NEW YORK TRUSTS

OVERVIEW OF TRUSTS TOPICS

I) REQUIREMENTS FOR A TRUST
II) TYPES OF TRUSTS
III) MODIFICATION AND TERMINATION OF TRUSTS
IV) TRUST ADMINISTRATION
V) LIABILITY OF TRUSTEE IN CONTRACT AND TORT
VI) RULE AGAINST PERPETUITIES AND

SUSPENSION RULE

I) REQUIREMENTS FOR A TRUST

Three (3) things using the name “trust”:
1. Express trusts;
2. Resulting trusts; and
3. Constructive trusts.
The express trust is the only real trust; the other two (2) are just equitable remedies

A) EXPRESS TRUSTS:
1) Defined: A legal device that allows an owner of property to make transfers of
property and have those assets managed on behalf of someone else. (Rather than
have the beneficiary manage the money by himself or herself).

The person who creates the trust, the SETTLOR gives legal title to a TRUSTEE to
manage the money, and the beneficiaries have equitable title to enjoy the distributions
from the trust.

2) Two (2) kinds of express trusts:

(i) Life time (inter vivos) trust, set up during the lifetime of the person
who created the trust, who we call the settlor of the trust.
(ii) Testamentary trust, set up in the settlor’s will.

3) Eight (8) requirements for a valid trust:

(i) Settlor (also called creator) who makes a...
(ii) Delivery of legal title to...
(iii) Property (also called res, or corpus, or principal) to a...
(iv) Trustee who holds legal title for the benefit of a...
(v) Beneficiary (or beneficiaries) with...
(vi) Intent to create a trust for...
(vii) A lawful purpose…
(viii) In a validly executed document.
NOTE: No consideration is required to create a trust.

B) EXPRESS TRUSTS REQUIREMENTS:

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 1) SETTLOR: The Settlor can be anyone age 18 or older, with the capacity to enter
into contract.
2) DELIVERY: Titled assets (houses, cars, etc) must be formally transfered for
delivery to be valid.

HYPO 1: Sarah, a personal injury attorney in Manhattan, signed a trust agreement

naming her friend Tom, as trustee, and her children Betty and Ben as beneficiaries. The
trust agreement was properly notarized. The agreement recited the property of the trust as
shares of stock in various corporations, and recited that the trustee acknowledged receipt
of the shares. The stock certificates were handed over to Tom by Sarah at the time the
trust document was signed and acknowledged. Before the shares could be reregistered in
Trustee Tom’s name, Settlor Sarah died.
 Is this trust valid? NO, because there was no DELIVERY of the stock
certificates.

3) PROPERTY (RES):

(a) The property can be almost anything, but must be property that the settlor
owns, not just a mere expectancy of ownership in the future.

HYPO 2: Sam’s mother Teresa executed a will leaving her farm to him. Sam was
delighted that he would get the farm when his mother died, and decided to create a trust.
He executed a document naming himself as trustee and his sons Bob and Barry as income
beneficiaries for life, with the principal then going to his granddaughter Marie. Teresa
approved of this because she greatly loved Marie and thought that this would preserve the
farm for Marie to own one day.

 Is this a valid trust? NO – because Sam only has an expectancy of property

ownership. He does not have present ownership in the farm that will entitle him to
put into the trust.

(b) It must be identified property, not subject to future determination.

HYPO 3: Sam created a trust to be funded with “whatever money or property that I may
choose to contribute to the trust over the next ten (10) years.”
 Is this a valid trust? NO – the property must be something identified that the
settlor owns, not something the setller promises for the future.

4) TRUSTEE:

(a) For a lifetime (inter vivos) trust, almost anyone can be a trustee since no court
involvement is needed for such trusts.

(b) For a testamentary trust created under court supervision, anyone except for those you
can’t:

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 (i) Those under the age of 18
(ii) People who are judicially declared incompetents.
(iii) Convicted felons
(iv) Those incapable because of drunkenness, dishonesty, want of understanding,
or improvidence.

(c) A non-resident “alien” can serve as trustee ONLY IF: A New York resident serves as
co-fiduciary.

NOTE: Failure to name a trustee in the trust does not matter; the court can appoint
someone.

