Trusts Review
What are the 5 situations in which a beneficiary may be liable for breach?
1) misappropriated or otherwise wrongfully dealt with the trust property; ◼ (2) expressly consented to, participated in, or agreed with the trustee to be liable for a breach of trust committed by the trustee; ◼ (3) failed to repay an advance or loan of trust funds; ◼ (4) failed to repay a distribution or disbursement from the trust in excess of that to which the beneficiary is entitled; or ◼ (5) breached a contract to pay money or deliver property to the trustee to be held by the trustee as part of the trust.
▪ What if the Beneficiary is married? How does that affect principal distributions classification?
B's SP
What is the proper ID standard for a beneficiary in a private trust?
Clearly ascertainable. A trust will fail for lack of proper ID
T/F: A perpetual trust is only sometimes in violation of RAP?
False! A perpetual trust is ALWAYS in violation of RAP b/c it's perpetual!
T/F: Trust is automatically valid because the will is valid
False, settlor stills needs intent
How does a testamentary trust get property?
From the will, just have deliver the will
What are the 3 elements needed for RAP to apply?
Future interest, contingent (as in not totally vested), AND held by the transferee
What kind of trust can you do a self-declaration of trust?
Inter vivos trust (settlor creates while he is still alive)
When you have multiple trustees, how many votes are required to make a decision?
Majority
Does the use of trust terminology alone demonstrate intent to create a trust?
Mere use of terminology insufficient to demonstrate intent, must split title and impose fiduciary duty
What kind of honorary (purpose) trust does TX recognize?
One for the care and maintenance of pets
What dated conveyances does RAP apply to?
Only conveyances on or after 9/1/1969
What if the Beneficiary is married? How does that affect discretionary income distributions?
SP, treated as a gift
Bond is required unless what?
Settlor waives the requirement or we are dealing w/ a corporate trustee
How do we know when the settlor has intent to create a trust?
Splits legal and equitable title, imposes fiduciary duties on an individual
Who is a beneficiary?
The beneficiary holds the equitable interest in the trust property. The beneficiary may also be called a donee, grantee, or cestui que trust.
What if the Beneficiary is married? How does that affect trust's undistributed income?
We don't know until B has a right to demand distribution
What if the Beneficiary is married? How does that affect mandatory income distributions?
We don't know, case law varies
Can you have multiple beneficiaries of a charitable trust?
Yes
Steve transferred his vacation home and surrounding land to Thomas and signed a written instrument instructing Thomas to hold the land in trust for Brad and to deed the land to Brad on his twenty-fifth birthday. Brad was eighteen years old when this happened. Brad is now twenty-four years old and has no knowledge that Thomas is supposed to be holding the property for his benefit. Did Steve have the intent to create a trust?
Yes. Steve split legal and equitable title as well as imposed a fiduciary duty on Thomas as trustee. It is not necessary that Steve communicate his intent to Brad
Can a beneficiary disclaim their right to a distribution under the trust?
You bet! ◼ Beneficiaries are not required to accept the proffered equitable title. ◼ Beneficiary CANNOT exert dominion , control, or accept benefits ◼ May "cherry pick" (partial disclaimers allowed) ◼ Irrevocable and unconditional
What is a private trust?
a trust created for non-charitable beneficiaries
What is the general rule of beneficiary's duties to one another?
◼ A beneficiary is generally not in a position to breach the trust and is not liable for breaches of trust committed by the trustee.
◼ Settlor created a trust which provides that the trust terminates in the year 2020 and the trustee is then to distribute all remaining trust property to Randy. Randy's interest indefeasibly vested when Settlor created the trust because Settlor did not place any condition on Randy taking the property; he does not even need to be alive in 2020. Additionally, Settlor did not include a spendthrift provision. In 2015, Randy sold his remainder interest to Florence (she now has a life estate pur autrie vie). In 2016, Randy sold the same interest to Sam. To whom should the trustee distribute the remaining trust property when the trust ends in 2020?
