Trusts & Estates Flashcards
what is a trust?
an arrangment under which the trustee holds legal tittle to property for the benefit of the beneficiaries.
trustee has burdens and beneficiaries have benefits of property ownership.
trustee is subject to fiduciary standards; he is not privileged to use trust property as his own.
harsh “self dealing” rules preclude trustee from doing so.
what are the requistes for a trust?
creator
delivers
legal title of trsut assets
to trustee
for the benefit of beneficiaries
with intent to create trust
for a valid purpose
what counts as delivery
requirement does not apply to self-declaration of trust (i hereby declare myself trustee) or testimentary trust
but for inter vivos trust with 3rd party as trustee, there must be delivery of subject matter of the trust.
testamentary trust
stated in the will
inter vivos trust
delivery requirement
EXAMPLE:
father executes a vlaid deed of blackacre naming daughter as the grantee.
subsequently, father hands the ded to brother telling him orally at that time “hold this deed and record it if daughter survives me”
does brother hold blackacre in trust for daughter?
has father made a valid gift of blackare to daughter?
- father has escrowed the deed with brother
2. it depends– to make a gift, father must deliver the property to the donee or the donee’s agent.
how can delivery be made?
actual
constructive (making gift of a car by delivering the keys to the donee)
OR when actual or constructive delivery is not possible– symbolic
(delivering a signed writing, evidencing the gift)
REMEMBER: the creator must have proper intent!
requirement of intent and valid purpose:
- Ts will contains a bequest of $100K “to A to be used for the education of pete and repeat”
does A hold the $100K in trust for T’s 2 kids?
_______________________
- COMPARE: To A it is my wish and my desire that he look after X and Y
________________________
- COMPARE: it is my wish and my desire that he use the income for the support of X and Y until both have attained the age of 18 at which time to distribute the principal of this gift to X and Y outright.
- A= trustee, P & R= beneficiaries
proper trust– shows intent - suggestive– this is not a trust
- trust bc discloses an intent/duty of a trust
T’s will contains a bequest to BANK as trustee for the benefit of daughter Jean, “provided, however, that should Jean ever marry, she shall forfeit her entire interest in this trust.” is this a valid arrangement?
the trust is good BUT the forefeiture condition is void because this is an unreasonable restraint on marriage
In trust to pay the income to my husband Mark until such time as he remarries, thereafter principal to my daughter Jen.
valid condition?
yes because purpose of condition is different
intent to provide for him until he is married
trusts with provisions that encourage divorce or the commission of crimes and provisions restraining the right to procreate or the free practice of religion are…..
VOID or OKAY?
Void
if they make access to the trust conditional on those provisions.
I make no provision for my son peter because i disapprove of his marriage outside of our religious faith
okay or void?
not a problem because not a condition
you can decline to provide for any reason
the requirement of trust property
Res Requirement
the corpus, the principal, the subject matter of the trust.
in order to have a trust, there must be a specific interest in property to which the trustee’s duties relate, such that the beneficiary who is dissatisfied with the trustee’s performance can say “you are no doing your job with respect to these asserts
the subject matter must be certain and identifiable.
if we have no certain and identifiable trust property, there is no trust
TRUE OR FALSE
TRUE!!!
EXAMPLE:
A owes B $10K. in writign A states “I hereby declare myself trustee of the debt which I owe to B”
VALID?
this is an attempted trust
- self-declaration of a trust
Has A created a valid trust?
NO bc A has not segregated out any specific property
A’s duty to repay NOT property
EXAMPLE:
A owes B $10K. in writign A states “I hereby declare myself trustee of the debt which I owe to B”
what if it was B who stated “i hereby declare myself trsuteeof the debt whihch A owes me, said trust to be for the benefit of C”
Valid trust?
yes because B’s side of the relationship = property
choses in action and accounts receivable are _______________ in _________
they are ________ to support a trust even though they are ____________.
- interests
- property
- sufficient
- intangible
grandfather tells uncle that he is leaving whitieacre to uncle in his will.
uncle thereupon records a declaration of trsut “ i declare myself trustee of my interest in whiiteacre, income to nephew for life, remainder to his issue.” valid trust?
NO!!!
uncle’s claim is NOT a recognized property interest.
it is an expectancy
when grandfather writes the will, uncle has no claim or property right.
uncle’s expectancy will ripen into a property interest ONLY IF
1. grandfather dies without changing his will
AND
2. the will is admitted top probate
UNTIL THEN the law views uncles actions as:
gratuitous promise to create in future
SAME AS PROSPECTIVE HEIRS
grandfather tells uncle that he is leaving whitieacre to uncle in his will.
uncle thereupon records a declaration of trsut “ i declare myself trustee of my interest in whiiteacre, income to nephew for life, remainder to his issue.”
