CAB Trusts

Fiduciary relationship with respect to property whereby one person holds legal title for the benefit of another and which arises out of a manifestation of intent to create it for a legal purpose

• Fee simple
• Future interest
• Life insurance policy
• Bonds
• Stocks
• Cannot be illusory interests (debt owed or expected profits)

• Any legal person
• Class, even unascertained individuals
• Unincorporated entity
• - common law:not allowable beneficiary
• - Modern: allowable beneficiary

• Present manifestationof trust intent made by settlor (not be expression of future intent)
• Pecatory words are not enough (hope, wish, desire)
• Precatory rules + parole evidence may = trust
• SOF does not apply

• Must comply with Statute of Wills (local probate code)
• I.e., appears in T's will

• 3rd person is trustee
• Real Propery:
• - SOF applies
• - Deed must be executed
• Personal Property: 
• - required delivery of property to trustee at the time intent is manifested

• Settlor is trustee
• Real Property:
• - SOF applies
• - Some writing required (cannot deed property to one's self)
• Personal Property:
• - Only intent is examined
• - Delivery is not necessary

• Excise the illegal portion/counter to public policy portion, if possible
• Otherwise Crt will:
• - invalidate the trust, reverts to settlor
• - allow trustee to keep corpus

• Resulting trust is decreed
• Resulting trustee devises to settlor or settlor's estate

• Common law: Trusts for education, alleviation of poverty or sickness, to help orphans
• Restatement:Any trust which confers a substantial benefit upon society

• Manifestation of trust intent
• at settlor's death by will or during settlor's lifetime by declaration of trust/transfer in trust
• of a presently existing property that can be transferred
• for a legal charitable purpose

• No ascertainable beneficiary is allowed
• While a few people are receiving an incidental benefit, the focus is on society
• RAP does not apply
• Cy Pres does

• "As near as possible"
• If settlor manifests a general charitable intent, but the mechanism for effectuating that intent is not possible or practicable, the court can modify the mechanism to effectuate S's general charitable intent
• Intent is determined using intrinsic and extrinsic evidence

• e.g. for pets
• A trust with no ascertainable beneficiary and confers no substantial benefit upon society
• Goal of the settlor - trustee is not required to carry out the intent, but is authorized to do so
• failure to find trustee causes failure of trust
• RAP applies

• Not really a trust - more an account
• The named beneficiary takes what is in the bank account
• Some type of savings account w/ right of suvivorship
• No fiduciary duties are owed
• - unless depositor's intention is manifested somehow

Beneficiary cannot transfer rights to future payments of income or principal and creditors cannot attach those rights

• Common law: generally no
• Exceptions:
• - Gov't
• - Those providing necessities to B
• - Child support
• - Spousal support
• - Alimony
• - Tort judgment creditor
• Surplus Concept: difference b/twn station in life and amount of income including STT is attachable
• Self-settled Spendthrift Trust: Trust is valid, but spendthrift provision is not

• Trustee is required to use only so much of income/principal as is necessary for the beneficiary's:
• health,
• support,
• maintenance, or
• education

Common law: generally noExceptions:- Gov't- Those providing necessities to B- Child support- Spousal support- Alimony- Tort judgment creditor

• Trustee is given sole and absolute discretion in determining:
• how much to pay the beneficiary, if anything, and
• when to pay the beneficiary, if ever

• On one hand, beneficiary cannot voluntarily transfer rights b/c may not get anything
• If there was an assignment, then asignee steps into beneficiary's shoes;
• however - if trustee has notice he must make payments to assignee or risk being held liable

• If there was an creditor, then creditor steps into beneficiary's shoes;however
• - if trustee has notice he must make payments to creditor or risk being held liable

• Created by court - transfers property to settlor, or settlor's estate
• Examples:
• - end of private express trust
• - No beneficiary in private express trust
• - Charitable trust ends b/c impossibility or impracticability and Cy Pres cannot be used
• - If private express trusts becomes illegal after creation
• - Excess corpus in a private express trust
• - Semi-section trust
• - Purchase money resulting trust

• When A pays consideration to B to have title to property to be transferred to C
• If A and C are not related, rebuttable assumption that C is holding for benefit of A
• If A and C are related, rebuttable presumption of a gift

