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Trust Cheat Sheet


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									KUTC Instrument v. KUTC:Language of Instrument will not override (KUTC § 5): a) requirements to create the trust; b) Duty of trustee to act in goodfaith; c) Has to be for benefit of beneficiaries § 25; d) Lawful § 25; e) Doesn’t contravene public policy § 25. Common Law § 6: Unless displaced by KUTC, look to CL. Effective Jan. 1, 2003 § 92: KUTC is retroactive but can’t go directly against terms of trust and can’t change a vested property right. ELEMENTS OF A TRUST 1. Present Intent to create a trust. 2. Transfer of lawful and realized property by a person with capacity. 3. Trustee accepts transfer and duties. 4. Definite beneficiary. 5. Instrument: a) declaration or deed of trust; b) can be oral or written. Types of Trusts 1. Inter Vivos: set up during lifetime: a) Deed or b) Declaration Trust: settlor is trustee 2. Testamentary: through a will. PRESENT INTENT § 23(2). 1. Subsequent conduct does not show intent at time of creation. Taliaferro. 2. Jimenez: transfer to dad to hold for daughter’s education. Dad bought stock and claimed not trust creating language. H- trust created, and no express language required just present intent. 3. Factors: intent of grantor; precatory language; no writing required; don’t have to say “trust.” Jimenez. TRANSFER OF LAWFUL AND REALIZED PROPERTY BY A PERSON WITH CAPACITY. 1. Transfer to a trustee. § 22(1): Trustee = Grantor: transfer not required. KUTC § 22(2): “declaration by the owner of property that holding property as trustee.” Taliaferro: revokable trust by declaration, agreeing to act as trustee as shown by the unambiguous signed instrument. H – transfer not required if grantor = trustee. The failure to transfer may just be a breach of duties. *Argue it’s a gift, which requires delivery. Hebrew. 2. Necessity of Property: $1 may be enough. Property § 3(11): anything that may be subject of ownership, whether real or personal, legal or equitable, or any interest therein. Property must be identifiable: Unthank: $200/month for five years in letter. Did not meet formalities of will so beneficiary claimed it was a trust. H – must literally separate an identifiable amount from estate because don’t want beneficiary to have claim regarding entire estate. Speculative property is ok if “You Have done everything you can do to realize”: Brainard: grantor traded stock for wife and kids. Claimed was oral trust. He was trying to avoid taxes. H – no trust cause declaration of intent must be after obtain property (hadn’t even bought stocks when made self serving declarati and was trying to avoid taxes - unclean hands.) § 3(11) prob. wouldn’t help. Speelman: letter giving (gift) % of profits for musical once released. H – donor can assign rights of property expects to receive because “did as much as he could to transfer,” and clean hands, and written intent. 3. Can’t comingle. 4. Capacity § 23(1). 5. Lawful § 25. TRUSTEE ACCEPTS TRANSFER AND DUTIES 1. Manifests intent to take on duties. Taliferro: Unambiguous signed instrument. Jimenez: acceptance was that property was titled in trustees name and did not reject. Acted as trustee. Jimenez: argued custodian and not trustee – only required to use the property for benefit of beneficiary but not limited to specific use like education. Ct. didn’t buy. Hebrew: P claimed wife held in trust. D claimed it was a gift w/out delivery. H – trust created. Hebrew: Grantor = Trustee: must manifest intent to take on duties of trustee. Lack of transfer requires more intent. 2. Must actually have duties. § 22(4). BENEFICIARY § 23(3). 1. Grantor/trustee can be beneficiary but must also owe an equitable duty to another beneficiary (after death remainderman is ok.). § 23(5). 2. Can be an animal § 23(3)(B). § 29(a): allows trust for care of animal if animal was alive during settlor’s life. Not offspring. No prob. RAP. § 29(b): enforcer can be designated in trust or appointed by court. Common Law: generally animals can’t be bene. because can’t enforce. Honorary Trust: binding the conscience of the trustee where no beneficiary capable of enforcing. Courts will enforce if trustee accepts. - Searight’s: T left dog to friend and 1K in trust to care for dog. H – honorary trust and specific amount limited time so no RAP problem. 