TRUSTS

VIII. ALIENABILITY AND CREDITOR'S RIGHTS: SPENDTHRIFT AND SUPPORT TRUSTS spendtrhift 28. S transfers one million dollars to trustee to pay the income to S's son Aaron for life. On death of Aaron, principal is to be distributed to Aaron's child (C). Trust provides that "No interest of any beneficiary herein shall be assignable by such beneficiary nor shall it be subject to the claims of the beneficiary's creditors." Aaron builds an expensive home for $500,000 signing note for purchase price. In performance of the obligation, Aaron assigns to the payee $50,000 yearly for eight years out of trust income. Three years later Aaron instructs the trustee to make no more payments to the creditor. The creditor sues Aaron and seeks to enforce the assignment or to reach Aaron's interest in the trust. What result? Exceptions: 1.Claims for necessities. 2. Alimony and child support obligations. 3. Claims by US or a state.

creditor cant get it

VIII. ALIENABILITY AND CREDITOR'S RIGHTS: SPENDTHRIFT AND SUPPORT TRUSTS Settlor's Creditors 31. D transfers stock to a revocable inter vivos trust, the terms of which provide that the income is to be distributed back to D for his life, remainder at his death to his children. The trustee, BANK, has authority "to pay out of trust corpus such sums as BANK determines to be in D's best interest." The trust instrument also contains a spendthrift clause. D runs up some bills that he is unable to pay. What are the creditors' rights? a. As to trusts for the benefit of the settlor: x Spendthrift clauses are unenforceable so the creditor can reach any right to distributions D has in the trust. x In addition, D's creditors may reach the actual trust property if D has the power to revoke the trust OR (even if he doesn't) if the trustee has discretionary authority to make distributions to settlor. b. As to irrevocable trusts for third persons, settlor's creditors have no rights. Exception: Fraudulent transfers doctrine:

Trust could be set aside

XII. POWERS OF APPOINTMENT 38. Tom died in 2001, leaving a will that bequeathed property in trust: "to pay the income to my daughter Dana for life, and on her death to distribute the trust principal to such persons, including Dana's estate, as she appoints by her last will. If Dana does not exercise this power of appointment, on Dana's death the trustee shall distribute the trust principal to Dana's descendants." In this scenario: Tom is the ____________ of the power of appointment; his will created the power. Dana is the ____________ of a ___________________ testamentary power of appointment. x It is general because she is not limited in the class of beneficiaries to whom she can appoint. More precisely, she can appoint the property to "herself, her estate or the creditors of either." x It is testamentary because she is limited to appointments by will. She cannot exercise (or contract to exercise) during life. Dana's descendants are the ________________________________________________. They will take the property on Dana's death if the power of appointment is not exercised. 39. Dana dies in 2010 leaving a will that bequeaths her residuary estate "one-half to my husband and one-half to my son." Did the residuary clause in Dana's will operate to exercise her testamentary power of appointment, even though her will made no reference to the power? 40. Trust to pay the income "to my daughter Beulah for life, and on Beulah's death to distribute the trust principal to such of Beulah's descendants as she shall appoint by a will that specifically refers to this power of appointment. In default of appointment, to Beulah's children in equal shares." Beulah has a life estate and a _________________ testamentary power of appointment. 41. Beulah dies several years later, leaving a will that bequeaths "all my property, including any property over which I have a power of appointment, half to my son Stan and half in continuing trust to pay the income to my daughter Diane for life, principal at her death to Charity." Did Beulah's will exercise her special testamentary power? 42. Assume Beulah did attempt to exercise her power by making a specific reference to the power in her will. a. Is the appointment of the income interest to Diane valid? b. How about the principal interest in Charity?

donor donee general taker in default no must refer to it special no - must specifically refer yes no

