MN Essay
-very uniform law,
-not as frequently tested as Wills
Law; (but substantively similar)
Restatement of trusts
Uniform trust code
I. Trusts
A. Definition
1. arrangement in legal system for when T holds title for someone else
2. T= trustee, has fiduciary duty to use for B
a. Has burdens
3. B= beneficiary
a. Has benefits
b. Can be trustee as well (just not sole trustee and sole beneficiary )
4. settler
a. the one who makes the trust
B. requirements
1. creator
2. with intent
a. using word trust is not critical
b. fulfilled when legal property in name of one with duty to manage for others.
c. ≠ language of suggested use
1) wish, hope or “fondest desire”
2) Unless so much detail that turns into trust
3. for valid purpose
a. OK under public policy
b. NOT OK if condition
1) Restraint on marriage
a) But if primary purpose to provide until they do OK
2) Encourage divorce
3) Commission of crimes
4) Restraining free practice of religion
c. Not apply to disinheriting
4. delivers
a. applies to inter vivos trusts
1) simply signing is not enough
b. exceptions
1) self declaration of trust
a) when I as own property owner declare myself trustee for others
2) testamentary trust
a) terms appear in will
b) distribution by executor counts as delivery
5. legal title to property (
a. specific interest in property to which the trustee’s duties relate
b. certain and identifiable
1) NO
a) gratuitous promise to create trust in future
(i) does not automatically create trust when
b) consideration
(i) automatic trust when get property
c) promise of trust in will before death NO
d) prospective heirs in intestate estate
e) dividends to be received by me
2) OK
a) Promise in will after death (before distribution of estate)
b) OK even if amount not yet ascertained.
6. to trustee
a. ok if not specified, court can appoint
b. not fail if trustee dies
1) exception- powers personal to named trustee
7. for benefit of beneficiaries
a. see private/charitable trust distinctions.
b. If class of beneficiaries described
1) Don’t need to describe amounts, can be determined by discretion of trustee.
C. Express
1. private –usually for family
a. must be for ascertainable beneficiaries
b. Need human
c. Not need alive, only know when born
1) If not kids, returned to trustee maker (implied trust)
2) Default to power of appointment?
a) Majority rule
(i) NO, power of appointment no obligation to perform
b) Minority rule/
(i) YES so special power of appointment which says can’t transfer to self.
2. honorary trusts
a. standing to sue? Ct will designate
b. graves- 21 years
c. pets- ok for lifetime of animals
3. charitable
a. Rule against perpetuities doesn’t apply
b. Rule against accumulations doesn’t apply
c. doesn’t need to be for charity, just charitable purpose
1) real question is how does the charity operate in fact
a) preference clause is not fatal
2) science
3) religion
4) medicine
5) governmental Parks
6) research
7) education
8) other- fact issue
d. must be for reasonably large and identifiable group of people.
e. When specific chartiable purpose no longer possible may be reformed (cts like to) CY PRES
1) Primary intent
2) Specific direction
4. the doctrine of deviation from trust terms because of changed circumstances
a. for both private and charitable trusts
b. ct can authorize looks at primary intent/specific direction
c. reformed if frustrates and defeats primary prupose
d. BUT don’t tinker with distribution terms
D. Implied (quasi-at law)
1. for these if sale by trustee to BFP for value,
a. cuts off beneficiaries right to specific property
1) gets money damages
b. for sale by trustee NOT for Value
1) then B gets choice
a) money damages OR
b) the consideration
2. resulting (no where else to go)
a. an implied reversion,
1) when purpose of trust impossible, and no cy prey
2) goes back to settler.
b. Purchase money
1) When S gave money to 3rd party to buy and hold real estate
2) Defenses
a) Gift- presumed when close family
b) loan
3. constructive (if something wrongful happened)
a. remedy by court- unjust enrichment theory
b. fraud, misrepresentation, duress, mistake
c. secret trust case
d. semi secret trust case
e. oral trust of land
1) fraud in inducement HARD to
2) breach of confidential relationships (must be agreement)
a) attorney client
b) close family etc.
II. trusts as valid will substitutes
A. revocable trust and
1. ok but revocable gift is not legal.
B. bank account trusts
1. or called totten trusts
2. bank account trust by signature card
a. revocable in life
b. creditor can get during life and death (if nothing else)
c. can use extrinsic evidence to see if intent was to creat trust.
3. revocable?
a. Majority
1) Can revoke by will
b. Minority/
1) No revocation by will
4. beneficiary dies before othe
a. then lapse/anti-lapse statutes
b. or automatic revocation.