3. Doctrine of Merger: if trustee is only beneficiary then equitable and legal title merge = no trust. Jimenez, held no merger when another beneficiary. 4. Equitable Title: a) right to benefit, and b) right to claim against trustee. 5. Must be definite § 23(b): see resulting trust also: Clark: T created discretionary trust for his “friends.” H – court created a resulting trust, which went to next takers under the will. Rule: private trust must have definite beneficiaries: a) can be class as long as there are boundaries; b) must be clear who can enforce it. Clark. Power of Appointment Argument: power given to trustee to select. H – no because power of appoint can’t be mandatory, has to have option not to give and an alternate take in default (Ballard thinks resid. is ok.) Clark. Exception – Public Trust (charitabl): - Doesn’t require definite benes. - Attorney general enforces. KUTC is different from CL:

§ 23(c) + § 30(1): private trust may be created for indefinite beneficiary, but only enforceable for 21 years. - Bene doesn’t even have to be alive, for instance cemetary maintenance. 6. Beneficiary = Attor/drafter § 27: Invalid unless: a) related by blood or marriage; or b); read and understood and had independent counsel.. INSTRUMENT 1. Declaration or deed of trust; 2. Personalty: Oral or written. 3. Real estate - writing § 28 ~ CL. 4. Fraud – Exception to Realty/Writing. See Implied trusts. 5. Clear and convincing evidence only § 28. 6. Jimenez: no writing required just need manifested present intent. 7. Brainard: self serving oral declaration before even bought stocks. Problem was property. 8. Policy for No writing: flexibility and unjust enrichment trumps SOF (constructive trust.) 9. Policy for writing: fraud, and unambiguous delivery with a writing like a deed. EXPRESS v. IMPLIED 1. Express: outward manifestation through oral, written, or conduct of intent to create. 2. Implied (result and constructive) no intent – arises from operation of law: Resulting Trust: arises when express trust fails, for instance when forget to designate final beneficiary. Secret Trusts: trustee is given an outright gift with a deal on the side. - Court will uphold, creating a constructive trust because could result in unjust enrichment. - Can use extrinsic evidence. Semi-Secret: trustee is named on face of will but beneficiaries are not. - Oliffe: To Rev. in trust to distribute to those at his discretion. H – no semi rather created resulting trust and goes to heirs. Policy for not upholding semi - No fear of unjust enrichment because we know only trustee from language. Solution under § 39: can just make a separate list or statement w/ instructions: must be in writing; must describe; personalty only; not cash; inter vivos. Constructive Trust: Imposed by court as equitable remedy to avoid unjust enrichment (killer) in Realty or Personalty. Exception to SOF: court will impose constructive trust w/out writing for realty transferred through fraud – no intent needed. Hieble: P got cancer and transferred legal title to son and daughter JTRS w/ oral agreement to reconvey when she recovered. H – constructive trust. Factors from Hieble: a) Confidential relationship: parent and child not per se but good indication; Sickness; Promise. b) Conduct: Clean hands like Hieble (sick) v. unclean hands like Rhodes (avoiding taxes). c) Presence of an oral agreement. REVOCABLE TRUSTS 1. Majority: silent = presumed irrevocable. 2. KUTC § 46 Silent = presumed revocable but only applies if executed before Jan. 1, 2003. § 46(a). User friendly. 3. Method § 46(2)(A),(B): - Express = revocable my method prescribed. - Silent or not Expressly Exclusive (“only”): by any method manifesting clear and convincing evidence of intent; or by a specific devise in later will or codocil (residuary clause is not specific for realty.) Pilafas: Trust and will were not found after T’s death. Trust had express method for revoking. H – will is presumed revoked but trust is not because of express method. Rule: when settlor reserves power to revoke in a particular manner, he can revoke only in that manner. Pilafas. 4. CL is more strict then KUTC because code says “expressly exclusive.” 5. Written and Delivered: most courts say will or codicil delivered to trustee is sufficient. 