Trusts, Trustees and

1
Chapter 5

• Trusts, Trustees and
• Powers of Appointment

2
Definitions

• Living Trust
• Testamentary Trust

• Common Trust Fund
• Trust
• Rule of Perpetuities
• Trust Situs
• Grantor
• Beneficiary
• Trustee

3
Fiduciary

• Individual or corporate entity charged wih the
  duty to act exclusively for the benefit of
  another party. The trustee or fiduciary has a
  responsibility or duty for the manage-ment of the
  property (the assets).
• Trustee does not have to accept, but once he
  does, he has a legal responsibility to fulfill
  obligations.

4
Q and A

• Does the power of an executor of an estate or
  trustee of a trust come from the federal
  government or from the state??
• Does anyone qualify?? What might disqualify
  you??
• The courts (probate court) get involved in the
  settlement of an estate. Do the courts generally
  get involved in trust arrangements?
• Do trusts and estates have an indefinate life?

5
Duties of Fiduciary

• Loyalty high standard . duty to act on behalf
  of the other party . cannot delegate
  responsibility.
• Cannot Self-Deal cannot sell asset to yourself.
• Preserve Property and Grow it protect first and
  grow (invest) second.
• Impartial and Objective
• Balance between Income Beneficiaries and
  Principal (Corpus) Beneficiaries.
• Keep records
• Follow the trust rules
• Corporate Trustee has higher duty

6
Fiduciary Powers

• Investment prudent investments . delegate to
  professionals. Trustee has legal liability if he
  invests in assets beyond his expertise or outside
  the direction of the trust document.
• Legal List identifies acceptable investments
• Trust Instrument Governs must follow rules.
  Trust instrument will give direction as to what
  investments are acceptable . along with a lot of
  other rules.

7
Purpose of Trusts

• Obtain competent professional management
• Beneficiary may not have the skills or character
  or judgment .. Trusts protects assets for
  beneficiary.
• Achieves security and protection after grantors
  death.
• Protect the interest of children from an earlier
  marriage.
• Protect against a beneficiaries spouse
• Can give the grantor an ability to manage and
  control assets after death.
• Tool to save estate taxes

8
Elements of a Trust

• Purpose why not give the property outright to
  the beneficiary??
• Creator / Grantor the person who initiates the
  trust?
• Trustee person named to be in charge
• Assets / Trust Property trust must be funded.
• Beneficiaries who benefits??
• Trust Terms governance trust instrument
• Term of Trust when does it end??

9
Types of Trusts

• Living Trust (Inter Vivos)
• Revocable Trust
• Irrevocable Trust
• Testamentary Trust
• Charitable Trust
• Charitable Remainder Trusts
• Charitable Lead Trusts

Chapter 16
10
Powers of Appointment

• Donor / Donee / Appointees
• General Power versus a Special Power
• See example on Page 126
• If the Power of Appointment is not made, there is
  a lapse of the power.