1. Classification of Trusts, the Living Trust, and Other Special Trusts
Chapter 13

2. Trusts Express Trust Implied Trust
Created in explicit terms for an express purpose
Implied Trust
Created by operation of law based on implied intent

3. Express Trusts Private Public 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

4. 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

5. Active Versus Passive Trusts
The trustee actively manages the trust
Passive
The trustee has no active duties

6. Inter Vivos Trust Created during the life of the settlor
Can be public or private

7. Testamentary Trust
Created at the time of the settlor’s death or becomes effective upon execution of the settlor’s will

8. 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

9. Implied Trusts Resulting Constructive
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

10. Miscellaneous Trusts Spendthrift Totten
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

11. Miscellaneous Trusts Sprinkling
The trustee has authority and discretion to accumulate or distribute income or principal, or both, among beneficiaries in varying amounts

12. 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

13. Revocable Living Trusts
Avoids publicity
No court supervision
Tax savings
Allows the settlor to manage or dictate assets and distributions after death

14. 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

15. Pour-Over Will
A will provision in which the testator directs the residue of the estate to go to an existing living trust

16. 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

17. Trust Administration Duties
Pre-Death
Manage trust property
Preserve and maintain trust property
File tax returns

18. Trust Administration Duties
Post-Death
Obtain Federal Employer Identification Number
Notice to beneficiaries
Open a checking account for the trust
Transfer funds

19. Trust Administration Duties
Post-Death
Collect, preserve, and value assets
Pay creditor claims
File tax returns
Distribute income or principal to beneficiaries