TRUSTS

1. Introductiona. Inherently flexible nature

i. Derived from case law now codified in FTCb. FTC – default rules when the trust does not state otherwise, except pertaining to

mandatory terms or characteristics i. Mandatory:

1. Substantive elements for creation of a trust2. Procedural matters (jurisdiction, venue, limitations on commencing

actions)3. Public policy restrictions on place of administration 4. Effect of penalty, spendthrift and exculpatory clauses5. Provisions of court powers (assign trustee, modify or terminate trust)6. Duties of trustees

2. Definitions §736.0103a. (20) Trust Instrument – instrument executed by a settlor that contains terms of a trust,

including any amendment to that trusti. MUST have a division between legal and equitable interests

1. This is why sole trustee (legal) CANNOT be sole beneficiary (equitable)ii. Trust = 5 substantive requirements + trust formalities

b. (16) Settlor – person who transfers assets to or otherwise funds the trust i. If there is more than one person, each is a settlor

c. (21) Trustee – person charged with managing the trust assets for the benefit of the beneficiaries

i. Can either be original trustee, successor trustee or co-trusteesd. (3) Beneficiary – person who has an equitable interest and for whom the trust is

administerede. (14) Qualified Beneficiary – a beneficiary living at the time interest is created who will

or would be a distribute of trust or trust income f. ***CAN SERVE MORE THAN ONE ROLE***

i. EXCEPT sole trustee cannot be sole beneficiary

3. Methods of Trust Creation – §736.0401a. §736.0401 – 3 methods of creation

i. Transfer: settlor transfers funds to a 3rd party who serves as trustee ii. Declaration: settlor declares himself trustee of trust assets for the benefit of

beneficiaries 1. a.k.a. self-declared trusts

iii. Power of Appointment: holder of PoA can create a trust by exercising that power

b. 2 types of trustsi. Inter vivos: trust that takes effect during the settlor’s lifetime (assets in inter

vivos trust avoid probate)1. Revocable: settlor retains the right to modify, amend or revoke the trust

a. Effect on creditors – settlor’s creditors can reach ALL of the trust assets

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b. Effect on taxes – ignored fro federal income, estate and gift tax purposes

2. Irrevocable: settlor has to authority to alter the trust a. Effect on creditors – settlor’s creditors can ONLY reach the

beneficial interest of trust retained by the settlor3. ***UNLESS terms of trust state otherwise, the trust is presumed

revocable*** (§736.0602)a. Not applied retroactively, not applied to trusts created before

FTC (2007)i. Policy: changed from trust common law which held the

opposite ii. Testamentary: trust that takes effect only upon settlor’s death; trust created as

part of a will

4. Substantive Trust Elements – §736.0402 a. §.0402 – 5 elements for express trust:

i. Res1. Trust must have a valid principal or corpus which is satisfied by any type

of recognized property interest2. Timing: trust must have res when trust declared3. §733.808 – trust res valid even if the only property is an expectancy

interest in a death benefita. Life insurance policyb. Health or accident policy

4. Testamentary trust does have res, even though the assets may be presently tied up in probate

ii. Settlor Intent to Create a Trust and Capacity 1. 3 intent requirements:

a. Settlor must have intended a trust i. Thus, if transferor intended anything other than a trust

(gift, bailment) then intent failsii. CANNOT have an implied trust

1. Issue spotter of intent problems: precatory language

a. I wishb. I strongly desirec. I request

2. Courts generally interpret precatory language as NOT legally enforceable for lack of trust intent

a. Court have found and can find a legally enforceable trust from precatory language, look at facts of the case to determine

b. Settlor must have capacity to formulate the requisite intenti. Opens door to capacity of settlor at the time of trust

creationii. Revocable trust

1. §736.0601 need same requirements as with a will

iii. Irrevocable trust

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1. Governed by common law and need same capacity as if giving a gift

c. Present intent to create the trusti. CANNOT be an intent to create a trust sometime in the

futureiii. Trustee with Fiduciary Duties

1. 2 part test:a. Trust must have a trustee

i. Can have 1 or many; can be people or entities ii. Failure of trust to name a trustee is not fatal court will

name a trustee if necessary b. §736.0402 Trustee must have duties to perform

i. See infra for trustee’s fiduciary duties iv. Identifiable Beneficiaries

1. Hold equitable interest in trust property and hold the trustee accountable to perform his duties

2. CAN wear different hats:a. Beneficiary can also be settlorb. Beneficiary can also be trustee, so long as not the sole

beneficiary and not the sole trusteei. legal and equitable power in same person and trust

merges1. Merger Doctrine: trust disappears and res

belongs to sole beneficiary3. §736.0402 – a trust has a definite beneficiary OR is:

a. Charitable trustb. Trust for care of an animalc. Trust for non-charitable purpose pursuant to§736.0409

