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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'.
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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.
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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.
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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.
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Minnesota is the only state that does not allow trusts for pets.
Minnesota is the only state that does not allow trusts for pets.
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The settlor always retains legal title while transferring equitable title to beneficiaries.
The settlor always retains legal title while transferring equitable title to beneficiaries.
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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.
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Consideration is required for a valid trust to be created.
Consideration is required for a valid trust to be created.
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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.
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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.
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A certificate of deposit can serve as valid trust property.
A certificate of deposit can serve as valid trust property.
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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.
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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.
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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.
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Mortmain Provisions allow unlimited gifts to charity regardless of circumstances.
Mortmain Provisions allow unlimited gifts to charity regardless of circumstances.
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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.
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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.
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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.
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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.
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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.
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A trust that qualifies for specific requirements can obtain significant tax benefits.
A trust that qualifies for specific requirements can obtain significant tax benefits.
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A trustee in Texas is rarely required to post a bond.
A trustee in Texas is rarely required to post a bond.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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Notarization of a trust is mandatory for its validity.
Notarization of a trust is mandatory for its validity.
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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.
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Oral trusts are never allowed under any circumstance.
Oral trusts are never allowed under any circumstance.
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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.
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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.
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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.
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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.
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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.
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Lawyers can use exculpatory clauses to exempt themselves from malpractice.
Lawyers can use exculpatory clauses to exempt themselves from malpractice.
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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.
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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.
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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.
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The primary function of a trust protector is to create new trusts.
The primary function of a trust protector is to create new trusts.
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What is one benefit of using a trust for managing property?
What is one benefit of using a trust for managing property?
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Professional trustees are usually less experienced than individual trustees when managing investments.
Professional trustees are usually less experienced than individual trustees when managing investments.
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Why might a settlor choose to create a trust instead of transferring property directly?
Why might a settlor choose to create a trust instead of transferring property directly?
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A trust is considered valid if it meets elements like trust intent, capacity of the settlor, and ___________ compliance.
A trust is considered valid if it meets elements like trust intent, capacity of the settlor, and ___________ compliance.
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Match the following types of trusts with their characteristics:
Match the following types of trusts with their characteristics:
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What is one condition that cannot be imposed when creating a trust?
What is one condition that cannot be imposed when creating a trust?
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Once a settlor becomes incompetent, the property in the trust immediately transfers to the beneficiaries.
Once a settlor becomes incompetent, the property in the trust immediately transfers to the beneficiaries.
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What type of trust is created while the settlor is still alive?
What type of trust is created while the settlor is still alive?
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A custodian has legal title to property gifted to them for a minor.
A custodian has legal title to property gifted to them for a minor.
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What is the role of a guardian in relation to property?
What is the role of a guardian in relation to property?
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In a loan agreement with collateral, a __________ is created by the bank to secure the loan.
In a loan agreement with collateral, a __________ is created by the bank to secure the loan.
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What happens to the title of the property immediately after the settlor's death?
What happens to the title of the property immediately after the settlor's death?
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An equitable charge is created when a donor transfers property to a donee subject to the donee paying money to a __________.
An equitable charge is created when a donor transfers property to a donee subject to the donee paying money to a __________.
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What is the primary duty of a personal representative in estate administration?
What is the primary duty of a personal representative in estate administration?
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Match the following terms with their descriptions:
Match the following terms with their descriptions:
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A power of appointment creates a fiduciary relationship.
A power of appointment creates a fiduciary relationship.
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Which of the following statements about a trustee's rights in trust property is true?
Which of the following statements about a trustee's rights in trust property is true?
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A trustee in Texas must be of legal age and competent to hold the position.
A trustee in Texas must be of legal age and competent to hold the position.
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What is the significance of the acceptance step for a trustee?
What is the significance of the acceptance step for a trustee?
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A trustee's creditors cannot touch trust property because the trustee has no _____ interest in the property.
A trustee's creditors cannot touch trust property because the trustee has no _____ interest in the property.
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Match the following types of trustees with their respective requirements:
Match the following types of trustees with their respective requirements:
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What happens when a settlor is found to have acted with moral culpability in creating a trust?
What happens when a settlor is found to have acted with moral culpability in creating a trust?
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A trust must have property to exist.
A trust must have property to exist.
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What is the role of a settlor in the creation of a trust?
What is the role of a settlor in the creation of a trust?
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The Dacey Trust allows the ____ to retain total control over the property while alive.