5. Declaratory Trust (G=T) + Lifetime Bene + Revocable: issue is whether trustee gave anything up, if not just a will. Farkas: created revocable trust with stock in writing. H – trust upheld because symbolic interest was sufficient – he does have fiduciary duty even though not feasible to enforce. Factors: stock had benes name; created 4 instruments; clear intent of farcas; conditions for revoking; had duties. Farcas. Arguments: just a failed will (ballard), merger doctrine. Since Farcas: revocable inter vivos trusts have taken off to avoid probate. CREDITORS Grantor’s Creditors: 1. Irrevocable: creditors can’t get unless settlor retained something. § 42(2). 2. Revocable: creditors can reach after death what debtors exercised control over during life (trustee + substantial control). State Street: revocable IV trust w/ power to amend, and power over disposition principal and income. Took out an unsecured loan based on trust property but didn’t mention trust. H – bank gets what was in his control during life (bank overrides benes interest.) Farca v. StateStreet: reconcile because there is a 3rd party in State (creditor). KUTC § 42(a)(1): during settlor’s lifetime, revocable trust property is subject to creditor’s claims. KUTC § 42(a)(3): after settlor’s death, amount that was revocable is subject to creditors. Beneficiaries Creditors: 1. Court can grant lien for present or future distributions § 40, but 2. With or without spendthrift clause, creditors can’t compel distribution from discretionary trust. § 41(d). 3. Spendthrift Clauses (mandatory): prohibits a bene from voluntarily or involuntarily alienating trust rights. § 41(b). General rule: you can transfer your property interest unless instrument says otherwise. KSA 58-2404. Purpose: creditors can’t just dip into trust income or corpus.

KSA 58-3101: can’t make spendthrift trust for yourself (would mess up whole economy). Exceptions to Spendthrift: a) Child Support: public policy trumps spendthrift (duty to support kid.) Shelley: Spendthrift in mandatory trust for son. H – income is subject to child support and alimony. Corpus is subject to child support cause instrument referenced kids and said emergency. b) Necessary Services: hospital bills. Policy – don’t want state to pay bill and consistent with G’s intent. c) Tax Claim: policy – don’t want state to pay. d) Tort claims: some states cause victim doesn’t get a choice like regular creditor. KS undecided. 4. Purely Discretionary Trust: same as spendthrift. Bene has no right to undistributed property. §41(d). O’Shaughnessy: revocable discretionary trust created and one of benes owed a lot of taxes. H – bene has mere expectancy right, which gov. can’t get until distributed. Farcas v. O’Shaugn: both revocable - beneficiary v. taxman. Goodfaith Duty: trustee must exercise discretion in goodfaith. § 5(b)(2). 5. Supplemental Needs Trust: don’t give $ outright or disabled will lose medicaid. Support trust provides for medical costs but only as a supplement for gov. aid (cause can’t give money to disabled person outright or will lose medicaid.). Drafting: discretionary to “support above and beyond” state support. Make discretion specific to what state doesn’t provide, and pay creditors directly. Pay Back: Generally Have to Pay back state in the end for self settled trust (spouse or person with legal authority.). Mandatory + Spendthrift: is no good against state because of Necessaries exception. Avoiding Pay Back: money from third party – create a purely discretionary supplemental needs trust (parents could do it through Will). State becomes just a regular creditor. POUR OVER WILL 1. Definition: clause in will transfers property to trust upon the death of T. 2. Advantages: a) creates on set of insructions to coordinate admin. of estate; b) incase forget or acquire more; and c) allows to amend w/out meeting will formalities. 3. UTATA (1990) § 2-511: don’t have to put funds in right away (not like CL); can be executed before or after will; and can amend after execution. 