Five elements of a valid trust
- intent
- identifiable corpus
- ascertainable beneficiaries
- proper purpose
- mechanics and formalities
What is required for Intent?
- Settlor must have capacity
- present intent to create a trust
- competent trustee with duties
- a definite beneficiary
- same person not the sole trustee and sole beneficiary
also the present disposition of specific property then owned by the settlor and the trust must have a valid trust purpose
Settlors Capacity
same as to make an inter vivos gift and to make a will furthermore undue influence, fraud, or duress will render the trust unenforceable
present intention
must intend to split legal and equitable tile
1. no formal words needed
2. don’t have to communicate it to the beneficiary - just deliver property to the trustee
3. manifested while settlor owns the property
4. intend trust to take effect immediately
5. can’t change character of a completed gift
6. precatory expression doesn’t create a trust
who is a qualified beneficiary
- a current beneficiary or
- a first line remainderman - become eligible to receive distributions were the event triggering
Define disclaimer of trust and requirements
can’t be compelled to accept a trust
1. 9 months of the interest’s creation unless beneficiary is under 21
2. may be estopped from making a disclaimer if exercised any dominion or control
3. disclaimer relates back for disclaimer of all (ins ome states can be use to defeat creditor claim)
anti-lapse statute
UPC applies to future interests created in trusts
Effect of divorce
A final divorce revokes all beneficials gifts and fiduciary appointments
The UPC and some states extend those related to the former spouse
Definiteness of beneficiary
requires definite beneficiary or it reverts back
- can be definite even if not yet ascertained (ascertainable when gift comes into enjoyment)
- can be designated by generic description “children”
CL: class must be reasonably definite
UTC: settlor may empower the trustee to select the beneficiaries from an indefinite class.
What trust purposes aren’t allowed
- illegal
- contrary to public policy
- impossible to achieve
- intended to defraud the settlor’s creditors or based on illegal consideration
what happens to a trust if it’s against public policy
- settlor’s alternative desire controls if it was expressed
- if illegal condition subsequent the condition is invalidated but the trust is valid
- if it’s a condition precedent hold valid unless evidence that settlor’s wish would be void the beneficiary’s interest
Rule Against Perpetuities
CL: non vested property interest is invalid unless it is certain to vest or fail no later than 21 years after the death of a person who is alive when it’s created
Wait and see approach or alternative 90 year vesting period
Does a trust fail if the trustee dies, refuses, or resigns
no but it can become inter vivos
Requirements for the acceptance of trusteeship
- signing the trust or a separate written acceptance
- substantially complying with the terms
- accepting delivery of trust property, and exercising powers or duties
Trustee compensation
reasonable compensation or what is specified as well as reimbursements for expenses
Removal of a trustee
grounds include 1. breach of trust
2. lack of cooperation among co-trustees
3. unfitness, unwillingness, or persistent failure to administer
4. substantial change in circumstances
trustee resignation
- if you accept can be liable because of “relation back”
- UTC: gives 1) 30 days notice or 2) court apprival
what to look for to determine if a trust is valid
- settlor with capacity
- present intent to create the trust
- trustee
- definite beneficiary
- trust property (res)
- valid trust purpose