The Dacey Trust allows the ____ to retain total control over the property while alive.
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Which of the following is NOT a power that a settlor may retain?
Which of the following is NOT a power that a settlor may retain?
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An inter vivos trust can be created only if the settlor has capacity to transfer property.
An inter vivos trust can be created only if the settlor has capacity to transfer property.
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What type of trust is created at the death of the settlor?
What type of trust is created at the death of the settlor?
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Trust property must consist of property that the settlor can _____.
Trust property must consist of property that the settlor can _____.
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What is the primary function of a resulting trust?
What is the primary function of a resulting trust?
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What is the RAP, or Rule Against Perpetuities, primarily concerned with?
What is the RAP, or Rule Against Perpetuities, primarily concerned with?
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The 'wait and see' approach in RAP allows for a trust to potentially remain valid depending on the actual circumstances that occur.
The 'wait and see' approach in RAP allows for a trust to potentially remain valid depending on the actual circumstances that occur.
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What happens to a trust if the Rule Against Perpetuities is violated under common law?
What happens to a trust if the Rule Against Perpetuities is violated under common law?
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Under the Uniform Statutory Rule Against Perpetuities Act, the time period before interests must vest is ___ years.
Under the Uniform Statutory Rule Against Perpetuities Act, the time period before interests must vest is ___ years.
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Match the following terms with their definitions related to the Rule Against Perpetuities:
Match the following terms with their definitions related to the Rule Against Perpetuities:
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Which scenario exemplifies a violation of the Rule Against Perpetuities?
Which scenario exemplifies a violation of the Rule Against Perpetuities?
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The Cy pres doctrine allows courts to change the terms of a trust to comply with the settlor's general intent.
The Cy pres doctrine allows courts to change the terms of a trust to comply with the settlor's general intent.
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What age must the youngest child reach in the inter vivos trust example before property is distributed?
What age must the youngest child reach in the inter vivos trust example before property is distributed?
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The ___ period in a trust refers to the time before remainder interests must vest according to the RAP.
The ___ period in a trust refers to the time before remainder interests must vest according to the RAP.
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Which legislation mandates a court to reform interests that violate the RAP?
Which legislation mandates a court to reform interests that violate the RAP?
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Piercing the corporate veil involves disregarding the separate legal entity of a corporation to hold its shareholders personally liable for corporate debts.
Piercing the corporate veil involves disregarding the separate legal entity of a corporation to hold its shareholders personally liable for corporate debts.
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A shareholder derivative action is initiated by shareholders to enforce a corporate right that the corporation itself fails to enforce.
A shareholder derivative action is initiated by shareholders to enforce a corporate right that the corporation itself fails to enforce.
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When a corporation uses a corporate signature, it binds the corporation to the obligations incurred under that signature.
When a corporation uses a corporate signature, it binds the corporation to the obligations incurred under that signature.
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An organizational meeting is typically held after the incorporation of a business to adopt bylaws and appoint officers.
An organizational meeting is typically held after the incorporation of a business to adopt bylaws and appoint officers.
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Board members can only be removed for cause, and not without specified grounds.
Board members can only be removed for cause, and not without specified grounds.
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A corporation can take action that harms its shareholder if motivated solely by humanitarian concerns.
A corporation can take action that harms its shareholder if motivated solely by humanitarian concerns.
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A director can file a written dissent to a corporate decision to express disagreement.
A director can file a written dissent to a corporate decision to express disagreement.
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The business judgment rule permits a director to escape liability for making a decision that results in misfeasance if gross negligence can be established.
The business judgment rule permits a director to escape liability for making a decision that results in misfeasance if gross negligence can be established.
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Disinterested directors have no material financial interest in a transaction involving the corporation.
Disinterested directors have no material financial interest in a transaction involving the corporation.
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A director can self-deal in transactions if they disclose material facts and obtain approval from shareholders.
A director can self-deal in transactions if they disclose material facts and obtain approval from shareholders.
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A fiduciary must prove that their decision was detrimental to the corporation in the case of a conflict of interest.
A fiduciary must prove that their decision was detrimental to the corporation in the case of a conflict of interest.
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The factors for a corporate opportunity include whether the corporation has an interest in the opportunity.
The factors for a corporate opportunity include whether the corporation has an interest in the opportunity.
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A board of directors cannot ratify a transaction involving a conflict of interest without an attorney present.
A board of directors cannot ratify a transaction involving a conflict of interest without an attorney present.
