Trusts - Validity

Question 1

Elements of Valid Trust

Answer 1

1) Trust intent
2) Identifiable corpus
3) Ascertainable beneficiaries
4) Proper purpose
5) Compliance with mechanics and formalities

Question 2

Element 1: Trust Intent

Answer 2

2 elements of trust intent:
1) Splitting of legal and equitable title (as long as the sole trustee and sole beneficiary aren’t the same person, it’s fine. If they are the same, that’s called merger and not allowed. Also, you can have the settlor be the same as the trustee & beneficiary during their life so long as there is a future different beneficiary after settlor dies)
2) imposition of enforceable duties on the person who holds legal title (the trustee)

No req for any particular words. No magic language. Just because trust language is used doesn’t mean you’ve actually complied with trust intent either. Don’t have to tell beneficiary. For a gift, acceptance is presumed.

A promise to create a trust in the future is NOT enforceable unless the promise is actually a binding K under state law. Would need support through consideration.

Trust intent must exist at the time of the conveyance of the property.

Precatory language (I hope, I wish, I desire) are not sufficient to show trust intent.

Question 3

Element 2: Identifiable Corpus / Trust Property

Answer 3

1) Must be identifiable with certainty
2) Anything capable of transfer

Question 4

Element 3: Ascertainable Beneficiaries

Answer 4

For private trusts: need beneficiary with capacity. Just need to be able to take and hold title. Don’t have to be competent to manage it. That’s why they’re good for minors and those without management skills. Possible to name them by class designations such as children. If you use a class designation, it’s permissible for them to be unascertainable when the trust is created so long as they are ascertainable when they are to benefit. “To my children and upon their death to my then surviving grandchildren”.

Discretionary Trust = Could allow trustee and third party to select from the class of which people will receive benefits.

Class Membership = MUST BE ASCERTAINABLE. trustee must be able to determine who belongs in the class. Grandchildren works. Siblings works. Friends? Nope. That fails because not ascertainable.

If beneficiaries aren’t ascertainable, no trust is created and the property goes back to the settlor who merges both legal and equitable title into himself. That’s a “resulting trust” resulting from failure of ascertainable beneficiaries.

CHARITABLE TRUSTS:
- ok to have ascertainable beneficiaries, and actually preferred

HONORARY TRUST:
- trust to provide benefits to non-human, noncharitable purposes. Like to maintain a clock or feed/care for a dog. There are varied rules for caring for property.
-

Question 5

Element 4: Proper Purpose

Answer 5

Any purpose is viable as long as it’s not illegal or against public policy. Can’t require trustee to avoid legal responsibilities like paying debt.

“Contrary to public policy” requires case by case analysis. Public policy changes over time and maybe varies among jurisdictions.

Question 6

Element 5: Compliance with Formalities

Answer 6

see next unit on trust creation