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Business Law Chapter 51
Trusts and Wills
47
Business
Undergraduate 3
03/06/2012

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Term
Trust
Definition
a fiduciary relationship in which one or more persons hold legal title to property while its use, enjoyment and benefit (equitable title) belong to another
Term
Trusts May Be Created By:
Definition
Agreement of parties, by a grant in a will, or by a court decree
Term
Creator or Settlor
Definition
The party that is creating the trust. They must be legally capable of make a contract, meaning infants and people who are incompetent are unable to create a trust. The presence of this condition will make the declaration of a trust void.
Term
Trustee
Definition
The party holding legal title to the property. They also must be legally capable of holding title to and dealing with property.  The lack of a trustee will not destroy a trust, but the court will appoint an individual or institution to act as trustee.
Term
Beneficiary
Definition

The person who receives the benefit of the trust. May be a specific charity  and if the settlor's object does not outrage public policy or morals it will be upheld.  

 

May accept or reject the trust, but creditors do have the right to seize the beneficiary's interest 

Term
Espress Trusts
Definition
a trust established by voluntary action and is represented either by an oral staement or conduct of the settlor
Term
Creating an Express Trust
Definition

Real Property: must be in writing to meet the requirements of the statute of frauds

 

No particular words, provided the settlor's intent to establish a trust is unmistakable

Term
Precatory Expression
Definition
Wishful expression. May be so definite as to impose a trust upon the property for someone's benefit.  The court will focus on whether from all the facts the settlor genuienly seemed to intend to create a trust
Term
Testamentary Trust
Definition
Employed in wills and they become effective after the settlor's death
Term
Inter Vivios Trust
Definition
"Btwn-the-living" trust: A trust established during the settlor's lifetime
Term
Charitable Trust
Definition

any trust that has for its purpose the improvement of the whole or a class of humankind, unless it is so vague that it cannot be enforced.

 

Ex. Gifts for public museums, for park maintenance, and for the dissemination of a particular political doctrine or religious beleif 

Term
Spendthrift Trust
Definition

A settlor who believes that a beneficiary cannot be trusted to preserve even the limited rights granted to her as a beneficiary may provide that the beneficiary cannot, by assignment or otherwise, impair her rights to recieve principal or income and that creditors of the beneficary cannot attach the fund or the income to the beneficiary

 

*Creditor's may seize it after the income is received by the beneficiary 

Term
Totten Trust
Definition

Savings account trust.  Involves a joint bank account apened by the trust settlor.  

 

Ex. Sally, in trust for John

 

Sally may make additional depositis into the acct. and may withdraw the money at anytime.  Transfer becomes complete at the time of the depositor's death. 

Term
Implied Trusts
Definition
Owes its existence to the law. These occur when, in the absence of any expressed intent to create a trust, the trust is imposed on property because the parties' appear to warrant such a construction.
Term
Constructive Trusts
Definition

Results when a court imposes a trust on property to rectify misconduct, to prevent unjust enrichment, or to undo a morally wrongful situation. 

 

Established when a confidential relationship has been abused or where actual fraud or duress constitutes an equitable ground for creating the trust 

 

Trustee prohibited from seeking any personal benefit

Term
Resulting Trust
Definition

serves to effect the inferred or presumed intent of parties who have inadequately epressed their actual wishes.

 

Based off of  presumed intent, and it does not need to be evidenced in writing 

Term
Essence on a Resulting Trust
Definition
Presumption made by the law that the holder of legal title does not hold the property personally, but as a trustee for another party
Term
Needed for the Creation of Trusts
Definition
Needs:

1. A creator/settlor

2. A "corpus" or trust property

3. a trustee

4. a beneficary

5. Unmistakeable intent to establish a trust

Term
Subject Matter of a Trust
Definition
Requirement:  Corpus or res must consist of property that is definite or specific. A trust cannot be effective for property not in existence or yet to be aquired.
Term
Duties of the Trustee
Definition

1. Carry out the purposes of the trust

2. to administer the trust prudently and carefully

3. to exercise a high degree of loyalty toward the beneficiary 

Term
Powers of a Trustee
Definition

Determined By: 1. the authority granted to him by the settlor in the instrument creating the trust

2. the rules of law in the jurisdiction in which the trust is estanlished. 