4. §736.0402 – beneficiary is definite if:a. Beneficiary can be ascertained now OR in the future subject to

any RAP5. §736.0402 – trustee has the power to select beneficiaries from an

indefinite classa. HOWEVER, if power not exercised within a reasonable time,

then power fails and the property is subject to the power passes to person(s) who would have taken the property had the power never existed

i. if power not exercised in reasonable time then the trust may fail altogether

v. Lawful Purpose 1. §736.0404 – trust purpose MUST be:

a. Lawful, ANDb. Not contrary to public policy, ANDc. Possible to achieve, ANDd. For benefit of beneficiaries

5. Formalities a. 3 factors determine the trust formalities:

i. Types of trust1. Inter vivos

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a. Real property – must comply with SOF regardless of whether revocable or irrevocable

i. Found in §689.051. Must be in writing and signed by the party to be

boundii. If transfer real property into trust via deed

1. Deed: signed by the grantor and at least 2 witnesses

iii. Constructive trust – found after semicolon of SOF1. Created as equitable remedy, usually to avoid

unjust enrichment 2. Have a deed but no trust instrument 3. Imposed when there is a confidential

relationship between the parties and the confidence breached OR duress, fraud, undue influence or other wrong-doing

a. Constructive trust will not be imposed for a mistake

4. Ex. Wodonos v. Wodonosa. Father deeds ¼ interest in apartment

building to daughter and son-in-law with daughter’s name only on the deed

b. Son-in-law argues constructive trust bc deeded but no trust instrument

i. Son-in-law wanted trust because then kept an interest

ii. Daughter wanted deed because then all belonged to her

c. There was no evidence to show trust intended; only evidence shows gift to daughter

i. No wrong-doing, so court left as a deed to daughter for entire complex

5. Ex. Williams v. Grogana. Father gave trust to mother and son and

son was convinced that to give his mother his trust interest with the understanding she would deed it to him when he was older and more responsible

b. Mother willed all of son’s interest to other beneficiaries

c. Son wanted constructive trusti. Here, confidential relationship

breached so constructive trust created

6. Ex. Allen v. Dalka. Settlor forgot to sign the will and

beneficiaries wanted court to impose constructive trust

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b. Court held that a settlor mistake is not sufficient to create a constructive trust

b. Personal propertyi. Irrevocable – no formalities

ii. Revocable – any testamentary aspects must be executed like a will

1. Testamentary Aspects: provisions of the trust instrument that dispose of the trust property on/after the settlor’s death other than to the settlor’s estate

2. Testamentary a. Since the trust is created as part of a will, it must comply with

the formalities of a will i. If formalities not followed, then struck and the rest of

the trust remains validb. Found in §732.502

ii. Type of property in trust (inter vivos)1. Real property – SOF issue supra2. Personal property

a. Irrevocable inter vivos – no formalitiesb. Revocable inter vivos – any testamentary aspects must be

executed like a will iii. Whether trust is revocable and if so, does it contain testamentary aspects?

1. If there is personal property in a revocable trust has testamentary aspects then those aspects must be executed with the formalities of a will

Inter vivos Inter vivos Testamentary TrustRevocable Irrevocable

Personal Property If any testamentary aspects formalities of a will

None Formalities of a Will

Real Property Follow SOF, any testamentary aspects formalities of a will

Follow SOF Formalities of a Will

iv. Oral Trusts1. §736.0407 – no formalities required for an oral trust and the trust only

needs to be established by CCE (BOP on proponent)2. Even though oral trust can be created, cannot do so for:

a. Inter vivos trust with real property b. Revocable inter vivos trust with testamentary aspectsc. Testamentary trust d. all of these would violate SOF

6. Revocable Trustsa. §736.0103(15) – revocable means revocable by the settlor without the consent of the

trustee or any person holding adverse interest

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i. Beneficiary’s interest is created immediately in an inter vivos trust, regardless of whether the possessory right is postponed

ii. “An interest passes to the beneficiary during the life of the settlor, although that interest does not take effect in enjoyment of possession before the death of the settlor, the trust is not testamentary.” – Zuckerman

b. Revocable trust res is not part of probate estate, even if there are testamentary aspects

i. Avoids probate because the settlor transferred these assets before deathc. Revocable trusts CANNOT be testamentary because once settlor dies he can no

longer change the trust (negates revocability characteristic)d. Can contain interest created during:

i. Settlor’s life, AND1. Income to settlor for life , then to B

ii. After settlor’s death1. Income to settlor for life, then to B

e. Governed by §736.0601—.0604 i. .0601 – if trust does not state otherwise, it is presumed revocable; settlor’s

capacity is the same as needed under a will ii. .0602 – revocation and amendment

1. Settlor can revoke or amend by:a. Substantial compliance with a method provided in the terms of

the trust2. If trust silent (no method in trust), modification by:

a. Later will or codicil that expressly refers to the trust or specifically devises property that would otherwise have passed according to the trust

b. Any other method manifesting CCE of settlor’s intentiii. .0603 – settlor’s powers

