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2011-07-22 18:08:36
CA barbri

barbri trusts 2011
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  1. private express trust
    a fiduciary relationship with respect to property whereby one person, the trustee, holds legal title for the benefit of another, the beneficiary, and which arises out of a manifestation of intent to create it for a legal purpose.
  2. trustee
    • rule - a trust must have a trustee, but the court will not allow the trust to fail solely because there is no trustee or a trustee refuses to serve.
    • in such case, court will appoint a trustee.
    • until a trustee is appointed, the settlor or the settlor's estate will hold legal title.
  3. create a private express trust
    Settlor want trust to take effect at his death
    only way S can do this is by complying with the Statute of Wills--the local probate code.
  4. create a private express trust
    Settlor want trust to take effect during his lifetime
    • 2 ways: transfer in trust and declaration in trust
    • 1. Transfer in Trust: a 3rd party is the trustee. (i) for a trust of real property, S muct execute and deliver a deed transfering title to the trustee. SOF demands the writing requirement. (ii) for a trust of personal property, there must be delivery to the trustee at the time S manifests the intent to create the trust (delivery can be actual, symbolic, constructive). If no delivery to trustee, there is no trust.
    • 2. Declaration in Trust: S himself is the trustee. For real property, SOF must be satisfied by writing. For personal property, only have to look for the present manifestation of the trust intent.
  5. illegality at creation of trust
    • court will try to excise the bad from the good. If possible, the trust will stand.
    • If not possible to excise the illicit condition, court has 2 opitons: (1) invalidate trust at inception, and S ramians the owner of the property; (2) allow trustee to keep the property for himself (punish S for unclean hands).
  6. illigality after creation of trust
    if a T is created that was legal at the time of creation but later becomes illegal due to a change in law, we have a Resulting Trust in favor of the S if S is alive, if not, to S's estate.
  7. a charitable trust
    • Statute of Elizabeth: T for education, alleviation of proverty, of sickness, to help orphans.
    • Restatement: any trust which confers a substantial benefit upon society.
  8. cration of a charitable trust
    • created in the same way a private express trust is created: need (1) a manifestation of trust intent, which can be done (2) at testator's death by will or (3) during settlor's lifetime by declaration of trust or by transfer in trust (4) of a persently existing interest in property that can be transferred (5) for a legal charitable purpose.
    • In a charitable trust, there is NO assertainable person or group of people who are the beneficaries.
  9. cy pres
    • if court finds that S had a general charitable intent and only the mechanism for effectuating that intent is not possible or practicable, the court can modify the mechanism as nearly as possible to effectuate S's general intent.
    • * if S's charitable intent was general = cy pres; if specific = trust fails & we have a resulting trust to return the property back to the S or his estate.
  10. honorary trusts
    • trust with no assertainable beneficiary & confers no substantial benefit upon society.
    • It is a goal of the settlor. trustee is not required to carry out S's goal, but has the power to do so.
    • If trustee refuses to serve, then the trust fails. It goes to S or S's estate.
  11. totten trust
    named beneficiary takes whatever is left in the account at the death of the owner of the account.
  12. spendthrift trust
    beneficiary cannot transfer his right to future payments of income or principle & creditors cannot attache the beneficiary's right to future payment of income/principle
  13. suport trusts
    • trustee is required to use only so much of the income or principle, as is necessary for the beneficiary's health, support, maintenance, or education.
    • * B cannot transfer his right to future payments; creditors cannot attach B's right to future payments (unless preferred creditors)
  14. discretionary trusts
    • trustee shall have full, sole, and absolute discretion in determining when to pay the beneficiary and how much to pay the beneficiary.
    • * B cannot voluntarily transfer his right to future payments. If there was an assignment, then assignee steps into the shoes of B. But if trustee decides to pay ... then pay or be liable.
    • * creditor cannot attach B's right to future payments. But if trustee decides to pay ... then pay or be personally liable.
  15. Resulting Trust
    an implied in fact trust and is based upon the presumed intent of the parties. If a resulting trust is decreed by the court, the resulting trustee will transfer the property to the settlor or his estate ... or if no residuary devisees, to the intestate takers (heirs).
  16. how a resulting trust arises
    • 1. a private trust ends by its own terms, and there is no provision for what happens next.
    • 2. when private express trust fails, because there is no beneficiary.
    • 3. charitable trust ends because of impossibility or impracticability and cy pres cannot be used.
    • 4. private express trust fails by becoming illegal.
    • 5. where there is excess corpus in a private express trust.
    • 6. when we have a "purchase money resulting trust." (A pays consideration to B, to have title to property transfered to C)
    • 7. semi-secret trusts = the will makes a gift to a person to hold as trustee, but does not name the beneficiary.
