Term
| Which is the only "real" trust? |
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Definition
| The express trust, which there are two: the exoress lifetime trust and the express testementary trust. |
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Term
| What do express trusts allow? |
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Definition
| They allow for an owner of property to make transfers of property and to have those assets managed on behalf of someone. |
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Term
| What is the exoress lifetime trust? |
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Definition
| An express lifetime trust is a trust that is set up during the settlor or creator's lifetime. |
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Term
| Wha tis an express testementary trust? |
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Definition
| An express testementary trust is a trust set up by the settlor in his will. |
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Term
| There are 7 steps to have a valid trust, what are they? |
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Definition
| 1. Settlor or creator who, 2. Delivers legal tilte to the 3. Property (also called res, corpus or principla) to a 4. Trustee who holds legal title for the benefit of a... 5. Beneficiary (or beneficiaries) with the 6. Intent to create a trust for a 7. Lawful purpose |
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Term
| What other requirements must be met for there to be a valid trust? |
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Definition
| The trust must be in writing signed by both the settlor and the trustee, which must be either acknowledged by a notary public OR signed by 2 witnesses. |
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Term
| Is valid consideration needed to create a trust? |
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Definition
| No consideration needed. A trust is more analogous to a gift then to a K. |
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Term
| What prerequisites must be met before becoming a settlor? |
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Definition
| You must be 18 and have the capacity to enter into a K. |
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Term
| What are the names of two equitable trusts that are actually not trusts? |
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Definition
| resulting trust and a constructive trust. |
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Term
| What constitues valid delivery? |
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Definition
| Titled assets require formal delivery to be valid. Physical delivery will not be enough, legal title must be passed for there to be valid delivery, a valid trust. Title to car, house stock.... physical not enough. |
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Term
| What constitutes property or res for purposes of an express trust? |
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Definition
| Res is property that is actually owned. If the settlor believes he will own in the future not valid to create a trust. |
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Term
| When a parent bequests property to a child, may that child then create a trust for their child on the basis of that res? |
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Definition
| No. Even thought the res left to the son in his mother's will-- will most likely go to him, he cannot create a trust with the expected gift from his mother because he must have actual legal at the time of the creating the trust. |
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Term
| Jen creates a trust and states that it will be funded with whatver money or property she contributes to it over the next 10 years. Is this a valid trust? |
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Definition
| No. Trusts can only be created by the settlor identifying specific property owns at the time, which is relinquished both physically and legally to the trustee. |
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Term
| Who can be the trustee for a lifetime trust? |
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Definition
| Anyone who is 18 and who has capacity because not court involvement is necessary. |
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Term
| For testamentary trusts we care who will be the trustee because the court becomes involved. Who may be a testamentary trustee? |
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Definition
| A trustee cannot be under 18, cannot be incompetent, cannot be a convicted felon and cannot be a drunkard, want of understanding, dishonest or improvident. |
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Term
| When may a non-resident alien serve as a trustee? |
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Definition
| When that person is related to the decedent (creator) AND the alien has a NY resident serve as a co-fiduciary. |
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Term
| In the context of a testamentary trust, does a nameless trust result in an invalid trust? |
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Definition
| No. A court may appoint a trustee. |
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Term
| Mother Teresa executed a will that created a trust to pay the income from the trust to her son, James for life and then upon his death the principal would go to his daughter Terry. No trustee is named in the will. Is this a valid trust? |
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Definition
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Term
| When creating a trust what are the rule concerning beneficiaries? |
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Definition
| Beneficiries must be definite or ascertainable. The beficiarymay not be ambiguous. |
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Term
| If a beneficiary to a trust is demed ambiguous, what happens to the property? |
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Definition
| The property is held by the trustee on behalf of the residuary beneficiary. |
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Term
| If an appointed trustee decides he cannot fulfill his obligation, will the trust fail? |
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Definition
| No the court may appoint a trustee. |
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Term
| What is the result? Lance's will creates a trust and appoints Mariel the trustee. Lance gives Mariel 4 million dollars in IBM stock. As the trustee he instructs her to give the income from the stock to his very best friends for life then to his children |
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Definition
| This trust will fail. This does not mean that Mariel keeps the stock. It means tha tMariel willremain the trustee over the property tiled to her and the trust will no longer be a testementary trust, but rather a resulting trust since"my very best friens" is so ambiguous. the resulting trust will then require Mariel to give the res to the residuary beneficiaries, Lance's children. |
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Term
| If a testemantary trust is "to my family" wha tis the result? Or "next of kin" |
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Definition
| The trust will not fail because it is family. The trust will then be given to the settlor's family based on intestacy: as if he dies without a will. therefore, if his wife was alive she would take first.... then his issues... |
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Term
| To create a trust what is required for intent? |
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Definition
| cannot use precatory language, must be an enforceable obligation. |
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Term
| If a trust does not give the trustee duties, wha tis the trust considered? |
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Definition
| It is considered a passive trust, which is not trust at all. |
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Term
| What are considered directions (duties) in a trust? |
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Definition
| trust income to Lance for life and then trust principal to be given to his daughter Cecilia or his children or his daughters or his sons. |
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Term
| Lance gives 250,000 in cash to Melissa, in trust, with a statement that he would like for his daughter Cecilia to receive the trust income for life and then the residuary to his son Cole. Is this trust valid? |
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Definition
| No. this trust contains precatory language, not sufficeint intent. Is now a resulting trust... |
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Term