1. While trust revocable the trustee’s duties are OWED SOLELY to the settlor

a. Trust is no longer revocable after settlor’s deathiv. .0604 – limitation on action contesting revocable trust

1. SOL for contesting trust that were revocable immediately prior to settlor’s death

2. Action barred, unless commenced within the earlier of:a. Time in chapter 95, ORb. 6 months after the trustee sent the person a copy of the trust

instrument and notice informing the person of trust’s existencei. Person whoever is trying to sue

7. Funding Trustsa. Revocable Trusts

i. Probate avoided ONLY for the assets that were actually transferred into the trust prior to death

ii. Transferring assets into trust requires:1. Assessing nature of assets, AND

a. Personal property:i. Publically titled tangible personal property – retitle

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ii. Non-publically titled tangible personal property – often not transferred, BUT can be by drafting an “assignment” document

1. Assigned by settlor, AND2. Accepted by trustee 3. essentially the same requirement for gifts

a. Intent, delivery and acceptance iii. Intangible personal property – contacting applicable

entity and re-registering1. Ex. stock, securities

b. Real property – usually through deed recorded in the country where the real property is located

i. Signed by GR or GR agent in the presence of two Ws, delivery (does not have be recorded, just delivered), language of conveyance and signed by notary (if going to recorded then must be notarized)

ii. Trust can also serve as a deed, so long as language of conveyance in document

1. Just trust language is insufficient to transfer real property

2. Follow §689.07a. State the nature and purpose of trust in

deedb. Record trustc. Identify trust, by name or date, in the

deedd. Name beneficiaries in deede. In deed – express that trustee should not

hold land in FSA2. Complying with the requisite formalities

a. See supra, formalities b. Irrevocable Trusts

i. Generally, assets place in revocable trust can also be transferred into irrevocable trust AND in the same manner as revocable trust

c. Testamentary Trusti. Created by means of devise which will be effective upon settlor’s death

1. Four types of devises:a. Specificb. Demonstrativec. Generald. Residuary

ii. Trust not funded until PR distributes assets to the trusteeiii. Devises may abate or be subject to ademption; thus, trust may lose funding

d. Transferring Homesteadi. To retain homestead protection must be a revocable trust where settlor retains

benefits1. Super-creditors are still able to pierce homestead protection, even if it

protected in a trustii. Do not just put homestead in trust because it does not need the added protection,

it has constitutional protection

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8. Creditor Protectiona. Generally, creditor stands in the shoes of the debtor

i. Thus, creditor can reach all property to which the debtor has access b. Distributive provisions (all work together and overlap):

i. Mandatory1. Trustee must do something, must make distributions pursuant to settlor’s

directions and instructionsii. Discretionary

1. Trustee has the option to make certain decisionsa. Who, how much, how often, pay out or reinvest

i. Ex. “trustee can decide monthly which of A, B, C, and D get income. Can be all four or just one”

ii. Ex. “trustee must distribute at least as often as semi-annually”

iii. Ex. “trustee can decide to pay up to … amount”iv. Ex. “trustee may in his sole discretion distribute some,

all, or no income to A or instead distribute such income to other trust beneficiaries”

1. Who and how much iii. Support

1. Settlor places assets in trust for the care, comfort, maintenance and education of designated beneficiary or beneficiaries

a. Can designate ONLY one support or support in GENERALi. Only one – for son’s education

ii. General – to support my wife2. Bridge between mandatory and discretionary

a. Must give property to beneficiary but the “how much” or “when” is discretionary

