Term
| Private Express Trust Defined |
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Definition
| A FIDUCIARY RELATIONSHIP with respect to property whereby the TRUSTEE HOLDS LEGAL TITLE for the benefit of THE BENEFICIARY and which arises out of a manifestation of INTENT to create it for a LEGAL PURPOSE. |
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Term
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Definition
Any PRESENTLY EXISTING INTEREST in property that can be transferred can be the corpus of a trust.
NO ILLUSORY INTEREST (e.g. future profits, debt, mere expectancy) |
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Term
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Definition
| Any ASCERTAINABLE PERSON or group of people can be the beneficiary of a private express trust. Person INCL LEGAL PERSON |
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Term
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Definition
| 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. |
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Term
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Definition
There must be PRESENT MANIFESTATION of trust intent made by the settlor to create trust.
PRECATORY words (not mandatory) no good
- i.e. words of wish, hope, or desire
Precatory words and parol evid MIGHT BE OK |
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Term
| Creation of Trust (at death and in lifetime) |
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Definition
To take effect at DEATH - need to comply w/ stat of wills
To take effect DURING LIFETIME
- Transfer in Trust (3P is trustee)
**Real ppty - EXECUTE AND DELIVER deed transferring title to trustee; satisfying SoF
**Personal ppty - DELIVER trust ppty to trustee
- Declaration in Trust (settlor is trustee)
**Real ppty - writing satisfying SoF
**Personal ppty - manifestation of INTENT in decl |
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Term
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Definition
| A trust may be established for any legal purpose. |
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Term
| Illegality of Trust Purpose |
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Definition
At creation:
- EXCISE bad condition; if possible will stand
- NOT possible to excise then
**ct invalidate trust
**allow trustee to keep ppty for self (punishment for settlor's unclean hands)
After creation:
- Resulting trust |
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Term
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Definition
| The resulting trustee has only one obligation: to transfer the property BACK TO SETTLOR if the settlor is alive, and if not, to the settlor’s estate |
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Term
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Definition
| Any trust which confers a substantial benefit upon society. |
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Term
| Creation of Charitable Trust |
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Definition
- Manifestation of TRUST INTENT
- By WILL at death or DECL OF TRUST or TRANSFER OF TRUST during lifetime
- of a PRESENTLY EXISTING INTEREST IN PPTY that can be transferred
- for a LEGAL CHARITABLE PURPOSE |
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Term
| Charitable Trust Beneficiaries |
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Definition
There is no ascertainable person or group of people who are the beneficiaries, as in a private express trust.
Beneficiary are a small group of poor (SPLIT)
- private express trust because only a few people are getting a benefit
- charitable trust because whenever poverty is eliminated society benefits |
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Term
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Definition
Nearly as possible
If settlor manifests a general charitable intent, but the mechanism for effectuating that intent is NOT POSSIBLE OR PRACTICE, the court can MODIFY the mechanism cy pres, as NEARLY AS POSSIBLE, to EFFECTUATE S'S GENERAL charitable intent (not SPECIFIC intent)
Intrinsic and extrinsic evid OK |
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Term
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Definition
Settlor creates an inter-vivos trust, with a provision in her will DEVISING ALL OR PART OF ESTATE TO THE TRUSTEE
Validated by
- Incorp by reference
- Indep significance
- UTATA |
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Term
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Definition
A trust which has no ascertainable beneficiary and confers no substantial benefit upon society.
The trustee is not required to carry out settlor’s goal, but has the power to carry it out. Trustee on his honor to carry out settlor's intent.
- Fails if trustee refuse to carry out (NEVER happens w/ private express or charitable trust since ct will appoint)
- RAP problem |
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Term
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Definition
| A Totten trust is also referred to as tentative bank account trust, whereby the named beneficiary takes whatever is left in the account at death of the owner of the account. |
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Term
| Alienation of private express trust interest |
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Definition
BENEFICIARY of a private express trust can VOLUNTARILY ALIENATE INTEREST in property (transfer his right to future payments),
CREDITORS can INVOLUNTARILY ALIENATE a B’s interest in property (attach or seize a beneficiary’s right to future payments) |
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Term
| Spendthrift Trust and alienation rights |
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Definition
The beneficiary CANNOT TRANSFER his right to future payments of income or principle and creditors CANNOT ATTACH the beneficiary's right to future payments
Exception
- Preferred creditors CAN ATTACH bene's right to future payments, notwithstanding spendthrift provisions
(e.g. IRS, child support, spousal support, alimony)
- ANY CREDITORS can attach surplus |
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Term
| Spendthrift Trust for self and alienation rights |
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Definition
Involuntary alienation - spendthrift provision NOT recognized but trust valid
Voluntary alienation (SPLIT)
- Ignore and allow vol alienation
- Not allow settlor to transfer right to future pmt |
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Term
| Support Trust and alienation rights |
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Definition
A trustee is required to use only so much of the income or principle as is necessary for the beneficiary's heath, support, maintenance or education
Voluntary alienation - NO; not allowed to transfer future pmt
Involuntary alienation - Same as spendthrift trust (cannot attach, but preferred creditors can) |
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Term
| Discretionary Trusts and alienation rights |
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Definition
Trustee is given sole and absolute discretion in determining how much to pay the beneficiary, if anything, and when to pay the beneficiary, if ever.
Voluntary alienation - NO, because there is no interest; however, if assign then assignee steps into shoes of bene
Involuntary alienation - CANNOT attach because nothing to attach |
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Term
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Definition
If decreed by the court, the RESULTING TRUSTEE will TRANSFER PPTY to the SETTLOR if the settlor is alive, and if not, to SETTLOR'S ESTATE
Occurs when
- Private express trust ENDS
- Trust FAILS because NO BENE
- Charitable trust ENDS w/ no Cy Pres
- Trust becomes ILLEGAL
- EXCESS CORPUS
- PURCHASE MONEY resulting trust - to buy ppty
- SEMI-SECRET trust |
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Term
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Definition
A semi-secret trust arises when the WILL MAKES A GIFT to a person to hold as trustee, but DOES NOT NAME BENE.