C. pour over clause
1. pour over residue of estate @death to intervivos trust
a. Ok even if empty before death
b. Only requirement is that trust must exist before or at time will made
c. Then ok to modify after
D. Can trustee be only beneficiary.
1. ≠ ok to have sole trustee be sole beneficiary
2. otherwise ok
III. oral trust
A. or when is it necessary to have in writing?
B. Testamentary trust-
1. secret trust
a. no mention of trust in will, but benefit in will to trustee
b. no unless
1) extrinsic evidence shows existence
2) of clear and convincing
3) And trustee knew (then constructive trust)
c. SOF applies
2. semi-secret trust
a. will mentions trust, but not specifics
b. majority says
1) no goes to heirs
c. restatement/minority says
1) constructive trust because that “further’s T’s intent”
C. Oral promise
1. oral promise supported by consideration to make devise in will
2. majority
a. if re; land SOF contract laws
3.
a. Contract re; will only if
1) Terms in will
2) Terms in separate writing
3) Will refers to contract
b. NEVER IMPLIED
D. Intervivos
1. oral promise of personal property OK
2. of land SOF
a. exception “constructive trusts”
E. Defaults
1. quantum meriut for value of services (just compensation)
IV. remedies
A. Beneficiary can sue to get ct order for trustee to give income
1. beneficiaries who participate in breech can’t sue trustee (estopped)
B. Then if persistent, can ask to remove trustee (persistent breach of trust)
C. creditors of beneficiary
1. ct order to get trustee to give then income until bill paid
V. Alienability/creditors
A. income interest in trust
1. ok sold, given to …(theoretically)
B. spendthrift trust
1. “no interest assignable and Not subject to claims of creditors”
2. OK can’t sell, creditors can’t get
3. exceptions
a. claims for necessities
b. claims for alimony and child support
c. claims for services or materials that preserve or benefit interest of beneficiary
d. claims by govt (usually taxes)
C. discretionary support trust
1. beneficiary right to income limited (if in need , etc.)
a. necessity = only if B can’t pay
2. discretionary trust
a. B has no right to income,
b. Trustee has only the duty to act in good faith
D. Creditors of settler
1. public policy that Settlor can’t put aside assets for own benefit and then escape creditors
2. if settler is also beneficiary then creditors can reach settlor’s rights and any revocable trust assets if
a. trustee has discretionary authority to make payments of assets.
3. if settler has revocable then ok
4. if settler make unrevocable trust for others
a. creditors can’t get
b. unless fraud (to avoid creditors)
VI. trust administration
A. duty of loyalty
1. can’t by or sell to self
2. can’t borrow from funds
3. can’t sell/buy from one trust to another
4. corporate trustee cannot purchase own stock as investment
a. ok to retain if meets prudent investment standard
5. Not for personal gain
B. Prudent investor rule “reasonable care, skill caution, suited to trust and considering purpose”
1. duty to keep trust productive (big picture view, overall portfolio)
2. duty to balance return with potential risk
3. duty to diversify investment
4. duty not to co-mingle (duty to ear mark)
5. duty to delegate investment decisions
a. only by statute
b. UPIA permits if use reasonable care in selecting agent
C. Duty of impartiality
1. fair to all beneficiaries
D. duty to account and inform
1. periodically
a. reasonably informed about administration of trust
2. income beneficiaries get income
3. remainder men get corpus (principal)
4. so have to keep them straight
a. income
1) + rents
2) + dividends
3) + interest
4) –ordinary expenses in production of income
5) – ½ trustee fee
b. Principal
1) + Proceeds from sale of trust assets
2) + Stock splits
3) + Dividends paid in stock
4) –capitol improvements
5) –extraordinary items
6) –income taxes
7) –etc.
8) - ½ trustee fee
E. powers of trustee and successor trustee
1. instrument controls
2. otherwise
a. OK sell, improve, lease,
b. NOT OK borrow against (
3. corporate trustees
a. OK for bank officer to take title (easier to move/administrate)
b. But then strictly liable for any breach.
4. ok to invest in common trust funds
F. co-trustees
1. trustees can act by majority rule
2. if 1 dies need replacing only if instrument requires
3. liable for co-trustee breach
a. no unless fault or
b. no reasonable care (time big factor here)
G. liability
1. HARSH
2. strictly liable, only Q is amount of damages
3. NO DEFENSE good faith, reasonableness
4. each breach judged seperately
5. beneficiary can
a. ratify – waive breach
1) consent waives
2) knowledge does not waive
b. sue for resulting loss (surcharge)
c. if self dealing trace funds and recover “fruits of transaction”
VII. early termination of trusts
A. when can beneficiaries end it?
1. claflin doctrine
a. if all beneficiaries are compentant and of age and
b. all consent
c. no further trust purpose
d. OK terminate
2. spendthrift clause
a. NO
1) Unless
3. settler
a. yes if
1) revocable trust;
a) expressly reserved right to revoke and
2) complies with all trust rules
VIII. powers of appointment
A. donor gives power
B. donee gets power
C. power is;
1. general power of agent (special powers of appointment can restrict transfer to themselves)
2. NOT limited in class of beneficiaries
a. Can transfer to (among others)
1) Herself
2) Her estate
3) Creditors of either
3. if testamentary limited to appointments by will
a. if explicit about transfer in will?
1) Only if no explicit gift in default (appoint by will or dana’s kids get it..)
4. Never owned, so creditors can’t get it (unless transfer to self)
D. Anti-lapse statute applies here too.
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