3. Ex. “trustee shall distribute such income as necessary for A’s support, health and education.”

iv. Spendthrift provisions1. Provision in trust explicitly restricting a beneficiary’s right to

voluntarily or involuntarily alienate his interesta. Settlor restricts beneficiary’s right to manipulate his interest and

prohibits creditors from touching it2. §736.0502 – Spendthrift Provision

a. Elements:i. Must restrict both voluntary and involuntary transfers of

beneficiary’s interest ii. Must state that the interest of the beneficiary is subject to

a spendthrift, or similar wordsb. Effect beneficiary cannot transfer and creditor cannot reachc. EXCEPTION: spendthrift clauses do not prevent the

appointment of interests through the exercise of a PoA3. EXCEPTIONS: spendthrifts do not protect against the following special

creditors §736.0503:a. Alimony – only as a last resort

i. Must exhaust all other avenues of collection; if creditor does, then can attach a trust with spendthrift provision

ii. Ex. Bacardi v. Whiteb. Child support – only as a last resort

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c. Attorney’s fees – judgment creditor who has provided services for the protection of beneficiary

i. Only as last resortd. U.S. government – does not have to be last resort; free reign to

attach property4. These special creditors attach trust by:

a. Obtain court order attaching present and future interestb. Court can limit the award as it deems appropriate

5. HOWEVER (exception to exception) §736.0504 a. If discretionary trust, trustee cannot be compelled into making a

distribution creditors cannot force trustee to make a distribution

i. Creditor cannot obtain more rights than the beneficiary had

1. If or when trustee makes the distribution then creditor can garnish the interest

b. If discretionary trust and trustee fills both that role and the role of beneficiary AND trustee’s discretion is limited by ascertainable standard creditor can only reach interest of trustee to the same degree the creditor could reach interest of any other beneficiary (of a discretionary trust)

i. Cannot compel distribution c. BUT beneficiary can sue trustee to force distribution if trustee is

abusing discretion or failing to comply with distribution scheme established in trust

6. Creditors to beneficiaries with spendthrift provisions can only reach interests in mandatory trusts

7. Ex. “no interest of any beneficiary in the income or principle of this trust shall be assignable in anticipation of payment or be liable in any way for the beneficiary’s debt or obligations and shall not be subject to attachment”

8. Ex. “no beneficiary shall have any power to dispose of or charge by way of anticipation or assignment any interest in this trust and the beneficiary’s interest shall not be subject to the beneficiary’s creditors in any legal or equitable process”

c. §736.0505 – creditor’s claim against settlori. Rules for self-settled trusts

ii. Whether or not trust contains a spendthrift clause:1. Property of revocable trust is subject to claims of settlor’s creditor during

settlor’s lifetime a. Concept: settlor still holds the property since he can change his

mind until death2. Property in a irrevocable trust is subject to settlor’s creditors to the extent

the settlor receives any interest from the trust

9. Elective Share Trusts a. §732.201 – Right to Elective Share

i. Surviving spouse of a person who died domiciled in FL has the right to a share of elective estate, to be designated by elective share

b. §732.2065 – Amount of Elective Share

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i. Elective share is 30% of elective estate1. Elective Estate is the same from wills

c. Elective Share Trustsi. §732.2025 – elective share trust

1. Trust under which:a. Surviving spouse is entitled for life to the use of the property or

to all the income payable at least as often as annually, ANDb. Surviving spouse has the right to require the trustee either to

make the property productive or to convert it within a reasonable time, AND

c. During surviving spouse’s life no one other than the surviving spouse has the power to distribute income or principal to anyone other than the surviving spouse

ii. Once the trust meets the requirement of an elective share trust, then must determine how the assets of the trust are valued for purposes of satisfying surviving spouse’s 30% elective share amount

1. 100% – if spouse has both a qualifying invasion power AND qualifying PoA

2. 80% – only has qualifying invasion power3. 50% – only has qualifying PoA4. 50% – neither power

iii. §732.2095(c) Qualifying invasion power: power held by surviving spouse or trustee to invade trust principal for the health, support and maintenance of the spouse

iv. §732.2095(b) Qualifying PoA: general power of appointment exercisable by the spouse in favor of the spouse or the spouse’s estate

d. Connection with elective estatei. Elective share trust can be used to fund surviving spouse’s 30% so that no other

devises have to abate

10. Life Insurance Trustsa. Trust that have life insurance policy as part of res

i. Trust is the beneficiary of the life insurance policy which is permitted by the expectancy rights

b. Primary reasons:i. Tax evasion

ii. Secure assets for minor children without having a guardian appointed 1. If guardian appointed then all distributions must occur through court

order2. No guardian, trustee already appointed, more pain-free process

a. Dead hand control c. Life insurance policies are a method for funding surviving spouse’s elective share

i. Settlor makes elective share trust (elements above) beneficiary of life insurance policy

1. Proceeds can be treated as satisfying elective share AND only smaller cash surrender value used in calculation of elective estate

11. Trusts for Animals

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a. §736.0402 – trust has a definite beneficiary OR is (2) trust for the care of an animal b. §736.0408 – Trust for the Care of an Animal

i. Trust created to provide for care of an animal alive during settlor’s lifetime1. Alive during settlor’s life2. Added to trust during settlor’s life3. In gestation4. Future animals not protected under pet trusts

a. Can be protected under §736.0409 for 21 yearsii. Trust terminates:

1. Upon death of animal, OR2. If more than one animal, upon the death of last one

iii. Overseer of trustee must be appointed or court will appoint one1. Concept: animal cannot force trustee to act

iv. Trust must be used for its intended use UNLESS the court finds the trust over-funded

1. If excessive funds, then court will take portion not needed by animal back. Funds go to the settlor, if living, or to settlor’s estate.

