Podcast
Questions and Answers
A settlor can use express language in a trust to prevent acquiring corporations from taking trustee powers from a local bank.
A settlor can use express language in a trust to prevent acquiring corporations from taking trustee powers from a local bank.
True
A beneficiary can only be a single human person according to the guidelines provided.
A beneficiary can only be a single human person according to the guidelines provided.
False
Honorary trusts lack a human beneficiary or charitable purpose and may serve to care for pets.
Honorary trusts lack a human beneficiary or charitable purpose and may serve to care for pets.
True
A trust is considered valid if the settlor describes the beneficiaries in vague terms, such as 'my friends'.
A trust is considered valid if the settlor describes the beneficiaries in vague terms, such as 'my friends'.
Signup and view all the answers
The Substitute Fiduciary Act allows a corporation to acquire trustee powers without court permission.
The Substitute Fiduciary Act allows a corporation to acquire trustee powers without court permission.
Signup and view all the answers
Capacity to hold property does not require a person to be able to transfer property.
Capacity to hold property does not require a person to be able to transfer property.
Signup and view all the answers
In a traditional approach, honorary trusts are deemed valid because they serve private interests.
In a traditional approach, honorary trusts are deemed valid because they serve private interests.
Signup and view all the answers
Minnesota is the only state that does not allow trusts for pets.
Minnesota is the only state that does not allow trusts for pets.
Signup and view all the answers
The settlor always retains legal title while transferring equitable title to beneficiaries.
The settlor always retains legal title while transferring equitable title to beneficiaries.
Signup and view all the answers
A settlor can create a trust that takes effect only during their lifetime.
A settlor can create a trust that takes effect only during their lifetime.
Signup and view all the answers
Consideration is required for a valid trust to be created.
Consideration is required for a valid trust to be created.
Signup and view all the answers
Promises to create a trust in the future must have consideration to be enforceable.
Promises to create a trust in the future must have consideration to be enforceable.
Signup and view all the answers
If the trust property is only a promise, it does not need to be enforceable for the trust to be valid.
If the trust property is only a promise, it does not need to be enforceable for the trust to be valid.
Signup and view all the answers
A certificate of deposit can serve as valid trust property.
A certificate of deposit can serve as valid trust property.
Signup and view all the answers
The will's validity guarantees the validity of any trusts mentioned within it.
The will's validity guarantees the validity of any trusts mentioned within it.
Signup and view all the answers
A friend's promise to pay money can be used as trust property without any contractual agreement.
A friend's promise to pay money can be used as trust property without any contractual agreement.
Signup and view all the answers
A trust that rewards students for receiving an A in law school courses is considered charitable.
A trust that rewards students for receiving an A in law school courses is considered charitable.
Signup and view all the answers
Mortmain Provisions allow unlimited gifts to charity regardless of circumstances.
Mortmain Provisions allow unlimited gifts to charity regardless of circumstances.
Signup and view all the answers
A trust set up for medical research is considered charitable if the settlor's designation is broad.
A trust set up for medical research is considered charitable if the settlor's designation is broad.
Signup and view all the answers
The opinion of the settlor about a charitable purpose is crucial in determining the trust’s status.
The opinion of the settlor about a charitable purpose is crucial in determining the trust’s status.
Signup and view all the answers
The court uses a subjective standard to determine whether a trust's purpose is charitable.
The court uses a subjective standard to determine whether a trust's purpose is charitable.
Signup and view all the answers
Trusts that serve to carry out the personal whims of the settlor are typically considered charitable.
Trusts that serve to carry out the personal whims of the settlor are typically considered charitable.
Signup and view all the answers
Courts are stricter in regarding religious trusts as charitable compared to other types of trusts.
Courts are stricter in regarding religious trusts as charitable compared to other types of trusts.
Signup and view all the answers
A trust that qualifies for specific requirements can obtain significant tax benefits.
A trust that qualifies for specific requirements can obtain significant tax benefits.
Signup and view all the answers
A trustee in Texas is rarely required to post a bond.
A trustee in Texas is rarely required to post a bond.
Signup and view all the answers
A trustee is liable for losses due to commingling trust property with their own assets.
