9504355
Description
Flashcards by Erika Lopez, updated more than 1 year ago
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Created by Erika Lopez
almost 7 years ago
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| Question | Answer |
| Definition | Fiduciary Relationship in which trustee holds legal title to specific property under fiduciary duty to (i) manage (ii) invest (iii) safeguard (iv) administer trust assets & income for benefit of designated beneficiaries who hold equitable title |
| Types of Trusts | 1. Express Trusts 2. Resulting Trusts 3. constructive Trusts |
| Method to Creating a Trust | 1. Self-declaration of trust 2. Transfer to a 3rd person named as trustee 3. Will (testamentary trust) 4. Exercise of Power of Appointment |
| Formal Requisites of Trust Creation | There must be (i) SETTLOR who (ii) DeLIVERS the (iii) TRUST PROPERTY to a (IV) TRUSTEE with the (V) INTENT to create a trust (VI) for the benefit of BENEFICIARIES |
| Settlor | Must be a person w/ legal capacity who intends to make a trust & who makes a transfer of assets to the trustee |
| Delivery | To create a valid inter vivos trust where someone other than settlor manages there must be delivery of assets to trustee w/ intention to create a trust. Mere intention ≠ enough. Does not apply to self-declaration of trust or testamentary trust. |
| Trust Property | 1. Legal title to a specific interest in property must be conveyed to the trustee 2. Subject matter of trust must be certain & identifiable |
| Promise to Create a Trust | 1. Merely a promise to create a trust ≠ unenforceable UNLESS cosideration |
| Trustee | 1. Must have legal capacity to deal w/ property 2. Must have capacity to K & to execute a deed 3. ≠ Unincorporated Association 4. |
| Note: What if fail to name trustee? | 1. No trust ever fails for lack of a trustee 2. Intent to create a trust= manifested the court will appoint a suitable successor |
| Can compel a trustee? | No b/c no one can be compelled to accept fiduciary responsibilities & duties. |
| How can Trustee Resign | 1. Court approval upon showing can no longer appropriately serve as trustee 2. Accounting a) Property initially received b) Receipts & Disbursements c) Property now on hand including liabilities |
| Trustee by Estoppel | Not valid in Texas |
| Beneficiaries | 1. noncharitable trust must have definite & ascertainable beneficiaries & their interests must vest if at all no later than LIB + 21 years 2. Doesn't apply to charities |
| Resulting Trust | 1. Not a trust 2. Term court employ when a trust fails |
| Intent to Create a Trust | 1. Q to ask = Language precatory (non-binding suggestion) OR impose enforceable obligation 2. Precatory language= wish, desire, request |
| Lawful Purpose | Turns on motive OR purpose |
| Three trust purposes prohibited by law | 1. Trust calls for commission of a crime 2. Calls for destruction of property 3. Unlawful condition that is against public policy |
| Restraints on Marriage | 1. Courts refuse to encourage divorce OR total restraint on marriage 2. Partial restraints are ok |
| Writing | All trusts must be in writing except a transfer of personal property to a trustee other than the settlor or beneficiary coupled w/ declaration to create a trust simultaneously w/ or prior to the transfer |
| Revocability | 1. All inter vivos trusts are revocable & amendable by the settlor UNLESS made irrevocable & unamendable 2. Any revocation or amendment must be made in writing NO ORAL 3. If settlor later placed in guardianship only court can revoke 4. Divorce revokes all revocable trust provisions in favor of former spouse & relative |
| Distinct Rules Applicable to Charities | 1. Not subject to RAP 2. Must be charitable purpose 3. Must be in favor of reasonably large segment of public at large 4. When specific charitable purpose can no longer be accomplished may be reformed under cy pres |
| Cy Pres | 1. "Near as Possible" |
| Cy Pres Perpetuities Reform Statue | 1. If will/trust violates the instrument shall be reformed or construed so as to carry out the settlor's general intent AS FAR as possible w/in period of rule 2. ONLY APPLIES IF RAP Violation |
| Charitable Cy Pres | 1. If named charitable beneficiary under a trust ceases to exist or qualify trustee may w/o court approval a) name a new charity as beneficiary w/o court proceeding 2. Just need to give AG notice approval 3. But must have same or similar charitable purpose |
| Standing for Charitable Trust | 1. AG is proper party (not necessary) to any suit concerning charitable trust 2. Failure to give notice to AG makes judgment voidable 2. Only settlor & AG have standing |
| Purchase Money Resulting Trust | Purchase for land Evidence is admissible to show 1) gift or 2) loan of purchase price |
| Constructive trust | 1. Not a trust 2. Equitable remedy whose object is to disgorge unjust enrichment 3. Benefit: enables injured party to recover 4. Two elements (i) wrongful conduct (ii) unjust enrichment 5. Not under trust code |
| Spendthrift Trust | 1. Full effect in Texas 2. Purpose: protects a trust beneficiaries' interest from creditors by prohibiting voluntary assignment 3. Judgment creditor ≠ reach beneficiary's interest in spendthrift trust by garnishment or attachment |
| Exceptions to Spendthrift | 1. Contracts for Necessities 2. Child support obligations 3. An interest retained by the Settlor SA. Revocable trust 4. Federal Tax Lien |
| When Can Creditor Reach Money | 1. Yes once income is distributed or its spendthrift |
| Any interest retained by Settlor | Power to revoke--> No spendthrift provision |
| Trust Principal | 1. As to interest irrevocable transferred to 3P 2. Except Fraudulent transfer |
| Accountign | 1. Trust beneficiaries are entitled to an accounting, on demand, no sooner than 12 months after the trust was created; and to successive accountings on demand. Has to keep records but accounting on command |
| No Self-Dealings | Can't violate duty of loyalty 1. Trustee cannot borrow trust funds or use trusts assets as collateral for a person loan 2. Trustee cannot buy or sell trust estates to itself 3. Trustee cannot loan funds to the to the trust & any interest earned on such a loan must be received 4. Trustee cannot profit from serving as trustee 5. Corporate trustee cannot buy its own stock as trust asset |
| If trustee breaches any fiduciary duty ex: breach of trust= self-dealing, imprudent investment beneficiary can | 1. Ratify the transaction & waive breach of trust 2. Can bring surcharge action for the resulting loss |
| Prudence | 1. Measured by conduct when investment is made not outcome or performance 2. Not measured by hindsight 3. Look to conduct in making the investment decision, not outcome, or performance |
| Support Trust | Discretionary trust in which the trustee's discretion is tied to a standard. Ex: Amount necessary for beneficiary's support Other sources of income are taken into account in determining need for support & maintenance |
| Anti-General Power of Appointment Statute | Distribution power not limited by ascertainable std may be exercised only by a trustee who is not a potential distributee |
| Termination | 1. Terminate automatically according to its terms 2. After terminates trustee may continue to exercise trustee powers fo reasonable time required to wind up affair |
| Judicial Modification | Court can modify or terminate a trust upon petition of trustee if one of the following trustee is met (i) trust purposes have been fulfilled or have become illegal or impossible to fulfill (ii) b/c of unanticipated circumstances (iii) order relates to administrative, non-dispositive terms & necessary to prevent waste or (iv) order is necessary to achieve settlor's tax objectives & not contrary |
| Nonjudicial Termination of Uneconomic Trust | After giving notice to the beneficiaries, trustee of a trust having value less than $50K may terminate trust w/o court approval if trustee determines cost of administration is too much |
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