4. KS v. UTATA: a) can execute before or simultaneously but not after execution of will; b) must have written instrument; c) don’t need property right away (springs into being when funded.); d) must be identified in the will. 5. Clymer: pour over trust w/ spouse beneficiary then divorce. No property in trust yet. H – doesn’t matter that no property in pour over trust under UTATA, however, divorce invalidated husbands share. - Reasoning: trust was supposed to take adv. of marital benefits, since divorce, trust no longer meets intent so terminate or modify. Clymer. - Non-Pour Over Trust: Court applied statute for “will,” however, probably wouldn’t if not pour-over. - KS: divorce does not terminate a trust but does terminate a will. TRUSTEE DUTIES Mandatory: no discretion. Discretionary: trustee has discretion. 1. Support Clause: amount needed is discretionary but whether or not to give is mandatory. Marsman: discretion to “support” Cappy. Cappy remarried but lost house. H – support trusts create a duty to inquire into the financial needs of beneficiary. § 71: discretionary trustees shall act in good faith and in accord with terms and purpose of trust. *Maybe a duty of inquiry. Comfortable support…: in accordance w/ the standard of living which he was accustomed to before became beneficiary. Marsman. Rich Beneficiary: most CL will still require support to come from trust. 2. Stingy Trustees (policy): future needs; impartial; fee is % of corpus. 3. Exculpatory Clauses § 83(a)(1): unenforcable if badfaith or reckless indifference. Duties Breach: if trustee fails to perform duties = breach of fiduciary duty. Disagreeing Co-Trustees. § 51: need majority w/out court order. Court could add a 3rd trustee. Co-Trustee Liability: 1) not liable for decisions you didn’t make 51(f), however, 2) you must participate 51(c). 1. Loyalty: must administer trust solely in the interest of benes. § 59. Conflict of Interest – prohibited: when trustee has reason to favor someone other then bene. Self Dealing (Hartman): trustee w/ power to sell violates duty by selling to self. No Further Inquiry: if ther is evidenc e of self dealing, doesn’t matter what circumstances are, even goodfaith, there is irrebutable presumption of violation of duty. Harman. §59(b): embodies no further inquiry. T doesn’t have to benefit and even if benefits benes. Dealing for Family: rebuttable presumption of conflict. Can argue it was a good deal. §59©(2). Argument: settlor authorized (terms) or benes consented after full disclosure but still must be fair and reasonable. Text pg. 905, §59(b)1-5. Non-Trust Property: betw trustee and bene = rebuttable presumption of conflict of fid. duties §59d. T has to prove it was fair. Opportunity Doctrine: T can’t usurp opp. From the trust. §59(e). 2. Prudent Admin. §61: reasonable care, skill, and caution. Shriner: trustee breached the prudent man standard by transferring total investment power. Should participate in some degree. 3. Delegation §64: CL: duty not to delegate. Shriner: delegated all to brother who embezzled. H – can’t delegate so much as to create a surrogate. Breached delegation duty, however, may not have been causal connection KUTC 64: can delegate admin. duty KSA 58-24a09: can delegate management and investment decisions but have to oversee. Requirements (b): written notice; review inv. and management; establish scope; inv. qualifications of delagatees; use reasonable care and caution.

4. Impartiality: duty to treat present and FI equally. §60. Dennis: failed to repair and sell when feasible. Helped income benes but not remainderman. H- violated tuy. 5. Inform & Account to benes. §70. Qualified bene: problem w/ 70 – generally excludes remaindermen. Fletcher: brother/co-trustee wouldn’t give accounting of trust property to brother/bene. H – oral agreement w/ grantor not to tell doesn’t matter, have to divulge. 6. Duty of Confidentiality: silent = duty to inform only qualified bens. Embedded in fiduciary language. 70 6. Trustee Powers 72 & 73: if not listed then can: get bens consent; court permission; prohibited by UTC MODIFY & TERMINATE Revocable: settlor reserved the right. Irrevocable: 1. Can modify or terminate if expressed in trust. 2. Settlor Alive and Agreeable: with consent of settlor and all benes (CL), even if inconsistent with material purpose. § 32(a). Ascertained: all benes must be ascertainable so open class = no modify. CL. KUTC § 32(a): same but all benes must be qualfied (rights to distribution). Legislation indicates only vested. Trustee: has no say under KUTC or CL unless: § 35 – after notice to benes, Trustee determines that a trust w/ a total value of less then $100K, is insufficient to cover administration costs. Court: - § 35(b): can terminate w/out notice if finds cost outweighs benefit. - § 33(b): can modify administrative terms if impractical or wasteful (resembles Cy Pres). 