Trusts & Estates Flashcards
Trust
A fiduciary relationship with respect to property with which one person holds legal title (trustee) to the trust property (res) subject to enforceable equitable rights in another (beneficiary)
Requirements of an Express Private Trust
- Settlor with capacity and present intent to create a trust
- Competent trustee
- Trust property (res)
- Beneficiaries
- Valid trust purpose
- Formalities (inter vivos trust vs. testamentary trust)
Does the failure to name a trustee defeat a trust?
No, Court will appoint.
Beneficiary
Must be capable of taking and holding title to property. Must also be definite and ascertainable so as not to violate the Rule Against Perpetuities
Valid trust purpose
Invalid if illegal; impossible to achieve; contrary to public policy; intended to defraud creditors
Formalities of an Inter Vivos Trust
Declaration of trust by property owner that he holds in trust, or transfer of property by settlor to trustee
Formalities of a Testamentary Trust
Essential terms ascertained by the will/incorporated document/facts of independent significance/exercise of power of appointment
Spendthrift trust
Beneficiary may not voluntarily or involuntarily transfer his interest (nor can creditors reach it)
Invalid if settlor is also a beneficiary
Unenforceable against claim brought by government or by child, spouse, or former spouse with support order
Transfer of Beneficiary’s Interest
Beneficiary may voluntarily transfer their interest in trust & creditor’s may levy on his interest
Discretionary trust
Before payment, interest can’t be reached by creditors. Must pay creditors directly if trustee has notice.
Modification of a trust by the settlor
UTC—> trusts are presumed revocable & amendable unless terms expressly state otherwise
Traditional—> must reserve rights to revoke or modify
Modification of a trust by beneficiary
Settlor and all beneficiaries consent, even if modification conflicts with a material purpose; or all beneficiaries consent and no material purpose will be frustrated.
Unborn beneficiaries need appointed representative.
Modification of a trust by a trustee
If trust property is less than $50k and is inefficient to justify administrative costs, trustee can move to modify
Modification of a trust by a court
Courts may modify if the trust could have been modified if all beneficiary’s consented and interests of the non-consenting beneficiaries will be protected
May modify if continuation is wasteful or impracticable
May reform to reflect settlor’s intent if clear and convincing evidence
Charitable trust
Benefits the whole public and has indefinite beneficiaries. May be perpetual, unless a shifting interest from private to charitable. Enforceable by settlor, a qualified beneficiary, or an attorney general.
Cy pres
If settlor’s intended purpose is impracticable, unlawful, or wasteful, Court substitutes new charitable purpose
Must find the settlor had charitable intent and must select another purpose as near as possible to original
Honorary trust
Not for charitable purpose but no private beneficiary who can enforce (i.e., animal trust)
Enforceable by someone named in trust or appointed by the court
Pour over will to revocable trust
Trust may be established before, after, or concurrently with the will
Freely amenable and revocable
Valid even if trust unfounded during settlor’s lifetime
Resulting trust
Purchase money resulting trust—> person taking title did not supply consideration, but their sole duty is to convey title to the one furnishing consideration
Failure of express trust—> resulting trust arises with settlor as beneficiary
Constructive trust
Equitable remedy to prevent unjust enrichment
