Trusts & Estates Flashcards

You may prefer our related Brainscape-certified flashcards:
1
Q

What are the elements of a trust?

A

(1) Settlor (2) Delievers (3) legal title of trust property (4) to a trustee (5) for the beneifit of beneficiaries (5) with intent to create a trust (6) for a valid purpose.

Intent - language to impose a duty not permissive language.

Valid purpose - not illegal, contrary to public policy, or impossible.

Trust property - must be certain and identifable. ( a property interest rather than an expectancy interest).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Grandfather tells uncle that he is leaving whiteacre to uncle in his will. Uncle then records a declaration of trust “ I declare myself trustee of my interest in whiteacre, income to nephew for life, remainder to issue? Is this a valid trust?

A

No, Uncle only had an expectation interest in the property not a valid property right. This is a gratuitious promise. However, even when grandpa dies, there is no trust unless uncle reaffirms intent by word or conduct. However, if newphew paid consideration, under K principles it would be valid.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Will a trust fail for lack of trustee?

A

No, the court will appoint unless the court finds that the settlor intended for the trust powers to be personal to the trustee. (rarely invoked).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

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, remiander to F’s children. F does not transfer any assets into trust but instead names the trust as beneficiary under several insurance policies? valid trust?

A

Yes, an otherwise empty trust is valid if it named the direct beneficiary of a life insurance policy or person plan death beneift.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

T’s will left 100,000 to my friend mosely, in trust for my friends”. Valid?

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?

A

No, because friends is not an ascertaibale class of beneficiaries. However, yo ucan make a power of appointment argument.

RULE - a private trust must have ascertainable beneficiaries.

Yes, if class is defined, shares may be left to discretion of trustee.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Vera rich learned that her nephew Tom was to be married, so she transferred 100,000 to reliable trust bank to be held in trust for toms future children. Tom was jilted by his fiancee, and Vera dies. No living beneficiaries, is that okay?

Father devises 5,000 in trust to daughter as trustee to spend principal and income for care of 3 dogs? what is this and is it valid?

A

Yes, beneficiaries dont need to be living. If Tom never has children, a resulting trust occurs, which is a reversionary interest in the settelor.

This is an honorary trust, and under the UTC, is valid for the life of the animals. Leftover money goes back to Father’s estates via resulting trust.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

T placed her business realty in revocable trust, naming herself and her son charles as co- trustees and designating herself as the sole benefiicary of the income from the trust for her lifetime. The trust futher provides that on T’s death the trust property was to be held in fruther trust for charles daughter betty. T later exectured a will devising her residuary estate to the trust of which i am co- trustee with my son.

Are these Valid?

A

Yes, a revocable trust is valid even though the settlor retains the right to revoke, alter or amend, keeps an interest in the trust as benefiicary, retains a power of apoointment over the trust corpus or retains everyday control. Morever, the fact that she is sole beneficary is fine as long as (i) there are two trustees or (ii) if there are two beneficiaries. Additionally, the gift by will is valid.

The gift by will is valid because the Only requirements are that (1) the trust is identified in the will(2) and its terms are set out in a written instrument. However, if T revokes the trust, the gift lapses.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is a totten trust?

A

Placing money in savings account for the benefit of another. Revoable during life by any manifestations of intent to revoke including withdrawls. The account is reachable by depositors creditors during lifetime. In a majority of states, it can be revoked by the depositors’ will. If the beficiary prediseases the depositor, it becomes a regular bank account.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

S promised 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 naming Frank as Grantee (no mention of trust), saying, hold this property in trust untill Marie’s death, then convey to angie. THis is in consideration of serviced rendered by Marie as agreed. Is this a valid express trust? If no, is there a way Marie ends up with the property?

A

No, an oral inter vivos trust of personality is enforceable provided its terms can be esablished by clear and convining evidence. However, trusts contaitning land, must be evidenced by a writing.

THis is not valid. However, a constructive trust may be imposed for maries benefit. A constructive Trust is a remedy imposed by a court to prevent unjury enrichment as the restul of wrongul conduct. Must show either (1) Fraud in the inducement (2) confidential relationship.

If no constructive trust, Marie can sue in quantum meruit for value of her services.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

T orally agreed with her valet S that she would devise her home to him if he would forego any weekley salary and remin in T’s employ as long as she lived. S fufiled, but T never inserted a provision in her will for his benefit. Can S sue?

A

Majority rule - WIth respect to personal property, oral K’s to devise in a will are allowed as long as proponent can show by clear and convincing evidence the terms. However, this is for land, so violates the SOF.

Under the UPC - any K to make a will can only be shown if (i) terms are in will itself (ii) terms are in a written K or (iii) will refers to the K and extrinsic evidence proves the terms.

Thus, sue must sue in quntum meriet for services.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

T dies leaving a will that devises Greenacre to Jones’ no mention of trust. T’s secretary now alleges that T orally told Jones that Jones was to hold the land as trustee for secretarys benefit, and the Jones agreed to serve as Trustee. What is this and can secretary enforce?

A

This is a secret trust. Secretary must show by clear, satisfactory and convining evidence that the agreement occured. If so, she gets constructive trust to prevent Jones unjust enrichment.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

T’s will devises land to “my good friend sam smith, as trustee, for purposes I have already communicated to him.

A

Semi - Secret trust - this is not valid because there is no element of wrongdoing and thus violates the SOW that beneficiaries must be identifiable from langauge in the will. Smith cant even voluntarily comply.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What are the rules of a charitable trust?

