Trusts Rules Flashcards
How to create a valid trust
- Intent
- Delivery
- Acceptance
MUST be identifiable trust property, a trustee, definite & ascertainable beneficiaries, and trust purpose
Promise to create a trust in the future: what is required for it to be valid?
Settlor’s promise to create a trust in the future is valid only IF:
- there is consideration OR
- he manifests anew an intention to create the trust when the assets come into existence
Pourover Will
A will that makes a gift to a trust is valid if the trust is identified in the will and the trust is executed before/concurrently with the execution of the will
Modern = later made amendments to trust are valid CL = amendments made after will executed not valid
Pour over gifts = valid even if the trust is underfunded or amended during the testator’s lifetime
Spendthrift Trust defined
Prevents the beneficiary from voluntary/involuntarily transferring his interests in the trust
Spendthrift: exceptions
Generally, creditor may not reach the beneficiaries distribution prior to the beneficiary reaching it unless exceptions:
- child support/alimony
- judgment creditors who have provided services for the protection of the beneficiary; and
- the united states
Settlor-beneficiary cannot use spendthrift trust to protect his own interests from creditors
Support trusts
Requires trustee to pay what is necessary to support the beneficiary
IF the trust is silent as to the standard of support, use the beneficiary accustomed standard of support
Discretionary Trust
Trustee has discretion to decide when to make a distribution to a beneficiary and the beneficiary cannot demand any part of income/principal and neither can creditor unless it shows that trustee acted dishonestly or in state of mind not contemplated by the settlor
Under the UTC, there is an exception for child support & alimony
Spendthrift provision — what does it prevent?
Precludes termination of the trust because the trust’s material purpose is that the Settlor does not trust the beneficiary’s judgment and management ability
Power of appointment – special
Donee has a special power of appointment and can only exercise the power in favor of designated objects (very limited)
Power of appointment – general
Class of people the beneficiary can exercise the power of appointment in favor of it unlimited (herself, her creditors, someone else, etc.)
Majority = general residuary clause not enough, need blanket exercise clause Minority = general testamentary power of appt via general language is typically enough
Termination
Presumption of revocability (UPC)
- by settlor = may terminate if all beneficiaries are in existence and agree
- by beneficiaries after S dies = all beneficiaries consent and no material purpose of trust is yet performed
Creditors
Generally, a creditor CAN reach a beneficiaries interest but not the trust property in absence of spendthirft clause of statutory provision
Cy pres
applies when a charitable trust becomes frustrated bc it is unlawful, impossible, or impracticable
If S had general charitable trust, it can be modified and applied to another charitable purpose —– under UTC, general charitable intent is presumed
Charitable Trust
may be created for a charitable purpose —- must have a large number of not readily identifiable individuals
Duty of loyalty
Trustee has duty of loyalty to act in best interest of beneficiaries
