Trusts

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Author:
apgiering
ID:
161131
Filename:
Trusts
Updated:
2012-07-05 15:45:10
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  1. Trust
    Settlor delivers trust res to trustee for the benefit of the beneficiaries with the intent to create a trust for a lawful purpose.
  2. Trust res
    An expectancy is not an interest in property.
  3. Can a trustee resign?
    • With court approval
    • Subject to an accounting
    • If resignation was called for by beneficiaries -- what was the settlor's intent?
  4. Do all trust beneficiaries have to be asscertainable?
    Yes.  No non-ascertainable beneficiaries.

    EXCEPTION: charitable trusts
  5. What satisfies the "intent" requirement?
    No precatory language - "I would like"
  6. What is an "unlawful purpose" for a trust?
    • Against public policy
    • Encourage divorce
    • Total restraint on marriage
  7. Special rules for charitable trusts
    • Not subject to RAP
    • Must be for a charitable purpose
    • Must be in favor of a reasonably large number of unidentifiable members
    • Cy pres (as near as possible)
  8. Resulting trust
    Creation of an implied trust by operation of law (equity), when actual trust fails for some reason.
  9. Purchase money resulting trust
    A pays the purchase price and causes title to be taken in B's name, assumed it is a trust for A's benefit and not a gift to B.

    Can show evidence of: 1) gift, or 2) loan of purchase price.
  10. Constructive trust
    Equitable remedy resembling a trust imposed by a court to benefit a party that has been wrongfully deprived of its rights due to either a person obtaining or holding legal right to property which they should not possess due to unjust enrichment or interference.

    • Requirements:
    • 1) Wrongful conduct PLUS
    • 2) Unjust enrichment
  11. Spendthrift trusts
    Created for the benefit of a person (often unable to control his spending) that gives an independent trustee full authority to make decisions as to how the trust funds may be spent for the benefit of the beneficiary.

    Protect trust res from beneficiary creditors. 

    • Valid except for:
    • 1) Contracts for necessaries
    • 2) Child support obligations
    • 3) Any interest retained by the settlor
    • 4) Federal tax liens
  12. When is a spendthrift trust not valid?
    • Contracts for necessaries
    • Child support obligations
    • Any interest retained by the settlor
    • Federal tax liens
  13. What are a trustee's fiduciary duties?
    • Cannot buy or sell trust assets to himself
    • Cannot borrow trust funds
    • Cannot loan funds to the trust
    • Cannot profit from serving as trustee
    • Cannot buy its own stock as a trust investment
    • Duty to segregate
    • Duty to earmark
  14. Uniform Prudent Investor Act
    Trustee must establish a custom-tailored investment strategy for each trust, taking into account many factors, including:

    • 1) General economic factors
    • 2) The role that each investment plays within the overall trust portfolio
    • 3) The expected TOTAL RETURN from income and capital gains
    • 4) Needs for liquidity
    • 5) The expected tax consequences
  15. What are some of the factors a trustee must take into consideration when establishing a custom-tailored investment strategy under the Uniform Prudent Investor Act?
    • General economic factors
    • The role that each investment plays within the overall trust portfolio
    • The expected TOTAL RETURN from income and capital gains
    • Needs from liquidity
    • The expected tax consequences
    • Etc.
  16. UPIA adjustment power
    Allows trustee to allocate between capital gains and income, depending on:

    • 1) Purpose and expected duration of the trust
    • 2) Intent of hte settlor as to respective interests of the beneficiaries
    • 3) The net amount of ordinary income and cap gain available for allocation
    • 4) Circumstances of the beneficiaries
    • 5) Any increase or decrease in value of the trust assets
    • 6) Whether the trust gives the trustee a power to distribute principal
  17. When can a trust be dissolved by judicial termination?
    • If the purposes of the trust or any provision thereof have been fulfilled or have become illegal or impossible to fulfill
    • Changed circumstances
    • Achievement of tax purposes
  18. What are the types of powers of appointment?
    • General power of appointment
    • Special power of appointment
  19. General power of appointment
    Can assign to herself, her creditors, her estate, or creditors of her estate.

    Does NOT fall into residuary if there are takers in default of appointment listed.
  20. Special power of appointment
    Not a general power of appoint,ent.

    Blanket exercise of power in a residuary does not exercise unless it says so -- there needs to be a specific reference to the specific power.

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