A trustee is liable for losses due to commingling trust property with their own assets.
Signup and view all the answers
Earmarking the property belonging to the trust is not necessary if the trustee is competent.
Earmarking the property belonging to the trust is not necessary if the trustee is competent.
Signup and view all the answers
The trustee must ascertain the identity and location of beneficiaries to distribute trust benefits.
The trustee must ascertain the identity and location of beneficiaries to distribute trust benefits.
Signup and view all the answers
The settlor's instructions in the trust instrument cannot be changed regardless of state law.
The settlor's instructions in the trust instrument cannot be changed regardless of state law.
Signup and view all the answers
A trustee may hold corporate stock in the name of a nominee to simplify transactions.
A trustee may hold corporate stock in the name of a nominee to simplify transactions.
Signup and view all the answers
Once a trustee accepts their position, there is no need to obtain control over the trust property.
Once a trustee accepts their position, there is no need to obtain control over the trust property.
Signup and view all the answers
A trustee has no obligations under the Trust Code if they claim ignorance about its requirements.
A trustee has no obligations under the Trust Code if they claim ignorance about its requirements.
Signup and view all the answers
A trust must always be evidenced by a written instrument to be enforceable.
A trust must always be evidenced by a written instrument to be enforceable.
Signup and view all the answers
The statute of frauds makes a trust unenforceable if not evidenced in writing.
The statute of frauds makes a trust unenforceable if not evidenced in writing.
Signup and view all the answers
It is necessary for the signature of the settlor to be included in the written evidence of the trust.
It is necessary for the signature of the settlor to be included in the written evidence of the trust.
Signup and view all the answers
Notarization of a trust is mandatory for its validity.
Notarization of a trust is mandatory for its validity.
Signup and view all the answers
An acknowledgment requires a notarized statement from the settlor confirming their free will in executing the trust.
An acknowledgment requires a notarized statement from the settlor confirming their free will in executing the trust.
Signup and view all the answers
Oral trusts are never allowed under any circumstance.
Oral trusts are never allowed under any circumstance.
Signup and view all the answers
The primary purpose of a trust contest is to establish the legal title of a trustee.
The primary purpose of a trust contest is to establish the legal title of a trustee.
Signup and view all the answers
Trust instruments concerning real property must often be filed in the deed records to establish the chain of title.
Trust instruments concerning real property must often be filed in the deed records to establish the chain of title.
Signup and view all the answers
An exculpatory clause can excuse a breach of trust committed in bad faith.
An exculpatory clause can excuse a breach of trust committed in bad faith.
Signup and view all the answers
Trust protectors must act in good faith with regard to trust purposes and beneficiaries.
Trust protectors must act in good faith with regard to trust purposes and beneficiaries.
Signup and view all the answers
A trustee can retain profits derived from a breach of trust if the settlor permits it.
A trustee can retain profits derived from a breach of trust if the settlor permits it.
Signup and view all the answers
Lawyers can use exculpatory clauses to exempt themselves from malpractice.
Lawyers can use exculpatory clauses to exempt themselves from malpractice.
Signup and view all the answers
Trustees are encouraged to include exculpatory clauses in trusts to lower their standards of care.
Trustees are encouraged to include exculpatory clauses in trusts to lower their standards of care.
Signup and view all the answers
A trust protector's instructions must be followed unless they breach their duties.
A trust protector's instructions must be followed unless they breach their duties.
Signup and view all the answers
An exculpatory clause can only exculpate negligence but not bad faith or intentional acts.
An exculpatory clause can only exculpate negligence but not bad faith or intentional acts.
Signup and view all the answers
The primary function of a trust protector is to create new trusts.
The primary function of a trust protector is to create new trusts.