◼ American view: First assignee prevails as there is nothing to give to second assignee ◼ Likely to be the Texas approach ◼ Florence would keep the remainder interest because it was sold to her first. Under this view, there is nothing to give to Sam because the interest was already sold to Florence. ◼ Sam can sue Randy for fraud
What are the 2 kinds of beneficiaries you can have under a charitable trust
◼ Concurrent- each is presently eligible for distributions ◼ Successive - one beneficiary may be entitled to the income from the trust until death with any remaining trust passing to a remainder beneficiary
◼ What is the effect of the divorce statutory revocation if someone was a BFP from say, Daphne?
◼ If someone purchased the property as a BFP from the ex-spouse, the BFP is not liable to repay the property
◼ What does a beneficiary have to do to disclaim?
◼ In writing ◼ Declare the disclaimer ◼ Describe what is being disclaimed ◼ Signed by beneficiary ◼ Property delivered
For a disclaiming B, what does delivery mean under a inter vivos trust?
◼ Inter vivos trust property delivery means: Deliver to the Trustee. If none, court with jurisdiction to enforce the trust. If neither, file in public records of situs of trust administration or where settlor domiciled. If trust is revocable, also to the settlor
What are the restrictions on B's ability to transfer/assign interest?
◼ Life interest - beneficiary only received a life interest, so there is nothing the beneficiary can transfer at death (same w/ remainder beneficiary) ◼ Spendthrift provision - beneficiary is prohibited from transferring the beneficiary's interest
▪ What affect if the Beneficiary gets divorced?
◼ On or after 9/1/2005: if the trust is in writing, revocable (presumed unless Settlor indicates otherwise), designates the now ex-spouse as a beneficiary or a trustee, AND the trust doesn't specify what should happen in the event of a divorce, then the implications via the statute are that the position of the ex-spouse as a beneficiary is revoked, the position of the ex-spouse as a trustee is revoked, the position of another ex-relative as a beneficiary is revoked, and the position of another ex-relative as a trustee is revoked
◼ What is the effect of the divorce statutory revocation?
◼ Property passes as though the ex-spouse/relative disclaimed (predeceased) ◼ If the property already passed to the ex-spouse/relative, that person is liable to repay the property ◼ If that person was designated as a fiduciary, then the designation will be interpreted as if that person died before the marriage was dissolved
What are the elements of a BFP?
◼ Purchased in GF ◼ For value ◼ without actual or constructive notice of any third-party claims
For a disclaiming B, what does delivery mean under a testamentary trust?
◼ Testamentary trust property delivery means: Give disclaimer to trustee. If none, personal representative of decedent's estate. If neither, file in public records where decedent domiciled or owned real property
▪ What is the beneficiary's power to transfer or assign his or her interest?
◼ The presumption is that the beneficiary is able to transfer (alienate) his or her equitable interest. How so? ◼ Inter vivos interest - by a gift or sale ◼ Beneficiary's interest at death - by will or intestate succession
List the 4 exceptions to the divorce statutory revocation?
◼ Trust was created after the divorce, and you name the ex-spouse/relative as trustee/beneficiary, that designation is still good ◼ Court order ◼ Express language in the trust that indicates what to do in the event of divorce ◼ Express language in a marital agreement executed before, during or after marriage that indicates what to do in the event of a divorce
Once disclaimer occurs, how will the property pass?
◼ Under specific terms of the trust ◼ "If A disclaims, then the property passes to B" ◼ Under terms of trust (if there are no specific) as if beneficiary predeceased trust creation ◼ Beneficiary cannot direct where the disclaimed property goes
What is a testamentary trust?
takes effect when settlor dies.
What is a charitable trust?
trust for a charity
Talk about the statute of uses
• Applies to real property (but same result with personal property likely) • Trust continues if trustee has a power or duty relating to trust administration • If trustee does not, legal title will vest in beneficiary
Why don't corps post bond?
◼ Corps don't post bond ever because they have already had to be chartered, so we already know the corp has assets to compensate the beneficiary
◼ Ex: Settlor transferred $100,000 to Timothy, in trust, "to distribute to those individuals whom my trustee so desires." Is this a sufficient beneficiary designation?