HYPO 4: Mother Jones executed a will that created a trust with 1 million dollars to pay
the income from the trust to her son Barry for life, and on his death the principal was to
go to her granddaughter Betsy. No trustee was named in the will.
 Is this a valid trust? YES – because the court can appoint a trustee. No trustee
need be named by the settlor.

5) BENEFICIARIES:
(a) Beneficiaries must be definite and ascertainable; no ambiguity.
(b) If ambiguous, the trustee holds in a resulting trust for the residuary
beneficiary of a will (or intestate heirs in absence of a valid will).

HYPO 5: Stephen’s Will created a trust, giving $4 million worth of IBM stock to his
friend Ted, as trustee, to pay the income for life “to all my good friends,” and to pay the
remainder to “my very best friend of all.” The residuary beneficiary of Stephen’s Will
was his sister Barbara.
 Does the trust fail? YES, because the beneficiaries “my good friends” and “my
very best friend” are not definite and ascertainable and.
 Does Ted get to keep the money? NO. He holds it in a resulting trustee (not a
real trust, just en equitable remedy) for Barbara.

(c) Exception: a beneficiary listed as someone’s “family” or “next of kin” IS considered

definite and ascertainable and the trust does not fail; consult the intestacy statutes for
the names of the persons who fit the description in the trust.

Definition – Intestacy: When a decedent dies without a valid will and their estate
property is distributed pursuant to a state statute.

HYPO 6: Stephen’s Will created a trust, giving his $4 million dollars worth of IBM stock
to his friend Ted, as trustee, to pay the income “to my family,” and to pay the remainder
to his sister Barbara.
 Is this OK? YES – because family can be determined by looking to the intestacies
statutes. Family has a legal definition.

6) INTENT ***:

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 (a) Settlor must intend to create an enforceable obligation; precatory (non-
binding) language is not enough.

(b) Trustee must be given duties to perform; if trustee has no given duties to
perform it is called a passive trust, which is no trust at all.

HYPO 7: June gives $250,000 in cash to her oldest daughter Mary, in trust, with the
statement, “I would like the trust income to be paid to my youngest son Sam, for life,
with the remainder going to Sam’s son Charles.”
 Is this a valid trust? NO - The language “would like” is just a suggestion,
precatory language and does not impose an enforceable obligation.
 I request; its my wish and desire = do not create a trust
NOTE: Just using the word “trust” does not show intent to create a trust; look at all of
the language AND all of the facts to determine intent.

HYPO 8 **: Samantha purchased Whiteacre in 2005, and the deed was made “to
Samantha in trust for Susan.” At the time the deed was executed, Samantha and Susan
agreed in writing that Susan would live on Whiteacre and pay $1,000 per month in rent to
Samantha.
 Is this a valid trust? NO. All facts indicate that Samantha really intended a
landlord/tenant relationship with Susan. Even though she used the words “in
trust” the facts are not certain.

7) LAWFUL PURPOSE:
(a) A trust cannot call for commission of a crime;
(b) A trust cannot call for the destruction of property;
(c) A trust cannot have a condition against public policy.

EXAM TIP: Major example to watch for on the bar exam are trusts restricting
marriage or promoting divorce.

HYPO 9: Ralph created a testamentary trust in his will, and he directed the trustee to pay
the income to his daughter Mary Ann “until she divorced her worthless husband Archie,
and upon her divorce the trust shall terminate and all principal shall be distributed to
Mary Ann. If Mary Ann should not divorce Archie then on her death the trustee shall
distribute the principal to the American Red Cross.”
 Is this a valid trust? NO, because it promotes divorce (that’s against pubic policy)

BUT if a purpose can be found that is NOT offensive to public policy then it is valid
(e.g., a trust that gives income to a spouse until that spouse remarries is OK).

HYPO 10: In his will James set up a testamentary trust with income going to his wife for
life or until she remarries, and upon his wife’s death or remarriage to his son Clyde.
 Is this a valid trust? YES, because his purpose was to provide for his widow
during her widowhood and that is a valid purpose.

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Marriage restrictions to members of a certain religion or ethnic group are valid as
permissible partial restraints on marriage.

HYPO 11: In his will Jerrold set up a testamentary trust with the principal going “to my
son Jeremy providing he marries a Jewish woman within seven years after my death. If
he does not do so the trust principal shall be paid to the State of Israel.”
 Is this a valid trust? YES, because he still has a fairly wide choice.