IX. TRUST ADMINISTRATION E. LIABILITY FOR BREACH OF TRUST, TORTS AND CONTRACTS 34. Sam and Bill were co-trustees of a trust which specifically limited trust investments to certificates of deposit. Without consulting Bill, Sam invested half of the trust corpus in X stock and the other half in Y stock. In short order, the value of X stock tripled while the value of Y stock declined. Overall, Sam showed a much greater return than a bank C.D. could have earned. a. Any problem for Sam? b. How about Bill? Answer:___________ unless there is an element of fault. (e.g., Bill participated in the breach or he failed to use reasonable care to prevent it, or he neglected to take proper steps to compel his co-trustee to redress the breach.) c. Assume that before the facts above are discovered, Sam resigns. Pursuant to the terms of the trust, Deidra is appointed successor co-trustee. Deidra reviews the trust records and discovers the above information. Any problem for Deidra? Answer:___________ unless there is an element of fault. (e.g., she continues the breach or she fails to take proper steps to compel Sam to redress it.)

each breach judged separately ratify/surchage no unless collusion no

III. THE REQUIREMENT OF TRUST PROPERTY (THE "RES" REQUIREMENT) Rest. Trusts: Where a promise to create a trust is gratuitous (i.e., not supported by consideration), a trust arises when all elements of a valid trust have been met if, but only if, at that subsequent time the settlor (Uncle in our case) manifests an intention then to create the trust. Indicia of trust might include: Compare: A different result is reached when the promise to hold property (to be received in the future) in trust is supported by consideration. There, under contract principles the trust automatically attaches when the property is received. BUT WAIT! If we conclude that there was a valid trust created, what of the fact that after Uncle's death, there is no trustee? Rule: No trust fails for want of a trustee. If the intention to create a trust is clearly manifested but no trustee is named, or the named trustee dies or resigns with no provision for a successor trustee, the court will appoint a suitable trustee to execute the trust. Exception: _____________ If the court finds that the settlor intended for the trust powers to be personal to the trustee, such that the trust should fail if the named person is no longer capable of serving, then the trust would terminate. (This exception is rarely invoked. The court will invariably determine that the settlor's primary intent was to have a trust for the indicated purposes, not that the trust was to continue if and only if the named person would serve as trustee.)

expres, implied through conduct fill in the blank powers personal to named trustee

VIII. ALIENABILITY AND CREDITOR'S RIGHTS: SPENDTHRIFT AND SUPPORT TRUSTS 27. T creates a trust with income required to be distributed to Sam for life; remainder to Sam's son. a. Sam and the Trustee have a falling out and the Trustee stops distributing the income to Sam. What are Sam's rights? b. Sam wants to sell his income interest. Can he? c. Sam runs up a large bill at Sears. What are Sears' rights to satisfy their claim out of the trust?

go to court - court order yes no right to actual trust assets, only right to garnish income stream from trustee

IV. A PRIVATE TRUST MUST HAVE ASCERTAINABLE BENEFICIARIES 14. Father devised $5,000 "in trust" to Daughter "as trustee," to spend the principal and income for the care of Father's 3 dogs. The rest of Father's estate was devised to Son. Daughter spent $1,000 during the first three years for that purpose after which time she discontinued that use saying she believed she'd keep the remainder of the "trust money" for herself. TRUSTS 5. a. Valid trust? This type of trust is called an ________________________________ b. At common law, honorary trusts violate the Rule Against Perpetuities and are void. (The money is returned to Father or Father's estate by resulting trust.) c. However, under the UTC,______________________________________________ d. If the trust is valid: i. Who has standing to enforce the trust? ______________________________ ii. What happens to any money left over at the death of the last dog?

honorary trust lifetime of animals court designated enforcer $ returned to trust

VII. CHARITABLE TRUSTS 1. Not subject to either Rule Against Perpetuities or Rule Against Accumulations. (Can last and accumulate income perpetually). 2. Must be for charitable purpose. 22. [Virginia case] Man who lived across the street from Shenandoah Grammar School died leaving will that devised his estate in trust: Trustee to accumulate income for twenty-five years. Thereafter, on Monday before Easter and again on Monday before Christmas in each year, trustee to distribute the income to grammar school students in first and second grades, "the said income to be used by them for educational purposes." His nearest kin, a second cousin, challenges the trust. a. V alid charitable trust? b. Compare: What if the instrument stated: "the trustee shall expend the income for the educational needs of the grammar school students in the first and second grades." Valid charitable trust?

