信托法Trusts

1、TrustsOverview A. Express trusts arise from the expressed intention of the owner of property to create the relationship1. Private one or more ascertainable persons as beneficiaries, subject to RAP 2. Charitable cannot be for the benefit of identifiable beneficiaries, can be perpetual B. Implied or i

2、mposed trusts not exactly trusts, but court-imposed equitable remedies1. Constructive trusts simply a name for an equitable remedy the court imposes in cases involving (i) fraud, (ii) unconscionable conduct, & (iii) unjust enrichment2. Resulting trusts the remedy the court uses when an attempt to cr

3、eate a trust failsC. Trust-like mechanisms ways to hold property & designate somebody to take it without writing a willE.g. Joint bank accounts with rights of survivorship; Totten Trusts; custodial gifts to minors- NOTE: trust law applies ONLY to express trusts . The express trust is the only real t

4、rust; the other two are just equitable remediesI. Requirements for a valid TrustA. Express trusts:1. Defined: a legal device that allows an owner of property to make transfers of property and to have those assets managed on behalf of some one else.(rather than have the beneficiary mange the money by

5、 himself or herself)a. Settlor has the legal title to manage the money, and the beneficiary have equitable title to enjoy the distributions from the trust.2. 2 kinds of express trusts:a. Lifetime trust, set up during the lifetime of the person who created the trust-settlor of th trust(AKA inter vivo

6、s trust)b. Testamentary trust, set up in the settlors will.3. 8 requirements of a valid trusta. Settlor(AKA creator) who makes a b. Delivery of legal title to c. Property(res, corpus or principal) to ad. Trustee who holds legal title for the benefit os a e. Beneficiary(or Beneficiaries) with f. Inte

7、nt to create a trust for g. a lawful purposeh. In a validly executed documentv NOTE:no consideration is required to create a trust.1) Settlor: The settlor can be anyone 18 or older, with the capacity to enter into Ks2) Delivery:titled assets must be formally transferred to the trustee for delivery t

8、o be valid.a) the mere intent to create a trust, or a gratuitous written promise to create a trust, is not enough. Ii) In creating a lifetime trust:(1) titled assets for assets whose title is evidenced by a document, (e.g. real estate, stocks and bonds, etc.), legal title must be formally transferre

9、d to the trustee (whether the trustee is a third party or the settlor himself). (a) Hypo:There was no delivery without transfer of the title of the stock certificates. (2) other assets transfer must be by a written assignment to the trustee. ii) Testamentary trusts “delivery” requirement does not ap

10、ply to testamentary trusts, wills law controls.3) Property(RES):to have a trust, legal title to specific property must be formally transferred to the trustee. v The subject matter of the trust must be certain and identified.v If there is no trust property, there is no trust.a) The property can be al

11、most anything, but must be property that the settlor owns, not just mere expectancy of ownership in the future.i. Expectancy interest in anothers will is not property. He just has hopeb) It must be identifiable property , not subject to future determination.i. Cannot create trust with “whatever mone

12、y or property that I can contribute over the next 10 years” (this is promise to create a trust in the future, not supported by consideration)1. but if written promise to create trust of property (to be received in future) is supported by consideration, under contract principals, trust automatically

13、arises upon receipt of the property4) Trustee:a) For a lifetime trust, almost anyone can be a trustee since no court involvement is needed for such trusts.b) For a testamentary trust created under court supervision, anyone can be a trustee except who cant:i. Those under 18ii. Judicially declared inc

14、ompetentsiii. Convicted felonsiv. Those incapable because of drunkenness, dishonesty, want of understanding , or improvidence.c) Nonresident alien can serve as fiduciary (testamentary trustee, or executor or administrator of a decedents estate) ifi. related to decedent (decedents spouse; grandparent

15、 or descendant of grandparent of decedent or decedents spouse; or spouse of any of the above persons); andii. NY resident must serve as co-fiduciaryNOTE:NO trust ever fails for lack of a trustee. If the intent to create a trust is clearly manifested but no trustee is named (or the named trustee dies