Imposes a resulting trust if fails. |
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Term
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Definition
The will on its face makes a gift outright to A, but the gift is given on the basis of an oral promise by A to use the property for the benefit of B.
Use PAROL Evid to show who bene
Creates constructive trust |
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Term
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Definition
Trustee has one obligation - to transfer all ppty to the intended bene
- A remedy to PREVENT FRAUD OR UNJUST ENRICH
- DISGORGE wrongdoer of ill-gotten gains
Occurs
- Trustee PROFITS because of SELF-DEALING
- FRAUD in inducement or UNDUE INFLUENCE
- SECRET TRUST (cf. semi-secret = resulting trust)
- ORAL REAL ESTATE trust |
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Term
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Definition
| The deed on its face makes a transfer outright to A, but actually transferred on the basis of an oral promise by A to hold property for the benefit of B. |
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Term
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Definition
- All ENUMERATED powers
- IMPLIED powers - helpful and approp to carry out trust purpose (sell ppty, incur expenses, lease, borrow) |
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Term
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Definition
Duty (LIE NACS)
- of LOYALTY
- to INVEST
- to EARMARK
- Not to DELEGATE
- to ACCOUNT
- of CARE
- to SEGREGATE |
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Term
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Definition
Trustee ADMIN the TRUST for BENE of all BENEFICIARIES (implicitly, trustee must be impartial), having no other consideration in mind.
NO SELF DEALING
Consequences - surcharge (make good on loss); constructive trustee |
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Term
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Definition
- STATE LISTS: Some states have lists which trustee must follow in the absence of directions in the trust
- C/L PRUDENT PERSON TEST: Req trustee to act as RPP investing his own property, trying to maximize income while preserving corpus. If havve greater skill, he is held to that higher standard.
- Uniform Prudent Investor Act: Adopted by most states: The act simply provides that the trustee must invest as a “prudent investor.”
Also, duty to DIVERSIFY and no SPECULATION |
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Term
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Definition
This requires the trustee to label trust ppty as trust ppty
Consequences - C/L trustee held LIABLE for loss; modern only LIABLE for loss cause by failure to earmark |
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Term
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Definition
| Trustee cannot commingle his personal funds with trust funds |
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Term
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Definition
The trustee can rely on professional advisors in reaching a decision, but the trustee CANNOT DELEGATE DECISIONMAKING AUTHORITY to these advisors.
C/L - NO delegation to money market manage; Modern OK |
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Term
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Definition
| Requires the trustee on a regular basis to give the beneficiary a statement of income and expenses of the trust |
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Term
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Definition
ALWAYS DISCUSS!
The trustee must act as a reasonably prudent person dealing with his own affairs
Remedies for breach
- DAMAGES
- CONSTRUCTIVE TRUST
- TRACING and EQUITABLE LIEN
- RATIFICATION if good for bene
- REMOVAL |
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Term
| Trustee Liability in Contract |
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Definition
C/L - Trustee is sued in his PERSONAL CAPACITY, but can get INDEMNIFICATION from trust assets if the trustee acted within his or her powers and was not personally at fault.
Modern - If the other person to the K KNOWS ENTERING INTO K IN REP CAPACITY, then the trustee MUST BE SUED IN REP CAPACITY. |
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Term
| Trustee Liability in Contract |
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Definition
C/L - Trustee is sued in his PERSONAL CAPACITY, if w/o fault can get INDEMNIFICATION
Modern - is personally liable for torts only if the trustee is personally at fault |
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Term
| Modification by the Settlor |
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Definition
Settlor can modify the trust if settlor expressly reserves the power to modify the trust
Retains POWER TO REVOKE |
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Term
| Modification by the Court |
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Definition
| There can be modification by the court regarding charitable trusts and the cy pres power |
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Term
| Court's Deviation Power (Doctrine of Changed Circumstances) |
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Definition
When the court exercises its deviation power, the court changes the ADMIN OR MANAGEMENT provisions of the trust. NOT CHANGING BENE
Occurs
- UNFORESEEN Circumstances
- Necessity |
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Term
| Termination of Revocable Trusts |
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Definition
Majority - To retain the power to revoke, the SETTLOR MUST EXPRESSLY RESERVE the power in the trust instrument
Minority - Settlor has the POWER TO REVOKE, unless the trust is EXPRESSLY MADE IRREVOCABLE |
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Term
| Termination of Irrevocable Trusts |
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Definition
- Settlor and all the beneficiaries AGREE to terminate
- ALL BENE AGREE to terminate and all the MATERIAL PURPOSE ACCOMPLISHED
- OPERATE OF LAW
**Passive trusts and statute of uses - trustee has no duty - just holding onto bare legal title of ppty |
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Term
| Income and Expenses Allocated to the Life Tenant |
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Definition
INCOME:
- Cash dividends
- Interest income
- Net business income
EXPENSES:
- Interest on loan indebtedness
- Taxes
- Minor repairs (e.g. paint job) |
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Term
| Income and Expenses Allocated to the Remainderman |
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Definition
INCOME:
- Stock dividends
- Stock splits
- Net proceeds on the sale of a trust asset
EXPENSES:
- Principal part of loan indebtedness
- Major repairs or improvements (new wing on a building) |
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Term
| Adjustment Power of Trustee |
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Definition
| Trustee can disregard the above stated rules regarding allocation of income to life tenant and remainderman if a different allocation is necessary to administer the trust fairly. |
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