impossible to policed wont operate in fact

IX. TRUST ADMINISTRATION D. POWERS OF TRUSTEE AND SUCCESSOR TRUSTEE By statute, a corporate trustee may take title to stock in name of nominee (statute eliminates concern that this is breach for failure to take title to trust property). However, trustee is liable for acts of nominee. Trustee may invest in common trust funds. (Accounts created by corporate trust companies where several smaller trusts are combined for purposes of investment -- allows greater economy and diversification.) Since statute allows, not breach for commingling. 33. Green, Grey, and Gary are co-trustees appointed under the will of Jackson. A clause in the will provides that "my trustees shall have the power to lease, mortgage and sell any real property held by them in trust." Green enters into negotiations for a lease of trust property. a. May Green enter into the lease alone or does he need Grey and Gary's signatures? i. Traditional view: ii. Modern (majority rule): b. During the lease negotiations, Grey dies. Must Green and Gary secure the appointment of a new co-trustee to replace Grey?

must act unanimously unless emergency needs one, but not both (majority) only if instrument requires it

III. THE REQUIREMENT OF TRUST PROPERTY (THE "RES" REQUIREMENT) 6. Grandfather tells Uncle that he is leaving Whiteacre (an apartment building) to Uncle in his will. Uncle thereupon records a Declaration of Trust: "I declare myself trustee of my interest in Whiteacre, income to Nephew for life, remainder to his issue." Valid trust? ________ Uncle's claim is NOT a recognized property interest. It is an expectancy. When Grandfather writes the will, Uncle has no claim or property right. Uncle's expectancy will ripen into a property interest only if (i) Grandfather dies without changing his will and (ii) the will is admitted to probate. Until then, the law views Uncle's actions as: Same rule for prospective heirs in intestate estate. 7. After the facts in 6, Grandfather dies and his executor deeds Whiteacre to Uncle, pursuant to the will's terms. Does a trust arise at this time? Answer: _______________, unless sometime after that time Uncle _________________

no gratuitous promise no reaffirms intent by word or conduct

∉ A. INTER VIVOS TRUSTS 17. S promised his widowed sister Marie that he would provide a home for her and her daughter Angie if Marie would keep house and serve as hostess in his home. Thereafter, in the presence of witnesses, S handed his brother Frank a deed naming Frank as grantee (with no mention of a trust), saying, "Hold this property in trust until Marie's death, then convey to Angie. This is in consideration of services rendered by Marie as agreed." TRUSTS 7. a. ________ Valid express trust? However, a constructive trust for Marie's benefit may be imposed where: 1. Fraud in inducement: If, at time land was deeded to Frank, he orally promised to serve as trustee and he had, at that time, no intention to perform his promise. 2. Confidential Relationship: Grantee-trustee served in confidential relationship to the grantor-settlor. (Attorney-client; business associates; husband-wife, father- child, brother-sister.) Rationale here is that equity's concern that one would take advantage of a confidential relationship to enrich himself outweighs Statute of Frauds. But grantee-trustee must have agreed to hold property in trust. b. If no constructive trust would Marie have an action against S's estate?

no no oral trusts of land quantum merit

VII. CHARITABLE TRUSTS 3. Must be in favor of a reasonably large number of unidentifiable beneficiaries. 23. Trust providing scholarships at the Florida State University for all residents of Southwest Tallahassee, Florida, whose last name is Powell. Valid charitable trust? 24. Trust created by Iris Smith to provide scholarships at the University of Chicago for all residents of Cook County whose last name is Smith, with preference to be given to those persons named Smith who are related to her. TRUSTS 9. a. Valid charitable trust? b. Assuming the trust is charitable, who has standing to enforce it?

no potentially settlor, any beneficiary

IV. A PRIVATE TRUST MUST HAVE ASCERTAINABLE BENEFICIARIES The rule is just the opposite for charitable trusts. In addition to being for a charitable purpose, such trusts must be for a reasonably large and unidentifiable segment of the public at large. 10. T's will left $100,000 "to my friend Lemuel Mosely, in trust for my friends." Valid trust? a. Answer: b. Can this instrument be given effect as a valid power of appointment? The traditional rule is that it cannot! A trust invalid for want of definite beneficiaries cannot be given effect as a power of appointment.. Reason: A trustee is under an obligation to perform, and a holder of a power is not. According to the traditional rule, these two are inconsistent. But: The majority rule today is that it can. So the power of appointment argument should be made. (If Lemuel Mosely doesn't exercise his power within a reasonable time, the property is returned to T's estate.) c. If the power of appointment is recognized, what happens if Lemual Mosely declines to exercise it? 11. T's will creates a testamentary trust for the benefit of her descendants, with the shares of each left to the discretion of the trustee. Valid trust?