16、 or resigns with no provision for a successor), the court will appoint a suitable trustee to carry out the trust purposes5) Beneficiaries:a) For a private (non-charitable) trust, beneficiaries must be definite and ascertainable,NO ambiguity.b) If ambiguous, the trustee holds in a resulting trust for

17、 the residuary beneficiary of a will(or intestate heirs in absence of a valid will)c) EXCEPTION: a beneficiary listed as someones family or next of kin IS considered definite and ascertainable, and the trust does not fail. Consult the intestacy statutes for the names of the persons who fit the descr

18、iption in the trust.i. Intestacy: when a decedent dies without a valid will and their estate property is distributed pursuant to a state statue.6) Intent: a) settlor must intend to create an enforceable obligation; precatory(non-binding) language is not enough.i. Eg:would like is precatory language

19、and does not impose an enforceable obligation.b) Trust must be given duties to perform; if trustee has no duty to perform it is called a passive trust, which is no trust at all.v Just use trust does not show the intent to create a trust;look at all of the language and all of the facts to determine i

20、ntent.7) Lawful purposea) a trust cannot call for commission of a crimeb) a trust cannot call for destruction of propertyc) A trust cannot have a condition against public policy.i. Trusts restricting marriage or promoting divorce.1. But if a purpose can be found that is not offensive to public polic

21、y then it is valid(e.g, a trust that gives income to a spouse until that spouse remarries is ok)ii. Marriage restrictions to members of a certain religion or ethnic group are valid as permissible partial restraints on marriage.1. E.g: trust condition on son find a jewish wife. Valid b/c he still has

22、 a fairly wide choice.8) Trust execution:must be in writing, signed by both settlor and trustee, and either:(i) acknowledged by a notary public, OR(ii)signed by 2 witnessesII. Types of trusts:l ALL trusts are presumed to be irrevocable, unless the trust explicitly authorizes revocation.A. Revocable

23、lifetime/inter vivos trusts1. The main requirement: at least one beneficiary who is not the settlor; settlor cannot be the sole beneficiary when also named the sole trustee.2. the settlor can play many roles:a. can be a trusteeb. an income beneficiary for life.c. Settlors estate can be one of the be

24、neficiaries of the principal so long as there is at least one other beneficiary.d. Settlor can retain the power to terminate or amend the trust.3. Reasons to have a revocable lifetime/inter-vivos trust:a. Manages assets efficiently, particularly using a professional trusteeb. Helps plan for possible

25、 incapacity by avoiding guardianshipc. Avoids probate process(i) No part of the principal of a trust goes thru the settlors estate in probate.-(a) PROBATE:the process of proving a will, or having it declared valid and effective following the death of the testator.(testamentary trust)4. Reasons not t

26、o have a revocable lifetime trust:a. Does not avoid taxesb. If a settlor keeps an income interest, or keeps a power to revoke, the full trust assets will be included in the settlors gross estate for federal estate tax purposes.B. pour-over gifts:1. Testamentary gifts(gifts made in a will) to an exis

27、ting revocable trust are ok.a. This called a pour-over gift.b. Such a gift avoids will formalities in the trust.c. Trust can be changed during the lifetime of th settlor in way that are easier than changing a willd. Key requirements for a pour-over gift to a trust to be valid(i) The trust must be in

28、 existence, OR(ii) Executed concurrently with the will(a) Will excuted on Jan. 3, trust document executed on Jan 10th. invalid b/c trust was not executed before or concurrently with willv 2 point:e. pour over is not limited to trusts created by the settlor, but it can be to any existing trust, inclu

29、ding those executed by other persons. f. Pour-over gifts are valid even if the trust was unfunded or only partially funded, during settlors lifetime.2. Life insurance proceeds:a. 2 ways an insured can make life insurance proceeds payable to a trust:(i) Insured can create an unfunded revocable insura