12. Termination and Modification of Irrevocable Trusta. §736.0602 – termination, modification and amendment of revocable trusts supra,

revocable trustsb. 2 types of termination and modification (governed by both CL and Statute):

i. Non-judicial (courts not needed)1. Common Law

a. If all the beneficiaries of an irrevocable trust consent, they can compel the termination or modification of a trust

i. Beneficiaries cannot compel if it would frustrate the material purpose of the trust UNLESS:

1. They obtain settlor’s consent, OR2. After settlor’s death, the court determines that

the reason(s) for termination or modification outweigh the material purpose

b. All beneficiaries: either through direct or indirect consenti. Indirect consent through guardians:

1. Needed for minors or incompetent adults ii. EXCEPTION: if cannot obtain consent of a beneficiary,

court may still allow modification if it gives the same beneficiaries equal or greater benefit

1. Only applies to modification, by analogy to termination

c. Material purpose:i. If purpose has yet to be fulfilled then trust cannot be

terminated 1. Spendthrift trust2. Postponement of enjoyment trust

a. Ex. get principal when reach 25b. Ex. get principal when graduate law

school3. Discretionary trust 4. Support trust

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d. No court decree needed, trustee is in charge of assuring the rule is applied appropriately and acting upon it

2. FL Statutesa. §736.0412 – Nonjudicial Termination of Irrevocable

i. 4 requirements:1. Unanimous consent of the qualified

beneficiaries2. Trustee consent3. Settlor must be dead at the time modification or

termination is sought4. Modification/termination must not be prohibited

ii. Settlor can block this statute if:1. Uses CL or 90 year RAP, AND2. Trust does not expressly allow nonjudicial

modificationii. Judicial (court steps in)

1. Common Lawa. Change in circumstances not anticipated by the settlor AND the

modification will further the trust’s purposeb. If trustee of aware of these differing circumstances, then trustee

has a duty to petition the court for appropriate modification or termination

c. Concept: give effect to what settlor’s intent probably would have been had the circumstances in question been anticipated

2. FL Statutes a. §736.04113 – Not Inconsistent with Settlor’s Purpose

i. Trustee or qualified beneficiary may ask court to terminate or modify trust terms

ii. Court considers:1. Terms and purpose of trust2. Surrounding facts3. All relevant extrinsic evidence4. Spendthrift clause, it is not dispositive

iii. Petitioner must allege:1. Purposes of trust have been fulfilled, are illegal,

impossible or impracticable to fulfill2. Circumstances not known or unanticipated by

the settlor have come up and compliance with terms of trust would defeat or substantially impair the accomplishment of a material purpose of the trust

3. Material purpose no longer existsiv. Remedies, court can:

1. Amend or change trust terms2. Terminate trust, in whole or part3. Direct or permit trustee to act, even though

actions may not be authorized or are prohibited by trust

4. Prohibit trustee from performing authorized or required action

b. §736.04115 – Best Interest of Beneficiaries

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i. Trustee or qualified beneficiary may ask court to terminate or modify trust terms if compliance with the existing terms is not in the best interest of the beneficiaries

ii. If modifications made:1. Court shall modify in a manner that conforms to

settlor’s intent to the best extent possible taking into account the best interest of beneficiaries AND:

a. Terms and purpose of trustb. Surrounding factsc. All relevant extrinsic evidenced. Spendthrift clause, it is not dispositive

iii. Settlor can block this statute by:1. Using CL or 90 year RAP, OR2. Expressly allowing nonjudicial modification

c. Other statutes governing modification or terminationi. §736.0410 – trust terminates to the extent the trust expires or is revoked or is

properly distributed pursuant to the terms of the trustii. §736.0414 – termination of non-economical trusts

1. Trustee of trust holding less than $50,000 may terminate the trust if the value of trust property is insufficient to cover administration costs