no returend yes

IV. A PRIVATE TRUST MUST HAVE ASCERTAINABLE BENEFICIARIES 13. When Vera Rich learned that her nephew Tom was to be married, she was so pleased that she transferred $100,000 to the Reliable Trust Bank to be held in trust for "Tom's future children." Unfortunately, nephew Tom was jilted within the week by his fiancée, and Vera died shortly thereafter. a. This trust has no living beneficiaries. Is that a problem? b. Who enforces the trust? c. What happens if Tom never has any children?

no - only described guardian ad litem goes back to estate

I. INTRODUCTION TO TRUSTS TRUST: An arrangement under which the trustee holds legal title to property for the benefit of the beneficiaries. Trustee has burdens and beneficiaries have benefits of property ownership. Trustee is subject to fiduciary standards; he is not privileged to use trust property as his own. Harsh "self- dealing" rules preclude trustee from doing so. REQUISITES: Creator ... delivers ... legal title of trust assets (the res) ... to trustee ... for the benefit of beneficiaries ... with intent to create trust ... for a valid purpose. DELIVERY: Requirement does not apply to self-declaration of trust ("I hereby declare myself trustee ...") or testamentary trust. But for inter vivos trust with third party as trustee, there must be delivery of subject matter of the trust. 1. Father executes a valid deed of Blackacre naming Daughter as the grantee. Subsequently, Father hands the deed to Brother telling him orally at that time "Hold this deed and record it if Daughter survives me." a. Does Brother hold Blackacre in trust for Daughter? b. Has Father made a valid gift of Blackacre to Daughter? Answer: ______________. To make a gift, Father must deliver the property to the donee or the donee's agent. Delivery can be actual, constructive (e.g., making a gift of a car by delivering the keys to the donee), or when actual or constructive delivery is not possible, symbolic (e.g., delivering a signed writing evidencing the gift). Regardless of the method, for Brother to serve as Daughter's agent, the gift must be irrevocable. Thus, delivery of the deed to Brother is a valid gift to Daughter only if Father intended the delivery to be irrevocable. Father's intent must be ascertained from extrinsic evidence.

no escrow depends

VIII. ALIENABILITY AND CREDITOR'S RIGHTS: SPENDTHRIFT AND SUPPORT TRUSTS Pure Discretionary Trust 30. Same as 29, except instrument read: "to accumulate or distribute income to my husband, Mr. M, in the sole discretion of my trustee. . ." (i.e., no standard of "support")? a. Mr. M demands distribution of the $5,000 income. What result? b. Grocery demands payment of $180 food bill of Mr. M. What result? UTC exception:

no right neither could creditor claim by child or spouse CS or alimony

VIII. ALIENABILITY AND CREDITOR'S RIGHTS: SPENDTHRIFT AND SUPPORT TRUSTS M's will devised Blackacre to Trustee, "to distribute or apply the income for the support of my husband, Mr. M, during his lifetime to the extent necessary in the sole discretion of my trustee; remainder to my son." Trustee now holds Blackacre and has accumulated income of $5,000. a. Mr. M, gainfully employed, demands distribution of the $5,000 income. Should ("must") the trustee distribute? Issue: The trustee of a discretionary support trust has a duty to support the beneficiary from the income of the trust if he can't support himself. But the facts say Mr. M is gainfully employed. So, in exercising its discretionary power to make distributions for the beneficiary's support, may the trustee take into account other resources available to the beneficiary for support? That is, may the trustee properly decide not to distribute if Mr. M can support himself? Rest. Trusts: It is a question of interpretation of the instrument as a whole, but _ _________________________________________________________________ b. If the trustee decides not to distribute, can M get a court to overrule the trustee's decision? Answer: ______________________ Courts are reluctant to question a trustee's decisions when the trustee has been given extended discretion. A trustee has extended discretion if the instrument includes words such as:: ___________________________________________________________________

