Term
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Definition
| A trust is a FIDUCIARY RELATIONSHIP with respect to SPECIFIC PROPERTY (res) wherein the trustee holds legal title to the property subject to enforceable equitable fights of the beneficiary. |
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Definition
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Term
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Definition
| Must have a valid purpose. |
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Term
| Intention to create trust |
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Definition
Intent may be manifested by written or spoken words or by the conduct of the settlor- unless the statute of wills or frauds applies.
An oral trust of personal property is valid. |
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Term
| Intention to create dust: delivery |
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Definition
Communication of the intent to the beneficiaries is not necessary; delivery of the deed to the trustee is sufficient.
If settlor is trustee, must segregate assets. |
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Term
| Must Intent Trust Take Effect Immediately |
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Definition
| The settlor's intent must be that the trust take effect immediately, not at some future time- although a future interest can be trust property. |
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Term
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Definition
A settlor's expression of hope, wish, or mere suggestion that the property be used in a certain way is caller precatory language.
Generally does not create trust. |
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Term
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Definition
The absence of a trustee may cause an attempted inter vivos trust to fail for lack of delivery.
Trustee must have duties. |
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Term
| Qualifications of Trustee |
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Definition
| Anyone who has capacity to acquire and hold property for his own benefit and has capacity to administer the trust may be a trustee. |
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Term
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Definition
A court can remove a trustee to confirm an appointment.
Grounds for removal include serious breach of trust, old age, habitual drunkenness, conflict of interest, etc. |
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Term
| Removal of trustee by beneficiaries |
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Definition
| Absent grounds, beneficiaries cannot remove the trustee unless the power is specifically granted by the trust instrument. |
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Term
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Definition
No trust
Trust property must be existing interest in existing property
MORE THAN A MERE EXPECTANCY
Settlor must have power to convey |
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Term
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Definition
Before acceptance, a trustee can disclaim or refuse appointment for any reason.
Once an appointment has been accepted, the trustee cannot resign without court permission, unless all beneficiaries consent or the trust provides otherwise. |
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Term
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Definition
| A debtor cannot hold his own debt in trust, but the debtor can declare himself trustee of particular property from which the debt is to be paid. |
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Definition
A trust cannot exist without someone to enforce it.
Trust must operate directly to benefit person. |
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Term
| Notice and acceptance by beneficairy |
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Definition
Acceptance by the beneficiary is not required, but can take place after a valid trust is created. Acceptance may be express or implied and is generally presumed.
Beneficiary can renounce rights |
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Term
| Unascertained beneficiaries |
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Definition
Beneficiaries must be ascertainable at the time their interests are to come into enjoyment.
Class, class must be reasonable definite. |
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Term
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Definition
| If a trust fails for lack of a beneficiary, a resulting trust in favor of the settlor or his successors is presumed |
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Term
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Definition
A trust purpose is invalid if:
i. it is illegal ii. its performance requires crime or tort or iii. contrary to public policy |
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Term
| Creation of an express trust |
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Definition
| A trust can be created by inter vivos transfer, by inter vivos declaration of trust or by will |
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Term
| Inter vivos trust: present declaration or transfer of trust required |
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Definition
A trust can be created either by a person declaring himself trustee for another or by the transfer of property to another as trustee.
Present intent must be manifested by conduct or words.
Delivery means placing out of settlor's control |
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Term
| Trusts for land: writing requirement |
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Definition
Most states do not require a writing for a trust of personal property.
For a trust of land, a written instrument signed by the person entitled to impress the trust upon the property is commonly required. |
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Term
| Testamentary trusts: formalities |
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Definition
| Trust intent and essential terms of the trust must be ascertained from the will itself, from a writing incorporated by reference, from facts having independent legal significance, or from the exercise of a power of appointment. |
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Term
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Definition
Absolute gift in will made in reliance on beneficiary's promise to hold the property in trust for another.
Extrinsic evidence allowed
Result: constructive trust |
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Term
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Definition
Gift in will to person in trust
Not allowed
Trustee holds on resulting trust for testator's legatees or heirs |
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Term
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Definition
Purpose must benefit the public
Beneficiaries must be indefinite
Duty of enforcement is place on AG. UTC: settlor and qualified beneficiaries have standing.