8) TRUST EXECUTION:
In a lifetime trust must be in writing, signed by both the settlor and trustee.
AND EITHER:
(a) Acknowledged by a notary public, OR
(b) Signed by two (2) witnesses.

II) TYPES OF TRUSTS

NOTE: All trusts are presumed to be irrevocable, unless the trust explicitly authorizes
revocation.

A) REVOCABLE LIFETIME/INTER-VIVOS TRUSTS:

1) The main requirement: at least one (1) beneficiary who is not the settlor; settlor
cannot be the sole beneficiary when also named the sole trustee in a lifetime trust
– to ensure the fiduciary duty.

2) The settlor can play many roles:

(a) Settlor can be a trustee.
(b) Settlor can be an income beneficiary for life.
(c) Settlor’s estate can be one of the beneficiaries of the principal so long as
there is at least one other beneficiary.
(d) Settlor can retain the power to terminate or amend the trust.

3) Reasons to have a revocable lifetime/inter-vivos trust:

(a) Manages assets efficiently, particularly using a professional trustee.
(b) Helps plan for possible incapacity by avoiding a guardianship
proceeding.
(c) Avoids probate process (process of having a will proved valid and
effective. Its the way title is transferred from the dead person into the
names of the beneficiaries)
No part of the principal of a trust goes through the settlor’s estate in probate.
Definition – Probate: The process of proving a will, or having it declared valid and
effective following the death of the testator.

4) Reasons NOT to have a revocable lifetime/inter-vivos trust:

(a) Does not avoid taxes
(b) If a settlor keeps an income interest, or keeps a power to revoke, the full
trust assets will be included in the settlor’s gross estate for federal estate

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 tax purposes.

B) “POUR-OVER” GIFTS**:
1. Testamentary gifts (Gifts made in a will) to an existing revocable trust are OK.

A trust has less formalities than a will (notary or 2 witnesses). With a pour-over you can
have a trust, change names of beneficiaries or contrains, without having to re execute the
entire will.

(a) This is called a pour-over gift.

(b) Such a gift avoids will formalities in the trust.
(c) Trusts can be changed during the lifetime of the settlor in ways that are
somewhat easier than changing a will.
(d) Key requirements for a “pour-over” gift to a trust to be valid:
a. The trust must be in existence; OR
b. Executed concurrently with the will.

HYPO 12: Roger executed his will on January 3, 2004. In the will, he provided that the
bulk of his estate would go to a trust that would pay the income “to his daughter Abigail
for life, with the principal then paid to her son Steve.” His lawyer had drafted the trust
document the week before and failed to have Roger execute it at the time of the will
execution. When Roger’s lawyer discovered that Roger had not executed the trust
document at the time of the will execution he called Roger and had him return to execute
the trust document. The trust document was executed on January 10th.
 Is the “pour-over” gift to the trust valid? NO, because the trust was not executed
before or concurrently with the will.
2. Two (2) subset points:
a. “Pour-over” is not limited to trusts created by the settlor, but it can be to
any existing trust, including those executed by other persons.
b. Pour-over gifts are valid even if unfunded, or only partially, during
settlor’s lifetime.

3. Life Insurance Proceeds:

(i) There are two (2) ways an insured can make life insurance proceeds
payable to a trust:
(a) Insured can create an unfunded revocable insurance trust and
name the trustee of the trust as policy beneficiary.
(b) Have the trust be a testamentary trust and have the life
insurance policy contract name “the trustee named in my will” as
the life insurance policy beneficiary.
(ii) Proceeds of savings accounts or pension plans can be handled the
same way as life insurance proceeds.

C) TOTTEN TRUST: A Trust-like Alternative ***

 Also called a bank account trust.

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  The Totten Trust is a bank account in the depositor’s name “as trustee for”
a named beneficiary.

HYPO 13: Mary Smith opened a bank account at First National Bank and the account
name is “Mary Smith as Trustee for John Smith.”
 This is a totten trust.

1) Two (2) key things to remember about Totten Trust accounts:

a. Depositor makes deposits and withdrawals as he or she wishes during
the depositor’s lifetime.
b. Beneficiary has no beneficial interest during the depositor’s lifetime, but
gets whatever is in the account when the depositor dies.

