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  1. Trust
    A trust is a method of holding property whereby legal title is vested in a trustee, and the right to benefit is held by one or more beneficiaries
  2. Parties to a Trust
    1) Trustor (or Settler) - establishes the trust;

    2) Trustee - administers the trust; and

    3) Beneficiary - receives the benefits of the trust.
  3. Requirements for a Trust
    1) Present manifestation of intent on the part of the Trustor to create a trust,

    2) Presently existing trust property (res),

    3) Trustee with duties,

    4) Beneficiary, and

    5) valid trust purpose.
  4. Beneficiaries and Modification of Trust
    Generally, if all beneficiaries agree, and the trust purpose is not materially frustrated, the trust may be modified or dissolved
  5. Early Termination of Trust
    Impossibility, impracticality, unanticipated changes in circumstances, and illegality of subject matter may all give a court the power to terminate or modify a trust.
  6. Alienation of Beneficiary’s Interest
    Beneficiaries may transfer their interest in the trust unless a statute or the trust instrument itself holds contra
  7. Income Beneficiaries and Entitlements
    Rents, interest, stock dividends, etc.. are generally considered the property of income beneficiaries.
  8. Income Beneficiaries and Expenses
    Normal operating expenses are deducted from income
  9. Remainder Beneficiaries and Entitlements
    Remainder beneficiaries are entitled to the principal remaining at termination of the income beneficiaries’ interest
  10. Remainder Beneficiaries and Expenses
    Expenses necessary to maintain the trust corpus are deducted from the principal.
  11. Mines and Allocation of Income
    Income generated from mines opened after the establishment of the trust is allocated to principal
  12. Responsibilities of a Trustee
    A trustee is to conduct himself as a fiduciary of the trust and beneficiaries.
  13. Trustees and Breaches
    Trustees are personally liable for any loss resulting from any breach
  14. Trustees and Benefits
    The general rule is that trustees are prohibited from receiving benefits from their position other than the compensation provided for
  15. Trustees and Self-dealing
    The general rule is that the trustees are prohibited from self-dealing.
  16. Trustees and Investments
    A trustee has a responsibility to make the trust property productive.
  17. Trustees and Commingling
    The traditional rule is that trustees may not commingle trust assets.  However, the modern trend is that trustees may be allowed to commingle assets to improve investment potential.
  18. Trustees and Conflicting Interests
    If a potential conflict arises between income and remainder beneficiaries, a trustee should look first to the trust instrument, second to the statute, third to commonly accepted industry standards, and lastly to the reasonable advice of those knowledgeable in the field.
  19. Beneficiaries Power over Trustee
    Beneficiaries may sue a trustee for losses or have the trustee replaced for breaches of duties unless the beneficiaries encourage the trustee’s actions
  20. Trustee and Delegation of Duties
    Traditionally a trustee could delegate ministerial tasks only.  However, the modern trend is to allow trustees to delegate tasks that are reasonably delegable.
  21. Exculpatory Clauses and Trustees
    Exculpatory clauses are effective; however they are strictly construed against the trustee.
  22. Trustees and Contract Liability
    A trustee who fails to indicate otherwise is personally liable on contracts.
  23. Trustees and Indemnification
    The trust is responsible for reimbursing trustees who sustain losses arising out of contracts entered into on behalf of the trust, if the trustee had the power to enter into the contract, and if the trustee acted reasonably
  24. Support Trusts
    The terms of a support trust require the trustee to provide only for the support of the beneficiary, as defined by the trust instrument
  25. Creditors and Trusts
    Creditors may levy on a beneficiary’s interest in the trust unless restricted by the terms of the trust or by statute
  26. Spendthrift Trusts
    The terms of a spendthrift trust require a trustee to provide the beneficiary only with what is necessary to meet the objectives stated in the trust instrument
  27. Discretionary Trusts
    The terms of a discretionary trust require the trustee to give the beneficiary only what the trustee decides to give
  28. Creditors and Support, Discretionary, and Spendthrift Trusts
    Creditors cannot levy on an asset one doesn’t have.  Consequently creditors cannot generally levy on a beneficiary’s interest in these types of trusts because the trustee is required to use the assets only as the trust instrument dictates.
  29. Revocable Trusts
    A trust may be written so as to be revocable by the trustor (settler), but irrevocable at the trustor’s (settler’s) death.
  30. Revocable Trusts and Estate Planning
    Property placed in a revocable trust passes to the successor beneficiary at the death of the trustor, free of probate
  31. Formation of Revocable Trusts
    The trustor may either transfer the property to the trust or declare him/herself trustee of the property in trust for another
  32. Revocable Trusts and Creditors
    A trustor’s creditor can reach assets placed in a revocable trust.
  33. Responsibilities of a Trustee
    A trustee is to conduct himself as a fiduciary at all times
  34. Resulting Trusts
    If for some reason, a trust is unable to dispose of all the trust assets, they will be returned to the trustor
  35. Wrongful Conduct and Constructive Trusts
    If title to property is obtained by inequitable conduct, the property is held in trust by the one in possession for the inequitably dispossessed former owner.
  36. Constructive Trusts and the Burden of Proof
    The party moving for establishment of a constructive trust must establish, by clear and convincing evidence, that title was obtained by inequitable conduct.
  37. When Trustee and Beneficiary Are One
    If the only trustee is the only beneficiary, title is held by that person free of the trust.
  38. Purchase Money Resulting Trust
    When one supplies the consideration for the purchase of property, but title is taken in another’s name, it is presumed that title is being held in trust for the provider of the consideration.
  39. Exceptions to Purchase Money Resulting Trust Presumption
    If the parties are closely related, a rebuttable presumption arises that a gift was made.
  40. Illegal Purposes and Purchase Money Resulting Trusts
    If the provider of consideration had title taken in another’s name to facilitate an illegal purpose, the courts may leave the parties where they have placed themselves.
  41. Honorary Trust
    An honorary trust has no charitable purpose and no living human beneficiaries.  It is unenforceable. However, if the trustee chooses to carry it out, no one has standing to object.
  42. Honorary Trusts and the Rule Against Perpetuities
    Honorary trusts frequently fail because they have no measuring lives to satisfy the Rule Against Perpetuities
  43. Honorary Trusts that Fail
    When the honorary trust fails, the trust res is held in a resulting trust for the trustor.
  44. Charitable Trusts
    A charitable trust is one established to benefit the general public
  45. Trusts to Benefit Political Parties
    Trusts to benefit political parties or other organizations whose theme is not predominately to benefit the public, will not be considered ‘charitable’
  46. Charitable Trusts and Cy Pres
    Courts may modify charitable trusts when their purpose has been frustrated by unforeseen circumstances
  47. Charitable Trusts and the Rule against Perpetuities
    Charitable trusts are no subject to the Rule Against Perpetuities. 

    Rationale – Since the beneficiaries are the public in general, it would be impossible to determine which lives in being were to be the measuring ones. Also charitable trusts, by their very nature, tend to go on for generations, and public policy is in favor of supporting charitable trusts
Card Set:
2015-07-05 22:47:16
bar exam

trust terms
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