RAP: a charitable trust may be perpetual |
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Definition
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Term
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Definition
Benefit of pets or property
Courts uphold honorary trusts as long as the named trustee is willing to perform her duties; failing this, a resulting trust is imposed.
RAP- must vest after 21 years |
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Term
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Definition
Voluntary- absent restrictions by trust or by statute, a beneficiary may freely transfer her interest in trust.
Involuntary: absent restrictions by statute or by trust instrument, an insolvent rust beneficiary's creditors may levy beneficial interest |
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Term
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Definition
| A spendthrift trust precludes the beneficiary from voluntarily or involuntarily transferring his interest in the trust, and his creditors are precluded from reaching it to satisfy their claims. |
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Term
| Restraint on involuntary alienation only |
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Definition
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Term
| Spendthrift provision: settlor as beneficiary |
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Definition
| A spendthrift provision is invalid if the settlor is the benefiary |
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Term
| Exceptions for special classes of creditors |
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Definition
| Many states allow certain classes of creditors to reach a beneficiary's assets notwithstanding a spendthrift restraint. |
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Term
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Definition
A support trust directs the trustee to pay only so much of the income or principal or both as is necessary for the beneficiary's support.
The interest of the beneficiary cannot be assigned or reached by creditors. |
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Term
| Termination of Trust by its own terms |
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Definition
| A trust terminates automatically upon the expiration of the term specified in the instrument or when all of the purposes of trust has been accomplished. |
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Term
| Power of settlor to revoke or modify |
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Definition
The power to revoke generally also includes the power to amend.
In many states, thes ettlor may not revoke or amend a trust unless he expressly reserved that right.
Under UTC, a trust is presumed revocable unless expressly provided otherwise. |
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Term
| Modification or Termination by agreement of beneficiaries |
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Definition
| Beneficiaries may compel modification or termination only when all consent, and the modification or termination will not frustrate any material trust purpose, such as protecting a beneficiary from lack of ability to manage property. |
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Term
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Definition
| Where all beneficiaries consent to termination, the trustee is not liable if he accommodates them by distributing the trust assets. |
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Term
| Judicial Power to Terminate Modify Trust |
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Definition
| 1. Premature termination: a court may prematurely terminate the trust where the trust's purpose has become impossible or illegal or has been completed. |
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Term
| Doctrine of change circumstances |
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Definition
| A court may also, upon a change of circumstances unanticipated by the settlor, authorize a deviation from the administrative terms where necessary to acheive the trust purpose. |
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Term
| Sources of Trustee's Powers |
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Definition
| A trustee has those powers expressly conferred by the trust instrument, state law, and court decree plus all powers implied as are necessary or appropriate to accomplish the trust purposes. |
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Term
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Definition
Traditional view: joint trustees must exercise their power by unanimous agreement.
Majority: majority. |
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Term
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Definition
| necessary to operate trust |
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Term
| Duties of trustee: standard of care |
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Definition
| Reasonably prudent person |
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Term
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Definition
Duty of undivided loyalty.
Cannot buy or sell trust assets
A trustee may not sell property of one trust to another trust
A trustee may not borrow trust funds nor loan her personal funds
A trustee cnnot use trust assets to secure a personal loan
A trustee cannot personally gain through her position as trustee |
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Term
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Definition
| Relatives and business associates |
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Term
| Beneficiaries rights in prohibited transactions |
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Definition
1. Set aside
2. Recover any profit
3. Affirm the transaction |
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Term
| Duty to seperate: no commingling |
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Definition
Must keep assets physically seperate
Property lost is trustee's, property gained is trusts |
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Term
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Definition
| A trustee may only delegate acts that would be unreasonable to require her to perform personally |
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Term
| Investment and management decisions |
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Definition
Under the UPIA, a trustee may delegate investment and management functions that prudent trustee of comparable skills could properly delegate under the circumstances.
