Trusts & Wills Flashcards
1
Q
Trust
A
- A trust is a fiduciary relationship in which a trustee holds legal title to specific property under a fiduciary duty to manage, invest, safeguard, and administer the trust assets and income for the benefit of the designated beneficiaries who hold equitable title.
- A trust is presumed revocable unless stated otherwise.
- A trust needs to be in writing for real property but is not required to be in writing for personal property.
- If any part of a trust fails, it becomes a resulting trust.
2
Q
Validity of Trusts
A
As governed by the Florida Trust Code, a trust necessitates the existence of—
- a settler (with the capacity to create the trust) with a present intent to create the trust;
- with an ascertainable beneficiary(s) at the time their interest comes into enjoyment;
- res (i.e. a trust property);
- a trustee (appointed/named to manage the trust, although the trust will not fail for lack of a trustee); and
- 5) a valid trust purpose (i.e. not illegal, contrary to public policy, impossible to achieve, etc.).
3
Q
Precatory Language
A
* Precatory language is language that suggests a result to a trustee by merely expressing—
* hope,
* wish, ***or***
* desire. * In Florida, precatory language is generally held to be insufficient to create a trust because it does not direct the trustee to act.
* The trustee named under such gift can generally—
1. take it outright for himself ***or***
2. choose to hold it in trust for the named beneficiary.
* The inference of trust may be overcome however, if the directions—
- aren’t vague, but are definite and precise; and
- are addressed by a decedent to his executor or administrator.
4
Q
Trust Res
A
- Trust Res is the subject matter of the trust.
- The res may consist of any of the following, alone or in combination: real property, tangible personal property, intangible personal property.
- The trust res must be in existence for the trust to be enforced.
- A mere expectancy may not serve as the trust res.
- The trust res must be sufficiently specific, identified and described.
5
Q
Trustee Requirements/Disclaimer
A
- A trustee may be any person 18 years or older.
- A trustee is entitled to receive
- reasonable compensation for the performance of her duties, according to the terms of the trust instrument; and
- reimbursement for expenses—
- incurred in the administration of the trust and
- other expenditures that benefit the trust.
- An individual may accept the trusteeship or may resign from the position by
- giving 30 days notice of his intent to resign to the settler, co-trustees, and qualified beneficiaries; or
- obtaining court approval of the resignation.
6
Q
Duties of a Trustee
A
- An appointed/named trustee has to be 18 years of age or older, and has a fiduciary duty in his/her position as trustee.
- Trustees have certain duties in connection with a trust, and must perform duties expressly delineated in the trust instrument in good faith and in compliance with the prudent trustee rule—which requires the trustee to
- act in good faith;
- not engage in self-dealing;
- invest trust funds prudently;
- not commingle personal funds with trust funds;
- act with impartiality toward all beneficiaries;
- defending any claims asserted against the trust; and
- provide trust accountings to beneficiaries annually and trust information as requested.
7
Q
Removal of a Trustee
A
- Trustees cannot be removed absent a court order.
- Removal may be requested by the settlor, a co-trustee, or a beneficiary, or the court may remove a trustee upon the court’s own initiative.
- If there is no remaining trustee, the trustee position must be filled.
- Grounds for removal include—
- incapacity,
- unfitness (commits a crime involving dishonesty),
- breach of duty, or
- friction between the trustee and beneficiaries which makes it impossible to carry out the trust purpose.
8
Q
Duty of Trustee to Perform Personally (Delegation)
A
- Trustee must perform functions that a reasonably prudent person would not delegate.
- A trustee can delegate investment and management decisions as long as the trustee uses reasonable care, skill, and caution in—
- selecting the agent,
- establishing the scope and terms of the delegation,
- monitors the agents performance, and
- compliance with the terms.
9
Q
Liability of a Trustee
A
- If the trustee commits or is about to commit a breach of these duties, the court can enforce specific performance, enjoin the trustee from committing the breach, or compel the trustee to pay money/restore the property.