THEN
Grandfather dies and his executor deeds whiteacre to uncle, pursuant to the will’s terms.
does a trust arise at this time?
no unless sometime after that time uncle reaffirms of his intent by word or conduct
Rest Trusts
where a promise to create a trust is gratuitous (not supported by consideration) a trust arises when all elements of a valid trust have been met if, but only if, at that subsequent time the settlor manifests an intention then to create the trust
NEED A REAFFIRMATION OF INTENT
indicia of trust might include….
express
NOT have to but can occur through conduct
what if valid trust was created but settlor dies and there is no trustee?
RULE:
No trust _____ for want of a _____
no trust fails for want of a trustee
if the intention to create a trust is clearly manifested by no trustee is named or the named trustee dies or resigns with no provision for a successor trustee, the court will appoint a suitable trustee to execute the trust.
what is an exception to the rule:
No trust fails for want of a trustee
powers personal to the named trustee
if the court finds that the settlor intended for the trust powers to be personal to the trustee, such that the trust should fail if the named person is no longer capable of serving, then the trust would terminate.
Ann is the residuary legatee under the valid will of her deceased aunt. Before the taxes and other charges against the estate are known. Ann in writing declares herself trustee of her interest as residuary legatee for the support of her husband and all such children as she should have by him.
thereafter $ 1 million is distributed by the executor to Ann as residuary legatee.
Valid trust?
yes
where the testator has died although her estate has not been distributed a legatee has more than a mere expectancy; she has an interest which may be the subject matter of a trust or a gift.
this is true even though the amount which the legatee is to receive has not yet been ascertained, as where she is a legatee of the residuary estate.
what happens when the promise to hold property (to be received in the future) in trust is supported by consideration?
under contract principles the trust automatically attaches when the property is received.
Don’t need intent!
F writes trust instrument naming X as trustee and providing that during F’s life, the income, if any from trust property is to be distributed to F and at F’s death the income is to go to Wife for life; remainder to F’s children.
F does not transfer any assets into the trust, but instead names the trust (i.e. trustee “as trustee”) as beneficiary under several of his insurance policies.
has a trust been created?
yes
most sates provide that an otherwise empty trust is valid if it is named the direct beneficiary of a life insurance policy or a pension plan death benefit.
ALSO: the statute applies to a trust that is named the direct beneficiary of the settlor’s will.
a private trust must have _________ beneficiaries
ascertainable
charitable trust
requirements:
being for charitable purpose
must be for a reasonably large
and
unidentifiable segment of the public at large
t’s will left $100K to my friend lemuel Mosely, in trust for my friends.
valid trust?
no friends are not ascertainable
can the following trust be given as a valid power of appointment?
t’s will left $100K to my friend lemuel Mosely, in trust for my friends.
No!
A trust invalid for want of definite beneficiaries cannot be given effect as a power of appointment
Why?
a trustee is under an obligation to perform, and a holder of a power is not
BUT the majority rule today is that it can!!
so the power of appointment argument should be made!
t’s will left $100K to my friend lemuel Mosely, in trust for my friends.
if the power of appointment is recognized, what happens if Lemuel Mosley declines to exercise it?
given a reasonable time to settle if not then will be returned to the settler or the settler’s estate.
T’s will creates a testamentary trust for the benefit of her descendants, with the shares of each left to the discretion of the trustee.
valid trust?
Yes if beneficiaries are described the shares maybe left to the discretion of the trustee.
T’s will left $250K to Bank as trustee, “ to pay over the income and dividends to train spiritualistic mediums.”
valid trust?
if charitable purpose then OK
if private then NO
when vera rich learned that her nephew tom was to be married, she was so pleased that she transferred $100K to the reliable trust bank to be held in trust for tom’s future children.
unfortunately, nephew tom was jilted within the week by his fiancee, and vera died shortly thereafter.
- there are no living beneficiares, is that an issue?
- who enforces the trust?
- what happens if tom never has any kids?
- no because does not require that they be alive; just described
- a guardian ad litem
- returned to her estate3 and then flow through to her successors.
father devised $5K “in trust” to daughter “as trustee” to spend the principal and incoem for the care of father’s 3 dogs .
the ret of father’s estate was devised to son.
daughter spent $1K during the first 3 years for that purpose after which time she discontinued that use saying she believed she’d keep the remainder of the “trust money” for herself.
valid trust?
this is called an honorary trust
are honorary trusts valid under common law?
NO!
void bc they violate the rule against perpetuities!
NEED HUMAN BEINGS!
would only be valid by statute for the lifetime of the animals
are honorary trusts valid under the UTC?
valid for the lifetime of the pet
if an honorary trust is valid:
who has standing to enforce the trust?
what happens to any money left over at the death of the dog?
the attorneys can provide someone
the money would return to the estate by implied reversion
T placed her business relaty in revocable trust, naming herself and her son Charles as co-trustees and designating herself as the sole beneficiary of the icnome from the trust for her lifetime. the trust further provided that on T’s death the trust property was to be held in further trust or charles’ daughter betty.
