Requirements for a valid trust
- 1. Settlor who makes a
- 2. Delivery of legal title to
- 3. Property to a
- 4. Trustee who holds title for benefit of
- 5. Beneficiary with
- 6. Intent to create a trust for
- 7. a Lawful purpose
- 8. in a Validly executed document
- A bank account in depositors name 'as trustee for' a named beneficiary
- "Depositor may use account as she wishes during lifetime, balance to beneficiary on depositor's death"
- "Revoked by: withdrawal of all money, manifest intent to revoke, by will, death of beneficiary"
- Creditors of depositor may reach it
Uniform Transfers to Minors Act
- Custodian has duties to manage and invest as prudent person
- Pay for minor's needs
- Pay remainder to minor at age 21
- These are not considered trusts (custodian does not hold legal title)
- 1. Must have indefinite beneficiaries
- 2. For charitable purpose
- 3. May be perpetual
- 4. Cy pres can apply
- 5. Attorney General has a duty of representing beneficiaries
- A private trust must have a human beneficiary (but trustee can still carry out objective if they choose)
- "Exceptions:Pet Trusts, Cemetery trusts (both are valid trusts and trustee must carry them out)"
Purchase Money Resulting Trust
- Example of a resulting trust - really an equitable remedy
- When a purchaser put title in someone else's name who is not a relative where no gift was intended (merely some sort of convenience to purchaser)
- Purchaser may compel the title holder to give up title
Spendthift clause validity
- "Must be expressly stated in trust (e.g., no assigning interest, nor shall be reachable by creditors...)"
- Creditors who furnish necessities may reach interest
- Child support and alimony
- Federal tax liens
- "Any interest retained by settlor (i.e., can't shelter own assets from own creditors)"
- Revocable trusts are also reachable by settlor's creditors
Modification of Trusts
- 1. Find the primary intent of settlor regarding material purpose
- "2. Due to a change in circumstances, the specific directions of the trust would frustrate its primary purpose"
Termination of irrevocable/unamendable trusts?
Impossible to terminate unless the power to revoke and amend is expressly reserved
- Must Manage personally (no delegating unless prudent to do so)
- Duty of Loyalty (no self dealing)
- No commingling trust and trustee assets
- Preserve and make trust property productive (diversify as a prudent investor)
Remedies for breach of trustee's duties
- "1. Self-dealing: recover profit made by trustee, affirm transaction, or set aside transaction"
- "2. Commingling: liable for any resulting loss is presumed trustee's, any gain is presumed trust's"
- 3. Improper delegation: trustee liable for amount lost
- 4. Prudent investor/productive property: Trustee liable for losses and lost profit
- Good faith and reasonableness are not defenses for trustee
- "Exculpatory clauses are invalid if cover all liability, bad faith, intentional breach, recklessness, abuse of confidences"
Trustee liability in Contract and Tort
- Personally liable unless contract specifically shields
- "But, trustee entitled to compensation if:"
- 1. Within powers of trustee
- 2. Acting in course of proper adminstration
- Trustees absolutely liable for own torts and trustee's employees' torts. (Cover by insuring at the expense of the trust)
- "Trustee reimbursed if acting within powers, not personally at fault"
Faith and Credit?
- 1.a. Jurisdiction was proper in rendering state
- b. Judgment on merits (default counts)
- c. Judgment final
- 2. No good defense
- "a. Judgment was penal (offense against public, excludes tax)"
- "b. Extrinsic fraud (bribing judge yes, perjury no)"
- "Against recognizing state public policy NEVER a defense, mistakes of law and fact in rendering state NEVER a defense"
Recognition of foreign country judgments
- Comity given same as between states plus roughly met due process:
- 1. Jurisdiction was proper (minimum contacts)
- 2. No sham procedures
Jurisdiction issues with divorce decrees
- Divorce decree jurisdiction where one spouse domiciled (voidable if violated)
- "Check to see if person attacking jurisdiction is estopped (i.e, the people in the proceeding, played meaningful role, children of parties, those who marry or remarry in reliance on it)"
Property and custody awards jurisdiction
- Property: Valid if PJ over spouse whose rights at issue
- Custody: Child's home state (6-mo)
Domicile established by...
- 1. Physical presence
- 2. Intent to be domiciled
- infants: parents (one with custody if divorced)
- incompetents: parents (or domicile of choice if chosen prior to incompetency)
- Three choice of law approaches
- 1. Vested rights (first restatement)
- 2. Most Significant Relationship (second restatement) (IL)
- 3. Governmental Interest
Vested rights approach
- 1. Area of substantive of law
- 2. State the vesting rule
- 3. Indicate winning state
- 4. Indicate result
- Performance (contract performance)
- Injury (torts)
- Situs (real property)
- Situs at time of transaction (personalty)
- Execution (contract formation)
Domicile of decedent at death (personalty inheritance)
- Most significant relationship approach
- Court will apply law most significantly related to outcome:
- 1. Connecting facts
- 2. Policy principles (gov't interest)
- 3. Indicate which state wins
- 4. Indicate result