信托法Trusts剖析.docx
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信托法Trusts剖析
Trusts
Overview
A.Expresstrusts–arisefromtheexpressedintentionoftheownerofpropertytocreatetherelationship
1.Private–oneormoreascertainablepersonsasbeneficiaries,subjecttoRAP
2.Charitable–cannotbeforthebenefitofidentifiablebeneficiaries,canbeperpetual
B.Impliedorimposedtrusts–notexactlytrusts,butcourt-imposedequitableremedies
1.Constructivetrusts–simplyanameforanequitableremedythecourtimposesincasesinvolving(i)fraud,(ii)unconscionableconduct,&(iii)unjustenrichment
2.Resultingtrusts–theremedythecourtuseswhenanattempttocreateatrustfails
C.Trust-likemechanisms–waystoholdproperty&designatesomebodytotakeitwithoutwritingawill
E.g.Jointbankaccountswithrightsofsurvivorship;TottenTrusts;custodialgiftstominors
-NOTE:
trustlawappliesONLYtoexpresstrusts.Theexpresstrustistheonlyrealtrust;theothertwoarejustequitableremedies
II.RequirementsforavalidTrust
A.Expresstrusts:
1.Defined:
alegaldevicethatallowsanownerofpropertytomaketransfersofpropertyandtohavethoseassetsmanagedonbehalfofsomeoneelse.(ratherthanhavethebeneficiarymangethemoneybyhimselforherself)
a.Settlorhasthelegaltitletomanagethemoney,andthebeneficiaryhaveequitabletitletoenjoythedistributionsfromthetrust.
2.2kindsofexpresstrusts:
a.Lifetimetrust,setupduringthelifetimeofthepersonwhocreatedthetrust--settlorofthtrust(AKAintervivostrust)
b.Testamentarytrust,setupinthesettlor'swill.
3.8requirementsofavalidtrust
a.Settlor(AKAcreator)whomakesa
b.Deliveryoflegaltitleto
c.Property(res,corpusorprincipal)toa
d.Trusteewhoholdslegaltitleforthebenefitosa
e.Beneficiary(orBeneficiaries)with
f.Intenttocreateatrustfor
g.alawfulpurpose
h.Inavalidlyexecuteddocument
vNOTE:
noconsiderationisrequiredtocreateatrust.
1)Settlor:
Thesettlorcanbeanyone18orolder,withthecapacitytoenterintoKs
2)Delivery:
titledassetsmustbeformallytransferredtothetrusteefordeliverytobevalid.
a)themereintenttocreateatrust,oragratuitouswrittenpromisetocreateatrust,isnotenough.I
i)Increatingalifetimetrust:
(1)titledassets–forassetswhosetitleisevidencedbyadocument,(e.g.–realestate,stocksandbonds,etc.),legaltitlemustbeformallytransferredtothetrustee(whetherthetrusteeisathirdpartyorthesettlorhimself).
(a)Hypo:
Therewasnodeliverywithouttransferofthetitleofthestockcertificates.
(2)otherassets–transfermustbebyawrittenassignmenttothetrustee.
ii)Testamentarytrusts–“delivery”requirementdoesnotapplytotestamentarytrusts,willslawcontrols.
3)Property(RES):
tohaveatrust,legaltitletospecificpropertymustbeformallytransferredtothetrustee.
vThesubjectmatterofthetrustmustbecertainandidentified.
vIfthereisnotrustproperty,thereisnotrust.
a)Thepropertycanbealmostanything,butmustbepropertythatthesettlorowns,notjustmereexpectancyofownershipinthefuture.
i.Expectancyinterestinanother’swillisnotproperty.Hejusthashope
b)Itmustbeidentifiableproperty,notsubjecttofuturedetermination.
i.Cannotcreatetrustwith“whatevermoneyorpropertythatIcancontributeoverthenext10years”(thisispromisetocreateatrustinthefuture,notsupportedbyconsideration)
1.butifwrittenpromisetocreatetrustofproperty(tobereceivedinfuture)issupportedbyconsideration,undercontractprincipals,trustautomaticallyarisesuponreceiptoftheproperty
4)Trustee:
a)Foralifetimetrust,almostanyonecanbeatrusteesincenocourtinvolvementisneededforsuchtrusts.
b)Foratestamentarytrustcreatedundercourtsupervision,anyonecanbeatrusteeexceptwhocan't:
i.Thoseunder18
ii.Judiciallydeclaredincompetents
iii.Convictedfelons
iv.Thoseincapablebecauseofdrunkenness,dishonesty,wantofunderstanding,orimprovidence.
c)Nonresidentaliencanserveasfiduciary(testamentarytrustee,orexecutororadministratorofadecedent'sestate)if
i.relatedtodecedent(decedent'sspouse;grandparentordescendantofgrandparentofdecedentordecedent'sspouse;orspouseofanyoftheabovepersons);and
ii.NYresidentmustserveasco-fiduciary
NOTE:
NOtrusteverfailsforlackofatrustee.Iftheintenttocreateatrustisclearlymanifestedbutnotrusteeisnamed(orthenamedtrusteediesorresignswithnoprovisionforasuccessor),thecourtwillappointasuitabletrusteetocarryoutthetrustpurposes
5)Beneficiaries:
a)Foraprivate(non-charitable)trust,beneficiariesmustbedefiniteandascertainable,NOambiguity.
b)Ifambiguous,thetrusteeholdsinaresultingtrustfortheresiduarybeneficiaryofawill(orintestateheirsinabsenceofavalidwill)
c)EXCEPTION:
abeneficiarylistedassomeone's"family"or"nextofkin"ISconsidereddefiniteandascertainable,andthetrustdoesnotfail.Consulttheintestacystatutesforthenamesofthepersonswhofitthedescriptioninthetrust.
i.Intestacy:
whenadecedentdieswithoutavalidwillandtheirestatepropertyisdistributedpursuanttoastatestatue.
