TRUSTS RULES!

Question 1

Trust Elements

Answer 1

A trust is a device where a trustee holds property for the benefit of another. To create, (1) settlor delivers (2) legal title of res, (3) to trustee, (4) for ascertainable beneficiaries, (5) with intent, & (6) valid trust purpose.

Question 2

Res – Trust Property

Answer 2

Any transferable property so long as it is identifiable. Can be empty if trust names direct beneficiary for life ins.

Question 3

Ascertainable Beneficiaries

Answer 3

Be named or at least identifiable – language sufficient to allow court to identify.

Question 4

Intent

Answer 4

No magic words, intention can be manifested by words orally or in writing, or by conduct (not “I desire, hope”).

Question 5

Valid Purpose

Answer 5

Any purpose that is not impossible or not contrary to public policy.

Question 6

Honorary Trust

Answer 6

No charitable purpose & no human beneficiary. Valid for animals for its life, or grave maintenance for 21 years.

Question 7

Revocable Trust

Answer 7

All trust presumed revocable unless terms provide otherwise. Settlor can also be trustee in revocable trust.

Question 8

Beneficiary as Trustee

Answer 8

Yes, as long as there is either an additional beneficiary or trustee.

Question 9

Totten Trust

Answer 9

Settlor deposits $ in an account in his own name as trustee for another. Revocable by any manifestation of intent (withdrawal). Reachable by creditors even after death. Can be revoked by will. EE admissible to show no trust.

Question 10

Oral Trust

Answer 10

Valid to both real & personal property so long as terms can be established by C & C evidence. Can’t self settle.

Question 11

Oral Promise to Make Devise in Will

Answer 11

A promise to devise real property must be in writing & supported by consideration. Becomes constructive.

Question 12

Secret Trust

Answer 12

One declares a devise in will was supposed to be trust, nothing admissible; cannot disrupt plain meaning of will.

Question 13

Semi-Secret Trust

Answer 13

Valid, even if beneficiary not identifiable (X to Y as trustee for purposes I already told him). T can do anything.

Question 14

Rights of Creditors

Answer 14

Creditor can attach to trustee by court order AND intercept his money from trustee until paid off.

Question 15

Spendthrift Clauses

Answer 15

Clause that precludes beneficiary from voluntarily & involuntarily transferring his trust interest. Cannot restrict only involuntary action or self-settle – clause is invalid. Creditor reaches mandatory dist. if not distributed.

Question 16

Trustee Duties

Answer 16

Duties of (1) loyalty, (2) invest prudently, (3) preserve/protect res, (4) impartiality, & (5) account & inform.

Question 17

Trustee Duty of Loyalty

Answer 17

T cannot buy/sell trust res to himself, borrow trust funds, sell assets from one trust to another, or self-deal.

Question 18

Trustee Duty to Preserve Property

Answer 18

T may not commingle trust funds.

Question 19

Trustee Duty to Invest Prudently

Answer 19

Must keep trust productive & diversify investment. Portfolio view: look into total return on portfolio. However, a trustee may delegate investment decisions if he uses reasonable care/skill/caution in (1) selecting agent, (2) defining scope & terms of delegation, & (3) periodically reviewing agent’s actions & decisions.

Question 20

Trustee with Revocable Trust

Answer 20

A trustee of a revocable trust who acts with settlor’s consent, cannot be liable to beneficiary.

Question 21

Multiple Trustees – Majority

Answer 21

Trustee must act with majority consent of trustees unless trust provides otherwise

Question 22

Resigning Trustee

Answer 22

Trustee must give written notice settlor – if alive, co-trustees, & all living beneficiaries. He must appoint new trustee if trust requires, but with unanimous consent of beneficiaries.

Question 23

Trustee Liability

Answer 23

Beneficiary can (1) ratify transaction (waive), (2) sue for loss, or (3) trace – recover property & its appreciation.

Question 24

Termination of Trust

Answer 24

By unanimous consent of beneficiaries, & no further trust purpose is served. EXCEPTIONS:

o Guardian can consent on behalf of minors or unborn

o Court can terminate or modify if non-consenting beneficiaries are adequately protected

o Court can terminate or modify if the material purpose is outweighed by modification

o Court can terminate or modify if the trust is insufficient to justify the costs of administration

o Trustee can terminate a trust with property worth less than $50,000 and can’t pay administration

Question 25

Charitable Trust

Answer 25

Generally, same rules as private trusts, but must be for charitable purpose not an ascertainable beneficiary, and the beneficiaries must be a reasonably large number and unidentifiable.

Question 26

Charitable Trust – Cy Pres Doctrine

Answer 26

As near as possible; trust may be modified if exact charitable purpose becomes illegal or impracticable.

Question 27

Resulting Trust

Answer 27

May arise upon failure of express one, or when trust purpose is accomplished & corpus not exhausted.

Question 28

Purchase Money Resulting Trust

Answer 28

Presumed when consideration for property is paid by one other than person taking title (no family member).

Question 29

General Power of Appointment

Answer 29

Presumed if donee wills away her property without mention of the appointment.

Question 30

Specific Power of Appointment

Answer 30

Must be referenced by donee in will, but a generic reference is presumed enough. Rebuttable by showing he did not know of the power.