trusts rule statements

trusts

a trust is a fiduciary relationship in which one party (trustee) holds legal title to property for the benefit of designated beneficiaries

settlor: person who created the trust, giving trustee legal title

express trusts

created with property owner’s express intent

can be private or charitable

can be inter vivos or testamentary

resulting trust

trust implied or imposed by law, most often when an express trust fails for some reason. settlor usually becomes beneficiary and trustee conveys title back to settlor or, if settlor has died, settlor’s estate

constructive trust

not a trust, but rather an equitable remedy used in cases to rectify unjust enrichment or wrongful conduct

court imposes constructive trust on property in wrongdoer’s possession

express private trust elements

settlor with capacity to convey

settlor has a clear present intent to create a trust relationship

competent trustee with duties

definite beneficiary

present and clear disposition of settlor’s specific property in trust

valid trust purpose

trustee powers and duties

powers: those necessary and appropriate to properly invest, manage, and distribute trust property if not contrary to trust terms

duties:

administer

loyalty/self-dealing

report/inform beneficiaries

separate trust property and keep records

enforce claims and defend trust

preserve property and make it productive

discretionary trust

trustee has absolute power and discretion to make decisions regarding distribution of trust property to beneficiaries

beneficiaries have no right to income until trustee exercises discretion to distribute property or income

beneficiary’s creditors cannot reach the trust because beneficiary cannot compel payment from the trust

support trust

directs trustee to pay beneficiaries from trust as much as is necessary for beneficiary’s support

beneficiary’s creditors cannot reach the trust

spendthrift trust

prohibits beneficiaries from transferring their interests in the trust either voluntarily or involuntarily

usually included to protect beneficiary from his own carelessness

beneficiary’s creditors cannot reach beneficiary’s interest in the trust, but distributions to beneficiary are reachable

charitable trust characteristics

must be created in favor of a reasonably large unascertained class of indefinite beneficiaries

must be considered to benefit the public

can be perpetual, RAP doesn’t apply

termination of private trusts

by settlor: can modify/revoke unless the terms expressly prohibit modification or revocation

by beneficiaries: can modify/revoke upon consent of settlor and all beneficiaries