presumptively yes probably not sole/absolute/uncontrolled discretion

VII. CHARITABLE TRUSTS 4. When specific charitable purpose can no longer be accomplished, may be reformed under the doctrine of cy pres (Old French for "as near as possible"). 25. Residuary estate devised to testamentary trustee, "to distribute the income to agencies and organizations, as selected by the trustee, actively engaged in research for the prevention of poliomyelitis." Twenty years later, the cure for polio is found and all organized research pertaining to the disease is terminated. The trustee petitions the court: What should it do with trust income and principal? T's heirs intervene: Since the purposes of the trust no longer can be accomplished, the trust should be terminated and the corpus distributed to them. Result? Primary intent: Specific direction: Related doctrine: deviation from trust administrative terms because of changed circumstances. (Applied to private as well as charitable trusts.) Leading case: Pulitzer. Will created trust for family; trust provided that P's stock in the New York World newspaper should not be sold so long as the trust was in existence. Many years later, things went bad for the "World"; its losses were so heavy that trustees had to use income from other assets to cover the losses. Court authorized deviation under primary intent-specific direction reasoning. Primary purpose of trust was to provide for P's family; in connection therewith he gave specific direction that stock should never be sold. But to continue to adhere to specific direction would frustrate the primary purpose of the trust. 26. W's trust provided that her house should never be sold and that her widower H be allowed to occupy the house rent free during his lifetime; upon H's death the trustee was to sell the home and distribute all trust property to W's living heirs at law. Some years later, the house becomes the center of a manufacturing district and is no longer suitable as a residence. H contends that the house should be sold and the proceeds of sale used to buy housing in a desirable residential district. What result?

research polio may be broader, and rewrite for nearest purpose h prevails unforeseen circumstance

III. THE REQUIREMENT OF TRUST PROPERTY (THE "RES" REQUIREMENT) Res: The corpus, the principal, the subject matter of the trust. In order to have a trust, there must be a specific interest in property to which the trustee's duties relate, such that the beneficiary who is dissatisfied with the trustee's performance can say, "You are not doing your job with respect to these assets." The subject matter of the trust must be certain and identifiable. If there is no certain and identifiable trust property, there is no trust! 4. A owes B $10,000. In writing, A states: "I hereby declare myself trustee of the debt which I owe to B." — This writing is an attempted — Has A created a valid trust? 5. What if, on the above facts, it was B who stated, "I hereby declare myself trustee of the debt which A owes me, said trust to be for the benefit of C." Valid trust? Choses in action and accounts receivable are interests in "property." They are sufficient to support a trust even though they are intangible.

self-declaration of trust no - no specific interest in trust yes

V. TRUSTS AS VALID WILL SUBSTITUTES: REVOCABLE TRUST AND BANK ACCOUNT TRUSTS 16. T places $15,000 in savings account at the First Main Bank. The signature card and passbook bear the statement, "Tom Testator, trustee for Seth Testator." This is his only account at the bank. Over the years he draws out the interest on the account but leaves the principal amount intact. Some years later T dies, leaving a will (executed after the account was created) that provides: "I give all my property, including my bank account at First Main Bank, to my daughter, Dolly." Who takes the $15,000? a. This bank account is called a _______________________. It is revocable during life by any manifestations of intent to revoke including withdrawals. The account is reachable by the depositor's creditors during life, and in many states, it may also be reached after death to the extent the depositor's probate assets are insufficient to pay his creditors. Extrinsic evidence is admissible to show a trust was not intended despite the designation on the signature card. b. Majority rule: A totten trust can be revoked by the depositor's will. Thus, Dolly takes the $15,000. But under the UPC, _______________________________________ . c. What happens when the beneficiary of a totten trust predeceases the depositor?