Signup and view all the answers
Study Notes
Introduction to Trusts
- A trust divides property ownership into legal and equitable interests
- Settlor creates the trust; trustee holds legal title, beneficiary holds equitable title
- Trustee manages property according to settlor's instructions
- Trust ends when duties are complete or property is depleted
- Texas trust legislation evolved from case law and sparse statutes to the Texas Trust Code
- Trusts are not always cost-effective
- Trusts are used to protect beneficiaries (minors, incompetents, spendthrifts)
- Provide asset protection against settlor's incompetence
- Trusts can avoid probate if created during the settlor's lifetime
Elements of a Valid Trust
- Trust intent
- Settlor with capacity
- Compliance with the Statute of Frauds
- Legal purpose
- Transfer of property
- Trustee holding legal title
- Beneficiary holding equitable title
- Compliance with Rule Against Perpetuities (RAP)
Trust Creation
- Trust intent is the key element in creating a trust
- No particular form or words are required to create a trust
- Manifest intent is needed from the settlor (or trustor, grantor)
- Split of legal and equitable title is a key element
- Imposition of fiduciary duties on the trustee is essential
Statute of Uses
- A precursor to trusts, uses could be honorary
- Became legally enforceable in 15th Century
- In Texas, the Statute of Uses applies to real property, but similar principles are frequently asserted to govern personal property.
Trust Creation During Lifetime
- A settlor creates an inter vivos trust during their lifetime
- Settlor can be trustee and transfer legal title to a third-party trustee
Trust Creation Upon Settlor's Death
- A settlor can create a testamentary trust in their will
- Must be a valid will and valid on its own terms, apart from the will
- The trust's validity does not depend on the will's validity.
Consideration
- Consideration is generally not required for trust creation
- But, an agreement to create a trust in the future requires consideration
Statute of Frauds
- Some trust agreements must be in writing to be valid (real property)
- Exception: Oral trust for personal property that lacks a signature but meets other requirements
Rule Against Perpetuities (RAP)
- Future interests are valid if they must vest within 21 years after the death of someone alive when the trust was created)
- Applies to non-charitable trusts, not charitable trusts
- Some states have modified or abolished RAP for certain circumstances
Trust Purposes
- To protect beneficiaries
- To provide flexibility in asset distribution (spread out benefits of trust)
- To avoid probate
Trust Property
- Must have property for a trust
- Property required for trust to be valid.
- Can include tangible (land, houses, cars) and intangible (stocks, bonds)
Trust Performance During Settlor's Lifetime
- Settlor can be the trustee
- Settlor can retain many powers in the trust, even if a trustee
Trustee Duties
- Exercise fiduciary duties, (prudent investor rule)
- Duty of loyalty (avoid self-dealing)
- Duty of impartiality (favor no one beneficiary)
- Duties are imposed by the Trust Code
Trustee Powers
- Powers granted by trust instrument
- Additional powers granted by Texas statute
- Powers to manage property: Sell, lease, invest, improve.
Trust Distributions
- To named beneficiaries in accordance with trust terms
- Manner of distribution is specified in the trust document
- The trustee has a duty to make proper distributions.
Trustee Compensation
- Trustee is not entitled to compensation unless the trust instrument specifies otherwise, or law states otherwise
- The amount of compensation is determined based on the value of the trust property and any unusual labor/skill required.
Settlor Revocation or Modification of Trust
- Settlor has power to revoke or modify trust, unless irrevocable (express language).
- Method for revocation or modification must be in the trust document.
Trust Termination
- Some express stipulations in the trust document
- Beneficiary agrees to end the trust
- Legal impossibility (property gone or illegal purpose).
- Trust becomes uneconomical
- Court order (allows judge to decide)
- Merger of legal and equitable titles in one person
Trust Account
- A bank account with a named beneficiary; not a trust (no split of title)
- A simple way to convey wealth to a beneficiary
- No fiduciary duty owed by account holder as it is not a trust, it's a contract.
Resulting Trusts
- Trust where trust fails or has no beneficiary
- Implied trust or an arrangement that a court finds appropriate
- Settlor or successors will be the beneficiary
Constructive Trusts
- Remedy to prevent unjust enrichment (unfair use of assets)
- Created by a court, not explicit in the trust document
- Prevents someone from keeping property they shouldn't have.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Related Documents
Description
Explore the essential principles of trust law, including the roles of settlors and beneficiaries. This quiz covers various types of trusts, their validity, and specific state regulations, highlighting both traditional and modern practices.