◼ No, the description is too vague. A court could not determine the identity of the individuals who would own the equitable title to the trust property. ◼ If this beneficiary designation were found in a power of appointment, however, it may be adequate because the potential appointees of a power of appointment do not need to be specified with the exactness required for beneficiaries of a private trust
◼ Ex: Settlor transferred $100,000 to Timothy, in trust, ''to distribute to those of my friends whom my trustee so desires.'' Is this a sufficient beneficiary designation?
◼ No, the identity of the actual individuals who would fall within Settlor's class gift to ''friends'' cannot be ascertained with certainty. The term ''friends'' does not have an established meaning. Some people use this term to refer to mere acquaintances or the people they interact with on a social media website such as Facebook, while others reserve the term for individuals with whom they share a very close personal relationship. ◼ The court may be willing to consider extrinsic evidence to determine whether Settlor used the term in a restricted manner so that the identity of Settlor's friends could be determined. For example, perhaps Settlor is a recluse who for the past twenty years has always referred to the same three people as ''my friends.''
What are the co-trustees duties to one another?
◼ Prevent another cotrustee from committing a serious breach ◼ Compel breaching cotrustee to redress a serious breach You may have to bring an action and if you don't you may be liable
What kind of honorary (purpose) trust does TX NOT recognize?
◼ Say masses (a religious ceremony) - not in TX ◼ Erect monuments - Not in TX ◼ Care for a grandfather clock - Not in TX
What is an incidental beneficiary?
◼ Someone who benefits from the trust but does not have equitable title
What do we do if AT LEAST ONE successor trustee remains?
◼ Successor named by settlor ◼ Replacement method specified in trust ◼ Court will not fill vacancy (courts only get involved if necessary) ◼ If charitable trust, remaining trustees may fill vacancy by MAJORITY vote, even if trust is silent ◼ Policy - Old trustees can pick someone with like philosophy/goal; as trustees die off, the workload is distributed amongst the remaining trustees (increasing their workload)
▪ Does the trust need a bond to protect beneficiary from trustee embezzlement?
◼ The costs of the hearing and the annual bond premiums are proper trust expenses and thus reduce the amount the beneficiaries eventually receive. ◼ Bond does, however, protect the beneficiaries from an evil trustee. But, if Settlor thinks the trustee will act improperly, Settlor should probably name a more trustworthy person to that position.
What is an honorary (purpose) trust?
◼ Trust lacking a human beneficiary or charitable purpose.
"i hope bobby will use this trust money for his tuition." Sufficient to impose a fiduciary duty?
No, the use of precatory language is insufficient
What do we do if no trustee remains?
(1) the method specified in the trust instrument, (2) the court on its own motion, or (3) the court upon petition of an interested party.
Who has standing to raise the issue of SOF?
Alleged Trustee, though they aren't req'd to. Alleged trustee can still carry out the duties despite the defense of SOF being available. Trustee in bankruptcy also has standing here. A person appointed to represent the bankrupt person's unsecured creditors has the benefit of using the SOF defense. People who file for bankruptcy cannot claim they hold their real property subject to oral trusts for the benefit of others to keep the property out of the hands of the creditors. Prevents deceiving creditors
What is an acknowledgement?
An acknowledgment is a notarized statement that the settlor willingly executed the trust as an act of the settlor's own free will
Who can be a trustee?
Can be settlor, can be beneficiary
How can a settlor prevent a RAP violation from cropping up?
He can use a savings clause. specifies exactly what is to happen to the trust property if a court determines that the settlor violated the Rule
How can the trustee accept the property?
He must be able to take title, hold title, AND transfer title
How does the settlor transfer property into the trust?
He must have property to transfer and then he must actually transfer that property into the trust, the future intent to transfer is not enough.It is not enough for the settlor to sign a trust instrument, own assets that would make good trust property, and intend for that property to be in the trust. The settlor must consummate this intent by actually transferring or delivering the property.
What is merger?
If all legal and equitable title becomes reunited in one person, merger occurs and the trust will cease to exist. In the normal course of events, this is what happens when the trust terminates and the trustee distributes the property to the remainder beneficiaries. However, merger could occur earlier either because of circumstances the settlor did not anticipate or because the trustee and beneficiary are working together to terminate the trust
What is a self-declaration of trust?