2. Dead or Disagreeable Settlor: Change of Circumstances Doctrine: can modify or terminate if a) unforeseen change, and b) modification would not contravene settlor’s intent. CL ~ § 33(a). - Must actually be a change in circumstances, not just extra beneficial for benes (Stuchell: one kid was mentally disabled, court said no.). - § 33 makes no requirement for consent for change in circumstance. - § 32(b) seems to override Stuchell’s benefit idea. Power of Appointment is an alternative for change in circum. Material Purpose (Caflin Doctrine): even if all benes consent, can’t terminate if material purpose is violated. Brown. § 32(b) modified Caflin?: can terminate or modify if 1) all benes consent, and 2) does not violate a material purpose. Seems to bypass a need for change in circumstance doctrine. Brown: T for education and support of nephew. H – no termination cause violated material purpose of life-long income. Examples of Material: support clause; spendthrift (§ 32(c)); income for life; Supp. needs; Education. Non-Material: purely mandatory; purely discretionary. 3. Settlor Alive or Dead: KUTC § 32(e): even if not all benes consent, court may modify or terminate if unconsenting bene will be protected (might have changed stuchell). - Limitation: material purpose unless settlor is alive and consents. 3. Termination: no purpose of trust remains to be achieved; have become unlawful; contravene public policy, or impossibility. § 31(a). CHARITABLE TRUSTS 1. Ads: RAP does not apply to; tax breaks. 2. Charitable Purpose: relief of poverty; education; religion; promotion of health; gov. or muncipal purpose; other purposes that benefits the community. 3. Benevolent: gratuitous transfer of good will. 4. Candy Trust is not Charitable: Shenandoah: estate to bank to distribute at easter and x-mas directly to kids. H – dominant intent was benevolent and not charity. General Purpose of benefitting community: should consider whether group is needy. § 26. 3. Modification – Cy Pres: court can modify when trust is impractical, considering intent. CL ~ § 34, except under 34 if have an alternate plan can’t use Cy Pres. Elements: a) must be charitable, b) orig. purpose is illegal, impractical, or impossible, and c) must be a general and not specific purpose. Neher: T left her home to community to be used as hospital. Became infeasible. H- can be modified because general. Conditional Gift is not a charitable purpose: to my GC as long as build hospital.. § 33: can modify adminstrative terms in both private and charitable. Impractical - Beryl Buck: Stock value greatly increased left in trust for Marin Co. H – not impractical just because inconvenienced trustee or inefficient. Policy for Cy Pres: settlor would expect court to fix; reduce dead hand control; marin co. doesn’t need it. Policy against Cy Pres: autonomy. POWER OF APPOINTMENT 1. Definition: power given to choose or appoint benes. 2. Advantage: very flexible because permits one to give away or postpone designations to benes. 3. Inter Vivos: power to appoint during donnee’s life. 4. Testamentay: power to appoint only in will. 5. Special Power: objects/appointees are chosen - do not include donnee. because donnee gets no benefit. - Exclusive: can appoint all to one at exclusion of others, “one or more.” - Nonexclusive: can’t exclude anyone. - Illusory: where give only a dollar to bypass the nonexlclusive. Depends on jurisdiction. 4. General Power (presumed): open ended power to give to anyone including self. 5. Creditors: ordinarily can’t get at property in general power until power is excercised (maybe child support). Urwin; Relation Back: creditors of special donne must treat as if donor still owned (there are no public policy exceptions.) 6. Estate and Gift Tax: a) General: property in donnees possession at death is taxable. b) Exceptions: 1) Power to consume – not a general power if