Improper delegation, trustee becomes guarantor |
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Term
| Uniform Prudent Investor Act: Standard of care |
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Definition
A trustee must exercise reasonable care, skill, and caution when investing and managing trust asset.
Duty of loyalty and impartiality applies |
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Term
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Definition
| Investment decisions must be evaluated in the context of the entire trust portfoliio as part of an overall investment strategy that has risk and return objective reasonably related to particular trust |
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Term
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Definition
| Permits a trustee to invest in any ind of property or any type of investment provides she acts prudently; no particular type of investment is inherently imprudent. |
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Term
| UPIA: factors considered in making investment decisions |
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Definition
| i. general economic conditions 2. the possible effect of inflation or deflation 3. the expected tax consequences of investment or strategies 4. the role that each investment plays within the overall trust portfolio 5. the expected total return from income and the appreciation of capital vi. other resources of beneficiaries vii. needs for liquidity, regularity of income and preservation or appreciation of capital viii. an asset's special relationship or value to the purposes of the trust or to one or more bneficiaries. |
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Term
| UPIA: Reviewing compliance with act |
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Definition
| At the time of the trustee's decision or action. |
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Term
| Delegation of investment and function permitted |
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Definition
| Prudence in 1. selecting an agent 2. establishing the scope and terms of the delegation and iii. periodically reviewing the agent's actions. |
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Term
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Definition
If the list is permissive, the trustee can invest in securities outside the list.
If the list is mandatory the trustee probably commits a breach of trust if he invests in properties outside the list. |
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Term
| Liabilities of trustee: enforcement by beneficiaries |
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Definition
Beneficiaries may seek damages or removal of the trustee for breach of duty.
The settlor may sue if he is also a beneficiary, but outsiders cannot enforce the trust.
Trustee is liable for losses resulting from breach. |
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Term
| Liabilities of trustee: defenses |
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Definition
| equity will not enforce the list if the beneficiaries consented to or joined in the breach of trust. |
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Term
| Trustee's liability for the acts of others: agents |
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Definition
| A trustee will be liable for the acts of her agents if she: i. directs, permits, or acquiesces in the act, conceals the act, or fails to compel the agent to redress his wrong; improperly selects or improperly delegates, or iii. fails to exercise reasonable supervision. |
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Term
| Trustee's liability: co-trustee |
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Definition
1. approved, acquiesced, or participated in the breach or negligently disregarded her own duties
2. concealed the breach or failed to take steps to compel redress
3. improperly delegated authority to the co-trustee |
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Term
| Trustee liability: predecessor trustees |
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Definition
1. knew or should have known of the breach and failed to compel redress
2. was negligent in determining what property should have been delivered to her. |
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Term
| Effect of exculpatory clauses |
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Definition
1. no bad faith, intentional breach, or recklessness is involved
2. they were not inserted in the trust as a result of the trustee's abuse of a confidential relationship with the settlor |
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Term
| Trustee's liability to third parties: contract |
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Definition
Unless the contract specifically provides otherwise, a trustee is personally liable to third parties on contracts made in course of trust administration.
A trustee is entitled to reimbursement. |
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Term
| Trustee's liability to third parties: tort liability |
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Definition
A trustee is personally liable for torts committed in the course of the trust administration, including those committed by the trustee's agents.
There is indemnification only if the trustee was not personally at fault and fault and the tort occurred as a normal incident activity in which the trustee was properly engaged. |
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Term
| Property Improperly Transferred to Party Who is Not Bona Fide Purchaser |
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Definition
| Beneficiary or successor trustee can set aside transactions that are breaches of trust if the property is not in the hands of a bona fide purchaser. |
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Term
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Definition
| Cuts off beneficiaries interests |
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Term
| Direct suit by beneficiaries |
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Definition
Direct suits by beneficiaries are not permitted against third parties who damage trust property; the trustee alone can sue.