30、nce trust, and name the trustee of the trust as policy beneficiary. (a) Unfunded insurance trusts are validated by statute (and can be the recipient of a pourover gift), even though there is no res until after the insured settlor dies and the insurance proceeds are paid to the trustee (this would re

31、sult in additional legal fees for preparation of a trust)(ii) Have the trust be a testamentary trust and have the life insurance policy K name the trustee named in my will as the life insurance policy beneficiary.b. Proceeds of savings accounts or pension plans can be handled the same way as life in

32、surance proceeds. C. Totten Trust(bank account trust)1. Definition: the Totten Trust is a bank account in the depositors name as trustee for a named beneficiary.a. Hypo:A open a bank account A as trustee for B2. Key:a. depositor makes deposits and withdrawals throughout her lifetimeb. Beneficiary ha

33、s no beneficial interest during the depositors lifetime, but get whatever in the account when the depositor dies.3. No particular words are required to create a Totten Trust accounta. ITF is enough to indicate In Trust For and thereby create a Totten Trust account.4. 4 ways to revoke:a. Withdraw all

34、 the money in the accountb. Express revocation made during lifetime by depositor (1)making a writing naming the beneficiary and the financial institution and (2)having the revocation notarized and (3)delivered to the bankv Any missing elements make the whole attempted revocation invalidc. Revocation

35、 in a will; must comply withe the same requirements for revocation during lifetime.d. Death of the beneficiary also results in having the Totten Trust revoked and the money in the account goes free and clear to the depositor.(i) Not the beneficiarys heirs5. Change of beneficiary can be made by the d

36、epositor, but it must be done the same way as a revocation:a. Notarized statement sent to the financial institution, naming the old beneficiary and the new one.6. Creditors of the depositor can always reach the TT account balance, either before of after the depositors death, since it is a form of re

37、vocable trust revoked partially each time a withdrawal is made.a. HYPO: the mum depositor broke,the creditors of depositor can always access the Totten Trust balance.D. Joint bank accounts that are not totten trusts:John and Jane with right of Survivorship1. Issue: after one of the parties of the ac

38、count dies, can anyone block the money from going to the survivor of the joint tenancy.a. Can challenge if clear and convincing evidence show that survivorship was not intended.2. If clear and convincing evidence show that survivorship was not intended when the account was established, and that the

39、account was opened only as a matter of convenience to the depositor, then the survivorship language can be set aside.(hard to satisfy)3. Each joint account hold owns one half of the joint account, no matter who deposits the money, and if one person makes the entire deposit it is considered a gift of

40、 one half to the other account holder.(i) H deposits $50,000 in a savings account at Dime Savings Bank that names H and son S as owners, payable to either or to the survivor of them. S takes by right of survivorship (H cannot revoke that right by will)(ii) before Hs death (H is very ill) S withdraws

41、 the entire $60,000 in the account, by doing this he severed the joint tenancy. Hs executor can cover a half.4. Uniform Transfers to Minors Act(UTMA)a. 3 reasons to make a gift to a minor under UTMA:(i) It avoids a guardianship(ii) It avoids a trust and hence the courts supervision.(iii) It qualifie

42、s for the $13,000 per donee annual exclusion from federal and state gift tax.b. Gifts under UTMA must be made to a custodian and it must specify that it is made under the NY UTMAc. UTMA gifts can be made in a will so long as the same required statutory language is used.d. Duties of a UTMA Custodian:

43、(i) Hold, manage and invest the property under a prudent person standard.(ii) Pay over to the minor or for the minors needs what part of the property that the custodian deems advisable; AND(iii) Pay what is left of the property to the minor when the minor turns 21(post-jan.1, 1997 gift) or 18(pre-ja

44、n.1, 1997 gift)v NOTE: UTMA does not create a trust; it is a special statutory conservatorship, where the custodian does not hold legal title(minor holds that)e. UTMA tax consequences.(i) If donor names himself as custodian then the amount of the gift is includible in the custodians gross estate for

