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Trusts - Coggle Diagram

- - - - Trustee must have mental capacity to administer trust
      - Failure to name trustee does not defeat testamentary trust; court will appoint trustee
      - Inter vivos trust will fail without trustee because there can be no valid delivery and transfer of trust property
      - Settlor can declare himself as trustee.
    - - property described with certainty settlor has power to convey
      - inter vivos transfer or testamentary trust
    - - Present intent for trust to take effect immediately
      - Must express intent by words or conduct while settlor owns the property
      - Precatory expressions result in inference that no trust was intended
    - - definitie or ascertainable beneficiaries; equitable owners of trust property
    - - similar to testamentary capacity
    - - Must not be:
        
        illegal
        
        impossible to achieve
        
        Contrary to public policy
        
        Intended to defraud settlor's creditors
        
        Based on illegal consideration
    - - Statute of Frauds applies to MYLEGS
      - Intrer vivos
        
        Declaration of trust by property owner that he holds in trust, or
        
        transfer of property by the settlor to the trustee
      - Testamentary
        
        Secret Trust: constructive trust imposed
        
        Semi-Secret trust: resulting gift for testator's heirs
        
        Essential terms must be ascertained from will, incorporated document, facts of independent significance, or exercise of power of appointment
  - - - trust property is less than $50,000 and the amount is insufficient to justify the cost of administration
  - - - UTC -- If all beneficiaries do not agree/consent can't be obtained:
        
        Trust could have been modified if all beneficiaries had consented, AND
        
        interests of any nonconsenting beneficiaries will be adequately protected
      - Unanticipated circumstances threaten the purposes of the trust
        
        Court may authorize or direct a trustee to deviate from the administrative terms of the trust(including acts forbidden by trust instrument) if settlor did not know or anticipate the new circumstances and compliance with the terms would defeat or substantially impair trust purposes.
        
        Changing beneficial rights
        
        Usually, doctrine of changed circumstances cannot be used to change beneficiaries' rights
        
        UTC: restriction against changing beneficiaries' rights does not exist
      - Continuation of the trust on its existing terms is impracticable or wasteful; or
      - The value of the trust is insufficient to justify the cost of administration or to achieve the settlor's tax objectives
    - - With Settlor's Consent
        
        modify with consent of settlor and all beneficiaries, even if conflict with material purpose of the trust
      - Without Settlor's Consent
        
        Claflin: All beneficiaries consent AND no material purpose of the trust frustrated
        
        material purpose
        
        Payment at certain ages
        
        Payment at certain dates
        
        Spendthrift provision
        
        Discretionary trust
        
        Support of beneficiary
        
        ALL beneficiaries consent, including unborn and unascertained beneficiaries
        
        UTC: Court may modify even without consent of all beneficiaries if
        
        (1) trust could have been modified/terminated had all beneficiaries consented
        
        (2) the interest of the beneficiary who does not consent will be adequately protected
    - - UTC: Trusts presumed revocable unless document expressly provides it is irrevocable
      - Settlor can revoke or amend trust unless the terms state it is irrevocable
    - - property has been exhausted
      - legal and equitable titles have merged
  - - - beneficiary cannot voluntarily or involuntarily transfer his interest
      - beneficiary's creditors cannot reach/attach trust interest until income or principal has been paid to beneficiary
        
        exceptions
        
        child support / spousal maintenance
        
        claim by victim of a felony
        
        government
      - Settlor cannot create own spendthrift trust to avoid the settlor's own creditors' claims
    - - Trustee has discretion whether to apply or withhold payments of income/principal to beneficiary
      - Neither beneficiary nor beneficiary's creditors can compel a distribution
        
        creditors generally can attach the beneficiary's interest but cannot compel distribution
        
        exception: court can force distribution to satisfy child support/spousal maintenance
      - Beneficiary cannot challenge trustee's use of discretion absent abuse
- - - - only improper if undertaken in bad faith / abuse of discretion
  - - - Objective standard of care unless superior skills warrant a higher standard of care
      - Prudent investor rule governs
        
        Trustee must seek to diversify the investments
        
        Standard is reasonable care, skill, and caution
        
        Trustee is permitted to invest trust assets as would a prudent investor, considering both the interests of life beneficiaries and remaindermen
        
        Only a few states maintain a "legal list" approach of approved types of investments
    - - No self-dealing, unless trust permits specific acts
      - No personal benefit other than official compensation
      - No apparent conflict of interest
      - Keep trust assets segregated from personal assets
    - - Traditionally, no delegation
      - Modern Statutes / UPIA: may delegate investment and management functions IF prudent trustee of comparable skills could properly delegate under the circumstances.
        
        trustee must act prudently in:
        
        Establishing the scope and terms of the delegation
        
        periodically reviewing the agent's actions
        
        Selecting an agent
        
        if delegation is improper, liable to beneficiaries for decisions/actions of agent
  - - - recovering profits made by trustee
      - Returning appreciation orprofits from commingled funds
      - compelling trustee to convey property back to trust
      - Punitive damages
      - Removal of trustee
- - - - Inter vivos trust created by transfer of property during settlor's lifetime
      - Testamentary trust created by a will
        
        "Pour over" provisions: direct the transfer of property into a trust established either by the testator during his lifetime or by another person rather than creating a brand new trust
      - Inter vivos trust created by declaration of trust by property owner, stating the trustee holds the property as trustee in trust
    - - Rule Against Perpetuities -- limited application
        
        trust may have perpetual existence
        
        If preceded by a noncharitable estate, the charitable interest must vest within the period of time proscribed by the RAP
      - Cy pres Applies
        
        when designed charity not in existence at settlor's death, court may redirect the trust to a purpose as near as possible to a charitable endeavor designated by the settlor
        
        charitable intent must be general
        
        UTC: presumes general charitable intent
        
        Specific charitable intent = trust fails
      - Charitable purpose
        
        Purpose can be broad
        
        Objective must be to benefit the public
        
        Categories
        
        Relief of poverty
        
        Advancement of education
        
        Advancement of religion
        
        Promotion of health
        
        Performance of governmental and municipal purposes
        
        Other beneficial purposes
      - Termination
        
        if charitable trust cannot perform as intended and the requirements for cy pres are not met, charitable trust terminates and a resulting trust in favor of the settlor's estate results
      - Must have indefinite beneficiaries
        
        cannot be restricted to a small group of people, even if benefits are payable for charitable purposes
  - - - failure of express trust
        
        resulting trust arises with settlor as beneficiary
      - Purchase Money resulting trust
        
        person taking title did not supply consideration; sole duty is to convey title to one furnishing consideration
      - Excess corpus
        
        if trust property remains after purpose fulfilled, resulting trust for settlor arises
    - - equitable remedy in cases involving wrongful conduct and unjust enrichment