2) Other Totten Trust issues: No particular words are required to create a Totten
Trust account.

HYPO 14: Depositor opened an account which was entitled “Joan Cohen ITF Rose
Cohen.”
 Is this a Totten Trust account? YES - ITS is enough to indicate “In Trust For”
and thereby create a Totten Trust account.

3) Four (4) ways to revoke a Totten Trust account:

(a) Withdraw all the money in the account.
(b) Express revocation made during lifetime by depositor making a writing naming
the beneficiary and the financial institution and having the revocation
notarized and delivered to the bank. (every elements needs to be present)
NOTE: Any missing elements make the whole attempted revocation invalid.
(c) Revocation in a will; must comply with same requirements for revocation during
lifetime.

HYPO 15: Donald Depositor died leaving the bulk of his funds in two (2) accounts at
Friendly National Bank. The names of the two (2) accounts were “Donald Depositor in
trust for Nancy Niece” and “Donald Depositor in trust for Ned Nephew.” He also left a
will, and in the will was the following provision: “I revoke all ‘in trust for’ bank accounts
that I have at Friendly National Bank and I give the amounts on deposit to my new and
very close friend Fifi La Rue.”
 Does Fifi get the money? NO, because this is not a valid revocation because no
beneficiaries of the Totten Trust accounts are named in the will.

(d) Death of beneficiary; also results in having the Totten Trust revoked and
the money in the account goes free and clear to the depositor.

HYPO 16: Darcy Depositor opened an account at Second National Bank in the name of
“Darcy Depositor in trust for Buffy Beneficiary.” One year later, Buffy was killed in a
car wreck leaving a son and daughter as survivors. On her death there was a balance in
the account of $57,000. Buffy’s son and daughter claimed that they had an immediate

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right to claim the $57,000 as heir(s) of Buffy’s estate or, in the alternative, should be
substituted as beneficiaries to the Totten Trust.
 Can they get either? NO, because when the beneficiary dies, the money in the
account goes free and clear to the depositor and the beneficiary’s heir(s) get
NOTHING.

4) Change of beneficiary can be made by depositor, BUT it must be done the same way
as a revocation:
 Notarized statement sent to the financial institution, naming the old beneficiary
and the new one.

5) Creditors of the depositor can always reach the Totten Trust account balance,
EITHER before OR after the depositor’s death, since it is a form of revocable trust
revoked partially each time a withdrawal is made.

HYPO 17: Dorothy Depositor opened an account at First National Bank entitled
“Dorothy Depositor in trust for Betsy Beneficiary.” Dorothy closed all her other bank
accounts and placed the money in this Totten Trust account. Dorothy made deposits
regularly over the years, and withdrew little money from the account. She financed her
living expenses mostly through charges on the 47 credit cards she had taken out. When
she maxed out her credit limit on all cards she told the credit card companies that she had
no money remaining and had no assets in her name with the exception of the Totten Trust
account in which she was merely a trustee for her daughter. The banks said, “Too bad for
your daughter,” and they sought to reach all the money in the Totten Trust account.
 Who wins? The Bank wins, because the creditors of the depositor can always
access the Totten Trust balance.
 Since the depositor has access to the money – then the money in the account is
available to the creditor; before and after the death of the depositor.

D) JOINT BANK ACCOUNTS: A Trust-like Alternative

NOTE: Joint Bank Accounts are not Totten Trusts
 “John and Jane with Right of Survivorship”

1. Most popular issue is: after one of the parties to the account dies, can anyone
block the money from going to the survivor of the joint tenancy.

HYPO 18**: Henry opened an account in the names of himself and his son Henry Jr. The
name of the account was “Henry Depositor and Henry Depositor Jr., payable to either,
or to the survivor of them.” (this is language of a joint account with right of survivorship
– who ever lives the longest get the amount). When Henry died he was survived by his
son Henry Jr. and his daughter Henrietta. He had no assets at death except for $200,000
in the joint account. Henrietta sued to recover half of the amount in the account, asserting
that Henry opened the account only to allow Henry Jr. to pay Henry’s bills and never
intended that Henry Jr. should get the entire account on Henry’s death. She introduced
several letters from Henry to her indicating that she would get half of the account on his
death, and that he did not understand the meaning of the words: “or to the survivor of

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them.”
 Can Henrietta successfully challenge the survivorship provision of the account?
Perhaps.

