Term
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Definition
| A fiduciary relationship where a trustee holds legal title to property under a fiduciary duty to manage, invest, and administer the trust assets and income for the designated beneficiaries who have equitable title. |
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Term
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Definition
-Grantor/Settlor/Trustor = puts together trust.
-Trustee = manages, invests and administers the trust assets. Have to maximize value of property
-Beneficiaries = have equitable title and receive the donative/commercial transfer from the settlor. They have the right to sue trustee if the trust is not being handled properly or if it’s not furthering their interest. Sometimes, the settlor can be a beneficiary. |
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Term
| Can trustee creditors come after the property in the trust? |
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Definition
| No, unless the trustee is also the settlor (cant hide from creditors) |
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Term
| What is needed to create a trust? |
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Definition
1) Intent
2) Purpose
3) Res
4) Trustee
5) Ascertainable beneficiary |
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Term
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Definition
| Intent during lifetime or at death to create a trust relationship with the property (intention to create duties of a trustee and obligation to care for it) |
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Term
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Definition
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Term
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Definition
| Property; if there’s no res, no trust. It must be identifiable and segregated (must be kept separate). Note: Future earnings can be res but only if those are documented in an existing contract. In case where testator declared expected profits to go to wife after the trade, the court held it’s not a trust until there was property. Not until the stock was traded and generated profit was a trust created. |
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Term
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Definition
| Named trustee or a court can assign a trustee. A trust will never fail if there’s no trustee. |
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Term
| Ascertainable beneficiaries |
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Definition
| A trust needs someone to enforce it. Private trusts are enforced by beneficiaries. They must be ascertainable at the time an interest matures. Class must be sufficiently definite. |
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Term
| Exception for when the beneficiary class does not have to be sufficiently definite: |
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Definition
| Charitable and honorary trusts |
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Term
| Who can be a beneficiary? |
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Definition
| Anyone who is capable of taking and holding title to property can be a beneficiary. An unincorporated association cannot take title but a corporation can be a beneficiary. A child or incompetent beneficiary must have property administered. |
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Term
| Do beneficiaries need to receive notice? |
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Definition
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Term
| Do beneficiaries have to accept the transfer? |
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Definition
| Yes, a trust cannot be forced upon a beneficiary without acceptance. A beneficiary must renounce or disclaim the benefit. |
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Term
| What if there are unascertained beneficiaries in a trust? |
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Definition
Must be able to identify beneficiaries by the time their interests come into enjoinment.
Description must satisfy statute of wills or statute of frauds and may be incorporated by reference or by acts of independent significance. |
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Term
| What if there are no beneficiaries (either not sufficiently described or died)? |
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Definition
| The trust fails and property reverts to the settlor. If settlor is dead, then the property goes to his/her estate. |
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Term
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Definition
| Trust is identified in the will. The terms of the trust trusts exists separately from the will. The trust already exists. |
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Term
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Definition
Gift made in reliance of a promise to hold property in trust for another. Trust doesn’t exist on face of will but courts will impose a constructive trust to give effect to gift. (a remedy to prevent fraud or unjust enrichment)
Constructive trust – trustee holds trust for beneficiary |
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Term
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Definition
| Gift to person to hold in trust but does not name a beneficiary. Trust ends and we presume the settlor wants the property back (resulting trust) |
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Term
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Definition
| Trust that is not for charitable purposes and has no private beneficiaries with standing (i.e pets, graves) This exists when someone agrees to take on responsibility for caring for pet or other things. It’s up to named Trustee to carry out terms and if they are not willing to do so, trust fails. |
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Term
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Definition
A settlor wants to provide for the support of another and can impose conditions for that gift. A trust is a conditional gift so the donor can impose conditions. Beneficiary cannot transfer interest & creditors cannot reach (Except for alimony, child support, tort & government creditors). The trust is created to provide for maintenance of a beneficiary. Once income is paid out, creditors can attach. Beneficiary can assign his interest to another party but neither the beneficiary nor the assignee of the beneficiary can compel the trustee to pay. Spendthrift trusts do not protect a settlor who is also the beneficiary. Spendthrift trusts are subject to claims of dependents, gov’t and persons supplying necessities. Some states allow tort creditors.
