Trusts Generally

Question 1

Trust definition

Answer 1

a fiduciary relationship where one party (the trustee) holds legal title to property for the benefit of another (the beneficiary) who holds equitable title

Question 2

Kinds of trusts

Answer 2

(1) express trusts created intentionally
(2) implied trusts by operation of law

Question 3

Kinds of express trusts

Answer 3

(1) private trusts = generally created to benefit private beneficiaries
(2) charitable trusts = created for charitable purpose or for charities

Question 4

Kinds of implied trusts

Answer 4

(1) constructive trusts = imposed by court to fix wrongdoing
(2) resulting trusts = imposed by court where circumstances require, irrespective of any wrongdoing

Question 5

Parties to trust

Answer 5

(1) settlor
(2) trustee
(3) beneficiary

Question 6

Settlor

Answer 6

Creates the trust by transferring assets to a trustee with manifest intent to create a trust relationship

Question 7

Settlor ownership after transfer

Answer 7

Once a trust is created, the settlor no longer owns the assets; they have been transferred to the trust

Question 8

Trustee

Answer 8

The trustee is a fiduciary of the trust and holds LEGAL title to trust property for the
benefit of the beneficiaries

Question 9

Failure to designate trustee

Answer 9

A trust must have a trustee, but failure to designate or appoint a qualified trustee will not necessarily cause the trust to fail. Instead, the court will appoint one

Question 10

Legal title obligations of trustee

Answer 10

The trustee has legal title to the assets and is obligated to adhere to the terms of the trust with respect to the collection, preservation, enhancement, and distribution of the trust property to the beneficiaries

Question 11

Beneficiaries

Answer 11

Beneficiaries are owners of the equitable title to the trust property

There must always be a beneficiary in existence who can enforce the trust against the trustee

Question 12

Types of beneficiaries

Answer 12

Income Beneficiary = Present interest in the trust

Remainder Beneficiary = Remainder interest in the trust

Question 13

Sole trustee as beneficiary

Answer 13

The SOLE trustee cannot be the SOLE beneficiary → interests merge and trust
collapses

Question 14

Equitable title of beneficiaries

Answer 14

The beneficiaries are the equitable, beneficial owners of the trust assets, but cannot ordinarily affect or alter the dispositive or administrative provisions of the trust.

Instead, beneficiaries must wait for the property to be distributed to them before being able to exercise full control over the property, free of the trust