Wills and Trust - Trust
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What does it take to create a trust?
intent to create a trust, trust property, trust beneficiaries, written instrument
What type of beneficiary is required in order to create a trust?
A definite beneficiary. A beneficiary is definite if the beneficiary can by ascertained now or in the future
If a trust does not have a definitive beneficiary, what type(s) of trust must be created in order for the trust to be valid?
If the trust doesn't have a def. beneficiary, the trust must be a charitable trust, a trust for the care of an animal, or a trust for a non charitable purpose, to be a valid trust.
Must a trust be in writing to be valid?
NO, the settlor could create a oral trust?
What terms must an oral trust meet to be valid?
The creator of an oral trust, and it's terms may be established by clear and convincing evidence
What is a constructive trust and what does it do?
It is a remedy and is used as a device for preventing unjust enrichment by moving legal title from a person who has title but should not, to someone who should Constructive trust do not impose duties on the "trustee".
What are the two types of trust interest?
What must the trustee do when the beneficiary has mandatory interest in the trust?
The trustee must make specified distributions to an identified beneficiary
What powers does the trustee have under a discretionary trust?
The trustee has the discretion over who and when to distribute the property under the trust
What is the trustee's duty under NC law?
Not to act in bad faith
Under NC law does the trustee have a duty to act in good faith?
What is an exculpatory clause?
It is a clause that excuses the trustee from liability when the trustee fails to follow through under his duties
What is the general rule when it comes to whether the beneficiaries creditors can get to the trust?
What is the exception to the general rule?
The creditors CAN get access
EXCEPTION: where creditor can get access is when a spendthrift provision, a discretionary trust, or a protective trust is created
What is a spendthrift trust?
It is a trust created by imposing a disabling restraint upon the beneficiaries and their creditors. A beneficiary of a spendthrift trust cannot voluntarily alienate (transfer) her interest. Nor can her creditors reach her interest in the trust.
How is a protective trust created?
What does a protective trust operate?
A protective trust begins with a beneficiary receiving a mandatory interest, but that mandatory interest becomes discretionary if the beneficiary attempts to transfer the interest OR a creditor of the beneficiary seeks to attach the beneficiaries interest, the interest either terminates or becomes discretionary
When can a settlor's creditor get access to the trust?
Does it matter if its a revocable or irrevocable trust?
Does it matter if the settlor is dead or alive?
During the life of the settlor, the property of a revocable trust IS subject to settlor's creditors.
With respect to an irrevocable trust, a creditor may reach the maximum amount that can be distributed to or for the settlor's benefit
After the death of the settlor, the property of a trust that was revocable at the settlor's death is subject to claims of the settlor's creditors.
What is the general rule when it comes to whether or not a trust is deem revocable or not when the settlor does not specify?
A trust is revocable unless declared irrevocable
What does the Claflin Doctrine concern?
What is the Claflin Doctrine?
Modification and Termination of Trust
If continuance of the trust without modification or termination is necessary to carry out a material purpose of the settlor, the beneficiaries cannot compel modification or termination
What is a trust protector?
What is a trust protector's duties?
directs the trustee
Role is to represent the interest of the settlor when the settlor is no longer around to represent his own interest.
Can a trust be reformed?
If so, by who?
Yes, by the court, to conform the terms to the settlors intention if it is proved by clear and convincing evidence that both the settlors intent and the terms of the trust were affected by a mistake of fact or law.
Who can create a power of appointment?
What does a power of appointment give?
- Donor's create a power of appointment. It is typically created
- in the trust beneficiaries. It gives the person who holds the power the ability to distribute the trust property.
Definitions: Donor, Donee, Objects, Appointee, Taker in Default
What is the other names for the donee's and objects.
Donor - the one who creates the power
Donee- the one who holds the power and can exercise the power
Objects - those in whose favor the power could possibly be exercised
Appointee - the one to whom the property is appointed
Taker in Default - the one who takes the property upon failure of the Donee to exercise the power
Donee's are also known as the powerholders
- Objects are also known as the permissible appointee's
What are the two types of powers of appointment
General and Special
What does the general power of appointment mean for the donee?
Can be exercised in favor of the donee, donee's estate, donee's creditors, OR creditors of donee's estate
What does the special power of appointment mean for the donee?
CANNOT be exercised in favor of donee, donee's estate, donee's creditors, or creditors of donee's estate.
What is a reversion?
Future Interest remaining in the grantor who transfers a vested estate of a lesser value than that of the vested estate that he has
Def: Possibility of Reverter
Future Interest that remains in the grantor who conveys a fee simple determinable. "for so long as"
Def: Right of Entry
Future interest that is retained by the grantor who conveys a fee simple subject to a condition subsequent. "but if"
Def: Vested Remainder
A remainder is vested if it is given to an ascertained person (alive and can be identified), and is not subject to a condition precedent
What does it mean if a vested remainder is indefesible?
It is certain to become possessory?
What is a contigent remainder?
It is not given to a presently ascertained person OR it is subject to a condition precedent
What is an executory interest?
Divesting interest; divest a preceding estate
What are the two types of future interest that can be created in a transferee?
Remainder and Executory Interest
What makes a remainder a remainder?
interest that naturally follows the expiration of the preceding estate
What are the two types of executory interest?
Shifting - divest another transferee
Springing - divest another transferor
What is the Clobberies Rule?
A gift of the entire income to a person (or to a class), with principal to be paid at a designated age, indicates that survival to the time of possession is not required.
"to be paid to them at the age of __. " "Payable at" Enjoyment postponed. Each person has an interest, it just doesn’t become possessory until later.
At what time do you determine "heirs"?
death of designated individual, death of one who's heirs are to receive the property
Before it was abolished what was the doctrine of worthier's title and what was it interpreted to confer?
O > A for life, remainder to heirs of O = O>A for life, reversion to O
Abolished in NC; now you can actually invest a remainder to the heirs of O, without the interest going back to O
Before it was abolished what was the rule in Shelley's Case and what was it interpreted to confer?
O>A for life, remainder to the heirs of A = O>A in fee simple absolute
Abolished in NC; now you can actually invest a future interest to the heirs of A
In what ways can you determine when a class closes?
- Physiological - when all individuals who can feed the class are dead?
- Ex: the class "to my nieces and nephews" closes physiologically when the donor's siblings and parents die.
Convenience - when any class member has the right to demand possession of the interest. (quicker than physiological)
What is the RAP period?
An interest MUST vest, if at all, within the lives in being plus 21 years from the time of the creation of the trust.
Ask: During who's life, at who's death, or 21 years after death, can you determine if the interest will vest or fail?
What are the five questions that you must ask to determine whether the RAP has been violated?
Identify all interest
Identify interest subject to rule
WHEN will interest vest/fail and HOW
During who's life; at who's death OR 21 years after who's death will contingency occur (gives us list)
Valid if : person from list or whole class is certain to be alive at creation of interest
Invalid If: person from list is not alive OR some of class is not alive
What is the rule when it comes to class gifts and RAP?
A class gift must be valid for all members of the class, or it is valid for none.
In NC, an exculpatory clause, relieving the trustee from liablity for a breach of trust is unenforceable to what extent?
It is unenforceable to the extent that it relieves the trustee of liability for breach of trust committed in bad faith or with reckless indifference to the purposes of the trust or the interests of the beneficiaries.
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