Card Set Information

2013-02-17 21:16:13
Trusts Bar Review

Bar exam
Show Answers:

  1. Express Trusts - What do you need to create (5)
    • 1. Settlor - Capacity
    • 2. Present Intent to create Trust
    • 3. Trustee - Compitency
    • 4. Beneficiary - Definate
    • 5. Same Person: Not Sole Bene and Trustee
    • 6. Oral trust: ok for personal property
  2. Express Trusts - How to show Present intent to create trust (5)
    • 1. Must be manifest when he owns the property
    • 2. Must intend for it to be effective immediatly - can be oral for personal property
    • 3. Precautionary Expression: Settlor expresses "I hope, wish" are mere suggestions and do not show present intent. Overcome by showing definate instructions. Can use extrinsic evidence
  3. Express Trusts - How do you appoint/compensate/remove
    • 1. Named Trustee: Doesnt matter if he dies
    • 2. Must have duties: Court can imply duties
    • 3. Qualifications of T: Anyone w/ capacity, minors/insane can hold but not distribute
    • 4. Compensation: Entitled to compensation
    • 5. Removal of T: Court can remove for cause - Must show he cannot effectively perform
    • 6. Resignation: Once T accepts can resign, give notice to bene and court approval
    • 7. Successor T: succeeds to all rights oblig
  4. Express Trusts -  Types/requirements of Beneficiaries (6)
    • 1. Qualified B: Must be a current B, or someone who could take today if a condition were satisfied
    • 2. Capacity: Any person, entity capable
    • 3. Incidental B: Not sufficient
    • 4. Notice to B: Not necessary - shows intent
    • 5. Definate B: Can be a ascertainable in the future, like unborn child
    • 6. Class: Reasonably definate. Broad trustee power to decide who in the class benefits
    • 7. Lack of Bene: if trust fails, a trust will be made for settlor or successors
  5. Express Trusts - What is/or fails as Trust Property (5)
    • 1. Must be property in the trust or it fails. Must have transferred to trust
    • 2. Future Interest: Ok, like future profits, but not in interest not yet a legal right (like an expected inheritance)
    • 3. Power to convey: Needs the existing power to transfer
    • 4. Trust Res: Must be segragated from other property
    • 5. Debt: Cannot hold a debt in the trust
    • 6. Gratuitous Promise: Fails.  Cant say pay my maid $3k per month, need to ID specific property to pay from, like my stocks
  6. Express Trust - Intervivos Creation - writing/no wr/P evidence
    • 1. Oral: Can be oral for personal property only, must reasonably ID trustee
    • 2. Real Property: Must be in writing
    • 3. Parol Evidence: Ok if ambiguity on face
  7. Testimentory gift to trust (in the will)- Requirements and result
    Testimentory: T makes a gift to a trust  in the will - Trust res and bene must be referrenced in will or facts of independent legal significance (employees still employed).

    Constructive trust: If B did not agree to put the property in trust till after will executed - still enforceable by constructive trust
  8. Testimentory (in the will)- Secret/semi Trust - what are they
    • Secret Trust: Where T made a gift in the will to B - But infact he wanted B to keep it in trust for someone else. If proved by clear and convincing evidence court will create a constructive trust
    • Semi-Secret: fails to name bene- trustee holds property for heirs
  9. Charitable Trusts - Rules different from normal trusts (5)
    • 1. Charitable Purpose: Considered to benefit public
    • 2. Indefinate Bene: court can select charity - to carry out purpose - if none specified
    • 3. Perpetual: Can be perpetual and not violate RAPerpetuities
    • 4. Enforcing: Trustee, qualified bene, attorney general
    • 5. Cy Pres: When charity unlawful, impracticable, waste, court can select charity "as near as possible" to carry out wish
  10. Honorary Trusts - Animals - Result
    Trusts usually made for animals. If no care taker named, court can appoint someone. Residual is given back to Settlor or successors
  11. Transfer of Bene Interest voluntary/involuntary
    • 1. Voluntary: Bene can freely transfer his int.
    • 2. Involuntary: Absent statute or trust provision creditors can attach B's share
  12. Trust - Restraint on alienation- Spendthrift Provisions - What are effects (4)
    • 1. Creditors can't attach until distributed;
    • 2. If D has the right to force trustee to distribute, he is not protected
    • 3. Assignments: Unenforceable but trustee has discretion (like distribute to my son instead of me, to avoid creditors)
    • 4. Settlor cannot be bene. Cant avoid support or gov claims
  13. Modification and Termination of Trust When/how (5 instances)
    • 1. By its terms:
    • 2. By settlor:
    • 3. By Bene: All B's must agree and no material purpose frustrated
    • 4. By Court: If could have by all bene and no bene hurt; becomes impractable/waste; few assets to justify administration. Can reform by clear and convinc of S intent
    • 5. By Trustee: Can terminate if less than $50k, w/ notice
  14. Trust Administration - Trustee Powers - Source of Power/scope
    • 1. Express powers:
    • 2. Necessary: to acheive investment management, distribution
    • 3. Statutory rights/obligations
  15. Trust Administration - Duty of Loyalty - What cant Trustee do (7)
    • 1. Cannot buy or sell assets even fmv
    • 2. May not sell from 1 trust to another
    • 3. Not borrow or loan to himself
    • 4. Cant use assets to secure personal loan
    • 5. Cant personally gain
    • 6. Corp Trustee Cannot invest in his stock, nor retain prior stock in his corp unless prudent
    • 7.  Cannot self-employ, but entitled to more compensation if lots of work