donnee can take part of principal for specific reason: health; education; support, and 2) Authority to withdraw in trust: each year 5K or 5%, whichever is greater; c) Special is not taxed. 7. Creation: a) intend to give discretionary power to donnee, b) donne must have option to appoint, and c) don’t have to use expres langunage. 8. Release of Power: if donne doesn’t want can release. Once released the taker in default will take. - Residuary clause release: can only use if expressly state you are releasing. Majority. Minority = general and specific can be exercised through residuary. 9. Ineffective Exercise of Power: Rule: if fail to exercise, takers in default take, if none then goes back to donor’s estate. Exceptions: - Defined Class: special power - if no takers in default and objects are of a defined class, property can pass to objects. Policy = donor’s intent. Loring: special power, no default takers and donnee failed to exercise as to principal. Goes to class. - Allocation doctrine: when special power donnee’s property and appointive property are combined, court will allocate to effect power - Capture Doctrine: when general donnee manifests intent to assume control for all purposes, property goes to donnee and she is taxed. FUTURE INTERESTS Possessory Estates: FSA: O retains nothing LE: O retains reversion. FS Defeasibles: a) FSDet.: so long as, while, during, until – O retains poss. of reverter (automatic); b) FSSCS: provided that, on condition, but if – O retains right of reentry (not automatic); and c) FSSEI: 3rd party retains possibilty of reverter. Fee Tail: “heirs of my body” Future Interests: 1. In Grantor: a) reversion - all but FSA and V. Remainder; b) Poss. of reverter - FSDet., and c) Right of Reentry - FSSCS. 2. Vested Rem. - Two Elements: a) ascertained, and b) no conditions precedent. - Ind. Vested: can’t be taken. - Vested Subj. to Open: a) one ascertainable, and b) parent alive. - Subj. to Complete Divestment/EL: a) condition subsequent, and b) followed by EL. 3. Contingent Rem: precedent cond. - Lapses: springing EI from O’s reversion. - Followed by Alt. Cont. Rem. And not EI. 4. Executory Interest: follows a vested remainder subj. to complete divesment or O’s reversion. - Cuts short; never follows LE. - Springing: cuts off grantor’s int. - Shifting: from prev. poss. estate. Acceleratoinv. Disclaimer: Acceleration: accellerate to next possesser upon renunciation. CL and KS: treat disclaimer as if predeceased and shall accellerate to next taker. If disclaimer has no issue then unborn issue are cut off from accelleration. Gilbert. Policy: Preference for Vested Interests. Remainders and Taxes: Rule: if transferrable, then taxable to remainderman’s estate. - Even if die before possession. - Policy: Present property inerest. - Spendthrift: can avoid tax if add. Survival: 1. Rule: for ind. gifts (not class), there is no requirement that remaindermen live. Just goes to RM’s estate – taxable because transferrable. 2. Exception: T can create survival requirement in language – contingent 3. Revocable Trust = Vested Rem. Subject to divestment. - Vests at time of creation. First National: revocable IV, which omitted some heirs. Heirs claimed that parents interests were vested so should inherit. Counter was revocable so not vested. H – vested at creation but subject to divestment. Policy: favor vested interests, and no survivor requirement. 4. Irrevocable Trust = Vested Remainder (possibly subj. to open). 5. Life Ten. is also Remainderman: Security Trust: Left income and remainder to same. H – Vested at T’s death and not Life Tenant’s. 6. Mult-Generational Gifts: implied survival requirement (issue or heirs.) 7. Who is the Qualifying life: “to dean for life then to bob but if top student predeceases…” Generally have to survive until right to possession. 8. Rule in Clobberies: overrides survival requirement: a) to A at age 21 with interest – no survival; b) to A at 20 – survival required; and c) to be paid or payable at age… - no survival. CLASS GIFTS 1. Ambiguity – grantor’s intent: language and surrounding circumstances (extrinsic). Dewire: look at circumstances, under language would have waited 21 years before possession. Must have intended to take as each dies off. Also, would have violated RAP. Policy: intend class to be flexible and want benes to benefit. 2. General Rule: if class member dies treat like JTRS. Taking by Representation 1. KS: Eng/Strict/Pure/Classic: split at first level of issue even if dead. 2. American/Modern: split at first level where at least one living. 3. Percapita @ each Generation: split at first level of survivor but split remainder equally among next. Adopted Children 1. Minary: adopted adult wife to make wife an heir. But Language of T said to “my heirs” not the “heirs of my child.” H – adopted wife can inherit from H but not through H because thwarts grantor’s intent. KS: adult adoptee can be included in class gift. Courts are split. Step Children: not included in Class gifts – children. NonMarital Children: children usually includes. Half Bloods: states are split. Class Closing

