What is a Trust?
Fiduciary Duty concerning the specific property where one trustee holds legal title to property for the benefit of another
Types of Trusts (3)
- Express - Intention of property owner
- Resulting Trusts - By operation of law
- Constructive Trusts - Equitable Remedy
Parties to a Trusts (3)
- Settlor - Property owner creating the trust
- Trustee - Legal owner of property who holds it for benefit of beneficiaries
- Must have the capacity, accept the position, and may be removed if failed at duties; duty to preserve the property
- Beneficiary - Equitable owners of property; have right to enforce terms
General effects fo trust creation ?
Once created, settlor no longer owns the assets
Elements Necessary to Create a Trust? (4)
Intent + Trust Property + Trust Beneficiaries + Valid Purpose = Trust
- Intent - Manifest words or condict to create trust; suggesting or hoping not sufficient; promise to create in the future not sufficient
- Trust Property - Need the Res! Can create trust, will w/execution instructions; trustee needs res
- any property that is transferable constitutes trust
- K rights, interest in another trust, possessory interests (not future expectations)
- any property that is transferable constitutes trust
- Beneficiary - Definite or ascertainable beneficiaries now or at a future time (natural or artificial/corp, not animals)
- may include a class if for reasonable basis, uninc corps, unborn
- Valid Purpose - any purpose except one that is illegal
Creation of Express Inter Vivos Trusts
Must be signed, acknowledged, and signed by at least 1 trustee
- Doc must be notorized or executed in presence of two witnesses who mist affix a signature
- IRREVOCABLE!!! (unless specificed and reserved the right)
- Transfer is by physical, symbolic, or constructive delivery
Creation of Testamentary Trusts
Created by testator’s will; doc complies w/ due execution requirements
Totten Trusts
Opening a bank account
- Can be revoked/modified by withdrawing funds, writing
Honorary Trusts
Trust that does not qualify as charitable bc no charitable purpose
Ex: Caring for a Pet
Limits on Trust Duration
Private trusts cannot last forever (R against Per)
Modification or termination of Trusts
A revocable inter vivos trusts - amended or revoked in writing w/consent of all living beneficiaries
- Chafin Doctrine - Trust terminated modified w/o settlor but w/all beneficiaries
Charitable Trusts
Distinguishing characteristics
Serve Religious, Charitable, educational, or benevolent purposes
- have perpetual existence, charitable purpose, beneficiaries must be indefinite and cy pres
Cy Pres
Close enough - if purpose cannot be carried out
AG has authority to sue to enforce charitable trusts operating in NY
Source of Trustee’s Powers
From trust instrument and granted by statute or implied by law
- acquire assets, invest assets, maintain insurance, sell/lease, exercise stock rights
Trustee’s Duty of Loyalty
Duty of utmost faith and loyalty
- prohibited from self-dealing and precluded from any personal benefit (unless agree upon)
- Must segregate trusts assets
Affirmative Duties w/Respect to the Trust’s Assets
Affirmative duty to preserve and enhance! – Objective standard of care
- Prudent Investor Rule - Trustee is permitted to invest trusts assets as would a prudent investor considering both interests of lifetime B’s and remaindermen
Termination by Settlor
Revocable -> Amend or revoke in writing, signed, and acknowledged or witnessed
Irrevocable -> only w/consent of all beneficiaries
Termination by Merger
Sole trustee becomes the sole beneficiary
Termination by Operation of Law
Purpose fully accomplished or the accomplishment of material purpose of the trust has become illegal, impossible, or impractical