T later executed a will devising her residuary estate “to the trust of which I am co-trustee with my son Charles”
what of the fact that T was both trustee and beneficiary?
no problem!
while the sole beneficiary fo a trust cannot be the sole trustee (who would use the trustee for breach of a trust?) this rule doesn’t apply if:
there are two trustees even though one o the trustees is the sole beneficiary
if there are two or more beneficiaries, even though the sole trustee is one of the beneficiaries
pour-over clause
takes property at our death and adds to pre-existing trust.
ex: T later executed a will devising her residuary estate “to the trust of which i am co-trustee with my son charles”
are revocable trusts valid?
yes by statue in some states and by case law in almost every other jursidiction.
valid even though the settlor retians the right to revoke, alter or amend the trust, keesp an income interest or other interests in the turst as beneficairy, retians a pwoer of appointment over the trust corups or retians every day control ove the trsut etiehr by naming herself trsuteeor by retaining veto power over the trustee’s decisions.
is a 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 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.
gift by will to the revocable, amended trust
the devised property
how must it be added?
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.
gift by will to the revocable, amended trust
the devised property
how must it be added?
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.
T placed her business relaty in revocable trust, naming herself and her son Charles as co-trustees and designating herself as the sole beneficiary of the icnome from the trust for her lifetime. the trust further provided that on T’s death the trust property was to be held in further trust or charles’ daughter betty.
T later executed a will devising her residuary estate “to the trust of which I am co-trustee with my son Charles”
what happens if T revokes the trust before she dies?
the gift in the will lapses
T places $15K in savings account at the first main bank.
the signature card and pasbook bear the statement “tom testator 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, elaving a will (exceuted after the account was created) that provides: I give all my property including my bank account at first man bank, to my daughter, dolly”
who takes the 15K?
majority rule:
dolly takes the $15K
UTC: seth wins bc no revocation by will
totten trust
it is revocavble during the life by any manigfestations of intent to revoke incluyding withdrawals.
the account is reachavble byt eh depositor’s creditors during life, and in many states it may also be reacehd after death to the extent the depositor’s probate assets are insuffcient to pay his reditors.
extrinsic evidcen is admissible to show a trust was not intened despite the designation on the signature card.
what happens when a beneficiary of a totten trust predeceases the depositor?
automatic revocation
what is an oral trust?
oral promise to hold in trust
interv vivos trusts
REMEMBER: do not need writing for personal property
rule: an oral trust of personalty is enforecable proviudes its terms can be established by clear and convicing evidence.
however, trusts containing land (whether created by declaration of trust or by inter vivos transfer) must be evidenced by a writing that satisifies the SOF
S promises his widowed sister marie that he would provide a home for her and her daughter angie if marie would keep house and serve as hostess in his home.
thereafter, in the presence of witnesses, S handed his brother Frank a deed nameing Frank as grantee (with no mention of a trsut) saying “hold this property in trust until Marie’s death, then convey to angie. this is in consideration of services rendered by marie as agreed”
valid trust?
NO b/c real property
may have remedy in equity
S promises his widowed sister marie that he would provide a home for her and her daughter angie if marie would keep house and serve as hostess in his home.
thereafter, in the presence of witnesses, S handed his brother Frank a deed nameing Frank as grantee (with no mention of a trsut) saying “hold this property in trust until Marie’s death, then convey to angie. this is in consideration of services rendered by marie as agreed”
trust is not valid BUT a constructive trust for Marie’s benefit may be imposed where?
fraud in the inducement: LIAR FROM THE START
if at the time land was deeded to Frank, he orally promised to serve as trustee and he had, at that time, no intention to perform his promise
confidential relationship:
grantee- trustee served in confidential relationship to the grantor-settlor (attorney-client; business associates; husband-wife, father-child, brother-sister). Rationale is that equity’s concern that one would take advantage of a confidential relationship to enrich himself outweighs the SOF.
BUT grantee- trustee must have agreed to hold property in trust
S promises his widowed sister marie that he would provide a home for her and her daughter angie if marie would keep house and serve as hostess in his home.
thereafter, in the presence of witnesses, S handed his brother Frank a deed nameing Frank as grantee (with no mention of a trsut) saying “hold this property in trust until Marie’s death, then convey to angie. this is in consideration of services rendered by marie as agreed”
if no constructive trust would Marie have an action against S’s estate?
yes for the value of her services rendered but not for the house.
ORAL PROMISE (SUPPORTED BY CONSIDERATION) TO MAKE DEVISE IN A WILL:
T orally agreed with her valet Sydney that she would devise her home to him if he would forgo any weekly salary and remain in T’s employe as long as she lived. Sydney fufilled his commitment, but T never inserted a provision in her will for his benefit.
is this enforceable?
No
majority rule: subject to SOF which will fail
UTC: does not meet any o the requirements will have a suit in quantum meruit
quantum meruit
a reasonable sum of money to be paid for services rendered or work done when the amount due is not stipulated in a legally enforceable contract
what is the majority rule for oral promise (supported by consideration) to make devise in a will?
with respect to personal property, oral contracts to make a will are enforceable provided there terms can be established by clear and convincing evidenc.
contracts to devise land must be evidenced by a writing that satisfies SOF