1. Heirs - General Rule: class closes at T’s death, except when heir holds LE, then heirs determined at end of LE. No double dipping. 2. Steps for Determining: a) Is a member of class born when irrevocable? No (contingent) - Physiological: not physically possible to have more kids (dead). Yes – look at facts: if dead use physio. b) VRSO or Springing EI, use convenience (once first member has right to possession). RAP 1. Rule: Interest must vest or not vest w/in life in being + 21 years. 2. KS: follows CL or a 90 year wait and see. 3. Rule only applies to irrevocable. 4. Future Interests: - LE Vested Subject to Open. - Contingent LE - Contingent Remainder (no comma) - VRSO 5. Process: a) classify gifts; b) validating lives; and c) vests w/in perp. period. 6. Unborn Widow: always contingent, and can’t be a validating life. 7. Slothful Executor: gifts explicitly conditioned on distribution violate RAP. Class Gifts and RAP 1. All or Nothing Rule: a) Class must close w/in perp; and b) Contingency is met w/in perp. 2. Exceptions to All or Nothing: Subclasses: allows you to examine subclasses independently. 1) Intent of Grantor to create – language. 2) No., size, and share is fixed w/in RAP. 3) Unascertained members won’t qualify but won’t taint. Cramer. 4) Issue: when multigenerational and A is still alive. Specific Sums: each receiver is treated like ind. rather then class. 1) Immediate Gifts: class closes at T’s death (if at least one alive then use R. of convenience if noone alive gift fails.) 2) LE: class closes at end of LE. 3) Postponed but no LE: if one alive then closes w/ R.Convenience. If noone alive then gift fails. 4) Policy: specific shows T’s intent. Avoiding RAP Problems: 1. Draft automatic termination. 2. Statute: wait and see for 90 yrs.** TRANSFER TAX 1. Unified Gift and Estate Tax: federal tax on the transfer of $. 2. Policy ads: equalize wealth; inheritance – power, estate tax encourages charitable gifts. 3. Dis ads: pseudo rich feel the impact much more then super rich; inheritance – take care of kids and worked hard and keep mine. 4. Inheritance Tax – State tax on receiver. 5. Estate – tax on the lump. 6. Gifts – Exclusions: a) 11K per person per year w/out tax. Policy – IRS doesn’t want to track down or dissuade gifts. Exceptions to 11K cap: - Med. And Tuition: pay directly. - Qualified State Tuition Plans – put annual amount into state mutual fund for up to 5 years. b) Elements: - Present property interest: no FI Exception: 1) unless you are a minor (income + principle by age 21), 2) Uniform Transfers to Minors – exception to present interest: custodian rather then trustee (21), and 3) Crummey Trusts. - Donor must part with dominion and control. c) Advantage: lifetime nontaxable gifts are excluded from estate tax at death. d) Tally up taxable gifts and pay in estate tax but: e) Unified Credit Exemption: lifetime exclusion – changes each year. Crummey Trusts: window is sufficient to be considered present interest if: 1) Bene has present right to withdraw (window for 11K – 3 days too short, 30 = ok). 2) Bene has notice of right to withdraw. Marital Deductions 1. Gifts between spouses are not taxed. 2. Law considers one unit. 3. Can transfer during life or at death. Will be taxed at death for surviving spouse. 4. Exception – Terminable (not FS) interests unless qualified (QTIP). 5. QTIP: give all income annually for lifetime. Allows D to say who gets remainder – dead hand control. Charitable Deductions 1. Deductable at life and death. 2. Remainder to charity. Arguments: Grantor = Trustee: 1. Revocable – just a will.; 2. Revocable – merger doctrine. 3. Intent to be trustee. 4. Transfer Grantor = Beneficiary 1. Merger doctrine. Realty + No Writing: 1. Fraud – constructive trust. 2. Secret Trust.

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