Trusts Overview Flashcards
Roadmap
A. Identify the type of alleged trust
a. Inter vivos (declaration or conveyance) or Testamentary (if so need valid will)
b. Private or charitable
B. Is trust valid?
a. Intent
i. Split title into legal and equitable portions
ii. Impose enforceable duties
b. Identifiable corpus
c. Beneficiaries
i. Private—clearly ascertainable
ii. Charitable—sufficiently charitable
d. Proper legal purpose—
e. Mechanics and Formalities—
i. SOF
ii. proper transfer
iii. rule against perpetuities
iv. TE appointed
D. Determine Traits of trust
a. Revocable or irrevocable
i. presumption of revocability
b. Limit on BE’s interest
i. spendthrift
ii. discretionary
iii. support
E. Can trust be changed
a. By parties
i. Settlor – presumed to be able to
ii. BEs—claflin rule
b. By court
i. Deviation – impossible or illegal
ii. Cy pres
c. Can it be terminated
F. Proprietary of TE’s actions during admin
a. What powers does TE have and did TE exceed
b. What was TE’s standard of care and was it breach
c. Did TE invest properly
d. DidTE account for what he did
e. Did TE violate fiduciary duties of loyalty, good faith, self dealing, conflict
f. Is TE liable to 3P in tort or k?
G. Potential remedies
a. e.g. money damages, remove TE.
How is trust different from legal relationships?
a. Way ownership to property is divided into parts, differently than in other legal relations.
b. Title is divided into legal and equitable portion
i. Legal title = held by trustee trustee
a. Legal interest
i. Held by the Trustee (TE), who has responsibility of ownership. TE receives no benefit from the legal title, except possibly a fee for acting as TE.
ii. TE is a fiduciary, thus must
1. Deal with the property with reasonable care
2. Maintain utmost degree of loyalty
3. Is personally liable if conduct falls beneath required standards.
- must manage and invest in accord with state law and settlor instructions.
b. When TE duties are done, trust terminates and the TE distributes any remaining property to the remainder beneficiaries.
ii. Equitable title = beneficiary
i. Held by beneficiary (BE). Receives benefits of ownership. Usually has little or no control over the trust or the trust property. BE enforces the trust. TE owes duties toward BE. TE can step in and enforce BE’s duties.
ii. Can’t do what you want with the property, subject to terms of trust.
Settlor
the person who causes the trust to come into existence by supplying the initial trust property. AKA trustor or grantor or donor.
F. Purposes and uses of trusts
a. Providing for and protecting trust beneficiaries
i. Minors, incompetents, those without management skills, spendthrifts.
b. Flexibility of asset distribution—If property in trust, the OR can come up with limits on how property can be used or when it can be used. Give TE discretion of how much or who to pay (like TE can choose which grandkid to give money). Can set standards, like certain GPA, or limit it to only healthcare.
c. Protect against OR’s incompetence (your own incompetence)—better than an expensive and embarrassing guardianship.
i. or if you become incompetent when you’re old, TE can step in and handle.
ii. Another estate planning technique that may be used is a durable power of attorney. Name an agent to manage the owner’s property.
d. Professional management of property—TE chosen for professional management of trust property, like financial planner. Gives you someone to sue
e. Probate avoidance—property wont pass through intestacy or will, may pass outside the process. Speeds up distribution of property. Private (not public record). May save a lot of money and time.
i. inter vivos trust Tax benefits (not tested)
G. Basic classification of trusts—
a. Express trust –Most common. express intention of OR. 2 kinds
i. Private—private beneficiaries
ii. Charitable trust
b. Trusts created by operation of law. 2 kinds
i. Resulting trusts—attempt to carry out an implied intent
ii. Constructive trusts—equitable remedy. Remedy to prevent unjust enrichment
