• Capacity
• Intent
• Fiduciary Duties at time of Creation
• Property Interest at time of Creation

• Settlor
• Trustee
• Beneficiary

• Capacity
  
• Intent
• Impose duties

• Holds legal title
• Fiduciary duty to B's--absolute loyalty
• Prudent investor standard

• Holds equitable title (income, use, enjoyment)

• Inter vivos = contractual (clear and convincing evidence of lack of capacity required)
• Testamentary = testamentary

• Must have clear intention to immediatley give B an enforceable interest.

• Can be demonstrated by an act (external expression) and not be known by B's (e.g. safe deposit box case)
• A gift does not create a trust

• Totten trusts are exception to intent rules
• More and more savings account trusts are being recognized--but discouraged in UPC

• No trust if no present property interest.
• Exception if there is a valid K (w/ consideration) to create trust at later date.

• Creditor/Debtpor relationship =/ a trust.
• Segregation of property is evidence of intent to create a trust (rugs)

• Not required if there is a clear B and property--court appoints (e.g. lady revokes trust to get a new trustee and can't find one before dying)
• Any legal person/entity can be a trustee (if appointed person/entity can't, court can just appoint another)
• Even if a deed fails, a trust can be valid (e.g. church as trustee that couldn't accept title)

• When the same person is the sole trustee and sole beneficiary = doctrine of merger = holds land in fee simple (can't owe fiduciary duties to yourself)
• Doesn't apply if multiple trustees or beneficiaries

• Joint tenant trustees: at death transfers to survivor
• Can't resign at own pleasure--must comply w/ trust instrument or need court's permission
  • Courts will usually allow if it won't harm the trust
• B's can't remove trustee unless violates fiduciary duty.

• Uniform Gifts to Minors Act or Universal Transfers to Minors Act:
  
  • Easy way to transfer property to minors but give someone else legal ability to protect it.
  • Custodian doesn't hold title, but has fiduciary duties
• Uniform Custodial Trust Act (not widely adopted)
  • Grantor is trustee until becomes incapacitated, then custodian becomes trustee

• Absolutely required for express trust
  • Must be identifiable (living persons have no heirs, single people have no spouse)
    • "friends" isn't an identifiable class. Those I play bridge w/ on Thur. is ok.
  • Someone in class must be living at time of creation (can have one kid when create and have trust apply to later born kids)
• Not required for charitable trust

• Gives exception to identifiable Beneficiary rule
• Must be an identifiable charitable purpose (benevolence and liberality isn't narrow enough)
• Ok reasons: religious, poverty, cemetery upkeep,

• Where puprpose is clearly defined, but isn't a charitable purpose (e.g. fox hunting, care of pet)
• Generally, allowed in UK, not in U.S.
• Uniform Trust Code: allows stuff up to 21 years to care for a specific animal

• B's can disclaim (courts especially won't assume acceptance if it would be onerous)
• When disclaimed, property reverts back to settlor

Only B's have standing

(Town can't force trustee to pay funds for indigent beneficiary--just guardian of B)

Beneficiary can assign/transfer equitable title rights (e.g. income from stocks and bonds--taxed to B, not settlor/trustee)

• But, a spendthrift trust may not allow beneficiary to assign rights

Statute applies--can't enforce assignment of equitable title to real property w/o a writing (e.g. dad wants to revoke trust and son says dad verbally gave him land in fee simple after trust creation)

• But, states may vary on this. May apply
  
  • land statutes
  • trust statutes
  • Statute of Frauds
  • No formality whatsoever

2 options:

• Notice (first to file) = priority (UK and UCC)
• First in time = priority

• 2 options:
  
  • declaration (saying "I hold this property in trust for Gavin") (e.g. son declares he holds farm land in trust for parents, when parents die, mom's estate sues for rental of the property for the 7 yrs after trust was created and before she died) or
    
  • conveyance (appoint someone as trustee and convey land to them) (was enough when recorded deed and left it in safe deposit box, wasn't enough when held all the stocks during life and kept income from them)
    
• No consideration required
  • Only required if seeking to enforce a promise to create a trust

• Majority: Trust w/ real property must be created in writing and signed by grantor (e.g. neice going after $ adn not land was ok, even though trust corpus was orignially land)
  
  • Parole evidence is permissible if clear and convincing
    • Can be from trustee or grantor
  • Part performance of an oral trust makes it enforceable
  • Parole evidence will be allowed in defending the trust, just maybe not in enforcing it.
  • Parole evidence is allowed for outside parties
• Minority 1: apply laws of land conveyance to trusts
• Minority 2: no formality required--oral evidence is sufficient

• SoF doesn't apply if not real property when enforcement is sought (had converted to $)
• Writing can be from the grantor or trustee
• Partial performance by beneficiary of an oral promise make the trust enforceable
• SoF doesn't apply in defenting the trust

1. In writing
2. Signed by testator
3. Signed by two witnesses

Doc. doesn't have to meet wills acts

Doc must be in existence before will execution (amended out of UPC)

Things can change after the will

CL: needed to fund the trust when created it

Unif. Testamentary Additions to Trusts Act: Doen't have to be funded (basically gets rid of the difficulties of the doctrine)

• Can prevent creditors from accessing trust assets.
• Cannot use if grantor is sole beneficiary (grantor trusts)
  • But: Asset Protection Trusts now allow this (from Carribean)

Discretionary: trustee decides when to make payouts.

