Trusts & Future Interests Flashcards
Support Trust
A support trust is one in which the trustee is required to pay or apply so much of the trust as is necessary for the support of the beneficiary. The trustee does not have discretion to refuse to pay bills necessary for the beneficiary’s support
Discretionary Trust
In a discretionary trust, the trustee is given discretion whether to apply or withhold payment of trust property to the B. this discretion actually limits the rights of the B to the amounts the trustee decides to give her. The B cannot interfere w/ the exercise of the trustee’s discretion unless the trustee abuses her power.
What constitutes abuse depends on the extent of discretion conferred on the trustee. Generally, a court will not interfere unless the trustee has aced in bad faith or dishonesty
Termination
Most jxs permit termination of a trust by its Bs only if all of the Bs consent and the modification will not interfere w/ a material purpose of the trust.
The presence of a spendthrift provision precludes termination of a trust bc it shows the settlor’s purpose and manifests his lack of confidence in the judgment and management ability of the B. If the settlor were to join in the request for termination, the material purpose will be waived.
A court can terminate a trust prior to the time fixed in the instrument if he trust purposes are accomplished early or the trust purposes become illegal or impossible to carry out
Valid Trust
To create a valid trust, there must be a settlor who, intending to create a trust for a valid trust purpose, delivers the trust property to the trustee to hold for the benefit of one or more Bs.
If no trust assets when trust instrument is executed (i.e., the settlor promises gratuitously to create a trust in the future), a trust arises in the future only if, when the assets come into existence, the settlor manifests anew an intention to create the trust. This remanifestation is not required, however, if the promise is supported by consideration
Merger of title
results in termination of trust where sole trustee is also sole B
Pour-over gift
under traditional view, to create a valid pour-over gift from a will to a revocable trust, the trust must be in existence or must be executed at the time of the will’s execution. However, under the prevailing view, a will may devise property to a trustee of a trust established or to be established during the T’s lifetime; i.e., the trust may be established after the will is executed but before the T’s death. Pour-over gifts are valid even if the trust is unfunded during the T’s lifetime and even if the trust is amended prior to the T’s death.
Under uniform testamentary additions to trust act and UPC, a person may bequeath assets to a trust created during the T’s lifetime, by the T or another, so long as the trust is identified in the T’s will and its term are incorporated in a writing executed before or concurrently w/ execution of the will. Under these acts, a devise is valid even if the trust is revocable or amendable. And, even if the trust is amended after the will execution, the terms of the amendment will govern the distribution of assets bequeathed to the trust.
Spendthrift
A spendthrift trust is one in which the B is unable voluntarily or involuntarily to transfer his interest in the trust. He cannot sell or give away his rights to future income or capital, and his creditors generally are unable to collect or attach such rights. However, an exception is made when the settlor is a B of the trust and attempts to protect his own retained interests from his creditors by the inclusion of a spendthrift provision. In that event, the settlor-B’s creditor’s can reach his right to the income just as if the spendthrift restriction did not exist.
Valid trust purpose
trust may be created for any purpose that is not illegal, contrary to public policy, or impossible to achieve.
Acts contrary to public policy: public policy is violated if trust is frivolous or capricious or if its purpose is to: induce others to engage in criminal or tortious acts, encourage immortality, limit religious freedom, or induce a person to neglect parental, familial, or civic duties.
prob invalid: encourages divorce (generally against public policy of favoring marriage). If settlor has made no alternative provision, and f condition is determined to be a condition subsequent to the interest to which it pertains, the condition is invalidated but the trust remains valid and the interest is relieved of its condition