- Claims against the trustee for breach must be brought within 4 years—though a beneficiary must bring her action within 6 months of receiving any report disclosing the breach.
- In a co-trustee situation, a trustee will not be liable for the acts of co-trustees if he did not join in the action and used reasonable care to prevent the breach.
- A trustee will not be liable to a beneficiary for a breach of the trust if he acted in reasonable reliance on the terms of the trust or the beneficiary consented to the conduct.
10
Q
Testamentary Trusts
A
- A testamentary trust is created in the settlor’s will, to become effective and irrevocable upon the settlor’s death.
- The trust intent and the essential terms of the trust must be ascertainable from the will itself, or a writing incorporated by reference into the will, from facings having independent legal significance.
11
Q
Charitable Trust
A
A charitable trust may be a perpetual and may be created to benefit a charitable purpose (such as religion, health, or education), and may designate a charity or an indefinite group as a beneficiary of the trust.
- If the purpose of a charitable trust fails, a court may—via Cy Pres Power—fashion a new charitable purpose that is as close as possible to the original purpose.
- The court can also deviate if the specific direction and the primary purpose of the trust was subject to a frustration of purpose that was an unforeseen change in circumstances causing harm.
12
Q
Resulting Trust
A
- A resulting trust arises when the settler conveyed property to a trustee under an express trust, but—
- the trust was void and unenforceable, or
- the beneficiary is dead or cannot be located.
- A resulting trust may also apply when—
- on a failure of a charitable trust, the cy pres is inapplicable; or
- the trust purpose is fully satisfied and some trust property still remains.
- The resulting trust is held for the settler or her successors.
13
Q
Constructive Trust
A
- A constructive trust is essentially not really a trust, but instead, an equitable remedy to avoid unjust enrichment from wrongful conduct (fraud, duress, undue influence, breach of a fiduciary duty, etc.)
- The trustee of a constructive trust has a single duty—to convey the property to the person who would have owned it but for the wrongful conduct.
- Facts giving rise to a constructive trust must be shown by clear and convincing evidence.
14
Q
Pour-Over Trust
A
- In a pour-over trust, the testator’s will “pours assets over” into a trust.
- To create a pour-over trust, the following elements must be satisfied:
- the trust may be established before or concurrently with the execution of the will;
- the trust must be identified in the testator’s will; and
- the trust terms must be set forth in a written instrument.
15
Q
Discretionary Trust
A
- A discretionary trust grants the trustee discretion to make distributions.
- A beneficiary cannot compel distribution—a court will order distribution only when there is an abuse of discretion.
- The trustee must follow directions given by the settler and honor settlor’s intent.
16
Q
Spendthrift Trust
A
- A spendthrift trust provision precludes a beneficiary from voluntarily or involuntarily transferring his/her interest in the trust, and his creditors are precluded from reaching it to satisfy their claims.
- This provision is to protect the beneficiary from his own negligence with the funds.
- Absent such a provision, a creditor can reach the income interest of the trust, but not the principal.
- A spendthrift clause cannot be used to protect the beneficiary from his creditors if he is the settler.
- A spendthrift clause can be reached for claims of support for alimony and child protection.
17
Q
Trust Termination:
Automatic
A
- A trust will automatically terminate—
- at a term specified in the instrument or when the purposes have been accomplished; or
- if the purpose is contrary to public policy, or impossible to achieve.
18
Q
Undue Influence
A
Contestants must establish that the product of the influence was a trust that would not have been created “but for” the influence.
19
Q
No-Contest Provision
A
- An action to contest the revocation of the entire trust may not be commenced until after the settlor’s death.
- A no-contest provision in a trust is unenforceable.
- Any beneficiary of a trust has standing to challenge the trust, or can assert a claim that the trust must be distributed in a particular way.