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Controlling shareholders are exempt from disclosure obligations toward minority shareholders.
Controlling shareholders are exempt from disclosure obligations toward minority shareholders.
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The procedural duty of care claim asserts that the board was grossly negligent in the procedures used for setting executive compensation.
The procedural duty of care claim asserts that the board was grossly negligent in the procedures used for setting executive compensation.
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Quantum Meruit allows a service provider to be compensated even if no formal agreement was established prior to service delivery.
Quantum Meruit allows a service provider to be compensated even if no formal agreement was established prior to service delivery.
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The Texas Act permits the board to set salaries without regard for conflicts of interest or procedural fairness.
The Texas Act permits the board to set salaries without regard for conflicts of interest or procedural fairness.
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One can sell controlling stock at a premium without any concerns if the purchaser does not intend to loot the corporation.
One can sell controlling stock at a premium without any concerns if the purchaser does not intend to loot the corporation.
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Substantive duty of care claims can lead to assertions that a board wasted resources in executive compensation decisions.
Substantive duty of care claims can lead to assertions that a board wasted resources in executive compensation decisions.
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Corporate indemnification allows a corporation to cover expenses for its employees, directors, or officers only when they are found guilty in legal matters.
Corporate indemnification allows a corporation to cover expenses for its employees, directors, or officers only when they are found guilty in legal matters.
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A controlling shareholder's fairness is prioritised over their self-interest when engaged in transactions with the corporation.
A controlling shareholder's fairness is prioritised over their self-interest when engaged in transactions with the corporation.
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All partners are liable for debts incurred by the partnership, even if the corporation is a separate entity.
All partners are liable for debts incurred by the partnership, even if the corporation is a separate entity.
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A partner does not need to inform the other partners if they learn of a beneficial opportunity to the partnership while acting outside their business capacity.
A partner does not need to inform the other partners if they learn of a beneficial opportunity to the partnership while acting outside their business capacity.
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Unanimous approval from all partners is required for decisions made within the ordinary course of business.
Unanimous approval from all partners is required for decisions made within the ordinary course of business.
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In closely held corporations, owners typically select themselves to be on the board of directors and also choose themselves as officers.
In closely held corporations, owners typically select themselves to be on the board of directors and also choose themselves as officers.
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The Board of Directors has authority to run the corporation without any input from the shareholders.
The Board of Directors has authority to run the corporation without any input from the shareholders.
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If the corporation goes bankrupt, partners are responsible for the losses incurred by the corporation as it is a separate legal entity.
If the corporation goes bankrupt, partners are responsible for the losses incurred by the corporation as it is a separate legal entity.
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Majority interest approval is necessary for decisions made that are outside the ordinary course of business.
Majority interest approval is necessary for decisions made that are outside the ordinary course of business.
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Officers of a corporation can act without the authority delegated by the Board of Directors.
Officers of a corporation can act without the authority delegated by the Board of Directors.
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A promoter can be held liable for agreements made before the corporation is incorporated.
A promoter can be held liable for agreements made before the corporation is incorporated.
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A corporation can adopt a pre-incorporation contract only if there is specific language allowing it.
A corporation can adopt a pre-incorporation contract only if there is specific language allowing it.
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Novation involves substituting the original promoter with the corporation in a contract.
Novation involves substituting the original promoter with the corporation in a contract.
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A corporation must ratify a contract in order to adopt it.
A corporation must ratify a contract in order to adopt it.
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A Nuisance Per Se involves activities that are intrinsically dangerous and pose a risk to others.
A Nuisance Per Se involves activities that are intrinsically dangerous and pose a risk to others.
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Trade secrets must be both valuable and kept confidential to qualify as such.
Trade secrets must be both valuable and kept confidential to qualify as such.
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A partner is entitled to receive compensation for all services performed in a partnership.
A partner is entitled to receive compensation for all services performed in a partnership.
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A joint venture is characterized by its broad time and scope.
A joint venture is characterized by its broad time and scope.
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A limited partner is liable for the obligations of the partnership even if they do not participate in the control of business.
A limited partner is liable for the obligations of the partnership even if they do not participate in the control of business.
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An LLP registration lasts indefinitely unless action is taken to remove it.
An LLP registration lasts indefinitely unless action is taken to remove it.
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Shareholders can remove a director without cause if they hold a majority vote.
Shareholders can remove a director without cause if they hold a majority vote.