6)Intent:
a)settlormustintendtocreateanenforceableobligation;precatory(non-binding)languageisnotenough.
i.Eg:
"wouldlike"isprecatorylanguageanddoesnotimposeanenforceableobligation.
b)Trustmustbegivendutiestoperform;iftrusteehasnodutytoperformitiscalledapassivetrust,whichisnotrustatall.
vJustuse"trust"doesnotshowtheintenttocreateatrust;lookatallofthelanguageandallofthefactstodetermineintent.
7)Lawfulpurpose
a)atrustcannotcallforcommissionofacrime
b)atrustcannotcallfordestructionofproperty
c)Atrustcannothaveaconditionagainstpublicpolicy.
i.Trustsrestrictingmarriageorpromotingdivorce.
1.Butifapurposecanbefoundthatisnotoffensivetopublicpolicythenitisvalid(e.g,atrustthatgivesincometoaspouseuntilthatspouseremarriesisok)
ii.Marriagerestrictionstomembersofacertainreligionorethnicgrouparevalidaspermissiblepartialrestraintsonmarriage.
1.E.g:
trustconditiononsonfindajewishwife.Validb/chestillhasafairlywidechoice.
8)Trustexecution:
mustbeinwriting,signedbybothsettlorandtrustee,andeither:
(i)acknowledgedbyanotarypublic,OR
(ii)signedby2witnesses
III.Typesoftrusts:
●ALLtrustsarepresumedtobeirrevocable,unlessthetrustexplicitlyauthorizesrevocation.
A.Revocablelifetime/intervivostrusts
1.Themainrequirement:
atleastonebeneficiarywhoisnotthesettlor;settlorcannotbethesolebeneficiarywhenalsonamedthesoletrustee.
2.thesettlorcanplaymanyroles:
a.canbeatrustee
b.anincomebeneficiaryforlife.
c.Settlor'sestatecanbeoneofthebeneficiariesoftheprincipalsolongasthereisatleastoneotherbeneficiary.
d.Settlorcanretainthepowertoterminateoramendthetrust.
3.Reasonstohavearevocablelifetime/inter-vivostrust:
a.Managesassetsefficiently,particularlyusingaprofessionaltrustee
b.Helpsplanforpossibleincapacitybyavoidingguardianship
c.Avoidsprobateprocess
(i)Nopartoftheprincipalofatrustgoesthruthesettlor'sestateinprobate.---
(a)PROBATE:
theprocessofprovingawill,orhavingitdeclaredvalidandeffectivefollowingthedeathofthetestator.(testamentarytrust)
4.Reasonsnottohavearevocablelifetimetrust:
a.Doesnotavoidtaxes
b.Ifasettlorkeepsanincomeinterest,orkeepsapowertorevoke,thefulltrustassetswillbeincludedinthesettlor'sgrossestateforfederalestatetaxpurposes.
B."pour-over"gifts:
1.Testamentarygifts(giftsmadeinawill)toanexistingrevocabletrustareok.
a.Thiscalledapour-overgift.
b.Suchagiftavoidswillformalitiesinthetrust.
c.Trustcanbechangedduringthelifetimeofthsettlorinwaythatareeasierthanchangingawill
d.Keyrequirementsfora"pour-over"gifttoatrusttobevalid
(i)Thetrustmustbeinexistence,OR
(ii)Executedconcurrentlywiththewill
(a)WillexcutedonJan.3,trustdocumentexecutedonJan10th.invalidb/ctrustwasnotexecutedbeforeorconcurrentlywithwill
v2point:
e."pourover"isnotlimitedtotrustscreatedbythesettlor,butitcanbetoanyexistingtrust,includingthoseexecutedbyotherpersons.
f.Pour-overgiftsarevalidevenifthetrustwasunfundedoronlypartiallyfunded,duringsettlor'slifetime.
2.Lifeinsuranceproceeds:
a.2waysaninsuredcanmakelifeinsuranceproceedspayabletoatrust:
(i)Insuredcancreateanunfundedrevocableinsurancetrust,andnamethetrusteeofthetrustaspolicybeneficiary.
(a)Unfundedinsurancetrustsarevalidatedbystatute(andcanbetherecipientofa"pourover"gift),eventhoughthereisnoresuntilaftertheinsuredsettlordiesandtheinsuranceproceedsarepaidtothetrustee(thiswouldresultinadditionallegalfeesforpreparationofatrust)
(ii)HavethetrustbeatestamentarytrustandhavethelifeinsurancepolicyKnamethe"trusteenamedinmywill"asthelifeinsurancepolicybeneficiary.
b.Proceedsofsavingsaccountsorpensionplanscanbehandledthesamewayaslifeinsuranceproceeds.
C.TottenTrust(bankaccounttrust)
1.Definition:
theTottenTrustisabankaccountinthedepositor'sname"astrusteefor"anamedbeneficiary.
a.Hypo:
Aopenabankaccount"AastrusteeforB"
2.Key:
a.depositormakesdepositsandwithdrawalsthroughoutherlifetime
b.Beneficiaryhasnobeneficialinterestduringthedepositor'slifetime,butgetwhateverintheaccount