2. If trust value is equal to or greater than $50,000 then trustee or qualified beneficiary can petition the court to terminate because not worth sustaining

iii. §736.04117 – Trustee’s Power to Invade Trust Principle1. Trustee can modify the distributive provisions of the trust if trustee give

absolute power to invade the principal of the trusta. Trustee has power to invade principle in order to make

distributions2. So long as power not limited to specific or ascertainable purpose

a. Ex. support trust – clearly ascertainable purpose, so trustee cannot modify

3. If trustee has the power:a. Trustee can take principle from one trust and place it in another

UNLESS trust expressly prohibits such actionsi. essentially creating a new trust

4. NEW trust must:a. Have the same beneficiaries as the originalb. Cannot reduce income or annuitiesc. Cannot disqualify or reduce certain tax benefits

5. Notice: must tell qualified beneficiaries of the first trust at least 60 days prior to action

13. Charitable Trustsa. §736.0405 – Charitable Purposes and Enforcement

i. Charitable trust elements:1. Charitable intent

a. Present charitable intent when trust created

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b. Relief of poverty; advancement of arts, sciences, education, or religion; promotion of health, governmental or municipal purposes

2. Indefinite beneficiaries a. Only definite beneficiary is the charity

i. No other ascertainable beneficiary because should be created for the good of society (not to benefit one individual)

ii. CANNOT be a specified group1. Ex. 5 women living on 4th floor Adams

3. Enforcement by:a. State Attorney-Generalb. Charitable organization that is beneficiary of trustc. Settlor

4. RAPa. Charitable trust can live on forever, in perpetuity

i. RAP still an issue if trust has both charity and non-charity purposes

1. To son, then to charityii. Insulted from RAP if charity-to-charity trust

1. To charity A, then charity Bb. §736.0413 – Cy Pres Doctrine

i. Only applicable to charitable trusts1. Only apply is settlor did not name an alternate take2. Only apply if settlor had specific intent which is now impossible,

impracticable, etc.a. If settlor had general intent then court will direct trustee to

distribute funds “as near as possible” to original purposeii. If a particular charitable purposes becomes unlawful, impracticable, impossible

to achieve, or wasteful court apply cy pres to modify or terminate trust1. Court can direct trust to be applied or distributed, whole or part, in a

manner consistent with the settlor’s charitable purposes iii. Settlor, trustee or qualified beneficiary can petition the court iv. Ex. charity dies, new statute, not enough money to fulfill purpose

c. §736.0409 – Non-charitable Trust without Ascertainable Beneficiaryi. Trust can be created for non-charitable purpose without a definite beneficiary or

a beneficiary to be selected by trustee BUT the trust is limited to 21 year enforcement

14. Resulting Trustsa. Not an express trust; arises because a trust failed

i. A fail-safe trust where settlor intent inferred when original trust failed1. Legally inferred intent that if the settlor has contemplated these

results, he would have intended the property to revertb. Arising from 2 scenarios:

i. Corresponding express trust failed or did not completely dispose of trust assets1. Trust can fail because purposes have become illegal, SOF issue, assets

not completely disposed of because assets exceed purposes2. Effect beneficial interest results back to settlor or settlor’s successors

in interest

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a. If undue influence, fraud, etc. involved then constructive trust created in fairness and to avoid unjust enrichment

3. Ex. to charity A, then to charity B; Charity A and B both close, cannot apply Cy Pres because settlor had specific intent

a. Trust now fails intent inferred herei. Trustee holding for beneficiaries that are no longer

existent so the res goes back to the settlor or the settlor’s estate

ii. Purchase money resulting trust that arises when the purchase price of property is paid by one person but title it taken by another

1. If payor and title holder are NOT related PMRT createda. Law presumes the person holding title is holding it in trust for

the person who paid the purchase price b. Presumption can be rebutted

2. If unrelated potential PMRTa. Presumption of gift intentions

i. Must have close familiar relationshipb. Presumption can be rebutted

15. RAPa. §689.225 – Statutory RAPb. CL RAP: measuring life in being + 21 years at the time the interest was created

i. Testamentary trust – interest created at settlor’s deathii. Inter vivos revocable – interest created when trust becomes irrevocable

iii. Inter vivos irrevocable – interest created when trust created c. Perpetuities saving clauses

i. If settlor thinks that trust may violate RAP then can put in a RAP savings clause ii. 3 examples on pages 559 – 560

1. Revocable trust: “notwithstanding anything in the instrument to the contrary, this trust shall terminate 21 years after the death of the last surviving trust beneficiary living at the settlor’s death. If this trust terminates pursuant to this clause, the trustee shall distribute that trust principle and accumulated income to the beneficiary or beneficiaries of this trust who are entitled to receive discretionary or mandatory distributions of income, in the proportions to which they are entitled to said income, but if there are no set proportions, then equally.

