Trusts ALL.txt

• 1) No interest is valid if it could vest later than any life in being at the time of the creation of the interest plus 21 years
• 2) Vested when
• - no condition precedent needs to be satisfied, and
• - exact identity of the taker is known
• 3) NY RULE
• - age contingencies reduced to 21 years
• - admin contingencies reduced to 21 years
• - women presumed infertile at age 55
• - ignore possibility of adoption

• 1) An interest is void if it suspends the power of alienation for a period longer than lives in being plus 21 years
• 2) Power to alienate is suspended when there are NO persons who could, together, transfer fee simple title
• - needs consent of both income and remainder beneficiaries

• 1) Spendthrift trusts (bc beneficiary cannot voluntarily alienate), or
• 2) Life estate created in
• - unborn person (can't agree to alienate), or
• - open class (unascertained persons can't agree to alienate)

• 1) NY Fiduciary Powers Act (FPA): controls powers exercisable w/o
• - court order, or
• - express authorization in the trust
• 2) Trustee can do almost anything, except:
• - engage in self-dealing***
• - borrow money on behalf of the trust
• - continue a business (unless court gives approval)

• Trustee CANNOT
• 1) buy or sell trust assets to himself
• 2) borrow trust funds
• 3) lend money to trust
• 4) profit from position as trustee (e.g., confidential info)
• 5) buy own stock as a trust investment

• Trustee MUST
• 1) segregate trust property from personal property, and
• 2) earmark assets as trustee ("John as trustee for XYZ trust")

• Beneficiary may
• 1) remove trustee
• 2) ratify transaction and waive breach
• 3) sue for any loss ("surcharge action")
• Note: breach of fiduciary duty is an automatic wrong
• - good faith is NOT a defense
• - reasonableness is NOT a defense

Beneficiary cannot sue a BFP for value who lacks notice of trustee's breach of duty (i.e., no knowledge of self-dealing)

• Self-dealing rules also apply to transactions with
• - relatives of trustee
• - business, of which trustee is an officer, employee, partner, or principal

• 1) Cannot be used to shield fiduciary breach in a testamentary trust
• 2) But can be used to exculpate trustee of an inter-vivos trust

• 1) NY Fiduciary Powers Act (FPA): controls powers exercisable w/o
• - court order, or
• - express authorization in the trust
• 2) Trustee can do almost anything, except:
• - engage in self-dealing***
• - borrow money on behalf of the trust
• - continue a business (unless court gives approval)

• Trustee CANNOT
• 1) buy or sell trust assets to himself
• 2) borrow trust funds
• 3) lend money to trust
• 4) profit from position as trustee (e.g., confidential info)
• 5) buy own stock as a trust investment

• Trustee MUST
• 1) segregate trust property from personal property, and
• 2) earmark assets as trustee ("John as trustee for XYZ trust")

• Beneficiary may
• 1) remove trustee
• 2) ratify transaction and waive breach
• 3) sue for any loss ("surcharge action")
• Note: breach of fiduciary duty is an automatic wrong
• - good faith is NOT a defense
• - reasonableness is NOT a defense

Beneficiary cannot sue a BFP for value who lacks notice of trustee's breach of duty (i.e., no knowledge of self-dealing)

• Self-dealing rules also apply to transactions with
• - relatives of trustee
• - business, of which trustee is an officer, employee, partner, or principal

• 1) Cannot be used to shield fiduciary breach in a testamentary trust
• 2) But can be used to exculpate trustee of an inter-vivos trust

• 1) Objectives of the trust would be defeated or substantially impaired, if trust is not modified or
• 2) Focus on PURPOSE of the trust
• - determine primary intent of Settlor
• - can modify specific directions whose continued enforcement would frustrate the primary purpose

• 1) NY RULE: in absence of express contrary language, all trusts presumed to be
• - irrevocable, and
• - unamenable
• 2) Exception: Settlor can terminate an irrevocable trust if
• - all beneficiaries in being consent
• - NB: no one can consent for a beneficiary who is a minor or incompetent (not even parents or guardians)

• 1) Revocable inter-vivos trusts
• 2) Pour-over trusts
• 3) Totten trusts***
• 4) Joint bank accounts***
• 5) Charitable trusts
• 6) Non-trusts
• 7) Spendthrift trusts***

• Main requirements
• - at least one beneficiary who is NOT the Settlor
• - Settlor cannot be the SOLE beneficiary when also named
• - the SOLE trustee

• Permissible roles for Settlor
• - can be "a" trustee (but not sole)
• - can be income beneficiary
• - can be remainder beneficiary, IF at least one other is named
• - can retain power to terminate or amend the trust

• 1) Does NOT avoid taxes
• 2) Full value of trust includible in Settlor's gross estate if he:
• - keeps and income interest, or
• - keeps power to revoke

• At time of the "pour over" gift,
• 1) Trust must be in existence, or
• 2) Trust executed at the same time as the Will

• Yes
• "Pour over" gift can be into any trust, not just ones created by the Settlor

Name trustee as the beneficiary of the insurance policy

• 1) Depositor can deposit or withdraw as he/she wishes during lifetime
• 2) Beneficiary get whatever is in account at Depositor's death
• 3) No particular words required; can be
• - "as trustee for X"
• - "in trust for X"
• - "ITF"

