legal title acts as trustee, part performance will preclude the SoF defense. Who does the SoF protect? To protect a donee of an outright gift from false claims that the donee is really a trustee. It’s not to protect a real trustee and not there to protect the beneficiary. If the SoF is violated the beneficiary wouldn’t have anything. So it’s there to protect someone who received an outright gift.
Pour-Over Will
This is a gift in a will to an inter vivos trust. Very common.
The property for an inter vivos trust is added to or comes from the will. The will isn’t a testamentary trust, but rather giving property over to an inter vivos trust. The property will go over to the trust as the trust exists on the terms of the trust at the date of the testator’s death.
If trust no longer exists, the gift fails/lapses.
In most jurisdictions, the pour-over property can be what funds the trust and effectively creates it. Modern law allows the will to make that property what initially funds the trust and the inter vivos trust didn’t actually need property in it before death. To do that, you need:
1) Trust must be identified in will
2) Trust must be executed before or concurrently with the will
Testamentary Secret Trust
This is where the settlor and will beneficiary orally agree that the beneficiary will hold property in trust as trustee for someone else. BUT this is not stated at all in the will. Not a technique you’d ever do on purpose.
The courts might allow the alleged beneficiary of the trust in this case to bring in extrinsic evidence to show a constructive trust. Unjust enrichment for beneficiary not to follow through with what they agreed to do.
Testamentary Semi-Secret Trust
Will leaves property in trust without beneficiary or terms. Almost always fails. This is also a scenario that creates a resulting trust.
Inter Vivos Secret Trust
Grant of property outright but grantee promised to hold in trust for another.
If the alleged beneficiary can show some sort of evil conduct like breach of confidential relationship or undue influence, some courts might hold the grantee to the terms of this inter vivos secret trust.
Not something attorneys do on purpose.