16. Estate Planning Related Documentsa. Power of Attorney

i. Gives someone the authority to act on your behalf1. Can be either extensive or limited

ii. Revocation, death and incapacity will terminate PoA1. Ex. when elderly person, who gave PoA to son, becomes incapacitated;

the son’s PoA is invalidb. Durable Power of Attorney

i. Same as PoA, except that it lasts beyond grantor’s incapacity 1. Can be general or limited

ii. Need magic words – “DPoA is not affected by settlor’s incapacity”

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iii. Terminated by death or revocationiv. Effective:

1. On date of creation, OR2. Upon grantor’s incapacity (springing DPoA upon incapacitation)

a. Need doctor’s affidavits to prove incapacityc. Deployment contingent PoA

i. PoA effective when military personnel deployedd. Living Will

i. Pull the plug documentii. Do not want to be sustained under artificial means

e. Healthcare Surrogatei. Akin to DPoA but specifically limited to healthcare decisions

f. Anatomical Giftsi. Document detailing that someone is an organ donor

g. DNRi. Do not resuscitate

1. Different from living will – if I already die, I am gone ii. Requires doctor to sign off on it

1. Only for those patients that resuscitation is prolonging the inevitable

17. Trustee’s Fiduciary Powersa. §736.0815 – trustee’s powers are limited to trustee’s duties

i. Trustee CANNOT exercise a power if doing so would cause trustee to violate one or more of trustee’s duties

b. §733.602 – PR is a fiduciary who shall observe the standards of care applicable to trustees

i. PR has same duties as trustee and visa versac. Trustee Powers

i. Breach of these duties get trustee into trouble:1. Express provisions of trust as limited by duties 2. State statutes granting trustees certain powers

a. §736.0815 – general powersi. Can do whatever needed to administer the trust UNLESS

the trust states otherwiseb. §736.0816 – specific powers

i. These powers will apply UNLESS the settlor limits these powers in the trust itself

1. Power to sell trust property2. Power to lease3. Etc. etc. etc.

3. CL powers 4. Authorization by the courts

d. Trustee Dutiesi. Duty to Administer Trust

1. §736.0801 – duty to administer the trust in good faith and in accordance with the terms and purposes of the trust instrument for the benefit of the beneficiaries

a. Intrinsic and mandatory ii. Duty of Loyalty

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1. §736.0802 – trustee to administer the trust solely in the interests of the beneficiaries

a. Transactions entered into by a trustee for his personal benefit is voidable (as opposed to outright void from CL)

i. Voidable UNLESS one of a—g metb. Self dealing: transactions with persons or entities that are

associated with the trustee c. EXEMPTION for lawfully authorized entities

i. Trustee can enter into transactions with itself it meets the statute §726.0802(5)

iii. Duty of Impartiality1. §736.0803 – trustee must administer a trust impartially such that the

administration is equitable to all beneficiaries a. Power struggle between income beneficiaries and remaindermen

beneficiaries i. Income want aggressive trustee so they get more funds

ii. Remaindermen want conservative trustee so money is left in trust for them

iv. Duty of Prudent Administration1. §736.0804 – trustee administer the trust as a prudent person would, by

considering the purposes, terms, distribution requirements, and other circumstances of the trust

v. Duty to Incur ONLY Reasonable Expenses1. §736.0805 – trustee to incur only expenses that are reasonable in relation

to the trust property, the purpose of the trust, and the skills of the trusteea. DO NOT overspend

vi. Duty to use Special Skills1. §736.0806 – if the trustee has special skills, or the trustee was selected

on the basis of representations of special skills or expertise, then trustee is under duty to use those skills

vii. Duty to Delegate1. §736.0807 – trustee may delegate duties and powers that a prudent

trustee of comparable stills could property delegate under the circumstances

2. If delegate, then must be prudent:a. In deciding what to delegateb. Who to delegate toc. Prudent in supervision of delegatee

viii. Duty to Control and Protect Trust Property1. §736.0809 – trustee shall take reasonable steps to take control of and

protect trust property 2. Need powers to execute this duty as enumerated in .0816 or by trust

document ix. Duty to Enforce and Defend Claims

1. §736.0811 – part of controlling and protecting trust property x. Duty to Collect Trust Property

1. §736.0812 – duty to compel delivery of trust property from any previous trustee or another person holding the property

a. If someone else is holding trust property they should not be holding then trustee has duty to get that property back

xi. Duty to Inform and Account

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1. §736.0813 – duty to qualify beneficiaries (living beneficiaries) to make and keep accountings with respect to the trust administration

a. Show, in detail, the nature and amount of trust property 2. Irrevocable – must give annual accounting3. Revocable – must give ONLY to settlor while still revocable

xii. Discretionary Powers1. §736.0814 – trustee who is also beneficiary of a trust is prohibited from

making discretionary distributions of trust property for himself UNLESS trust instrument expressly states that this statute will not apply

xiii. Duty not to Commingle 1. §736.0810(2) – trustee has a duty not to commingle trust assets

a. Duty not to commingle trust assets with trustee’s personal assetsb. Duty not to commingle trust assets with assets of other trusts

