Trusts MEE Rule Statements

Question 1

Creation of a Trust

Answer 1

To create a trust, there must be a SETTLOR who INTENDS (with CAPACITY) to create a trust for a PROPER PURPOSE and DELIVER the trust PROPERTY to the TRUSTEE to hold for the benefit of ASCERTAINABLE BENEFICIARIES.

Question 2

Rule for when there is no trust assets/property at the time of formation.

Answer 2

If there are no trust assets when the trust instrument is executed, there is no trust. A trust may arise when the trust assets are delivered, and the Settlor has the renewed intent to create.

Question 3

A future promise to create a trust

Answer 3

A future promise to create a trust is not enforceable unless there is consideration.

Question 4

Rule on Sole Trustee-Beneficiary

Answer 4

A trust is not valid if the sole trustee is also the sole beneficiary.

Question 5

Trust Purpose

Answer 5

A settlor may create a trust for any purpose so long as it is not
ILLEGAL
contrary to PUBLIC POLICY
IMPOSSIBLE to achieve OR
intended to defraud creditor’s.

Question 6

Pour Over Trust General Rule (Modern vs Traditional View)

Rule for Pour Over Property to be the initial funding of a trust.

Answer 6

Pour Over Trust: A settlor can make gifts by will to a trust.

Modern View: A will may devise property to a trust that is established or to be executed BEFORE THE TESTATOR’s death.

Traditional View: The trust must exist or be executed at the time of the WILL EXECUTION.

Question 7

Testamentary Trust

Answer 7

A trust that is created in the settlor’s valid will.

Question 8

Spendthrift Provision

Answer 8

A spendthrift trust prohibits a beneficiary from voluntarily or involuntarily transferring their interest in the trust. A beneficiary’s creditors are precluded from reaching the trust to satisfy their claims.

However, the limitation on precluding creditors does not apply to settlor-beneficiaries.