20
Q
Rule Against Perpetuities
A
The trust term and final disposition must not violate the Rules Against Perpetuities, so it must vest within the statutory period.
- Florida has adopted a 360 year statutory Rule Against Perpetuities for trusts created after December 31, 2000.
- The perpetuities period is 90 years for trusts created on or before December 31, 2000.
- Unvested interests in a trust will fail unless—
- they are certain to vest within 360 or 90 years of a life in being at the time the instrument becomes effective; or
- it actually vests within 360 years of creation.
- The trust is valid if there are vested interests because there are ascertainable named beneficiaries and there are no conditions precedent to taking the interest.
21
Q
Split Interest Trust
A
- A split interest trust has beneficiaries that are both charitable and non-charitable.
- A charitable trust may designate a charity as a beneficiary, but may not name specific individuals.
- If the trust does not indicate a particular charitable purpose, the court may select
a charity, consistent with the settlor’s intent.- Previously, trustee made that selection
- In a split interest trust, the rules for charitable trusts may be applied to the charitable beneficiaries if it is possible to identify the portion of the trust res to be applied to charitable purposes, or the time period during which the res is to be applied to charitable purposes
- A settlor has the right to enforce a charitable trust
22
Q
Trust Termination/Modification:
Court Ordered
A
A court can modify or terminate a trust whether or not the trust contains a spendthrift clause:
- At the request of the trustee or any qualified (i.e. living) beneficiary if the modification or termination would not be inconsistent with the settlor’s intent; or
- If the modification or termination is in the best interest of the beneficiaries, at the request of the trustee or any qualified (i.e., living) beneficiary even if the modification or termination would interfere with a material purpose of the settlor.
23
Q
Pretermitted Spouse
A
- A pretermitted spouse is a surviving spouse who married a testator after the testator executed a will.
- Under Florida law, a pretermitted spouse is entitled to take an intestate share of the testator’s estate unless—
- provision has been made for, or waived by, the spouse by pre-nuptial or post-nuptial agreement;
- the spouse is provided for in the will; or
- the will discloses an intention not to make provision for the spouse.
24
Q
Uniform Disclaimer of Property Interests Act
A
- Florida has adopted the Uniform Disclaimer of Property Interests Act, under which an heir may disclaim an intestate share.
- In order to properly disclaim the intestate share, the disclaimer must be—
- in a writing that is identified as a disclaimer,
- signed by the disclaimant, and
- witnessed and acknowledged.
- When the decedent dies, the property passes as if the disclaimant had predeceased the decedent.
25
Undue Influence
* Under Florida law, if a will is found to be the product of undue influence, a court may—
* deem the will to be invalid ***or***
* disallow the entitlement of the influencer to any inheritance.
* Undue influence may be found in cases where—
* a person shares a confidential relationship with the testator; ***or***
* the will is the product of suspicious circumstances coupled with an "unnatural" gift that prefers a stranger over blood relatives.
* A surviving spouse who is found to have procured a marriage to the decedent by undue influence is generally not entitled to any inheritance by intestacy, ***unless***—
1. the surviving spouse and decedent voluntarily cohabited as spouses
2. with full knowledge of the facts constituting the undue influence.
26
Condition Precedents in Wills
* Under Florida law, a will is not effective if it is subject to a condition precedent (e.g. wills conditioned on dying from a then upcoming surgical procedure).
* A will may be given effect if the court considers the conditional language to be merely an expression of the testator's motive for executing the will.
27
Advancement of Testamentary Share
A transfer of assets will be considered an advancement of a beneficiary's share if—
1. the delivery of the advanced property is accompanied by a writing that the gift is to be counted against the beneficiary's share of the donor's estate; ***or***
2. the beneficiary acknowledges in writing that he is receiving an advancement that is to be taken into account at the donor's death.