2. If clear and convincing evidence shows that a survivorship was not intended
when the account was established, and that the account was opened only as a
matter of convenience to the depositor, then the survivorship language can be set
aside.
NOTE: This is a hard requirement to satisfy.

3. Each joint account holder owns one half of the joint account, no matter who
deposits the money, and if one person makes the entire deposit it is considered a
gift of one-half to the other account holder.

HYPO 19: Henry opened an account in the names of himself and his son Henry Jr. The
name of the account was “Henry Depositor and Henry Depositor Jr., payable to either, or
to the survivor of them.” Henry opened the account with a deposit of $100,000.
 Who owns the $100,000 during the lifetimes of Henry and Henry Jr.? Henry owns
$50,000 and Henry owns $50,000 as a gift from Henry.
What if Henry Jr. knows that his father is very ill and goes to the bank and withdraws all
the money in the account, an amount that with additional deposits has now grown to
$200,000. Then Henry dies. Henry’s executor under his will sues Henry Jr. to recover the
money Henry Jr. took from the account before Henry’s death.
 Can Henry Jr. be forced to return any of the money he withdrew? During the
lifetime of account holders they were each entitled only to their fractional share.
Without authorization, taking more than one-half share, is taking someone else’s
money. That unilateral action acted as a severance of the joint tenancy and
transformed it into a tenancy in common (no survivorship rights).
 Henry Jr. owes the $100,000 amount he removed in excess of what was his
lifetime gift. If he waited until his father died = he could have had the entire
$200,000.

E) UNIFORM TRANSFERS TO MINORS ACT (UTMA): Trust-like Alternative

1. Three (3) reasons to make a gift to a minor under UTMA:

(a) It avoids a guardianship proceeding.
(b) It avoids a trust
(c) It qualifies for the $14,000 per donee annual exclusion from federal
and state gift tax.

2. Gifts under UTMA must be made to a custodian – not a trustee and it must
specify that it is made under the New York Uniform Transfers to Minors Act.

3. UTMA gifts can be made in a will so long as the same required statutory language
is used. (Named the custodian + say it was a gift)

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 4. Duties of an UTMA Custodian:
a) Hold, manage and invest the property under a prudent person standard;
b) Pay over to the to the minor or for the minor’s needs what part of the
property that the custodian deems advisable; AND
c) Pay what is left of the property to the minor when the minor turns 21 (with a
post-Jan. 1, 1997 gift) or 18 (with a pre-Jan. 1, 1997 gift).

NOTE: UTMA does not create a trust; it is a special statutory conservatorship, where the
custodian does not hold legal title (minor holds that).

5. UTMA tax consequences:

a) If donor names himself or herself as custodian then the amount of the gift is
includible in the custodian’s gross estate for federal and state estate taxes.
b) If donor names someone else as custodian, then the amount of the gift is not
includible.

F) CHARITABLE TRUSTS (honorary trust):

Five (5) key things to remember:

1. Charitable trusts must have INDEFINITE beneficiaries, and they must be a

reasonably large group. Cannot have specific, named persons as beneficiaries.

HYPO 20: Settlor created a trust to pay the income for the health care and costs of
education to “all my children” for life, and on his death distribute the principal to “all my
grandchildren” to improve their health and education.
 Is this a valid charitable trust? NO, because the beneficiaries are a small group of
identifiable beneficiaries. Its a trust – but not charitable. So we have to limit its
duration = apply rule against perpetuities.

HYPO 21: Settlor created a trust “to provide scholarships for the benefit of the
descendants of the settlor.”
 Is this a valid charitable trust? NO, not a large enough public group.

HYPO 22: Settlor created a trust “to benefit all orphans in Syracuse.”
 Is this a valid charitable trust? YES, because this group is large enough group to
qualify to represent the public.

HYPO 23: Settlor created a trust to benefit all orphans attending Syracuse University.
 Is this a valid charitable trust? UNCLEAR, because the class needs to not be so
narrowly defined that just a few people benefit.

HYPO 24: Settlor created a trust “to benefit all orphans living next door to me at 815
Albany Avenue, Syracuse.”
 Is this a valid charitable trust? NO, the group is too small.
But a trust for Masses for relatives is OK.

