1
Q
requirements of trust
A
- settlor w/ intent
- intend trust to take effect immediately
- express intent by words or conduct while settlor owns the property - trustee
- if dont name, court will appoint
- inter vivos trust will fail w/o trustee because there can be no valid delivery and transfer of trust property
- trustee must have duties
- settlor may declare himself trustee - trust property
- property may be of any type including future interest
- settlor must have power to convey
- must be described w/ certainty - beneficiaries
- must be capable of taking and holding title
- ascertainable and with RAP
- notice not required but beneficiary must accept, acceptance is presumed - valid purpose
2
Q
trust formalities
A
- inter vivos trust (created during life)
- declaration of trust by property owner that he holds in trust or
- transfer of property by settlor to trustee
- no writing required unless trust of land - testamentary trust (created by will)
- essential terms must be ascertained from will, incorporated doc, facts of independent significance, or exercise of power of appointment.
3
Q
charitable trusts
A
- purpose must benefit the public
- must have indefinite beneficiaries
- may be perpetual - RAP does not apply
- RAP does apply when private to charity or vice versa - enforceable by settlor, a qualified beneficiary, or attorney general
- cy pres - if settlor’s intended purpose is impracticable, unlawful, or wasteful, court substitutes new charitable purpose
- must find general charitable intent - not just interested in the named charity
- court will select another purpose as near as possible
4
Q
honorary trusts
A
- not for charitable purpose, but no private beneficiaries who can enforce trust (ex: pet., graves)
- enforceable by someone named in the trust or appointed by court
- if property is more than is needed, excess is distributed to settlor or his successors unless trust provides otherwise
5
Q
beneficiary’s equitable interest is alienable
A
beneficiary may voluntarily transfer interest in trust and his creditors may levy on his interest
6
Q
spendthrift trust
A
- provides that beneficiary may not voluntarily or involuntarily transfer his interest - cannot sell or give away and creditors cannot reach it
- not valid if settlor is also beneficiary
- unenforceable against claim brought by government or by child, spouse, or former spouse with support order
7
Q
discretionary trust
A
- before trustee makes discretionary payment, interest cannot be reached by creditors
- after trustee elects to make payments, must pay creditors directly if he has notice - unless there is a spendthrift restriction
8
Q
support trust
A
cannot be assigned or reached even without spendthrift clause
9
Q
modification and termination of trust by settlor
A
- UTC - trust presumed revocable and amendable unless terms expressly state otherwise
- traditional rule: must reserve right to revoke/mod - power to revoke includes powers to modify
10
Q
modification and termination of trust by beneficiaries
A
- may term or mod if:
- settlor and all beneficiaries consent, or
- all beneficiaries consent and no material purpose would be frustrated - representative can be appointed to rep interest of minor, unborn, or unascertained beneficiaries
- in most states spendthrift trust cannot be terminated without settlor’s consent
11
Q
modification and termination of trust by court
A
- may modify if trust could have been modified if all beneficiaries had consented ad interests of nonconsenting beneficiaires will be protected
- may terminate or modify if circumstances unanticipated by settlor threaten trust purpose
- may modify if continuation of trust is impracticable or wasteful
- may modify or terminate if value is insufficient to justify administration cost or achieve tax objective
- may reform to reflect settlor’s intent if clear and convincing evidence shows settlor’s intent and trust were affected by a mistake
12
Q
modification and termination of trust by trustee
A
may terminate if trust property is less than 50,000 and is insufficient to justify administration cost
13
Q
powers of trustee
A
- powers expressly conferred by trust
- powers an individual has over own property unless limited by trust
- powers appropriate to achieve investment, management, and distribution of trust property not forbidden by trust
- powers conferred by UTC unless limited by trust
14
Q
duties of trustee
A
- duty to administer trust - must act in good faith and in prudent manner, in accordance with trust’s terms and purposes and beneficiaries’ interest
- loyalty - no self dealing
- cannot buy assets from or sell assets to the trust
- cannot borrow from trust or loan to trust
- cannot personally gain through position
- corporate trustee cannot buy but may retain own stock - duty to report - keep beneficiaries reasonably informed
- duty to separate trust property - no commingling with own property or other
- duty to enforce claims and defend trust from attach
- duty to preserve property and make it productive
15
Q
trustee’s liability
A
- if trustee commits breach of trust court can
- order specific performance of trustees duties
- issue injunction against trustee
- compel trustee to pay money or restore prop
- suspend or remove trustee - trustee liable to beneficiaries for greater of
- amount necessary to restore trust prop and distributions to what they would have been absent of breach or
- trustee profit from breach - defenses
- trustee acted in reasonable reliance on trust terms
- beneficiary consented, released trustee from liability or ratified transaction - exculpatory clauses are void if they relive trustee of liability for breach committed in bad faith or reckless indifference or appear in trust because of trustee’s abuse of confidential relationship with settlor
- trustee not liable for acts of co-trustees if did not join in action and exercised reasonable care in preventing breach or compelling co-trustee to redress breach
16
Q
allocation of receipts and expenses - Uniform Principal and Income Act (UPAIA)
A
- trustee must administer trust impartially
- interest and dividend income to beneficiary
- receipts
- income = rental income, interest on bond, money received from entity, liquidating assets and mineral rights
- principal = proceeds from sale of asset, eminent domain awards, capital gains, property other than money received from entity, insurance proceeds where trust is beneficiary, liquidating assets and mineral rights - expenses
- income = one half trustee and consultant compensation; one half accounting and legal expenses; ordinary expenses
- principal = one half trustee and consultant compensation; one half accounting and legal expenses; principal payments on dent; environmental costs
17
Q
revocable trusts
A
- interest passes during life but becomes possessory at death
- pour over from will to revocable trust
-trust may be established before, after, or concurrently with will
-trust may be amendable and revocable
gift is valid even if trust unfunded during settlor’s lifetime
18
Q
life insurance trust
A
- contingent beneficiary trust allowed
2. assignment of policy trust allowed
19
Q
totten trust bank accounts
A
- trustee-depositor has full rights during lifetime
- revoked by withdrawals, any other lifetime act indicating intent to revoke, or by will
- subject to depositors creditors claims
- automatically terminates if beneficiary predeceases depositor
20
Q
resulting trusts
A
- purchase money resulting trust - person taking title did not supply consideration; sole duty is to convey title to one furnishing consideration
- failure of express trust - resulting trust arises with settlor as beneficiary
- excess corpus - if trust property remains after purpose fulfilled, resulting trust for settlor arises
21
Q
constructive trust - equitable remedy to prevent unjust enrichment
A
- theft or conversion
- fraud, duress, unde influence, mistake, or interference with contract relations
- breach of fiduciary duty
- breach of fraudulent promise, promise by one in confidential relationship, promise concerning will or inheritance, promise to forgo foreclosure bid
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Decks in class (11)
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