Trust

Benefits of Trust

1. Trustee manages assets for Beneficiary
2. Creator makes sure assets exist for the future generations
3. Trust that is created during Settlor’s lifetime does NOT own the trust property at
4. the Settlor’s death.

• Must be a written instrument

Living Trust = Takes effect during Creator’s Lifetime

Testamentary Trust = Trust created in Creator’s Will

The Legal Requirements for a Valid Trust

1. Creator/Trustor owns the property at the time Trust is Created 
   Designs the relationship
   Establishes the Trust
2. Trust Property can be Real Estate or Personal Property.
   Must be capable of producing income.
3. Valid Purpose – Must be legal and described in Instrument – must be specific.
4. Trustee - Owns Legal Title to the trust property subject to the duties specified by 
   the Grantor – Trustee is a fiduciary and is held to a higher standard of care.
   1. Cannot delegate duties to a third person
   2. Must be loyal to the trust and the beneficiaries.
   3. Cannot personally gain from trust assets except by
      fees as stated in trust or by statute.
   4. Must keep Accurate Records and Accounts of assets – Accounts must be given
   5. to the Beneficiaries at least yearly – If Beneficiary a minor then records go to Guardian.
   6. Trustee must take possession of the Trust property and make it profitable.
   7. Must see that all debts of the trust are paid – must collect all money owed to the Trust.
   8. Must preserve, protect and defend the balance of the trust.
   9. Trustee must have capacity – Must be a Natural Person or a Corporation.

The Creator can also be the Trustee

A Trustee may reject/resign duties by written instrument.

  
A Trustee is liable to Beneficiaries For:

Loss in value due to management. 
Breach of Loyalty to Trust.  

    5.  Beneficiary – Has Equitable Title to Property subject to the terms of the Trust  

• No need of Capacity – can be more than one.
• Take Property as Tenants in Common - % reduced as the class grows.
• Beneficiary may freely alienate benefits – the benefits are subject to creditors.
• The Beneficiary who takes remainder at termination of trust is called Remainderman.    
   

Creating a Trust

• Must be a Written Instrument
• If  Personal Property then it can be a simple document
• If the corpus is Real Property, then the Trust must be created by a DEED or
• Conveyance of Trust and must be recorded.
   

InterVivos Trust (Living Trust)

• Can be Revocable or Irrevocable.
• Revocable – Creator retains ability to terminate the Trust during lifetime.
• Irrevocable – Creator relinquishes right to terminate and the Trust must terminate naturally.
   

Testamentary Trust

• Created by Testator in his WILL to provide income to future generations or to create
• he Marital Deduction for the Surviving Spouse.

Drafting a Trust - Requirements

1. Name
   • Not legally necessary but good form.
2. Appointment of Trustee
   • Each time a trust is created / must have Capacity/ May need to post a bond.
3. Specify Purpose
    
4. Powers of Trustee 
   • Specify in addition to general powers along with discretion or limitations on the
   • Trustee in certain. functions
5. Trust Property
   • Must be in existence and the Trustor has transferable interest specific.
6. Beneficiary
   • Always name the beneficiary in a Private Trust – By Individual or by Class.
7. Power of Appointment (not necessary)
   • Person (trustee/beneficiary or 3rd person) Power to Appoint and Name Successor Beneficiaries
   • ex. Ability to appoint a Successor Trustee.
8. Termination
   • By the Life of the Beneficiaries / or a Specific # of years/ or upon a specific event.
9. Remainderman
   (Where the balance goes at the termination of the trust) 
   • Either distributed to beneficiary or reversion to Creator.
   • TRUST must be signed by the Creator.
   • Witnessed
   • Notarized
   • Trustee should sign too if it is an Inter Vivos Trust (A Living Trust).
   • If a Testamentary Trust – then Trustee goes to Surrogate to be confirmed.