Support: for specific support needs (usually maintain standard of living)

• Rule against perpetuities doesn't apply
• Must have a charitable purpose that will benefit general public
  • e.g., education, poverty, caring for aged, religious purposes, cemetery upkeep, government, health
  • not e.g., family members only, educate a boy or girl in music, tomb or family cemetery plot, mediums for non-healing purposes

State AG

Co-trustees

Sub-trusts

Individual w/ special interest

Perhaps grantors

What the grantor fails to give away she retains.

3 reasons:

1. Exessive property
2. Trust fails
3. Purchase Money resulting trusts

• Gifts to spouse = presumed gifts (majority)
  • Allow oral agreements btwn spouses even if violates statute of frauds
  • Minority: gifts to wives = gifts, gifts to husbands = resulting trusts
• Gifts to non-spouse = presumed resulting trusts
• To determine relative contribution, just look at time of transaction, not resulting payments

Fraud-rectifying trusts--NOT intent enforcing trusts

• Arise when person holding title has an equitable duty to convey it to someone else, or would be unjustly enriched. 
• Sole obligation of Tr. is to convey to the B.
• In trusts, generally used for relief in an oral trust barred by SoF or wills acts.
  • won't allow formalities to aid in fraud

• Secret trust: (evid. of promise and enforcment to intended B's)
  • elements of trust must be established during life of grantor (Carrot = didn't know who B's were =/ const. trust)
• Semi-Secret trusts: not valid trusts = resulting trust

• 3 Exceptions  to SoF writing requ:
  • Fraud, duress, undue infl.
    • Never intended to keep promise (changing mind isn't fraud)
  • Confid. Rel.
  • Security of a debt
• Remember: not all courts are following the above rule strictly (son & lake property, drunk friends)
• Specific Restitution: restore the grantor, NOT fulfill the promise

Always from wills

• known B during lifetime of G (trust essential elements known during life) = constructive tr.
• Unkonwn B during lifetime of G = resulting trust
• Semi-secret trust = resulting trust

• Causes:
  
  • illegal, invalid, criminal, tortuous, against pub. policy
• Remedies
  • Extinguish trust (resulting trust)
  • Trustee keeps property
  • Strike offending language and allow trust to continue w/o illegal purpose

Intent to defraud

Illusory transfer

• Must consider all pertinent circumstances
• Higher standard if expertise/hold self out
• Common trusts = elaborate practices to shield from liability
• Discretion doesn't overcome prudent investor, but may shield from liability
• Can argue for changed circumstances to follow prudent investor rule (e.g. want to invest in stocks)

• Capacity of Bs
• Single B or multiple
• Type of Property

Generally must get approval by court, but many states are allowing this now.

• Factors:
  
  • common practice
  • necessary to induce investments
  • competitiveness of property
  • benefits to B's
  • not forbidden in trust doc.

• Tr's can delegate ministerial duties or those outside of expertise (can pay experts out of trust funds). Must still exercise diligence on follow up (watch for red flags).
• Cannot delegate fid. duties--discretionary powers.Co-tr's must act jointly in performance of duties--can't delegate fid. duties to co-trustees

Can have no conflicting interests and can make NO profits from relationship (including incidental benefits).

• Fairness is the general standard for conflict of interest, unless is self-dealing.
• For extreme instances, may be liable for appreciation damages

• On both sides of transaction
• Triggers no further inquiry rule--must disgorge any benefit received and trust may rescind transaction.
• Exception for banks--mere fairness standard

• Deviation--change to express trust due to unanticipated circumstances
• Cy Pres--change to charitable trust
  • impossible/impractical/illegal to carry out
  • general charitable intent would still be carried out
  • Charitable trusts favored by law, but can't be used just for B's convenience
• Administrative Deviation--either kind of trust, simply change how administered due to illegal/impractical/unanticipated circ's

• (Can be extrinsic)
• Reversionary or gift over provision
• limitation on the reservation of gift
• bulk of estate to charity
• those who take by intestacy already received something

• Fraud, incapacity BUT NOT undue influence
• Surprise, mistake
• Want of freedom

Revoke = power to amend

Amend = power to amend so is revocable

3 Requirements

1. All B's agree
2. Have Capacity
3. Claflin Doct. (purpose is fulfilled)

• Compel to comply w/ terms
• enjoin wrongful act
• Make B's whole (payment or return of property)
• Suspend/remove Trustee
• Deny trustee compensation

• Private trust: B's (guardians), co tr's, successor tr's
• Charitable trusts: State AG, B's / those w/ special interest

Value of Lost Capital

(difference of value sold for as should have received if sold timely, reasonable interest from day of timely sale, fees, costs, trustee compensation)

Are breaches distinct (no offset) or a single breach (offset)?

Factors:

1. relate to same part of trust property
2. successive dealings
3. amount of time btwn breaches
4. whether an intervening accounting occurred btwn breaches
5. How Tr. dealt w/ property btwn breaches
6. Intent to breach
7. Were breaches result of single policy of Tr.

Must clearly be in the interest of the trust, not just bc B's want it.

• Breach
• bad health
• insanity
• habitual drunkenness
• financial distress

• Burden shift--if can trace some funds to purchase of something, tr. must show used some personal funds as well to keep pro rata share. (case by case approach)

• Majority rule: calculate pro rata at each stage (when unlawful withdrawl occurred, who owned what % of the funds)
• Minority rule: first in, first out: 1st to deposit funds loses all, last loses nothing if it is covered.
• Minority rule: Simple pro rata (10/27 x 11k)

Remember: are only presumptions

• Personal bank account
  • Going out = personal,
  • going in = personal
• Trust bank account
  • Going out = personal
  • going in = trust