28
Selection of Intestate Personal Representatives
Florida sets forth a straightforward hierarchy for the selection of a personal representative if a decedent does not leave a will:
1. the surviving spouse,
2. a person selected by a majority in interest of the heirs, ***then***
3. the heir of the next degree of kinship.
29
Proving the Contents of a Missing Will
* Under Florida law, the contents of a lost or destroyed will may be proved by—
1. the testimony of two disinterested witnesses; ***or***,
2. if a "correct copy" of the will is provided, by one disinterested witness.
* An interested party may not testify as to the contents of a lost or destroyed will, but may petition the court to establish the missing will's authenticity.
30
Annulment/Divorce/Dissolution Effects on Wills
Under Florida law, annulment, divorce, or dissolution of marriage revokes all will provisions with respect to the former spouse of a testator.
* Revocation applies to both devises and to the designation of the spouse as the personal representative of the decedent's estate.
31
Three Forms of Express Trusts
* Created by the settlor's expressed intention—whether *inter vivos* **or** testamentary—express trusts can be—
1. private,
2. charitable, ***or***
3. honorary.
* Express trusts do not include trusts created by operation of law, i.e.—
1. resulting trusts ***and***
2. constructive trusts.
32
Lineal Descendants
Lineal descendants are heirs who descend directly from the decedent, which include—
1. the blood-related children of the decedent born prior to the death of the decedent;
2. children who are conceived before, but are not born until after, the death of the decedent; ***and***
3. adopted children.
* Under Florida's intestate distribution scheme, lineal descendants take the portion of the estate that does not go to the surviving spouse per stirpes; their claim is superior to the decedent's parents.
* If the decedent is survived by a spouse and descendants—some of whom are not lineal descendants of the surviving spouse—the surviving spouse receives one-half of the intestate estate.
33
Intestate, Heirless Decedent Estates
If the decedent is not survived by a spouse, heirs in the first, second, or third parentela, or kindred of the last deceased spouse, the estate will escheat to the state—specifically, to the State School Fund.
34
Testamentary Capacity Requirements of the Testator
Florida law provides that, in order to have testamentary capacity, the testator must know—
1. the nature and extent of the testator's property;
2. the persons who are the natural objects of the testator's bounty;
3. the disposition the testator is making; ***and***
4. how the above elements relate to form an orderly plan for the disposition of the testator's property.
35
Trust Termination/Modification:
Settlor
Under the new Florida Trust Code, unless the trust instrument provides that the trust is irrevocable, the trust may be amended or revoked by the settlor.
* If a trust is irrevocable, the settlor cannot revoke it—even if the settlor has reconsidered the inclusion of a named beneficiar.
36
Nuncupative Will
A nuncupative will is an oral will that, as such, cannot be admitted into probate in Florida—even if it was valid in the state in which it was executed.
37
The Slayer Statute
Pursuant to Florida's Slayer Statute, a person who **feloniously *and* intentionally** kills another person, ***or*** procures the death of another person, forfeits all death-related benefits that the slayer would have derived from the decedent, including—
1. any intestate or elective share of the decedent's estate,
2. proceeds from a life insurance policy, ***and***
3. any survivorship in property held as joint tenants.
38
Determination of Property Adeemed by Extinction
* Property that is to be disposed of in a will is adeemed by extinction if it is no longer in the testator's estate at the time of the testator's death.
* Florida follows the modern approach, which considers the intent of the testator in determining whether property has been adeemed.
* If a portion of devised property is not in the testator's estate at the time of his death, the gift will be adeemed partially.
* The portion of the property remaining in the decedent's estate will pass to the beneficiary.
39
Spousal Waiver of Inheritance
A spouse may waive the right to receive—
1. an intestate, elective, or pretermitted share;
2. homestead protection;
3. exempt property;
4. family allowance; ***and***
5. the right to be given preference in the selection of the personal representative.
* A waiver of "all rights" ***or***"all claims" constitutes a waiver of all rights listed above, ***unless*** the waiver provides otherwise.
