Validity Flashcards
Intent
- Settlor must intend to create a trust,
- with currently owned property
- Settlor must be 18+ and of sound mind
Precatory Language
- “I hope/wish/desire”
- this language is not legally enforceable;
- EXCEPTION:
- Court will uphold precatory langauge if the settlor has a close, confidential relationship with trustee
- intended as a polite way to phrase an order or if there is a close, confidential relationship with the alleged trustee might explain why the settlor did not use more imperative language in creating the trust.
- EXCEPTION:
What can be used as a corpus for a trust?
- Any existing, identifiable, and segregated property, real or personal, tangible, or intangible
- A mere expectancy cannot be used as corpus for a trust
Future Interest
Can be an identifiable trust corpus
EXAMPLE: A dies leaving Blackacre to B for life, remainder to C. C declares herself trustee for D over her interest in Blackacre. There is a trust corpus.
Debt
Can be trust corpus unless the trustee is also the debtor
Ascertainable Beneficiaries
- Any person or entity who is capable of taking and holding title of property can be a beneficiary under a trust.
- Must be ascertainable at the time of distribution.
- Must be definite—or else too ambiguous
Class Gift Problem
- If a class is too indefinite, it fails.
- A settlor can set up a trust where a trustee is to distribute to the person picked by the trustee from a group so long as it is an ascertainable, definable group
Proper Purpose of a Trust
- Any purpose that is lawful and possible to achieve
- Remember: A charitable trust must be created expressly
Mechanics for creating a trust
- A writing
- Delivery of specific trust property
In Writing
- Oral trusts are unenforceable in PA
- A deed of trust is needed to transfer legal form settlor to trustee
- Statute of Frauds requires a writing for creation of a trust
Delivery
- Declaration of Trust
- Deed of Trust
- A will
Declaration of Trust
Settlor appoints himself as trustee for the benefit of another
If settlor is also beneficiary, he cannot be the ONLY trustee or ONLY beneficiary, otherwise bifurcation of title would cease
Deed of Trustee
- A 3rd paryt is named as trustee
- Property is transfered to trustee
- If settlor designates a trustee that lacks capacity: This is not a fatal flaw. The court will appoint a replacement
Testamentary Trust
- Trustee is named in the will
- Takes effect when testator dies
Secret Trust
- Are valid
- Is a trust that cannot be discerned by the words of the will
- Extrinsic evidence does come in to establish the existence of the trust
Semi-Secret Trust
- Does show existence of a trust in the words of the will
- Does not include, terms, words, or conditions
Totten Trust
- When a person opens a bank account in his own name as trustee for other parties, and
- Revocation of the trust:
- The withdrawal or transfer of all funds from the Totten trust account will act as a complete and permanent revocation of the trust
Pour-over Trust
Settlor sets up inter vivos trust
Settlor then executes a will, and sets up the residuary as the beneficiary of the trust
Limit on Trust Duration
- PA abolished R.A.P. when it comes to trusts, IF:
- Trust was created after Dec. 31, 2006
- All trust after 12/31/06 are subject to “wait and see” doctrine.
- The determination of whether the Rule has been violated is made on the basis of what actually did happen, rather than what might have happened
Rule Against Perpetuities
CEOs need CPR
Interests that violate R.A.P:
- Contingent remainders
- Executory interests
- Option Contracts
- Class gifts
- Powers of appointment
- Restraints on alienation
