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Trusts - Coggle Diagram
Trusts
Creation
Res (trust property): Settlor places title to the trust property and delivers to the trustee by 1) an inter vivos transfer, or 2) a testamentary trust.
Identifiable beneficiary: except for charitable trusts, trusts must have definite or ascertainable beneficiaries. Beneficiaries are equitable owners of trust property.
Trustee: Must have mental capacity to administer the trust. Cannot be a minor or a mentally incompetent person. Corporations are allowed to be trustees. State statutes may impose additional requirements on corporations as trustees. A settlor can create a trust naming herself as trustee. If a trustee is absent, the court can appoint one.
Proper Purpose: Virtually any purpose is allowed except those for an illegal purpose, a purpose that violates the Rule Against Perpetuities, or a purpose contrary to public policy.
Intent: Present intent to create a trust now, not in the future. No particular words required, not even "trust"; just a manifestation of intent to create a trust.
State of Frauds and Statute of Wills: apply, if necessary.
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Types
Charitable Trust: resemble private express trusts but have some significant, distinguishing characteristics.
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Express Trust: arise from the property owner's intents: 1) private express trusts: comprise most of the trusts established by individuals 2) Charitable trusts: resemble private express trusts but have some significant distinguishing characteristics.
Resulting Trust: places property in the hands of rightful owners when circumstances require it, even though there has not been any wrongdoing on anyone's part.
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Trustee: Powers originate in the terms of the trust together with the powers appropriate to achieve the proper investment, management, and distribution of the trust property.
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Duties
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Duty to preserve trust property and make it productive. 1) Objective stand of r care unless superior skills warrant a higher standard of care. 2) Prudent investor rule governs (trustee is permitted to invest trust assets as would a prudent investor, considering both the interests of life beneficiaries and remaindermen) 3) Trustee must seek to diversity the investments. 4. standard is reasonable care, skill, and caution 5) only a few states maintain a "legal list" approach of approved types of investments.
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Duty of loyalty and good faith to the beneficiaries. 1: no self-dealing, unless trust permits specific acts 2) No personal benefit other than official compensation 3) No apparent conflict of interest 4) Keep trust assets segregated from personal assets.
Duty NOT to delegate, but reasonable use of professional advisors is permitted
Spendthrift provision: the beneficiary cannot voluntarily or involuntarily transfers his interests. Creditors can reach the beneficiary's income from the trust. Does not protect against a claim by the government or a claim for child support or spousal maintenance or for necessary supplies or services rendered to a beneficiary or a claim by a victim fo a felony. A trustee's creditor cannot reach trust property as the trust "own" the property, not the trustee.
Discretionary provisions vest additional power in the trustee to decide when to distribute income of the trust. If the beneficiary's interest stems from a discretionary provision, then the beneficiary has no right to income until the trustee distributes the income. Neither the beneficiaries nor the beneficiaries' creditors can compel a distribution.