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HYPO 25: Settlor created a trust “to pay for the costs of Masses for the repose of souls of
the testator, his deceased parents, and other relatives.”
 Is this a valid charitable trust? YES, the Masses exception. Its an exception to a
large group requirement.

2. Charitable trusts must be for a charitable purpose: Health, education, and

religion are most common.

3. Charitable trusts may be perpetual.

o Are not subject to the Rule Against Perpetuities (RAP) which indirectly
limits the duration of trusts.

4. Cy Pres can be used to change the trust.

o If the stated purpose of the charitable trust can no longer be
accomplished, or the designated charity goes out of existence, the court
may use this to make the trust be as near as possible to what the
settlor wanted.

5. The Attorney General (AG) has the duty of representing the beneficiaries of
charitable trusts in the state.
a) The AG is an indispensable party to any suit on construction or enforcement
of a charitable trust.
b) The AG and the donor have standing to sue to enforce the trust’s terms.

G) NON-TRUSTS:

These are called trusts, but they are NOT trusts

1. Honorary Trusts: an attempt to create a trust without including an
individual human beneficiary but not establishing a charitable cause.
a) Where no human being is the beneficiary of a private (i.e., non-charitable)
trust.

HYPO 26: Samantha’s Will attempted a testamentary trust by giving $10,000 to her
friend Marjorie as trustee “to use the trust income to take care of my beautiful rose
garden.”
 Is it a valid trust? NO, because gardens are not human beings.
 What happens to the $10,000? It falls into the residuary of the estate.

Definition – Residuary Estate: Whatever remains in the probate estate after the payment
of specifically designated gifts of items or cash.

b) A private trust must have a human beneficiary.

c) Exceptions:

Pet Trusts: A valid pet trust can last for no longer than the duration of the pet’s lifetime.

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HYPO 27: Sarah’s Will bequeaths $50,000 to her sister Susan, as trustee, to use the
income to care for her beloved dog, Woofsie.
 Is this a valid trust? YES – NY Pet’s Statute.
 Who can enforce the trust? Someone designated in the will, or appointed by the
court, can enforce the trust and make sure the trust’s purposes are carried out.

Cemetery Trusts:
(a) Trusts for perpetual care and maintenance of cemeteries and burial plots are
classified as charitable trusts and are OK even though they have no human
beneficiaries – they will last indefinitely.
(b) Since they are called charitable trusts here is no RAP problem.

2. Constructive Trusts:
(a) Is just a flexible equitable remedy designed to disgorge unjust enrichment that
results from wrongful conduct.
Wrongful conduct + unjust enrichment = constructive trust
(b) The “trustee’s” only duty is to convey the property to the person who, in
equity, should have the property.

Constructive Trust in a Will Context Hypo:

HYPO 28: In 1992 a Testator named Marjorie executed a will that devised all her
property to her brothers Mel and Marvin. By 2005 Marjorie had lost confidence in Mel
and Marvin and thought they were out to take her money. She decided to change her will
and leave her property instead to the Girl Scouts of America. Marjorie’s lawyer was
Mel’s best friend Larry. When Marjorie told Larry Lawyer of her plans and asked him to
draw up a new will, he immediately told Mel that Mel and Marvin would be cut out of
the new will. When Marjorie showed up to sign the new will at Larry Lawyer’s office
she found Mel and Marvin waiting for her. They tried to convince her that changing the
will was a bad idea. When Marjorie refused to alter her plans to sign the new will, Mel
and Marvin created a disturbance in Larry Lawyer’s office and prevented Marjorie from
signing the new will. In the new will was a provision revoking the old one. Marjorie
suffered a stroke in Larry Lawyer’s office and died the next day.
 The question of WHO GETS MARJORIE’S PROPERTY is complicated by
the Wills rule requiring all wills to be signed by the Testator before two
witnesses.
 Can you probate the new will leaving the property to the Girl Scouts? NO,
because that will was not signed and witnessed.
 Was the old will validly revoked by the new will? NO, because it was not signed
and witness to be a valid will with a valid revocation of the old will.
 Do Mel and Marvin win as beneficiaries of the unrevoked old will still sitting in
Larry Lawyer’s office? NO, they hold title on a constructive trust (NO
MONEY) and they have a duty to transfer title to the Girl Scouts, because
otherwise they would be unjustly enriched by their wrongful conduct.