• 1) Withdrawal of all money
• 2) Express revocation during lifetime. Requires
• - writing signed by depositor
• - identifies the beneficiary and bank
• - notarized and delivered to bank
• 3) Testamentary revocation
• - must follow same procedure for lifetime revocation
• 4) Beneficiary predeceases Depositor

• Depositor can change through same method as revocation
• - signed writing notarized
• - names old beneficiary and new one
• - delivered to bank

• Creditors of the Depositor can always reach account balance, either before or after death.
• Rationale: Totten trust is nothing more than a revocable trust

• Clear and convincing evidence must show that
• 1) survivorship not intended, and
• 2) account opened solely for depositor's CONVENIENCE

• 1) Each owns HALF the balance, regardless who contributed the amount
• 2) During life, each can withdraw up to half the total balance contributed
• 3) At death, survivor takes all

• 1) Gifts must be made to a "custodian"
• 2) Gift must specify that it is made uner the NY UTMA
• 3) Gift can be testamentary or inter-vivos

• 1) Manage and invest under prudent person std
• 2) Custodian has discretion to pay over what is "advisable"
• 3) Must pay balance of account to minor upon turning 21 (18 for pre-1997 gifts)

• 1) Depositor names himself as Custodian: amount of gift included in gross estate
• 2) Someone else named Custodian: amount of gift not included in Depositor's gross estate

• 1) Beneficiaries must be indefinite and large group
• 2) Charitable purpose required
• 3) Not subject to RAP
• 4) Cy Pres applies
• 5) Attorney General represents beneficiaries
• a) AG must be named as party
• b) AG or donor have standing to sue to enforce trust terms

• Trust will fail and gift will pass to residuary estate if beneficiary is NOT a human being
• Exceptions
• 1) Pet trusts: May last for lifetime of pet w/o violating RAP
• 2) Cemetery trusts: No RAP violation (treated as charitable trusts)

• 1) Equitable remedy: disgorge unjust enrichment from wrongful conduct
• 2) "trustee's" only duty tis to convey property to person who, in equity, should rightfully have the property

Look for a transfer of property where the donor expects that take the property back at sometime in the future

• 1) Arises when P buys property, has title put in someone else's name, but P later expects to take back title to the property
• 2) NY does NOT recognize PMRT
• - Result: P cannot get property back
• - EXCEPTION: Clear and convincing evidence that grantee had expressly or impliedly PROMISED to reconvey property to P

• 1) Protects beneficiary's interest from creditors
• 2) Prohibits voluntary or involuntary transfer of a beneficiary's interest
• 3) NY RULES: Spendthrift protection
• - automatically applied to income interests
• - but does NOT automatically apply to remainder interests (provision must be express as to remainders)
• 4) Does NOT apply to any interest retained by Settlor

• 1) Necessities furnished
• 2) Child support and alimony creditors
• 3) Federal tax liens
• 4) Excess income beyond that needed for support and education (look to beneficiary's accustomed lifestyle)
• 5) NY 10% levy (all creditors share 10% together)***[FREQUENTLY TESTED]

• 1. SETTLOR who makes a
• 2. DELIVERY of legal title to
• 3. PROPERTY to a
• 4. TRUSTEE holds legal title for the benefit of a
• 5. BENEFICIARY with
• 6. INTENT to create a trust for a
• 7. LAWFUL PURPOSE in a
• 8. VALIDLY EXECUTED document

Anyone at least 18 years old with legal capacity to enter into K

Titled assets (e.g., land, registered stock) must be FORMALLY TRANSFERRED for delivery to be valid

• 1. Must be presently identifiable
• 2. Settlor must own property now
• a. mere expectancy of future ownership is not enough

• 1. Inter vivos trusts: Almost anyone can be a trustee
• 2. Testamentary trusts: trustee can be anyone except
• a. under 18 y/o
• b. adjudicated incompetent
• c. convicted felons
• d. incapable b/c of drunkennes, dishonesty, want of understanding, or improvidence
• e. non-resident alien, but only if
• i) related to decedent, and
• ii) NY resident serves as CO-fiduciary

• 1. Must be "definite and ascertainable"
• a. "Family" or "next of kin" is as definite and ascertainable
• 2. If ambiguous, trustee holds property in a "resulting trust" for the residuary beneficiary

• 1. Must intend to create an enforceable obligation in the trustee
• - Trustee must be given duties
• - Beneficiaries may enforce duties
• 2. Precatory words do not make enforceable obligations
• 3. Use of word "trust" not enough; consider
• - all facts, and
• - all language
• to determine intent

• 1. Trust cannot
• - call for commission of crime
• - call for destruction of property
• - have a condition against public policy
• 2. Against public policy (invalid)
• - restricts marriage (to anyone)
• - promotes divorce
• 3. NOT against public policy (valid)
• - income to widows until remarriage
• - marriage restricted to certain religious or ethnic groups

• Must be in writing, signed by both Settlor and Trustee, and either
• a) acknowledge by a notary public, or
• b) signed by 2 witnesses