45、 federal and state estate taxes.(ii) If donor names someone else as custodian, then the amount of the gift is not includible.5. Charitable trusts: 5 key thingsa. Charitable trusts must have indefinite beneficiaries, and they must be a reasonably large group.(i) Cannot have specific, named persons as

46、 beneficiaries.(a) Hypo: all my children, small and identifiable(b) the descendants of the settlor, not a large enough group.(ii) But a trust for Masses for relatives is OK.(a) Settlor created a trust to pay for the costs of Masses for the repose of souls of the testator, his deceased parents and ot

47、her relatives. Valid charitable trust.b. Charitable trusts must be for a charitable purpose: health, education and religion are most common.c. Charitable trusts may be perpetual, not subject to RAP which indirectly limits the duration of trustsd. Cy Pres can be used to change the trust.(i) If the st

48、ated purpose of the charitable trust can no longer be accomplished, or the designated charity goes out of existence, the court may use this to make the trust be as mere as possible to what the settlor wanted. e. The attorney General has the duty of representing the beneficiaries of charitable trusts

49、 in the state.(i) The AG is an indispensable party to any suit on construction or enforcement of a charitable trust.(ii) The AG and the donor have standing to sue to enforce the trusts terms.f. Non-trusts:(i) Honorary Trusts:(a) Where no human being is the beneficiary of a private(i.e. Non charitabl

50、e) trust.- Hypo: A give money to Bto use the trust income to take care of As garden.- not a trust b.c gardens are not human beings and was a honorary trust instead. The fund falls into the residuary estate.- Residuary estate:whatever remains in the probate estate after the payment of specifically de

51、signated gifts of items or cash. (b) A private trust must have a human beneficiary(c) EXCEPTIONS:- Pet trusts: A valid pet trust can last for no longer than the duration of the pets lifetime(may RAP, valid for 21 years) Someone designated in the will, or appointed by the court, can enforce the trust

52、 and make sure the trusts purposes are carried out. - Cemetery trusts: Trusts for perpetual care and maintenance of cemeteries and burial plots are classified as charitable trusts and are ok even though they have no human beneficiaries. No rap problem(ii) Constructive trusts(a) Is just a flexible eq

53、uitable remedy designed to disgorge unjust enrichment that results from wrongful conduct.(b) The trusteesonly duty is to convey the property to the person who , in equity, should have the property.- HYPO:T has a will that devises all her property to A and B. Now in her last illness, T asks a friend

54、to have lawyer prepare a new will that revokes Ts present will and devises her estate to D. The friend and lawyer return several days later, and the lawyer begins to explain the wills provisions to T. A and B are present; as soon as they learn what is happening, they create a disturbance and physica

55、lly prevent T from executing the new will. Highly agitated, T lapses into a coma; she dies three days later. T is survived by A, B, and D. Applying the law (step 1), the new will cannot be probated b/c it was not signed and witnessed and thus the old will was not validly revoked. Therefore the estat

56、e would go to A and B. The old will is not validly revoked by the new will b.c it was not signed and witnessed to tbe a valid will. Applying equity (step 2) there is wrongful conduct plus unjust enrichment therefore a constructive trust should be imposed for Ds benefit.- T has two children (S and D)

57、 and S has two children. After a heated family argument, S kills T . T left no will. Donna takes 1/2, of course. applying the law, without a will,S inherits of Ts estate under NYs intestacy statute. Applying equity, a constructive trust should be imposed against Ss share in favor of Ss children (tre

58、at as if wrongdoer predeceased T) because otherwise he will be unjustly enriched by his wrongful conduct.(c) Lifetime transfers (as constructive trust)- HYPO 3:a. There is no valid express trust because there is no writing to evidence the trust. b. General rule if a deed is absolute on its face and an oral agreement to hold land in trust is alleged, the general rule is that n