In a declaration (or self-declaration) of trust, the settlor declares him- or herself to be the trustee of specific property and then transfers some or all of that property's equitable title to one or more beneficiaries. The settlor retains the legal title and is subject to self-imposed fiduciary duties.
What kind of capacity does a settlor need to set up a trust?
Inter vivos trust = capacity to make an inter vivos gift. Testamentary trust = testamentary capacity Settlor understood what he/she was doing at the time of executing the trust instrument Settlor comprehended the effect of what he/she was doing at the time of executing the trust instrument "I know the trust is going to hold the property and my trustee will distribute that property per my instructions to the folks I name as beneficiaries" Settlor knows the general nature and extent of his/her property Doesn't have to know absolutely everything he/she might own Settlor knows the natural objects of his/her bounty Knows who his kids are, etc Holds the above 4 things in his/her mind simultaneously at the time of trust execution
What kind of beneficiaries can a trust protect?
Minors, people who lack management skills, spendthrifts, and people who are susceptible to influence
What are the capacity requirements for the trustee as an individual?
Must be 18 or have the disability of minority removed, and competent
What are the capacity requirements for the trustee as an corporation?
Must have power to act as trustee in Texas (power is in their charter) Financial institutions - these need no separate charter Trust companies - separate charter needed - set up as trust company and need separate charted giving them trust powers. Foreign (not Texas) corporations if comply with the Estate Code 505 Reciprocity - if that state allow Texas corporations to be trustees in that state, we will allow them to be trustees here.
Steven transfers both legal and equitable title to Thomas.
NO! Thomas now holds all legal and equitable title. Thus, Steven did not create a trust and Thomas owns the property outright.
Does the B have to aware that she is the beneficiary of a trust?
No
Will a trust fail because there is no trustee?
No
Is the future intent of the settlor sufficient to impose a duty?
No - must be a present intent
Does the trustee have liability for the property?
No liability until acceptance, but once you accept there's no turning back
What happens if the settlor has no property to put in the trust?
No property, no trust
Is a trust a legal entity?
No! Just a way of holding property!
David agreed to transfer $5,000 to Cindy in exchange for Cindy's promise to repay the money with interest at a specified future date. Did David create a trust?
No, David lent money to Cindy thereby creating a debtor-creditor relationship. David did not split title to the money. Instead, Cindy has full legal and equitable title and may do whatever she wants with the money. Cindy also has no duties with respect to the $5,000. Cindy may spend the money on frivolous items and may commingle the money with other funds. Cindy's only obligation is based on her promise to repay the money, with interest, by the date specified in the agreement.
Father gave Son the power to appoint particular items of Father's property to Grandson. Did Father create a trust?
No, Father gave Son a power of appointment over the property. See §14.5. The authority Father gave Son does not vest in Son any title to property that is subject to the power. Additionally, Son is not in a fiduciary relationship with either Father or Grandson. Son has no obligation to exercise the power and has no exposure to liability for either exercising or not exercising the power.
Oscar conveyed real property to George as follows, ''To George and his heirs but if tobacco products are sold on the premises, then I or my heirs may reenter and terminate the estate.'' Did Oscar create a trust?
No, Oscar's conveyance transferred a fee simple subject to a condition subsequent to George and Oscar retained a right of reentry (also called a power of termination). Oscar did not split title into legal and equitable interests and did not impose fiduciary duties on George. Oscar cannot prevent George from using the property for the sale of tobacco products. But, if George does so, Oscar or his heirs may divest George of his interest.
Paul gave Arthur written authority to sell some of Paul's property located in another state and to remit the proceeds back to Paul. Did Paul create a trust?
No, Paul created an agency relationship by naming Arthur as his agent under a power of attorney. Although Paul did impose fiduciary duties on Arthur, Paul did not give Arthur any title to his out-of-state property, much less split that title into legal and equitable portions.
Susan told Teresa, ''Tomorrow morning, I am going to give you $10,000 in trust for you to use for the benefit of your children. In addition, if I ever buy stock in Acme Corporation, I will give those shares to you in trust for your children as well.'' Does Susan have the intent necessary to create a trust?