totten trust seth wins - no revocation by will auto revoke

VI. ORAL TRUSTS: ORAL PROMISE TO HOLD IN TRUST B. ORAL PROMISE (SUPPORTED BY CONSIDERATION) TO MAKE DEVISE IN WILL 18. T orally agreed with her valet Sydney that she would devise her home to him if he would forgo any weekly salary and remain in T's employ as long as she lived. Sydney fulfilled his commitment, but T never inserted a provision in her will for his benefit. a. Majority rule: With respect to personal property, oral contracts to make a will are enforceable provided their terms can be established by clear and convincing evidence. However, contracts to devise land must be evidenced by a writing the satisfies the Statute of Frauds. b. UPC: Any contract to make a will, not to revoke a will, or to die intestate, can only be shown if: (i) the terms are in the will itself, (ii) the terms are in a written contract, or (iii) the will refers to the contract and extrinsic evidence proves the terms. The mere existence of joint or mutual wills does not imply a contract not to revoke. c. Our facts: _________________________________________________________ d. Suppose the agreement had been written and signed?

unenforcable he gets home - constructive trust

III. THE REQUIREMENT OF TRUST PROPERTY (THE "RES" REQUIREMENT) Empty Trust 9. F writes trust instrument naming X as trustee and providing that during F's life, the income, if any, from trust property is to be distributed to F, and at F's death, the income is to go to Wife for life; remainder to F's children. F does not transfer any assets into the trust but instead names the trust (i.e. Trustee "as trustee") as beneficiary under several of his insurance policies. Has a valid trust been created? Answer: ___________. Statutes or case decisions in most states provide that an otherwise empty trust is valid if it is named the direct beneficiary of a life insurance policy or a pension plan death benefit. In many states, the statute also apples to a trust that is named the direct beneficiary of the settlor's will.

yes

VI. ORAL TRUSTS: ORAL PROMISE TO HOLD IN TRUST C. TESTAMENTARY TRUSTS 1. Absolute devise by will with oral promise to hold on trust -- SECRET TRUST. 19. T dies leaving a will that devises Greenacre to Jones; the will makes no mention of any trust. T's secretary now alleges that T orally told Jones that Jones was to hold the land as trustee for the secretary's benefit, and that Jones agreed to serve as trustee. Can the secretary enforce the promise? Answer: ______ More precisely, her testimony is admissible to show the existence of the promise. If she is able to establish Jones' promise by clear, satisfactory and convincing evi- dence (more than a mere preponderance), a constructive trust will be implied for her benefit. Since a will and not a deed is involved, the Statute of Frauds is inapplicable. Equity's concern that one should not be allowed to be unjustly enriched in violation of his promise outweighs the Statute of Wills concern that the will beneficiaries should be identified by language in the will. A constructive trust is imposed to prevent unjust enrichment. 20. Same will provision except T never told Jones about any trust. Accompanying T's will is an envelope marked "Personal," addressed to Jones. Inside is a typewritten note, signed by T, instructing Jones to hold the land in trust for T's secretary. 2. Devise "in trust" with oral agreement as to beneficiaries -- SEMI-SECRET TRUST. 21. T's will devises land "to my good friend Sam Smith, as trustee, for purposes I have already communicated to him." Smith is willing to identify T's purposes and intended beneficiaries and is willing to serve as trustee. T's heirs object, saying no valid trust was created. What result? Majority rule [leading case: Olliffe v. Wells (Mass. 1881)]: Smith holds on a resulting trust for T's heirs. The semi-secret trust situation involves no element of wrongdoing so to impress the trust for benefit of intended beneficiaries would violate the requirement of the Statute of Wills that the beneficiaries be identifiable from language in the will. Smith may not even voluntarily comply.