Constructive Trust in an Intestacy Context Hypo:

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HYPO 29: Jack has two (2) children, Ralph and Roberta, and Ralph has two (2) children,
Mary and Marie. In a fit of anger Ralph shoots his father Jack to death. Jack died intestate
(without preparing a valid will). Without a will, the Intestacy Statute would give Jack’s
property to his two children in equal shares.
 Who gets Jack’s estate?
 Since Jack died intestate who would get his estate under the intestacy statutes?
One-half to Ralph and one-half to Roberta (his 2 children)
 But Ralph killed Jack, which is wrongful conduct, which would bring unjust
enrichment to Ralph.
 Result: a CONSTRUCTIVE TRUST is imposed and the property would go as if
the wrongdoer Ralph had predeceased Jack, and Ralph’s one-half would go to
Ralph’s children, Mary and Marie.

3. Resulting Trust:
a) Not a trust but is an equitable remedy.
b) Purchase Money Resulting Trust (PMRT), recognized in the vast
majority of states, but NOT NEW YORK. ***
c) PMRT only arises when a purchaser buys property and has title put in
someone else’s name – which’s not a relative. Later the purchaser claims NO
GIFT was intended and asks the title holder to give the title back and title
holder refuses.

d) Most states would find this situation to create a PMRT which allows the
purchaser to compel the title holder to give up title; NOT NEW YORK.

HYPO 30: Mary bought a beach house, but wanted to conceal the purchase from her
husband, who hated beach houses and would never have agreed to purchase one. Mary
made the down payment with money she had earned by doing the neighbors’ laundry. To
conceal the purchase she had title taken in the name of Blanche, her best friend. A few
years later, immediately upon the divorce from her husband, Mary asked Blanche to
transfer title to the beach house to her. Blanche refused. Mary sued Blanche to force the
conveyance of the property from Blanche to Mary on the grounds that the oral
understanding between the two (2) of them justified a resulting trust that would compel
the transfer of the property to Mary. Blanche’s attorney argued that the parol evidence
rule bars any testimony contradicting the deed.
 Who wins?
o In most states, Mary, by virtue of a PMRT
o In New York, Blanche wins because no PMRT in New York.
o Parole evidence applies.

e) BUT, a New York exception to the no-PMRT rule: If there is clear and
convincing evidence that the grantee had expressely or impliedly promised to
reconvey the land to the purchaser, then a constructive trust can be imposed
to benefit the purchaser. This only deals when there is clear and convincing
evidence.

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HYPO 31: Mary had title taken in Blanche’s name, assuming that her friend would
transfer title to her when Mary asked. Blanche refused when Mary asked.
 In New York can Mary sue to force Blanche to transfer title?
o No - because there is no PMRT in New York, and because there is no
clear and convincing evidence of a promise to reconvey the title to the
property.

HYPO 32: Mary had title taken in Blanche’s name. At the closing in the lawyer’s office
Blanche promised Mary that she would transfer title to Mary whenever Mary asked. This
comment was heard by the purchaser, Mary, Mary’s lawyer, Blanche’s lawyer, the local
bishop, and Mother Teresa, who were all in the room at the same time.
 In New York, can Mary sue to force Blanche to transfer title?
o YES, because there is clear and convincing that Blanche promised to
convey to Mary when asked and that will force Blanche to do it.

H) STATUTORY SPENDTHRIFT RULE AND PROTECTION FROM

CREDITORS ***:

1. Protects a trust beneficiary’s interest from creditors by prohibiting voluntary or

involuntary transfer of the beneficiary’s interests. (The money is secured – it
avoids creditors to getting access to the money.)

2. New York allows spendthrift clauses in trusts. New York has a special statutory rule
that protects all income interests in trusts with spendthrift protection even if the trust
instrument does not contain a spendthrift clause, BUT this just applies to income
from the trust – NOT principal.

3. To provide spendthrift protection to the Remainder Beneficiary (i.e., the one who gets
the principal) the spendthrift clause must be expressly stated in the trust.