    Doesnt matter if self dealing benefits the trust. Includes using spouses, relatives or other close relationship. Bene can void the transaction
  16. Trust Administration - Duties of trustee (4)
    • 1. Report to Bene
    • 2. Seperate trust property - keep records
    • 3. Enforce and defend claims
    • 4. Preserve and make productive trust property (lease land, collect accounts, etc)
  17. Trust Administration - What can trustee Invest in
    • 1. List Jurisdiction: Some states only allow prudent investments (low risk) - Must be on list
    • 2. Uniform Prudent Investor Act: (UPIA) MOST COMMON:  Allows any prudent investment, but not necissarily low risk. Look at overall investment strategy. Must diversify
  18. Trust Administration - Investments - List Statutes - List of things Trustee cannot invest
    • Generally cannot invest in:
    • 1. Unsecured loans, second mortgages
    • 2. Land, especially un-productive
    • 3. Cannot carry on Testators biz, unless trust expressly authorizes
    • 4. Mortgage participants, common trust funds, mutual funds, some states allow
  19. Trust Administration- Liable/not of Trustee (5)
    • 1. Remedies for breach: court may order specific performance, pay money to restore property, suspend trustee
    • 2. Damages to Bene: Greater of amount needed to restore or trustee's profit
    • 3. Trustee not liable: if he acted prudent or bene consented or ratified
    • 4. Co-trustee: not liable if did not participate
    • 5. 3rd Prty: T can be sued for breach if he did not reveal he was a T
  20. Trust Administration- When can trustee make Adjustment to principle and interest (3 rules)
    • 1. Trustee can characterize things as principle, rather than income, like capital gains, stock dividends, if trustee determines appropriate to carry out T's desire
    • 2. 10% Rule: If things produce income for a limited amount of time (like royalties in mineral rights) 10% is allocated to income and 90% to principle. Same if you liquidate the asset.
    • 3. Trustee/other Fees: 1/2 charged to principle and 1/2 to interest
  21. Constructive Trusts - Definition - Equity
    This is a creation by law in order to prevent an unjust enrichment.  Equitable Remedy, The court can create a trust to benefit someone where T intended to benfit them
  22. Resulting Trusts - Purchase money resulting trust creation and proving (6 elements)
    • When X pays consideration and T gives prop to Y, intending to go to X
    • 1. Consideration: money or other paid by X to T for purchase of property (improvements made not enough)
    • 2. Time: Consideration must be paid at or b4 Y takes title
    • 3. Burden of Proof: on X
    • 4. Presumption: Once X proves he paid consideration, a rebuttable presumption that a resulting trust was created
    • 5. Close relatives: Presumed a gift but can overcome presumption
    • 6. Pro-rata: When only gave part consideration, resulting trust is pro-rata
  23. Constructive Trusts - No trust arising from Breach of Promise - Exceptions (5 scenerios)
    • General Rule: No constructive trust for breach of K. Exceptions:
    • 1. Fraud Promises (never intended to pay)
    • 2. Breach by one in confidential relationship
    • 3. Breach by descendant to hold property in trust for X
    • 4. Breach of D to pay X for services rendered from trust property - unless damages work, if oral
    • 5. Promise to X that if he dsnt bid on his prop at foreclosure sale that T will buy and sell back to him - Unless damages suffice
  24. Constructive Trusts - When do they arise crimes/breaches
    • 1. Theft or conversion of X's property
    • 2. Fraud, Durress, etc: If Y gets property from X by fraud, constructive trust for X to get it back
    • 3. Breach of Fiduciary Duty: If Trustee breaches a fiduciary B gets a constructive trust for profit or the property
    • 4. Homicide: If bene kills T, convicted, estate gets the money back in const trust
    • 5. Failed Will
  25. Constructive Trusts - Duty of Trustee (1)
    Passive trustee. Only needs to convey property to bene.
  26. Exam Rule Statement: Allways begin a trust question with a statement of how to a valid trust is created
    In order to create a valid trust, there must be a settlor, present intent to create a trust, properly funds the trust, appoints a trustee to hold the trust for beneficiaries.
  27. Exam Rule Statement: When a beneficiary is not adequately identified
    A trust must adequately identify the beneficiaries, they need not be specifically named, but reasonably definite.
  28. Exam Rule Statement: What to do with a portion of the trust fails, for lack of beneficiaries
    When a portion of the trust fails for lack of beneficiaries, a resulting trust in favor of settlor or his succesors is created.
  29. Exam Rule Statement: When a named charity is no longer existing - Cy Pres
    The Cy Pres doctrine applies when a specific charritable purpose named by settlor is no longer possible practicable. Court can direct the gift to another charity.
  30. Exam Rule Statement: A trustee's Duty to Invest Prudently
    Trustee must invest as a prudent investor would.  The investory may invest in any investment that under the totality of circumstances is prudent.