  17. constructive trusts
    • not a real trust, but a remedy to prevent fraud or unjuect enrichment.
    • when court decrees a constructive trust, wrongdoer will be obligated to transfer the property to the intended beneficiary as determined by the court.
  18. trustee's implied powers
    power to sell the property, power to incurr expenses, power to lease, power to borrow.
  19. trustee duties to beneficiaries
    • duty of loyalty: administer the trust for the benefit of the beneficiaries. no self-dealing by the trustee.
    • if duty breached: if there is loss, trustee has to make good the loss. if trustee makes a personal profit, the with respect to those ill-gotten profits, trustee is a constructive trustee--must turn over profits to intended beneficiary.
  20. trustee's duty to invest
    • some states have lists that trustees must follow in the absence of directions in the trust:
    • fed gov bonds, fed insured CD, 1st deeds of trust in real estate, stocks of publically traded corporations, never invest in new business, never invest in second deeds of trust in real estate.
    • * common law prudent person test - duty to invest requires trustee to act as a reasonably prudent person investing his own property.
  21. good investement for trustee (common law test)
    • fed gov bonds, 1st deeds of trust in real estate, fed insured CD, blue chip stocks, mutual funds maybe ok.
    • never invest in new business, never invest in 2nd deeds of trust in real estate.
    • * unlike states list - each invidual investment is not scrutinized, but rather, performance is measured in the context of the entire trust protfolio.
    • * under any standard, trustee has a duty to diversify so as to reduce risk exposure.
  22. trustee's duty to earmark
    • requires the trustee to label trust property as trust property.
    • consequences of breaching duty:
    • common law - if there is loss, trustee is held personally liable. no causal relationship required between failure to earmark and a loss.
    • modern approach - if there is loss, trustee is held personally liable only if the loss was caused by the failure to earmark.
  23. trustee's duty to segregate
    trustee cannot comingle personal funds with trust funds, or mix different trust funds.
  24. trustee's duty not to delegate
    trustee can rely on professional advisors in reaching a decision, but the trustee cannot delegate decision-making authority to these advisors.
  25. trustee's duty to account
    requires trustee, on a regular basis, to give the beneficiary a statement of income and expenses of the trust.
  26. remedies of benefciary for breach of trustee's duty or duties
    • 1. damages
    • 2. constructive trust remedy
    • 3. tracing and equitable lien on property
    • 4. ratify the transaction of good for beneficiary
    • 5. remove the trustee
  27. trustee liability to 3rd person
    • common law - trustee is sued in his personal capacity. so his personal assets are at stake. but the trustee can get indemnification from trust assets if he acted within his powers and was not personally at fault. But if K probided that in event of breach, trustee is to be sued in his representative capacity, then trust is liable.
    • Modern law - if the other party to the K knows that the trustee is entering into the K in his representative capacity, then the trustee must be sued in his representative capacity.
  28. trustee liability to 3rd person
    • common law - trustee is sued in his personal capacity. if he was without personal fault, he can get indemnification from trust assets. so if agent committed the negligent act or it is a case of strict liability, then the trustee can obtain indemnification.
    • modern law - trustee is sued in his individural capacity and is personally liable for torts only if the trustee is personally at fault. thus if an agent committed the negligent act of if this is a cas eof strict liability, the trustee is sued in his representative capacity.
  29. termination of revocable trusts
    • majority rule - to retain revoke-power, S must express the power in the trust investement.
    • minority - S has the power to revoke, unless the trust is expressly made irrevocable.
  30. termination of irrevocable trusts
    • 1. S and all the beneficiaries agree to terminate.
    • 2. all the beneficiaries agree to terminate and all the material purposes have been acomplished
    • 3. by operation of law, passive trusts and the Statute of Uses.
    • SOU comes into play when you have a private express trust with a corpus of real property, and the trust is passive (trustee has no active duties and is just holding bare legal title).
    • In such case, under SOU, the beneficiaries get legal title by opperation of law, and the trust terminates.
  31. secret trust
    results when a gift is made in reliance upon the beneficiary's promise to hold the gift in trust for another. to prevent unjust enrichment of the named beneficiary, courts will allow the intended trust beneficiary to offer extrinsic evidence of the agreement. If agreement can be proved by clear and convincing evidence, a constructive trust will be imposed on the name beneficiary.
  32. residual gift
    a gift of what remains of the testator's property after first paying all debts and satisfying the specific and general gifts.
  33. uniform testamentary additions to trusts act
    under this act, pour-over trusts are valid if the trust is identified in the will and in existence when the will is executed.