| A trust that contains the word request: I reques that the ncome from the res be paid to my son for life... is this sufficient in terms of intent? |
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Definition
| No. the word request is prcatory and therefore results in an equitable trust, a resulting trust, which is not trust at all. |
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Term
| Just becaue the word trust is used does not satisfy to show tha there was an actual intent to create a trust. What must yu consider? |
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Definition
| All of language and all of the facts to determine the settlor's intent. |
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Term
| A trust may aonly be created for a lawful purpose. What purposes may a trust not be created for? |
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Definition
| A trust that calls for the commission of a crime and a trust that calls for the destruction of property. |
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Term
| What type of conditions may a trust not contain? |
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Definition
| A trust that has conditions that restrict marriage or proote divorce are invalid because they violate public policy. |
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Term
| Are there some conditions that violate public policy, but are permissible because they other purposes? |
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Definition
| A decendent spouse may set up a trust for roviding income dervied from res to his wife until she remarries. This is permissible. Here this is permissible because he intends to provide for his widow until she dies. |
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Term
| Under what circumstances may restriction on marriage in trust be enforceable and not render the trust invalid? |
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Definition
| Conditions on religion and ethnicity... |
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Term
| Why are conditions, in trusts, that are based on religion or ethnicity permissible? |
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Definition
| They are permissible because the bneficiry has a lot of options. |
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Term
| Can a trust be made in the settlor himself? |
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Definition
| Yes, provided tha tthe settlor is not the sole beneficiary of the trust. |
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Term
| Can the settlor wear many hats? |
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Definition
| Yes. The settlor may also be the trustee, he may also be a beneficiary of income derived from the res for life (alone). Settlor's estate may also be one of the benefciaries of the princial provided tha tthere is one other benficiary for the principal. |
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Term
| May the settlor retain the power to terminate or amend the trust? |
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Definition
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Term
| Why would a settlor want to create a lifetime revocable trust? |
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Definition
1. It is a way to manage res efficiently, especially when using a professional trustee.
2. By appointing a trustee, if you become incapacity have a pla for how you will receive your res.
3. Avoids probate. No part of the principal goes through the settlor's estate. |
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Term
| Does a revocable trust avoid tax liability? |
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Definition
| No. If the settlor keeps the power to revole or retains an income interest, the full trust assets will be considered part of the settlor's gross estate for federal tax purposes. |
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Term
| Testementary gfts may be added to an existing trust. what are the advantages of this and what are these gifts called? |
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Definition
| They are called pour over gifts and gifts will avoid "will" formalities. Because the trust are easily changed, gifts in the trust can be changed more easily.... easier than amending a will. |
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Term
| In order for a pur-over gift to a trust to be valid the trust must be: |
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Definition
| in existence before the will or made concurrently with the will. |
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Term
| Are pour-over gifts valid if the trust was either underfunded or not funded at ll at the time during the settlor's lifetime? |
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Definition
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Term
| How cn a life insurance be made payable to a trust? |
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Definition
1. the insured can create a revocable proceeds from the life insurance paybale to unfunded insurance trust and name the trustee of the trust the policy beneficary.
2. Proceeds from an insurance policy paybale to a testementary trust name the trustee as a beneficiary. |
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Term
| Can proceeds from a bank account or pension plan be treated te same way? |
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Definition
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Term
| What is a poor person;s trust? |
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Definition
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Term
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Definition
| It is a bank account in the depositor's name as trustee for a named beneficiary. |
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Term
| I go to Washington Mutual and I open an account and the account nme is Lance Simon as trustee for Cole simon. What is this? |
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Definition
| This is a valid Totten Trust. |
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Term
| What are the two key things to rememeber about the Totten Trust? |
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Definition
1. Depositor makes deposits and wishes as she wishes during her lifetime.
2. Beneficiary hs no right to the assets in the account until the depositor/trustee dies. |
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Term
| Are there particular words needed to create a totten trust? |
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Definition
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Term
| An account was opened Lance Simon ITF Ellen Simon. Is this enought to be a Totten Trust? |
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Definition
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Term
| What are the 4 ways to revoke a trust? |
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Definition
1. Withdraw all the funds from the ccount this is not an actual revocation, but constructively it is.
2. Express revocation: Depositor writes a letter naming the account, the intended beneficiary and the name of the banking institution, and having the writing notarized and delivered to the bank expressing that the depositor no longer desires the account to be in trust for the named beneficiary.
3. revocation in a will, which must comply with the above requirements: the will must state which bank and the benefiary's name.
4. Death of the beneficiary. The money simply reverts back to the depositor. |
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Term
| Do the heirs of a beneficiary to a totten Trust take the money if the trustee outlives the benficiary? |
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Definition
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Term
| Can a trustee/depositor change who the beficiary is on a Totten Trust? |
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Definition
| Yes the same steps as a revocation. signed and notarized writing by the depositor trustee stating that he would like the current beneficiary to no longer exist and to supplant it was another named beneficary. Also must include the banking institution's named and be delivered. |
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Term
| Can creditors reach a Totten Trust before or after death? |
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Definition
| Yes because the totten Trust is considered a revocable trust. |
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Term
| Why can credtors have access to a revocable trusts? |
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Definition
| Becuse the settlor cannot hide behind a trust that he has access to...for his own benefit. Revocabl |
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