2. EXCEPTION: can commingle if trustee is trustee of two separate trusts so long as keep clear and accurate records

e. Breach of Dutiesi. Liability to:

1. Beneficiaries a.k.a. internal liability a. §736.1012 – trustee is not liable to a beneficiary for breach of

fiduciary duty if the beneficiary:i. Consented to the conduct

ii. Released trustee from liability for the breachiii. Ratified the transaction

b. UNLESS (trustee still liable if)i. Consent, release, ratification was induced by improper

conduct of trustee, ORii. At the time of consent, release or ratification the

beneficiary did not know of his rights or of the material facts relating to the breach

c. If trustee breaches a fiduciary duties then courts allow many avenues of redress to beneficiaries

i. Listed in §736.1001(2)1. Remedies: Money damages, injunction, force

accounting, appoint receivership, remove or suspend trustee

2. Damages: Beneficiary can receive the greater of the amount of restoration to trust property or the profit made by trustee of property sold

a. §736.10022. Limitation on trustee’s personal liability; 3rd parties a.k.a. external

liability a. §736.1013

i. Trustee not liable in tort if tort was not trustee’s faultii. Trustee not liable in K in which trustee entered into with

3rd party on behalf of trust if:1. Trustee disclosed fiduciary capacity, OR2. K says otherwise

ii. Successor Trustees1. §736.08125 – Successor trustees will not be personally liable to qualified

beneficiaries and will not be required to initiate lawsuit against wrongdoing of previous trustee, IF:

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a. Settlor mismanagedb. Failure of previous trustee to do accounting if beneficiaries

waived the accountingi. If beneficiaries let it happen prior then SOL stops them

from bringing suit against successor trustee ii. No codified SOL, just court determination if COA is no

longer ripec. Is super-majority of beneficiaries releases the successor trusteed. If beneficiaries do not ask successor trustee to act, then not liable

18. Wills and Trusts Crossover Issuesa. Mistake

i. §732.5156 in willsii. §736.0406 in trusts

iii. Mistake in the execution1. Voided in both

iv. Mistake in the inducement1. Will voided2. Trust not voided, possibly reformed depending on court interpretation of

the statutev. Mistake in drafting

1. Will not invalidated2. Trust fixed by reformation

a. §736.0415 – Reformation i. Ct will modify a trust to correct a mistake, even if

unambiguous, to confirm the trust to the settlor’s intent if proved by CCE

1. CANNOT fix errors in a will, but courts WILL ALLOW reformation in trusts to fix errors

b. In re Estate of Robinson i. When applying reformation:

1. Look for settlor’s intent and follow it2. trust with testamentary aspects may be reformed

after the death of the settlor for a unilateral drafting mistake so long as reformation is not contrary to the interest of the settlor

b. Undue Influencei. Wills §732.5165

1. See supraii. Trusts §736.0406

1. If entire trust subject to UI then entirely invalidated, BUT if only portion of trust subject to UI then that portion invalidated

c. Ambiguities i. Will court will ONLY interpret here

1. Interpret document based on decedent’s intent by looking at the document as a whole

ii. Trusts courts interpret here and with mistakes 1. Interpret document based on settlor’s intent

d. Lapse and Antilapsei. Wills §732.603

1. See supraii. Trusts §736.1106

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1. Must survive to time trust is distributeda. Distribution: date in which beneficiary can enjoy interestb. If do not survive until date of distribution, interest is distributed

to a substitute gift created for the beneficiary’s surviving descendents

2. More extensive than wills because any beneficiary is subjected, not just blood of grandparents

3. Applies UNLESS trust shows a contrary intent e. Divorce

i. Wills §732.5071. See supra

ii. Trusts §736.11051. Same as wills EXCEPT only applies to revocable trusts

f. Murderi. Slayer Statute

1. Wills §732.802a. Person who kills or have them killed (unlawfully or intentionally

kill) cannot benefit from person killedb. Self defense allowed

2. Trust §736.1104a. Same as wills EXCEPT cannot take if participate in the killing

of:i. Settlor, OR

ii. Another person on whose death such beneficiary’s interest depends

b. Can kill anyone else and still receive interest

19. Miscellaneousa. In Terrorem Clauses: clause purporting to penalize any interested person for challenging

the will i. Invalid in FL

See Wills Class 732.517 For Will 736.1108 for a Trust

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