No, Susan did not have the present intent required to create a trust. Her future intent to create a trust is insufficient. A trust would arise only if Susan either (1) actually gave Teresa the $10,000, or (2) acquired Acme Corporation stock and thereafter transferred it to Teresa.
Susan transferred $10,000 to Teresa stating, ''I am creating a trust of this money. You are the trustee and thus have full power to use any and all of this money for any purpose that you wish.'' Did Susan have the intent necessary to create a trust?
No, Susan gave both legal and equitable title to the $ to Theresa while simultaneously imposing a fiduciary duty on Theresa. Just b/c Susan used the proper terminology is not sufficient to demonstrate intent
Aunt transferred $10,000 to Sister as custodian for Niece (Sister's daughter) naming Sister as custodian under the state's version of the Uniform Transfers to Minors Act (see §14.6). Did Aunt create a trust?
No, a conveyance to a custodian under these circumstances does not give rise to a trust. Sister is indeed a fiduciary with respect to the funds and has a duty to manage the money until Niece reaches age twenty-one. However, Sister has no title to the property. Niece, as the donee of an irrevocable gift, owns full legal and equitable title to the property.
For an undiagnosed reason, Eve became ''reality challenged'' and was no longer able to manage her property. Eve's mother petitioned the local probate court and was appointed as the guardian (conservator) of Eve's vast holdings. Has a trust relationship been established?
No, a guardianship does not create a trust relationship. While there is a similarity between a guardianship and a trust because both are fiduciary relationships, a guardian does not have title to the ward's property. Instead, the guardian merely has the right to possess and manage that property.
Adam and Brooke were neighbors. Adam borrowed a stepladder from Brooke to install a ceiling fan in Adam's living room. Brooke gave Adam her dog to feed and care for while Brooke went on vacation. Brooke lent Adam her notebook computer for one month in exchange for Adam's promise to buy her a new battery for the computer. Did any of these transactions create a trust?
No, each of these property transfers created a bailment. When Adam borrowed the ladder, a bailment for the benefit of the bailee (Adam) arose. When Adam took possession of Brooke's dog, a bailment for the benefit of the bailor (Brooke) was created. Adam's borrowing of the computer in exchange for a new battery gave, rise to a mutual benefit bailment. All of these transfers involved only a change of possession. Brooke did not transfer any title to the ladder, her dog, or the computer. Although Adam, as the bailee, does owe duties to Brooke with regard to the bailed property, those duties are not fiduciary duties. Rather, they are legal duties with a basis in contract law.
Pauline could not afford to purchase her dream house and thus she obtained a loan from Bank. Bank, however, was not satisfied with Pauline's mere promise to repay the loan and thus demanded collateral for the loan. She granted Bank a mortgage in her dream house as well as a security interest in her expensive sport utility vehicle. Did any of Pauline's transactions create a trust?
No, security arrangements such as mortgages, deeds of trust, and security interests in personal property under Article 9 of the Uniform Commercial Code do not create trust relationships. In most states, security arrangements are contractual liens on property and do not involve a split of title. In some states, however, the mortgagee (Bank) is treated as having a title interest in the mortgaged property. Nonetheless, the relationship is not a trust because the duties between the parties are based on contract law, not fiduciary law.
Erwin was appointed by the probate court as the personal representative of his father's estate. Has a trust relationship been established?
No, the administration of a decedent's estate does not give rise to a trust relationship. Although administrators and executors stand in a fiduciary relationship to the heirs and beneficiaries that is extremely similar to the fiduciary relationship between trustees and beneficiaries, the relationships are readily distinguishable because personal representatives have no title to the property. Both legal and equitable title to the decedent's property vests immediately in the heirs and beneficiaries upon the decedent's death. Personal representatives merely have the right to possess and manage that property during the administration process.
Terry's valid will contained the following devise, ''I leave all my real property located in Ottawa County, Michigan to Juanita Gomez provided she pays $25,000 to Sean Edwards.'' Did this provision of Terry's will create a trust?
