Wills and Trusts

Question 1

Trust, generally

Answer 1

Fiduciary relationship in which a trustee is given legal title/interest by the creator (settlor) to hold and protect the property for the benefit of another (beneficiary) who takes the equitable title/interest and therefore possesses the power to enforce the trust.

Question 2

Types of Trusts, generally

Answer 2

Express: private or charitable

Implied: resulting or constructive

Question 3

Revocability of trusts, generally

Answer 3

UTC (majority): presumed revocable

Traditional rule (minority): presumed to be irrevocable

Question 4

Elements of a Private Express Trust: Settlor

Answer 4

Creator of the trust; must have capacity the same as for making a will

Question 5

Elements of a PET: Trustee

Answer 5

Must have capacity to acquire and hold property, as well as administer the trust

Designation: Court will appoint if none designated; or, if the trustee dies, resigns, etc.

Merger: If the same person is both the sole trustee and sole beneficiary, then the trust will terminate; a settlor can make himself the trustee, however:

Removal: A trustee can be removed by the court or by the settlor on several grounds (conflict of interest, breach of trust); the beneficiaries can remove T only if the trust allows

Question 6

Elements of a PET: Intent

Answer 6

S must intend to make a gift in trust; look for words of trust, e.g., “for the benefit of”

Manifestation: of intent may be oral, in writing, or through conduct (delivery); a writing is required if created in a will (SOW) or the subject matter is land (SOF)

Ambiguous language: precatory words such as “hope” or “desire” are insufficient; but PL will suffice if accompanied by specific instructions to another, and failure to impose a trust would result in an unnatural disposition of donor’s property or enforcing a trust would be consistent with a history of support between the donor and beneficiary

Question 7

Trust timing

Answer 7

Present intent: required to create a trust, manifested before or during the transfer of property

For an immediate trust: a promise to create a trust in the future is unenforceable unless it is supported by consideration or the intent is manifested anew upon transfer

Question 8

Elements of a PET: Trust property

Answer 8

Presently identifiable and not a mere expectancy, unless it qualifies as a pour-over devise from a will

Question 9

Elements of a PET: Valid Trust Purpose

Answer 9

Cannot be illegal or against public policy; must be possible to achieve

Question 10

Elements of a PET: Ascertainable Beneficiaries

Answer 10

Must be presently identifiable or (UTC) capable of being identified by the time the beneficiaries receive their interest

Exceptions: class gifts, unborn children, and charitable trusts

Question 11

Trust Types: Express: Inter vivos

Answer 11

Lifetime transfers in trust

Declaration of trust: S declares herself trustee and is paid income during her life with the property going to the beneficiaries at her death; if real property, it must be in writing

Deed of trust: S creates trust and is not the trustee; delivery of the deed and transfer of the deed or property to T is required; must always be in writing

Revocable: can be revocable or irrevocable

Question 12

Trust Types: Express: Pour-Over Gift from Will

Answer 12

Will directs property be distributed to a trust upon the happening of an event; allows probate to be avoided because it is funded by the will

Trust must be in writing and identified in the will

Trust may be revocable but if revoked, the pour-over provision fails

Question 13

Trust Types: Express: Testamentary

Answer 13

Created according to terms of a will; funded independently of the will

In the terms of the will: terms of the will can include language creating trust

Incorporation by reference: trust terms are in separate document that is properly incorporated by reference into a will

Secret Trust: what appears to be an outright gift in a will is actually based upon a promise by the devisee to the testator to hold the property for another’s benefit

• Burden of proof: clear and convincing evidence
• Remedy is a constructive trust to avoid unjust enrichment to the secret trustee

Semi-secret trust: a will directs a gift to be held in trust w/o naming beneficiary

• Common law: prevents extrinsic evidence to prove the trust so the gift fails
• Remedy is a resulting trust in favor of the testator’s heirs; modern trend would impose a constructive trust in favor of the intended beneficiary, if known