• Will makes a gift to a person to hold as trustee without naming a beneficiary
• Violative of statute of wills - parole evidence is not allowed

• A remedy to prevent fraud or unjust enrichment
• A means to disgorge a wrongdoer or ill gotten gains
• Examples:
• - trustee of private express/charitable trust makes a profit b/c of self-dealing
• - there is fraud in inducement or undue influence
• - Secret trusts in the Law of Wills
• - Oral Real Estate Trust - breach of promise

• Will provides gift to A but is based on promise to use money for B
• Parole evidence can be used to show that beneficiary was B
• Constructive Trust is remedy

• Trusts where deed is transferred upon promise that property will be used to benefit 3rdP
• Exceptions to statute of frauds:
• Fiduciary relationship between Grantor and recipient
• Fraud in inducement (by making someone rely on your promise to deed property to you)
• Detrimental reliance by the intended beneficiary

• Enumerated: as listed in trust
• Implied: helpful and appropriate to carry out the trust purpose
• - to sell trust property
• - to incur expenses
• - to lease
• - to borrow (modern)

• Trustee must administer trust for the benefit of the beneficiaries (must be impartial), having no other consideration in mind
• No self-dealing by the trustee
• consequences: 
• - trustee is surcharged for loss
• - personal profit is transferred via constr. trust

• State lists
• Prudent person (common law)
• As a "prudent investor" (Uniform Prudent Investor Act)
• Notes: always a duty to diversify

• Trustee must act reasonably prudent person investing his own property, trying to maximize income while preserving corpus.
• If trustee holds himself to have greater care, then higher standard applies
• Each investment is individually scrutinized

• Trustee must act as a prudent investor
• If trustee holds himself to have greater care, then higher standard applies
• Performance of entire portfolio matters, not individual
• -

• Trustee must label trust property as trust property
• Common law: trustee is held personally liable for any loss, even without causality
• Modern: trustee is held personally liable only if loss was caused by failure to label (e.g. trustee's creditor attaches to trust funds)

• Trustee cannot co-mingle personal funds with trust funds or between trusts
• Trustee can be held liable for any loss

• Trustee can rely on competent advice
• Trustee must make decisions
• Cannot delegate to another trustee
• Common law:
• - could not delegate duty to invest
• - trustees must act unanimously
• Modern: 
• - Can delegate duty to invest
• - majority of trustees can decide to act

Trustee must give beneficiaries of income and expenses of trust on a regular basis

• Trustee must act as a reasonably prudent person dealing with his own affairs
• - note: discuss when there is any breach of duty
• Remedies: damages, constructive trust, tracing and equitable lien on property, ratification, removal of trustee

• Common law: Trustee is sued in personal capacity
• - can be indemnified by trust if acted w/in powers and not personally at fault
• - K could provide that trustee
• Modern rule: If other person to K knows trustee is entering into K as representative, the must be sued as representative

• Common law: trustee was sued in personal capacity
• - if w/out personal fault - trustee can be indemnified by trust
• - thus, if agent committed tort, trustee was indemnified
• Modern: Trustee is personally liable only if he is at fault
• - with agent torts or strict liability, representative is sued in representative capacity

• Settlor can modify trust if:
• - expressly reserved, or
• - has power to revoke

• Cy Pres - charitable trust
• Doctrine of Changed Circumstances:
• - Changes administrative or mgmt powers of trust
• - Does not change beneficiaries
• 2 Elements:
• - unforeseen circumstances at time of settlement
• - deviation is necessary to preserve trust

• Majority Rule: to retain power to revoke, settlor must expressly reserve power in trust instrument
• Minority: Settlor has the power to revoke unless expressly does not

• Settlor and all beneficiaries agree
• All the beneficiaries agree to terminate and all material purposes have been accomplished
• Passive trusts and statute of uses

• private express trusts w/ corpus of real property but trustee is passively holding title
• property passes to beneficiaries

• Income:
• Cash dividends
• Interest income
• Net business income
• Expenses:
• interest on loan indebtedness
• taxes
• minor repairs

• Income:
• - Stock dividends
• - stock splits
• - net proceeds on sale of trust assets
• Expenses:
• - principal part of loan indebtedness
• - major repairs

Trustees may disregard general rules of allocating income and expenses if necessary to administer the trust fairly