yes jones wins smith constructive trust for t's kids

XI. TRUSTS IMPOSED BY OPERATION OF LAW: RESULTING AND CONSTRUCTIVE TRUSTS Resulting Trusts: (i) May arise upon failure of express trust or when express trust purposes accomplished and corpus not exhausted: i Semi-secret trust case under Majority Rule. (See HYPO No. 21) i Trust of ten million dollars to build hospital wing. The wing is built for eight million dollars. Trust instrument silent as to this contingency. Excess two million dollars may be returned to settlor by resulting trust. i Express trust fails for any reason and trust instrument silent as to what happens in this event. (ii) Purchase money resulting trust: Presumed to arise when consideration for purchase of property is paid by person other than the person taking title. Defenses: (1) Gift; or (2) Loan. Gift and not trust presumed when person providing consideration bears close family relationship to title holder. (Parent-child, husband-wife, grandparent-grandchild.) 36. A loaned $10,000 to B. Just after obligation becomes due, A says to B, "Instead of paying me the money, I want you to acquire the title to Blackacre and hold it for me." B orally agrees. B acquires Blackacre taking title in her own name. Later, while A is overseas, B trades Blackacre to C for Whiteacre. When A returns from overseas, Blackacre is worth $25,000 and Whiteacre is worth $12,000. B is insolvent. a. Can A impose a trust on Whiteacre? b. Can A impose a trust on Blackacre? RULES: A sale or exchange by a trustee of a resulting or constructive trust to a BFP for value cuts off beneficiary's rights to the transferred asset. BUT, trustee holds any consideration received on the transfer in trust for beneficiary AND if the sale is not to a BFP, the beneficiary has choice of remedies: (i) impose trust on consideration received by trustee or (ii) impose trust on original asset in NON-BFP's hands. 37. Same as No. 36, except that under the terms of the original agreement, B was to purchase Blackacre for A, but she was to have title issued in A's name. B fraudulently had title to property issued in her own name.

yes maybe not

IX. TRUST ADMINISTRATION E. LIABILITY FOR BREACH OF TRUST, TORTS AND CONTRACTS 35. F creates irrevocable trust naming close friend T as trustee. Because T was not in trust business, and because he was busy in the operation of his own business, T asked his nephew N ("who knew a little about trading securities over the Internet") to make the investment decisions for the trust. N invested the trust funds in such a manner that they declined in value by $25,000. Is T liable for the acts of his agent, N? a. Answer: _________ unless T improperly delegated responsibility to his agent, N. Under the Uniform Prudent Investor Act, a trustee may delegate the investment decision provided the trustee exercises reasonable care, skill and caution in (i) selecting the agent, (ii) defining the scope and terms of the delegation, and (iii) periodically reviewing the actions and decisions of the agent. Our facts: b. Would the answer change if T had notified the trust beneficiaries that he was going to ask nephew N to make the investment decisions? Answer:_________ Although a beneficiary who consents to or participates in a breach of trust waives his right to sue, mere knowledge of a breach (in the absence of affirmative consent) is not enough. RELATED RULE: As long as a trust is revocable, a trustee who acts with the consent of the settlor cannot be sued for breach by the beneficiaries

yes no failure to use due care no no

II. THE REQUIREMENTS OF INTENT AND VALID PURPOSE 2. T's will contains a bequest of $100,000 "to A to be used for the education of Pete and Repeat." Does A hold the $100,000 in trust for T's two children? Compare: "To A, it is my wish and my desire that he look after X and Y." Compare: "it is my wish and my desire that he use the income for the support of X and Y until both have attained the age of 18 at which time to distribute the principal of this gift to X and Y outright." 3. T's will contains a bequest to BANK as trustee for the benefit of daughter Jean, "provided, however, that should Jean ever marry, she shall forfeit her entire interest in this trust." Is this a valid arrangement? Answer: The trust is good, but ______________________________________________. Reason: Compare: In trust "to pay the income to my husband Mark until such time as he remarries; thereafter principal to my daughter Jean." Valid condition? Related areas: Provisions which encourage divorce or the commission of crimes and provisions restraining the right to procreate or the free practice of religion. Compare: "I make no provision for my son Peter because I disapprove of his marriage outside of our religious faith.

yes - intent no yes - enough detail to require forfeiture condition is void against public policy yes not a problem - not a condition subsequent

III. THE REQUIREMENT OF TRUST PROPERTY (THE "RES" REQUIREMENT) 8. Ann is the residuary legatee under the valid will of her deceased aunt. Before the taxes and other charges against the estate are known, Ann in writing declares herself trustee of her interest as residuary legatee for the support of her husband and all such children as she should have by him. Thereafter, $1 million is distributed by the executor to Ann as residuary legatee. Valid trust? a. Answer: ____________. Where the testator has died, although her estate has not been distributed, a legatee has more than a mere expectancy; she has an interest which may be the subject matter of a trust or a gift. This is true even though the amount which the legatee is to receive has not yet been ascertained, as where she is a legatee of the residuary estate. b. But what of the requirement that the trust corpus be "certain and identifiable"?

yes but not $, her right to property