Examples:
-Discretionary trusts (discretion to apply and distribute payments)
-Support trust (required only to pay as much of the income or principal that is necessary for support of beneficiary) |
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Term
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Definition
For the benefit of a charitable purpose. It should advance a purpose that benefits the public. This includes:
-the relief of poverty
-the advancement of knowledge or education
-the advancement of religion
-the promotion of health
-governmental or municipal purposes; and
-other purposes that are beneficial to the community |
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Term
| How to modify charitable trusts |
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Definition
| Cy pres doctrine - any modifications must be “as near as possible” to the intent of the settlor; this is allowed if the stated charitable purpose becomes unlawful, impracticable, impossible to achieve, or wasteful |
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Term
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Definition
| Tentative bank account trust whereby the named beneficiary takes whatever is left in the account at death of the owner of the account. (not a true trust) |
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Term
| Trustee's fiduciary obligations, if not expressed, include the implied authority to: |
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Definition
1) to sell (unless trust terms indicate otherwise)
(2) to incur necessary expenses
(3) to lease - lease land and manage it, record documents that need to be recorded. Secure insurance on trust properties. Safeguard securities, funds and documents |
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Term
| Trustee's fiduciary obligations include: |
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Definition
-Duty of loyalty
-Duty of care
-Duty to invest
-Duty to earmark
-Duty to segregate
-Duty not to delegate
-Duty to account |
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Term
| Duty of loyalty for a trustee means: |
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Definition
-No self-dealing (includes relatives, business associate)
-No buying or selling trust assets to benefit self
-No borrowing trust funds or making loans
-No selling from one trust to another
-No buying own corporate stock
-No personal gain through Trustee position
-Trustee cannot give preference to one beneficiary vs. the other. Doesn’t mean being fair, just means being impartial. Has to go with settlor’s intent. |
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Term
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Definition
| Trustee must act as a reasonably prudent personal dealing with his own affairs |
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Term
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Definition
| Invest trust funds, investigate and consider liquidity, tax consequences, etc., and diversify when investing |
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Term
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Definition
| Requires trustee to label trust property as trust property |
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Term
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Definition
| Trustee cannot commingle his own personal funds with trust funds |
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Term
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Definition
| Keep beneficiaries reasonable informed when you are administering/managing the trust. If it involves their interest, include them. |
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Term
| When a trustee wrongfully conveys property, beneficiaries can pursue assets for their current holders unless: |
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Definition
| Person is a bona fide purchaser for value |
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Term
| If trustee breaches his fiduciary duty, beneficiaries may: |
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Definition
-Remove trustee
-Set aside the transaction
-Beneficiaries or court may ratify the transaction and waive the breach
-Sue for resulting loss
-Trace the money and recover the property (through constructive trust)
-If trustee comingles assets, presumption is that lost, destroyed, or devalued property is the trustee’s so the remaining property is the trust’s property |
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Term
| What is trustee doesn't want to be a trustee? |
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Definition
| He/she must provide a written rejection to the settlor or a beneficiary (if settlor is dead or incompetent) |
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Term
| If there are co-trustees, are they liable for each other's acts? |
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Definition
| Yes. To not be liable, a co-trustee must show that he/she failed to prevent the action, did not participate in the breach or acted to remedy the breach when he/she found out about it. |
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Term
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Definition
-The term of the trust expires
-The trust purpose is fulfilled
-The trust purpose becomes unlawful
-The trust purpose becomes impossible to fulfill
-The trust is revoked under the terms of the trust |
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Term
| Can a settlor modify a trust? |
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Definition
| Yes, BUT he/she must reserve the right to modify or revoke |
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Term
| Can the court modify the trust? |
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Definition
| Yes, under changed circumstances. The court permits a trustee to deviate from the trust terms if there are changed circumstances not anticipated by the settlor. The deviation must be necessary to accomplish the trust purpose (advantage to beneficiaries not sufficient) If circumstances changed in a way that the Settlor did not anticipate, the court can authorize a different outcome if it is deemed necessary to fulfill the Settlor’s intent and the trust’s purpose and it does not deprive beneficiaries of their interests. |
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Term
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Definition
| Prohibits termination or modification if it is contrary to the intent of the settlor. |
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Term
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Definition
| CA presumes the trust is revocable unless otherwise stated in the trust |
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