No, this provision created an equitable charge. An equitable charge on property arises when a donor makes a transfer to a donee subject to the donee paying a certain amount of money to a third person or performing a particular duty. An equitable charge does involve a split of title because Sean has an equitable right to obtain the $25,000. Nonetheless, the relationship is not a trust because Juanita is not a fiduciary. She has no duty to use the property in any particular manner; her only obligation is to pay the specified sum to Sean.
Can you have a promise to create a trust in the future w/o consideration?
No. • A promise to create a trust in the future, just like any other promise to make a gift, is not enforceable unless the promise qualifies as a contract under local law (needs consideration).
What is property that is not immediately transferable (and as such will not satisfy the actual transfer requirement)?
Non-assignable contract right Spouse's share of community property Property to be acquired in the future Expectancy to inherit from someone still alive
Is consideration necessary with a trust instrument?
Nope. A trust is considered the gratuitous transfer of property, so a beneficiary does not need to give consideration to the settlor
When you are checking for an appropriate trust purpose, what are you checking for?
Not illegal (like setting up a trust for heroin), not against public policy
Does the settlor have to communicate his intent to create a trust to the B?
Not necessary to communicate intent to the B
Steve included the following dispositive language in his valid will, ''I give Thomas $10,000 with the hope that he will use this money for the educational expenses of his son, Brad.'' Did Steve have the intent necessary to create a trust?
Precatory language such as "i hope" is not sufficient to impose a fiduciary duty onto Thomas, no intent
What are some trust duties that the trustee can carry out which would give rise to the presumption of acceptance?
Preservation of the property as long as T gives notice to the Bs OR inspecting the property
When is the trustee's acceptance of the property presumed?
Presumption = exercise power or perform duty. The trustee's acceptance may be implied from the fact that the trustee has started to act like a trustee by exercising trust powers or performing trust duties
What are the protections for a dissenting trustee?
Protections from joint and several liability if the trustee: -does not join in the vote, OR -Express dissent, even if join ◼ Exercise reasonable care ◼ Dissent in writing ◼ Give dissent to any cotrustee ◼ At or before time of action
What is the key rule to keep in mind about split of title and merger?
The key rule to keep in mind is that any title division is sufficient provided the same person is not the sole trustee and the sole beneficiary
Who is the settlor?
The settlor is the person who is responsible for the creation of the trust by supplying the initial trust property. The settlor may also be known as the trustor, grantor, or donor.
Settlor created a valid trust naming Tom as the trustee and Bruce as the beneficiary. On January 10, 2015, both Tom and Bruce conveyed their interests to Sarah. What are the ramifications of their conduct?
The trust terminated on January 10, 2015, because Sarah now owns all legal and equitable title to the property.
Settlor created a valid trust naming Bruce and Brenda as beneficiaries. On January 10, 2015, they conveyed all of their equitable interests to Tom, the trustee. What are the ramifications of the beneficiaries' conduct?
The trust terminated on January 10, 2015, because Tom now holds all legal and equitable title.
Who is the trustee?
The trustee holds legal title to the trust property. The trustee has all of the responsibilities related to property ownership but receives none of the benefits, except possibly a fee for trustee services.
How does a trustee resign?
The trustee may resign either by (1) following the terms of the trust or (2) petitioning the court for permission to resign. BUT the trustee cannot just "walk away" from the job.
T/F: All changes and any revocation must also be in writing, even if trust could have been oral originally
True
What happens if the trustee does not accept the property?
Trust instrument names an alternate Should name one or two alternates Trust instrument provides a method for selecting alternate Majority vote by beneficiaries to name a successor Court appointment upon petition of interested person
Settlor created a valid trust naming Tom and Teresa as trustees. On January 10, 2015, Tom and Teresa conveyed all of their legal title to Bruce, the only beneficiary of the trust. What are the ramifications of the trustees' conduct?
Unless state law provides to the contrary, the trust terminated on January 10, 2015 because Bruce now holds all legal and equitable title.
When checking for a violation of RAP, when does the time start to run on a testamentary trust?
When the settlor dies
When checking for a violation of RAP, when does the time start to run on an inter vivos trust?
