2. PROPERTY: Trusts and Rule Against Perps

Card Set Information

Author:
rubidoux
ID:
153166
Filename:
2. PROPERTY: Trusts and Rule Against Perps
Updated:
2012-05-14 19:25:00
Tags:
trusts property rubidoux perpetuities
Folders:

Description:
trusts
Show Answers:

Home > Flashcards > Print Preview

The flashcards below were created by user rubidoux on FreezingBlue Flashcards. What would you like to do?


  1. TRUSTS: CONCEPTS AND PARTIES
    An express trust involves the holding of title to property by a trustee, who has an equitable fiduciary duty to deal with it for the benefit of other persons (the beneficiaries).

    SETTLOR: the person who creates the trust by manifesting an intent to do so; while a trust of personal property may be expressed orally, the Statute of Frauds requires a writing to create a trust of real property; the settlor must own the property at the time the trust is created and must intend to make the trust efective immediately.

    TRUSTEE: holds legal title to the property; must act under the instructions of the settlor; has a fiduciary duty to use the highest care and skill for the beneficiaries; if the trustee has no duties at all, the trust will fail and legal title will vest immediately in beneficiaries; if trustee dies, court of equity will appoint a substitute.

    BENEFICIARIES: the persons for whose benefit the trust is created and held; they hold equitable title to the property; beneficiaries must be definitely identifiable by the time their interest comes into enjoyment and, in all events, within the period of the rule against perps.

    RES: the property that is the subject of the trust; may be real or personal, present interest or future interest

    The rule against perpetuities applies to the equitable future interests of the beneficiaries in a private trust just as it does to legal future interests.
  2. CREATION OF TRUSTS
    INTER VIVOS CONVEYANCE: can be created by the settlor's conveyance of the trust res to the trustee while the settlor is alive; for real property, must be done by a writing, usually accomplised by delivery of a deed

    INTER VIVOS DECLARATION: settlor may declare that he is now holding certain property in trust for certain beneficiaries; no deed or delivery is necessary, but if the res is real property, must be a signed writing

    TESTAMENTARY CONVEYANCE: settlor may create the trust by language in his will and may also transfer the res to the trustee by a devise in the will

    POUR-OVER INTO EXISTING TRUST: settlor may create an inter vivos trust before death and thenbequeath property to the trust, pouring it over into the trust
  3. CHERITABLE TRUSTS
    Must have an indefinite group of beneficiaries that are reasonably numerous and not individually identified; trust can be for an established charity or a group of persons.

    The Rule Against Perps does not apply to trusts that are entirely charitable. Such trusts may have infinite life.

    Cy Pres Doctrine: if the purposes of a charitable trust are impossible to fulfill, illegal, or have been completely fulfilled, a court may redirect the trust to a different purpose that is as near as may be to the settlor's original intent

    Charitable trusts may be enforced by an action of the AG of the state.
  4. THE RULE AGAINST PERPETUITIES:
    GENERAL
    An interest is void if there is any possibility, however remote, that the interest may vest more than 21 years after some life in being at the creation of the interest.

    • The rule applies to the following interests:
    • (1) contingent remainders;
    • (2) executory interests:
    • (3) class gifts (even if vested remainders);
    • (4) options and rights of first refusal; and
    • (5) powers of appointment.
  5. THE RULE AGAINST PERPETUITIES:
    WHEN THE PERIOD BEGINS TO RUN
    The validity of interests under the Rule is determined at the time the interests are created, taking into acount the facts then existing. The lives in being plus 21 years period begins to run, and the measuring lives used to show the validity of an interest must be in existence, at that time.

    Perp's period in the case of a will begins to run on the date of the testator's death.

    Perp's period in case of revocable trust begins to run on the date the trust becomes irrevocable; will be at settlor's death unless the settlor amends trust, making it irrevocable, during his lifetime.

    For irrevocable trusts, perps period begins to run on date trust is created.

    For deeds, begins to run on the date the deed is delivered with the intent to pass title.
  6. THE RULE AGAINST PERPETUITIES:
    "MUST VEST"
    must vest within lives in being plus 21 years

    an interest be omes vested for purposes of the Rule when: (1) it becomes a present possessory estate, or (2) it becomes an indefeasibly vested remainder or a vested remainder subject to total divestment

    a majority of states have modified the "must vest, if at all" rule to a wait and see approach; they suspend judgement as to whether the interest in question is good or void and potentially wait until the end of the perpetuities period -- it is good if it actually vests during the perps period
  7. THE RULE AGAINST PERPETUITIES:
    "LIVES IN BEING"
    The measuring lives need not be given a beneficial inteest in the property and they need not even be expressly referred to in the instrument, but there must be some connection that insures vesting or failure of the interest within the perpetuities period.

    A perpetuities saving clause can be used: names one or more lives in being and says trust will terminate 21 years after the death of the last survivor.

    The number of measuring lives must be reasonable.
  8. THE RULE AGAINST PERPETUITIES:
    INTERESTS EXEMPT FROM THE RULE
    The charity to charity gift over rule allows a gift to vest because of a remote event as long as both parties are charities.

    Vested interests are not subject to the rule. Thus, a devise "to A for life, then to A's children for life, then to Bin fee simple," is valid because B's interest is a vested remainder.

    **Vested remainders in a class, however, are subject to the Rule so long as the class remains open.

    Reversions, possibilities of reverter, and rights of entry are all vested in interest and hence not subject to the Rule.

    Possibilities of reverter and rights of entry, which are exempt from the Rule, must be carefully distinguished from executory interests, which are subject to the Rule. Remember that executory interests are created in transferees; possibilities of reverter and rights of entry are created only in the grantor.
  9. THE RULE AGAINST PERPETUITIES:
    INFECTIOUS INVALIDITY
    If an invalid gift is an essential part of the transferor's dispositive scheme, such that to strike this interest and give effect to the remaining interests would be to subvert the transferor's intent, -- if it is determined that the transferor would rather have had the entire disposition fail -- then the entire disposition is void.

What would you like to do?

Home > Flashcards > Print Preview