A
  1. Not subject to RAP
  2. Must be for charitable purpose - religion, medicine, science, research, education
  3. Must be in favor of a reasonably large number of unidentifable beneficiaries
  4. When specific chartiable purpose can no longer be accomplished, may be reformed under Cy pres.

Cy pres - Look at what was the settlor’s primary intent? Under the UTC, the settlor’s general chartiable intent is conclusively presumed, so unless the trust terms expressly provide otherwise, Cy pres is mandatory.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is the changed circumstances doctrine?(Trusts)

A

Court will permit a deviation from trust purpose if the specific intent of the trust is frustrated due to the impractiablity of specific direction. See Pulitzer case( hold stock as long trust was in excistence. Stock was shit, so court said specific intent was to provide for family, so they allowed sale of stock).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is a spendthirft trust?

A

One in which the benficiary is unable to voluntarily or involuntarily transfer his interest in land. Protects against creditors. Exceptions

(1) claims for necessities
(2) Alimony and chils support obligations
(3) Claims by US or state.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is a discretionary support trust?

A

A trust where the trustee is tasked with distributing trust property to support the beneficiary. Under the restatement of tusts, the trustee may properly decide not to make distrubitions. Cannot challenge unless you can demonstrate bad faith.

Look for language of sole, absolute, or uncontroleld language.

17
Q

What is a pure discretionary trust?

A

Benficiaries only right is to have an honest trustee who acts in good faith with a proper motive when determining wheter to distrubute money.

Creditors - cannot enforce a distribution, but if trustee chooses to distibute, must distrubte the creditor. Howver, doesnt apply if there is a spendthrift clause. However, claims by a child, spouse, or former spouse can get a court to order distrubution unde the UTC.

18
Q

D transfers stock to a revocable inter vivos trust, the terms of which provide that the income is to be distrubted back to D for his life, remainder at his death to his children. The trustee, the bank, has authority to pay out of trust corpus such sums as BANK determines to be in D’s best interest. There is also a spinthrift clause. D runs up some bills and is unable to pay. What are the creditor’s rights?

A

As to trusts that beneift the setllor, spendthrift clauses are unenforcable so the creditor can reach any right to distributions. Moreover, D’s creditors can reach the actural trust property if D has to power to revoke the trust OR if the trustee has discretionary authority to make distributions to the settlor. So creditor can go after corpus.

NOTE- as to irrvocable trusts for third persons, settlor creditors have no rights except for fraudulent transfers.

19
Q

What are the trustee’s duties to beneficaries?

A

A: Duty of loyalty

1) cannot buy or sell trusts assets to itself
(2) cannot borrow trust funds
(3) Cannot sell assets from one trust to another trust
(4) Corporate trustee cannot purchase its own stock
(5) cannot engage in any transaction where he or close family member seeks to secure personal gain.

B- Duty to invest prudently - Prudent investor standard - (a) duty not to comingle (b)Duty to balance risk/return (c) diversify (d) Keep productive. Looked at at a portfolio view.

C- Duty to preserve and protect trust property

D- Impartiality

E- Account and inform.

20
Q

When there a co - trustee’s, what is needed for one to make a decision?

A

Majority rule - Needs agreement of one, but not both.

21
Q

What are a beneficiaries options when a trustee breaches a fiduciary duty?

When is an exculpatory clause valid?

When is a trustee personally liable at tort and contract?

A

(1) Ratify transcation and waive breach
(2) Sue for resulting loss - breach of duty is automatic wrong, no good faith or reasonablness is no defense).
(3) In self dealing cases, can trace and recover the property for the trust.

Cant exclude liability for bad faith or if the clause was drafted by or at the direction of the trustee and the settlor was not represented by counsel.

UTC - tort - if personally at fault Contract - Unless she failed to disclose that she was acting in represenative capacity.

22
Q

F creates an irreovcable trust naming close friend T as trustee. Becasuse T was not in trust business, and because he was busy, he asked N to make investment decisions for the trust. Is T liable for acts of his agent when shit goes wrong?

A

No, unless T improrperly delegated responsiblity.

A trustee may delegate investor decisions as long as the exercise reaosnalbe care in (1) selection (2)defining the scope (3) and monitoring.

23
Q

WHen trust is revocable, who does trustee owe fidicuary duties to?

A

Only the settlor.

24
Q

What are the basic accounting rules?

A

Income beneficiaries get net income while remainderman are entitled to trust corpus at termination of the trust.

Expenditutes for production of income - beneficiaries

Capital improvements to principal - remainderman.

Trustee fee is shared.

25
Q

How can a trust be terminatied?

A

Beneficiaries can terminate the trust if (1) all consent (2) no futher purpose to be served. Thus, interest in unborn or minors precludes termination.

However, a spinthrift clause makes trust indestriuctible unless all beneficaries and settlor consent.

Morevoer, all trusts are revocable unless there is a stipulation in the insturment that states it is not.

26
Q

What is a resulting trust?

When does a purchase money resulting trust arise?

A

A trust imposed by operation of law - arises when there is a failure of an express trust or when express trust purposes accomplished and corpus not exhausted.

Presumed to arise when consideration for purchase of property is paid by person other than the person taking title - Defenses (1) gift (2) Loan.

27
Q

Powers of appointment rule

A

A person writing a will or trust can giver her beneficiaries power of appointment, which enables the beneficiary to desingate who will recover specific property.

Can either be general or specific. A general POA says that the class of people that the beneficary can exericse the power in favor of is unlimited, meaning she can use it for herself.

A power of appointment may be exercised in a general residuary clause of a will only if (1) power of appointment is general OR (2) the testator’s will manifests an intention to include the property subject to the power.

Special power of appointment - The class of people they can excerise in favor of is limited.

28
Q
A