The beneficiaries remedy is to bring suit in equity to compel the trustee to sue the third party. |
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Term
| Direct suit by beneficiaries: excepton |
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Definition
Direct actions by beneficiaries against third parties are permitted where the trustee:
i. participated in the breach ii. has left the jurisdiction and has no successor trustee iii. fails to sue a third person liable in tort or contract |
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Term
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Definition
| This adjustment power authorizes the trustee to characterize items such as capital gains, stock dividends, etc. as income if the trustee deems it appropriate or necessary to carry out the trust purposes. |
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Term
| Duty of fairness to all beneficaries |
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Definition
| The trustee is under a duty to administer the trust impartially |
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Term
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Definition
| 1. nature, purpose, and expected duration of the trust; ii. the intent of the settlor; iii. the identity and circumstances of the beneficiaries; vi. needs for liquidity, regularity of income, and preservation and v. the nature of the trust assets vi. the net amount allocated to income under the other sections of the act vii. whether and to what extent the trust gives or denies the trustee the power to invade principal viii. the actual and anticipated effect of economic conditions xi. the anticipated taxes |
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Term
| Revocable inter vivos trust |
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Definition
| The test for distinguishing a trust from a will is whether the transfer creates some present gift, even if that gift is of a future interest subject to divestment |
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Term
| Determining whether an interest passes |
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Definition
settlor may retain powers over trust property
where settlor is trustee: made intention clear |
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Term
| Advantages of revocable trust |
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Definition
| A revocable trust may be used for convenient management of assets, to plain for the possibility of incapcity, to avoid probate costs and delays, to permit secrecy, and to allow settlor to choose state law. |
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Term
| Totten trust bank account |
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Definition
A bank account depositor declares himself trustee of the account for a person who is to receive the money in the account at the time of depositors death.
Not really trusts because they do not sepeerate legal and equitable title |
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Term
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Definition
1. withdrawal of funds
2. any lifetime act manifesting the intent to revoke
3. unlike joint accounts, a specific contradictory provision in a will. |
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Term
| Uniform Transfers to Minors Act |
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Definition
| Legal title is in the minor subject to the custodian's statutory power. The custodian is the fiduciary subject to the standard of care of a prudent person dealing with property of another. |
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Term
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Definition
| involve revisionary interests and are based on the presumed intent of the settlor. |
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Term
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Definition
| used to prevent unjust enrichment |
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Term
| Resulting trusts: when will they be implied |
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Definition
| 1. Purchase money resulting trusts ii. resulting trusts arising on failure of an express trust 3. resulting trusts arising from an incomplete disposition of trust assets. |
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Term
| Purchase money resulting trusts |
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Definition
Presumed whenever beneficiary furnishes the consideration for the acquisition of real or personal property but with X's consent, title is taken in the name of Y.
At or before Y takes title.
Burden on beneficiary to prove by clear and convincing evidence |
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Term
| Purchase money resulting trusts: exceptions |
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Definition
1. No trust presumption where parties closely related
2. Unlawful purpose
3. Transferee obtained title wrongfully |
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Term
| Resulting trust on failure of express trust |
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Definition
| Arises where a settlor has conveyed property to a trustee under an express trust and i. the trust is void or unenforceable or ii. beneficiary is dead or cannot be located. |
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Term
| Resulting trust on failure of express trust: where resulting trust not applied |
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Definition
| i. instrument specifically or implicitly provides for disposition of trust property when the trust has failed or been completed; ii. settlor was given consideration for original terms; iii. settlor created trust for illegal purpose iv. cy pres inapplicable |
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Term
| Constructive trusts: when implied |
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Definition
A constructive trust is a flexible equitable remedy to prevent unjust enrichment from wrongful conduct.
Trustee's only duty is to convey property to person it is owed to.
Theft, conversion, fraud, breach of fiduciary duty, homicide. |
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Term
| Constructive trust: breach of promise |
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Definition
General rule no constructive trust.
The general rule is that a mere breach of a promise will not raise a constructive trust. Thus, where A transfers real property to B on B's oral promise to hold for C, trend is constructive trust. |
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Term
| Constructive trust: imposed |
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Definition
1. Fraudulent promise
2. Breach of promise re: confidential relationship
3. Breach @ devisee or heir
4. Breach by decedent
5. Breach by buyer at foreclosure sale |
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