 

*some states declare a prudent investor rule

-May list types of secruities that are acceptable investments

-Trustee may have to defend his reasoning for stock/bond choice 

Term
Tremination of a Trust
Definition
Unless the settlor resuves a power of revocation, the general rule is that a trust is irrevocable.  Normally the instrument creating a trust establishes a temination date, or maybe after the settlor's death
Term
Merger Doctrine
Definition
Applies when the beneficiary holds both the equitable and legal title, so the merger doctrine defines the beneficiary as the outright property owner.
Term
Testament
Definition
A will, with the creator of the will being named the testator. Gifts made in the will are called divises or bequeaths.
Term
Intestate Succession
Definition
If the person dies without a will, the state will have a statute explaining who will benefit from the decedent's estate. If no heirs or next of kin exisit than the property escheats (reverts) to the state.
Term
Per Stripes Destribution of Property
Definition

Through or by the roots or stock, by representation.  Each heir takes in a representative capacity and stands in the place on the deceased ancestor.  The beneficiary takes according to the share his ancestor would have inherited.  

 

Wife (.5) Son (.25) Daughter (deceased) Daughter's heirs split (.25)

Term
Pre Capita Distribution of Property
Definition
Equal division of the property to be divided among the beneficiaries, each receiving the same share as the others, without reference to the intermediate course of descent fromt the ancestor.  Each receives an equal share
Term
Will
Definition
Written instrument, executed according to statutorily dicatated formalitites, whereby a person makes a disposition of his property, which is to take effect after his death.  It is revocable at anytime of life, and takes effect only on the death of the testator
Term
Conduct Invalidating a Will
Definition
A will cannot reflect an intent other than the testator's, and will not be valid (duress, undue influence, fraud)
Term
Formal Requirements of a Will
Definition

1. In writing: pencil, ink, and photocopy are all valid

2. Signature of testator at the end of the will

3. Attestation: Certified by two or three witnesses

-Cannot have any interest under the will

 

Term
Incorporating a Memorandum into A Will be Reference
Definition

1. In writing

2. must be in existence when the will is executed

3. must be adequately described in the will

4. Described in the will s being in existence. 

Term
Revocation of a Will
Definition

Revokable by the testaor:

1. Destruction or Alteration

2. Subsequent Will

3. Codicils

 

By Law:

1. Marriage or Birth of a Child

2. Renunciation by the Surviving Spouse 

Term
Destruction or Alteration
Definition
Tearing, burning, or otherwise destroying a will is a strong sign that the testator intended to revoke it, and unless the destruction is proven advertent, it is effective in revoking a will.
Term
Subsequent Will
Definition
Execution of a second will. Will only revoke if the first will is inconsitent with the second or if there is a declaration in the second will that revokes all former wills.
Term
Codicil
Definition
An addition to or a revision of a will, generally by a seperate instrument, that expressly refers to the will and that, in effect, incorporates the will by reference. Must be executed with all the formal requirements of a will.
Term
Operation of Law Revocation 
Definition

Marriage fenerally revokes a will executed before the marriage, but divorce does not revoke a provision in the will of one party for the benefit of the other

 

Birth of a child may revoke the will as far as that child is concerned.  If child's omission is not apparently intentional the child is entitled to equal the share if the testator had died intestate. 

Term
Renunciation by the Surviving Spouse
Definition
Surviving Spouse has the right ot renounce a will and describe the method of taking (the will or intestate succesion) which would be the most advantageous
Term
Dower Rights
Definition

No issue to anyone else :  All property

Some of issue are not surviving spouse: 1/2 of real poperty, all personal property, 

Term
Share to Embrace Homestead
Definition
Spouse has the right to claim a single property of the decedent to act as a homestead for the spouse's life.
Term
Nuncupative Will
Definition
Unwritten oral decalration made before witnesses, usually in his last illness. Most statures limit the amount of personal property that can be passed in these wills.
Term
Holographic Wills
Definition
A will entirely in the handwritting of the testator is a valid testamentary document even if the will is not witnessed.
Term
Soldiers' and Sailors' Wills
Definition
For soldiers on active duty and sailors at sea, the formal requirements of a will are relaxed.  Permits a testamentary disposition to be valid regardless of the informaility of the  document.  Will cannot pass title to real estate.
Term
Living Wills
Definition
A document by which an individual states that that she does not wich to receive extraordinary medical treatment in order to preserve her life.  
Term
Probate
Definition
Procedure of managing the distribution of decedents' estate.
Term
Executor
Definition

the person named in the will and appointed by the court to administer the will

 

Term
Administrator
Definition
A person appointed by the court to administer the estate when there is no will or when the person named in the will fials to qualify.
Term
Executor or Administrator
Definition
A person who is responsible for collecting the assets, paying the debts, and disbursing the remainder according to the will or intestate succession.
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