An Overview of Trusts: Classification, Living Trust, and Special Trusts
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Classification of Trusts,
the Living Trust,
and Other Special Trusts
Chapter 13
Trusts
•
Express Trust
–
Created in explicit terms for an express
purpose
•
Implied Trust
–
Created by operation of law based on
implied intent
Express Trusts
•
Private
–
Settlor intends to create a trust
–
Trustee is named
–
Beneficiary is named
–
Transfer of property
•
Public
–
Same elements as a private trust, except
that a social benefit or charitable purpose is
set forth and there is an indefinite class of
beneficiaries
Cy-pres Doctrine
•
An equity court may order a gift intended for
a charity that is now nonexistent to be given
to another charity whose purpose is as near
as possible to the purpose of the original
charity named by the settlor
Active Versus Passive Trusts
•
Active
–
The trustee actively manages the trust
•
Passive
–
The trustee has no active duties
Inter Vivos Trust
•
Created during the life of the settlor
•
Can be public or private
Testamentary Trust
•
Created at the time of the settlor’s death or
becomes effective upon execution of the
settlor’s will
Rule Against Perpetuities
•
Fixes a period within which a future interest
must vest
•
Rule: No interest is valid unless it vests no
later than 21 years, plus the gestation period,
after some life or lives in being at the time of
the creation of the interest
Implied Trusts
•
Resulting
–
Created by operation of law from
circumstances implied from the intentions of
the parties
–
Can be a remedy to litigation
•
Constructive
–
An involuntary trust created by operation of
law to recover property from a person who
obtained possession or legal rights illegally
or improperly
Miscellaneous Trusts
•
Spendthrift
–
Created for beneficiaries who are financially
irresponsible
•
Totten
–
A payable-on-death savings account in a
bank in which money is deposited in the
depositor's name as trustee for another
person named as beneficiary
Miscellaneous Trusts
•
Sprinkling
–
The trustee has authority and discretion to
accumulate or distribute income or principal,
or both, among beneficiaries in varying
amounts
Revocable Living Trusts
•
Same conditions apply as for trusts in
general
•
Can be an advantage over a will and can
be considered a will substitute since they
avoid probate
•
Reduces costs of estate administration
Revocable Living Trusts
•
Avoids publicity
•
No court supervision
•
Tax savings
•
Allows the settlor to manage or dictate
assets and distributions after death
Disadvantages
of Living Trusts
•
They are costly to create
•
The settlor must transfer assets to the trust
and give up control of them during his/her life
Pour-Over Will
•
A will provision in which the testator directs
the residue of the estate to go to an existing
living trust
Irrevocable Trusts
•
Cannot be changed or the property returned
after they have been created
•
Terms may be changed during the settlor’s
life, but the trust continues
Trust Administration Duties
•
Pre-Death
–
Manage trust property
–
Preserve and maintain trust property
–
File tax returns
Trust Administration Duties
•
Post-Death
–
Obtain Federal Employer Identification
Number
–
Notice to beneficiaries
–
Open a checking account for the trust
–
Transfer funds
Trust Administration Duties
•
Post-Death
–
Collect, preserve, and value assets
–
Pay creditor claims
–
File tax returns
–
Distribute income or principal to
beneficiaries
This comprehensive guide delves into the classification of trusts, including express and implied trusts, active versus passive trusts, cy-près doctrine, inter vivos trust, testamentary trust, and the rule against perpetuities. Explore the nuances and characteristics of each trust type and gain insights into their unique purposes and legal implications.
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Presentation Transcript
Classification of Trusts, the Living Trust, and Other Special Trusts Chapter 13
Trusts Express Trust Created in explicit terms for an express purpose Implied Trust Created by operation of law based on implied intent
Express Trusts Private Settlor intends to create a trust Trustee is named Beneficiary is named Transfer of property Public Same elements as a private trust, except that a social benefit or charitable purpose is set forth and there is an indefinite class of beneficiaries
Cy-pres Doctrine An equity court may order a gift intended for a charity that is now nonexistent to be given to another charity whose purpose is as near as possible to the purpose of the original charity named by the settlor
Active Versus Passive Trusts Active The trustee actively manages the trust Passive The trustee has no active duties
Inter Vivos Trust Created during the life of the settlor Can be public or private
Testamentary Trust Created at the time of the settlor s death or becomes effective upon execution of the settlor s will
Rule Against Perpetuities Fixes a period within which a future interest must vest Rule: No interest is valid unless it vests no later than 21 years, plus the gestation period, after some life or lives in being at the time of the creation of the interest
Implied Trusts Resulting Created by operation of law from circumstances implied from the intentions of the parties Can be a remedy to litigation Constructive An involuntary trust created by operation of law to recover property from a person who obtained possession or legal rights illegally or improperly
Miscellaneous Trusts Spendthrift Created for beneficiaries who are financially irresponsible Totten A payable-on-death savings account in a bank in which money is deposited in the depositor's name as trustee for another person named as beneficiary
Miscellaneous Trusts Sprinkling The trustee has authority and discretion to accumulate or distribute income or principal, or both, among beneficiaries in varying amounts
Revocable Living Trusts Same conditions apply as for trusts in general Can be an advantage over a will and can be considered a will substitute since they avoid probate Reduces costs of estate administration
Revocable Living Trusts Avoids publicity No court supervision Tax savings Allows the settlor to manage or dictate assets and distributions after death
Disadvantages of Living Trusts They are costly to create The settlor must transfer assets to the trust and give up control of them during his/her life
Pour-Over Will A will provision in which the testator directs the residue of the estate to go to an existing living trust
Irrevocable Trusts Cannot be changed or the property returned after they have been created Terms may be changed during the settlor s life, but the trust continues
Trust Administration Duties Pre-Death Manage trust property Preserve and maintain trust property File tax returns
Trust Administration Duties Post-Death Obtain Federal Employer Identification Number Notice to beneficiaries Open a checking account for the trust Transfer funds
Trust Administration Duties Post-Death Collect, preserve, and value assets Pay creditor claims File tax returns Distribute income or principal to beneficiaries
