1. Introduction to Trusts
Chapter 12

2. Terminology Trust Settlor Trustee Legal Title Equitable Title
Beneficiary
Trust Property/Corpus
Trust Instrument

3. Creation of a Trust

4. Trust
A property arrangement in which real or personal property is transferred from the settlor to one or more trustees who hold legal title to the property for the benefit of one or more beneficiaries who hold equitable title

5. Settlor
The creator of a trust, also called the creator, donor, grantor, or trustor

6. Trustee
A person of trust who holds and manages property for the benefit of one or more beneficiaries
A fiduciary who is required to perform all trust duties according to the terms of the trust instrument and of the law with loyalty, honesty, and good faith

7. Legal Title
A form of ownership giving the trustee the right to control and manage the property for another’s benefit

8. Equitable Title (of a trust)
The right of the party who holds the beneficial interest in a trust to the benefits of the trust

9. Beneficiary
A person who has the right to receive the benefits of the property of a trust

10. Trust Property
The real or personal property of the trust that the trustee holds subject to the rights of one or more beneficiaries

11. Trust Instrument
A written document that creates a trust; establishes the terms of the trust; establishes the rights, duties, and obligations of the trustee; and names the beneficiary

12. Types of Trusts Revocable Irrevocable
The settlor has the right to revoke or change the terms of the trust prior to his/her death
Irrevocable
Once created, the trust cannot be revoked or changed by the settlor

13. Essential Elements of a Trust
A settlor who creates the trust
One or more trustees who administer and manage the trust
One or more beneficiaries who receive the benefits of the trust and who enforce the trust
Real or personal property that must be transferred to the trust

14. Removal of a Trustee Lack of capacity Serious breach of trust
Refusal to post bond when it is required
Refusal to account for expenditures
Crime of dishonesty
Prolonged absence from the state
Unreasonable failure to cooperate with a co- trustee, if there is one
Showing favoritism to one or more beneficiaries

15. Powers of a Trustee
Determined by the terms of the trust and by state statutes
Trustee powers
Sell assets
Lease property
Carry on a business
Lend or borrow money
Hire professionals

16. Duties of a Trustee Duty of performance and due care Duty of loyalty
Duty to preserve and possess trust property
Duty to invest trust property
Duty to make payments of income and principal to beneficiaries
Duty to account for profits and losses

17. Liability of a Trustee
Remedies available to a beneficiary for a trustee’s breach of trust
Removal
Recovery of wrongfully taken assets
Sue to compel the trustee to perform duties
Sue for breach of loyalty

18. Cost of a Trustee
Usually, a percentage of the assets under the trustee’s management
May be waived for family members
Can be regulated by statute

19. Beneficiaries Have equitable interest in the trust property
Do not have the right to direct distributions or investments
Can enforce the terms of the trust
May be individuals or a class of people

20. Property of a Trust Is a gift from the grantor or settlor
Also called corpus, res, principal, subject matter
Can include real and/or personal property

21. Termination of a Trust Completion of the trust’s purpose
Revocation by the settlor
Merger of all interests (legal and equitable) in the same person
Upon request of the beneficiary when there is no express purpose that requires continuation of the trust