Valid Creation/Funding of Trust Flashcards
To create a valid private trust you must:
(1) settlor who;
(2) intended to create a trust;
(3) for valid trust purpose;
(4) delivers trust property to the trustee;
(5) trustee holds for the benefit of one or more beneficiaries
Is a settlor’s promise to create a trust in the future valid?
No, UNLESS: (1) supported by consideration; OR (2) manifests anew an intention to create the trust when the assets come into existence
Merger of title occurs when:
the sole trustee and sole beneficiary are same individual and hold the same interest
Effect of merger of title
the trust terminates
Pour Over Gift
From a will to a trust:
settlor makes gifts by will to a trust established during his lifetime
- may remain unfunded during the lifetime
must be clearly identified in the will
Traditional View: creating pour over
(1) trust must be in existence OR
(2) must be executed at the time of the will’s execution
Prevailing view: creating pour over
trust may be established after the will is executed but before the testator’s death
Spend thrift trust
prevents beneficiary from voluntarily or involuntarily transferring his interest in the trust
prevents creditors from reaching interest in the trust
Exceptions to Spend Thrift
Cannot be used to shield beneficiary from:
(1) his own creditors where the beneficiary is the settlor;
(2) judgments or court orders for support or maintenance of the beneficiary’s child, spouse, or former spouse; or
(3) claims by the government
revocable trusts and the rules against perpetuities
period beings to run on the date of the settlers death
Rule against perpetuities
interest is void if any possibility it will vest more than 21 years after some life in being at the creation of the interest
Gift to class of children
includes children from all marriage and adopted children
Rule of convenience
gift to a class conditioned upon the members attaining a certain age the class closes when
- the preceding estate terminates AND
- the first class member reaches the specified age
Stock dividend and cash dividends
GR: cash dividends are allocated to income and stock dividends declared and paid by the corporation are allocated to the principal.
Writing
trusts generally must be in writing, most states do not require a writing for trust of personal property