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The extent of control is considered the least important factor in proving that a person is an employee.
The extent of control is considered the least important factor in proving that a person is an employee.
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Principals are generally liable for torts committed by independent contractors while performing contracted tasks.
Principals are generally liable for torts committed by independent contractors while performing contracted tasks.
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Signing under the 'By' line in a corporate contract indicates that the person is not personally liable.
Signing under the 'By' line in a corporate contract indicates that the person is not personally liable.
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An agent must give any benefit received beyond what the principal has given back to the principal.
An agent must give any benefit received beyond what the principal has given back to the principal.
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Piercing the corporate veil requires evidence that two different entities no longer have separate personalities.
Piercing the corporate veil requires evidence that two different entities no longer have separate personalities.
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Undercapitalization refers to a company having sufficient funds to pay its creditors.
Undercapitalization refers to a company having sufficient funds to pay its creditors.
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When the corporation goes bankrupt, shareholders are personally liable for the debts of the corporation.
When the corporation goes bankrupt, shareholders are personally liable for the debts of the corporation.
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Under the dual purpose rule, a servant can be held responsible for their own business as well as for the master’s business simultaneously.
Under the dual purpose rule, a servant can be held responsible for their own business as well as for the master’s business simultaneously.
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A shareholder derivative action allows shareholders to sue on behalf of the corporation.
A shareholder derivative action allows shareholders to sue on behalf of the corporation.
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A partnership agreement requires unanimity to change according to section 152.208.
A partnership agreement requires unanimity to change according to section 152.208.
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When a foreign corporation operates in Texas, Texas law governs its internal affairs.
When a foreign corporation operates in Texas, Texas law governs its internal affairs.
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If one partner owes money to a third party, the other partner is not required to pay that debt.
If one partner owes money to a third party, the other partner is not required to pay that debt.
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The borrowed servant doctrine holds that an employer is not responsible for the conduct of an employee under their control.
The borrowed servant doctrine holds that an employer is not responsible for the conduct of an employee under their control.
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A duty of loyalty claim can be made if a director has a conflict of interest in setting executive compensation.
A duty of loyalty claim can be made if a director has a conflict of interest in setting executive compensation.
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Quantum Meruit refers to compensation being granted if services were provided, regardless of any prior agreement.
Quantum Meruit refers to compensation being granted if services were provided, regardless of any prior agreement.
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Controlling shareholders have no obligation to disclose information to minority shareholders.
Controlling shareholders have no obligation to disclose information to minority shareholders.
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Under the Texas Act, directors are responsible for setting their own salaries.
Under the Texas Act, directors are responsible for setting their own salaries.
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Indemnification for legal expenses is mandatory only for board members who are wholly successful in their defense.
Indemnification for legal expenses is mandatory only for board members who are wholly successful in their defense.
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Equity divided by the number of shares can be used to find stock value when market value is unavailable.
Equity divided by the number of shares can be used to find stock value when market value is unavailable.
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A buyer can demand immediate control of a corporation and still complete a sale without issues related to looting.
A buyer can demand immediate control of a corporation and still complete a sale without issues related to looting.
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Fairness is the primary focus of duties imposed on controlling shareholders in their relationship with the corporation.
Fairness is the primary focus of duties imposed on controlling shareholders in their relationship with the corporation.
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An officer's removal prejudices his contract rights.
An officer's removal prejudices his contract rights.
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A closely held corporation can impose unreasonable restrictions on the transferability of its shares.
A closely held corporation can impose unreasonable restrictions on the transferability of its shares.
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Court will uphold a shareholder agreement that excessively limits board authority.
Court will uphold a shareholder agreement that excessively limits board authority.
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The percentage required for a super majority in a closely held corporation is 55%.
The percentage required for a super majority in a closely held corporation is 55%.
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Corporate formalities carry significant weight when determining factors for piercing the corporate veil.
Corporate formalities carry significant weight when determining factors for piercing the corporate veil.
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A corporation can be held liable for the acts of its sister corporation.
A corporation can be held liable for the acts of its sister corporation.
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A shareholder is typically considered a fiduciary to the corporation.
A shareholder is typically considered a fiduciary to the corporation.
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The Deep Rock Doctrine states that a stockholder's claim is subordinate to outside creditors if the corporation is undercapitalized.
The Deep Rock Doctrine states that a stockholder's claim is subordinate to outside creditors if the corporation is undercapitalized.
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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.
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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.
