Trust

Trust

Trust Requirements

1) Grantor/settlor (Creator of trust)

2) Intent

3) Trustee (holds legal interest or title in trust property...court will appoint if settlor does x designate)

4) Ascertainable Beneficiary

5) Trust Assets

Express Trust

Remedial Trusts

Beneficiary /creditor rights to Distribution

Trust Modification

Principle and income allocations (life beneficiaries entitled to trust income and remainderman to principal)

Trust Administration and Trustee's Duties

Trustee's Liabilities

Future Interests

Resignation and removal of trustee

Termination (Unless questions mentions a specific rule, mention both Majority and UTC, but apply majority

Rule: 1)Trust terminates automatically when purpose accomplished 2) can terminate by consent if settlor is deceased or has no remaining interest and all beneficiaries and trustee consent 3) By court if purpose achieved or become illegal, impracticable, or impossible

Majority: Trust presumed to be irrevocable unless expressly states otherwise

UTC: trust presumed to be revocable, unless states otherwise

Private Express Trust

Elements

Intent (settlor must intend to make gift orally, in writing, or by conduct)

Manifestation must occur before or simultaneous w/ transfer of property

Use of common terms like "in trust" or "trustee" create a presumption of intent to create trust

Whether gift is outright gift or in trust depends on whether it vest in recipient (outright gift) or a third party (gift in trust)

Promise to create trust must be supported by consideration

Charitable Trust

Reqs (must have a charitable purpose that exist 4 benefit of community at large or a class of persons)

Exempt from rule against perpetuities

Cy pres doctrine: If it is difficult to achieve org. charitable purpose (ex. illegal, impossible, impracticable), court can modify it to extent the settlor may have wished for an alternative purpose

If fails settlor intent, then resulting trust for benefit of settlor's estate

Duty of loyalty and good faith

Determine if trustee acted reasonable (objective) and in good faith (subjective)

Trust Investments

Duty to be impartial: Analyse If fact patters says that

[1] trust principal appreciating, but not generating a reasonable stream of income

or

[2] trust is producing good amount of income, but principal is depreciating

Rule: Must balance interest of present and future beneficiaries by investing in property that produces reasonable income and preserves principal for remaindermen

Duty to sell: Must sell property w/ reasonable time if a failure to diversify would be inconsistent with total performance portfolio approach

Class Gifts (a gift to group of individuals wi/ right of survivorship that closes when one class member interest becomes posesory)

Rule: shares of a deceased class member paid to class member surviving issue, so it does not go to issue of deceased class member

Unless, instrument states otherwise

IF trust creates a vested remainder in person and that remainder should go to that person's children if the remainderman predeceases the life tenant

CL: Remainder divest only if remainderman has a child. If not, then to remainderman's estate

UPC: Remainder vest only if remainderman survives life tenant. IF not, remainder x vest and does not pass to remainderman's estate

Adoptive children (say that adoptive children are treated as biological child for purpose of a trust

Date of adoption is a factor: talk about when a class closes

Allocation of principal/income (must balance to treat present and future beneficiaries fairly, unless instrument says otherwise)

Allocation of Expenses (50% of compensation to Trustee and other cost is to income, other 50% of expenses to principal

Allocation of receipts (AMT received for use of property=income)

UPAIA: Trustee can re-categorize and reallocate as necc. to fulfill trust purpose

Stock distribution: Treated as principal whether dividend or split

Traditional Approach:

1) money generated by trust property (includes cash dividends from trust securities)=income

2) money from conveyance of trust property=principal

If preceding estate ends (ex.disclaimer), then vested remainder becomes posesory

Unless, someone harmed by early distribution via disclaimer that would not be harmed if distributed on time