When the settlor transfers property into the trust or self - declares the trust
When is acceptance of the property by the trustee conclusive?
When the trustee signs the trust instrument OR signs a separate written acceptance
What effect does a will have on a testamentary trust?
Will validity is a condition precedent of trust validity
How does a trust satisfy SOF?
Written evidence of the trust's terms (property description, who the beneficiaries are, and how the property is to used) and signed by settlor
Examine each of the following situations and determine whether there is a sufficient split of title to create a trust. Steven transfers legal title to Thomas and equitable title to Brenda.
Yes
Steven transfers legal title to Thomas and retains equitable title.
Yes
Can a part performance trust still satisfy SOF?
Yes If alleged trustee acts like a trustee, alleged trustee estopped from denying existence of trust.
Can a self-declaration trust still satisfy SOF?
Yes if the trust contains all personal property AND Settlor states in writing that settlor holds property in trust, even though the writing does not comply with normal requirements.
Can an oral trust still satisfy SOF?
Yes if the trust contains all personal property, the trustee is not the settlor, the trustee is not the beneficiary AND Settlor expresses trust intent prior to OR simultaneously with transfer
Steven retains legal title and transfers equitable title to Brenda.
Yes! Legal and equitable title are not united in the same person
Does RAP apply to private trusts?
Yes! but not charitable trusts
Steve transferred $10,000 to Thomas, stating, ''Invest this money for my Son, Brad. Give Brad the income every year on his birthday until he reaches age thirty. Then give him the $10,000.'' If asked, Steve would define ''trust'' as having confidence in someone who is honest, ''legal title'' as the official name of a book in the Library of Congress records, ''equitable title'' as the formal name of horses used at professional racing tracks, and ''trustee'' as a special type of tea served at upscale restaurants. Did Steve have the intent necessary to create a trust?
Yes, Steve split legal title and equitable title and then impose fiduciary duty on Thomas. use of proper trust terminology doesn't demonstrate intent so it does not matter that Steve used the terms incorrectly
If delegating their duty to participate, does the co-trustee have to communicate that to their fellow co-trustees?
Yes, and they also have to file that delegation in the trust records
Steven transfers legal title to Thomas and equitable title to both Thomas and Brenda.
Yes, legal and equitable title are not united in one person. A co-beneficiary may also serve as the trustee of a trust.
Steven transfers legal title to both Thomas and Brenda and equitable title to Brenda.
Yes, legal and equitable title are not united in one person. A co-trustee may also be the beneficiary of a trust.
Steven transfers legal title to both Thomas and Brenda and equitable title to both Thomas and Brenda as well.
Yes, legal and equitable title are not united in one person. The split of title exists despite the same two people holding all the legal and equitable title. In fact, Thomas and Brenda may actually hold the legal and equitable title differently. As co-trustees, they may hold the legal title as joint tenants while as co-beneficiaries, they may hold the equitable title as tenants in common.
Does a co-trustee have a duty to participate? What are the exceptions?
Yes, they shall participate unless The co-trustee is unavailable to perform the function because of absence, illness, suspension under this code or other law, disqualification, or other temporary incapacity. ◼ Co-trustee has properly delegated the performance and communicated the delegation to all the other co-trustees and has filed the delegation in the records of the trust
What is the liability status of multiple trustees?
joint and several, meaning that all the trustees are liable for the acts of one trustee
What do TX courts do when is a RAP violation?
lengthen the period or permit the courts to reform the trust using cy pres; that is, the court may modify the trust to make it fit within the Rule while still carrying out the settlor's intent as closely as possible.
When does split of title occur?
split of title will not exist unless at least one other person receives some interest, either legal or equitable, in the property.
◼ Ex: Settlor transferred $100,000 to Timothy, in trust, ''to distribute to those of my children whom my trustee so desires.'' Is this a sufficient beneficiary designation?
◼ Yes, class designations, such as Settlor's gift to ''my children,'' are adequate beneficiary descriptions as long as the individual members of the specified class are readily ascertainable. The term ''children'' has a uniformly recognized meaning as direct descendants of the first degree, that is, sons and daughters. ◼ You have to be able to know who the members of the class are
