CA Bar- Trusts- Breeden Attack Sheet (Barbri)

TRUSTS (BREEDEN ATTACK SHEET) ------------------------------------------------------------------------------------------------------------------------------------------------- 1. ELEMENTS OF THE TRUST (“B TRIPS”) BENEFICIARY ((1)“definite, ascertainable beneficiary- class gifts valid as long as not overbroad; (2) directly benefit from trust; (3) capable of holding title; (4) acceptance by B required) TRUSTEE ((1)named trustee; (2)active duties; (3)capable of holding title; (4)must accept trust responsibilities; merger of legal and equity titles if B and trustee same)) RES (TRUST PROPERTY): ((1)presently existing property interest/not mere expectancy; (2) identifiable and actually identified with certainty; (3) must be capable of being transferred into trust) INTENT: ((1)settler must have intent to create trust; (2) expressed externally at time he owned property; (3) and intended to take effect immediately; (4) mandatory words, not precatory words; (5) writing required if land) PURPOSE: (valid purpose not contrary to public policy or illegal; if illegal at creation, try to excise good from bad to make trust stand; if illegal after creation, a resulting trust created) SETTLOR: (settlor must have capacity/same standard as wills; settlor may always revoke trust in CA unless trust states otherwise) ------------------------------------------------------------------------------------------------------------------------------------------------- 2. WHAT KIND OF TRUST WAS CREATED AND ARE ANY ADDITIONAL LEGAL REQUIREMENTS MET? (“TRISH STRIPS [in] DC”) INTERVIVOS TRUST (created while settlor living; requires “B TRIPS” and immediate transfer of res to trustee) REVOCABLE INTERVIVOS TRUST (trust in which res passes to trust in settlors life but possession does not pass until settlors death/ subject to settlors revocation) TESTAMENTARY TRUST (trust created by will that requires “B TRIPS” plus trust provisions must be clear from will, or by document incorporated by reference into will, or by facts having ind. Significance, or by power of appointment created by will ) LIFE INSURANCE TRUSTS (insurance policy may provide for trustee to hold life insurance proceeds for B; CA allows settlor to name trustee of life insurance policy in will) TOTTEN TRUST (not true trust; more like a will substitute; always a bank account where upon T’s death, B takes what is left in account) POUR OVER WILL: (see wills sheet; UTATA) SECRET TRUST: (trust not mentioned in will; res devised to trustee who promised to hold for another in trust/ enforceable through constructive trust if sufficient proof of agreement produced/Semi-secret trusts names trustee in the will but no B/ MAJ courts create constructive trust and give proceeds to residual estate (not to intended B)) CHARITABLE TRUST: (created for public benefit; has to be 100% charitable, not partly; B must be indefinite; doctrine of cy pres/as nearly as possible/must be general charitable intent, not specific/court can modify using cy pres if trust cannot carry out GENERAL intention ) HONORARY TRUST: (no beneficiary; not charitable; not true trust; simply a goal of settlor; trustee is on his honor to carry out, not required; ex: trust to further fox hunting; typically RAP problems with these trusts b/c no measuring life) SPENDTHRIFT TRUST: (B cannot transfer his right to future payments of income or principal and creditors cannot attach this right; settlor’s intent must be clear; some states may allow creditors to go after that amount not needed by B to support his manner of living) DISCRETIONARY TRUST: (Trustee has sole and absolute discretion to pay or withhold income or principal to B/ creditors can only reach once paid) SUPPORT TRUST: (trustee can pay only so much of income or principal as is necessary for B’s support/ creditors cannot reach) CONSTRUCTIVE/RESULTING TRUSTS: (trusts created by court to grant relief when person obtains legal title which rightfully belongs to another) ------------------------------------------------------------------------------------------------------------------------------------------------- 3. TRUST ADMINSTRATION: Is trustee’s act authorized and did trustee breach any fiduciary duty owed? If so, what recourse? TRUSTEE’S POWERS: (imperative powers and discretionary powers; may not borrow money, mortgage or otherwise encumber the res; trustee may sue 3rd party who damage trust) DUTIES OF TRUSTEE (“SAFE AD”) (Duty to) SUPERVISE Agents (trustee to only delegate those things he cannot reasonably do himself/ must select investments himself/ must select and supervise agents and is liable for their actions) (Duty to) AVOID self-dealing (trustee must take no personal advantage from position; must avoid conflicts; if duty violated, trustee strictly liable for losses to trust) (Duty to) FOLLOW instructions (trustee must comply with terms and duties under trust but cannot follow instructions blindly) (Duty to) EARMARK assets (trustee must separate trust assets from other assets and earmark trust property; under modern view, trustee liable only to extent damages caused by failure to earmark) (Duty to) ACT with skill (trustee must act with that skill, degree of care, and prudence exercised by a reasonably prudent person in managing his own property) (Duty to) DIVERSIFY assets (trustee must make trust productive; must invest and properly diversify; investments should be spread over different types of investments; proper investments include gov. securities, and first mortgages; follow UNIFORM PRUDENT INVESTOR ACT: look at entire portfolio, not each individual investment) IF TRUSTEE BREACHES DUTY TO TRUST (B may seek damages or removal of trustee for breach of duty; settlor can sue ONLY if he is also a B; exculpatory clause limiting trustee liability cannot absolve from all liability; measure of damages= actual loss to trust + interest; trustee is not permitted to offset loss from one breach with the gain from another breach) ACCOUNTING PROBLEMS (All assets received by trust allocated as either PRINCIPAL or INCOME; cash dividends are income whereas stock dividends are principal; property taxes, mortgage payments, and improvements are charged to principal; repairs & maintenance charged to income)