HYPO 33: Judith created a trust “to pay income for life to Jane, then on Jane’s death the
principal of the trust is to be transferred to Philip.”
 Who can a spendthrift clause protect? Jane, the income beneficiary, or Phillip the
remainder beneficiary, or both.
 In New York, who gets one automatically? Jane – the income beneficiary.

4. Typical Spendthrift Clause Language:

“No beneficiary of this trust shall have the power to assign his or her interest, nor
shall such interest be reachable by the beneficiary’s creditors by attachment,
garnishment, or other legal process.”
5. Effect of the spendthrift clause (statutory or expressly stated in the trust): keeps
creditors of that trust at bay.

6. Five (5) major exceptions to spendthrift clauses to remember:

1. Creditors who furnish necessity - Food, clothing or shelter, health services.
2. Child support and alimony creditors

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 3. Federal tax liens.
4. Excess income beyond that needed for support and education.
(a) A last resort remedy; have to show all other possible remedies have been
exhausted.
(b) What is needed for support is based on the life style of the beneficiary.
5. The 10% levy provided by CPLR § 5205(e).
(a) Devise available – all creditors share a 10% levy.

HYPO 34: Party Patty was the income beneficiary under a trust. Because of irresponsible
spending patterns she had many debts, and four (4) of her creditors sued and gained
judgments against her. The trust was subject to the New York statutory spendthrift rule.
 Can the creditors reach any or all of Patty’s income interest under the trust?
 YES, they can use the 10% levy even if the trust income is subject to a
spendthrift clause.
o All creditors together share the levy; it is not 10% percent per creditor.

EXAM TIP: This is not used much in real life, but is often on the exam!

7. Self-Settled Trust Rule as a big limitation on a spendthrift clause:

1. Spendthrift protection does not apply to any interest retained by the settlor.

HYPO 35: Settlor Sammy created a valid lifetime trust. The trust had the following
provision: “Trustee shall pay the income for life to Settlor Sammy, and on Sammy’s
death the trustee shall distribute the trust principal to Sammy’s son, Sammy Jr.” Five (5)
years later, while Sammy was still alive, a creditor obtained a judgment against Sammy
for $250,000.
 Can creditor reach the income interest of Sammy even though the trust is subject
to the statutory spendthrift rule? YES because there is NO spendthrift protection
to any interest retained by the settlor.

HYPO 36: What if Sammy had put an express spendthrift clause in the trust that would
extend to his income interest and to the remainder interest as well.
 Is income interest protected? NO, protection, because ANY interest retained by
the settlor is not protected by a spendthrift clause, whether it is a statutory
spendthrift clause or an express clause.
 Is the principal protected? YES, since the settlor is not a remainder beneficiary,
Sammy Jr. is the beneficiary.
 Settlor(s) cannot hide out from their own creditors, but they can protect other
beneficiaries.
 All revocable trusts are fair game for settlor’s creditors; even if the settlor has no
immediate financial interest in the trust, but settlor retained the power to revoke,
then the trust offers no protection at all against creditors of the settlor.

III) MODIFICATION AND TERMINATION OF TRUSTS

Court’s are reluctant to modify trusts – it requires specific situations.

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A) TRUST MODIFICATION BY TRUSTEE(S) AND/OR BENEFICIARIES:

1. Is appropriate only when the objectives of the trust would be defeated or

substantially impaired if the trust is not modified.
2. The purpose of the trust comes first, overriding any specific directions in the
trust. This is called the clafflin doctrine.

HYPO 37: Joseph Pulitzer, the newspaper publisher, established a trust to provide income
to his wife, children and grandchildren. He directed the trustee to keep and not sell the
principal trust asset, stock in his newspaper. Over the years, losses at the newspaper
resulted in virtually no income to be paid to the income beneficiaries. Trustee petitioned
the court to allow the sale of the newspaper stock so the funds could be more broadly
diversified and thus provide income to the beneficiaries.
 Could the trustee sell the newspaper stock, notwithstanding the direction of the
settlor that the stock must not be sold? YES, because the primary purpose of the
trust was to provide income to the Pulitzer family and retention of the stock of the
newspaper was just incidental to that.

B) TWO - LEVEL MODIFICATION TEST:

(a) Find out the primary INTENT of the settlor regarding trust purposes.
(b) Look at specific directions in the trust instrument to determine whether,
because of changes in circumstances, those specific directions in the
trust would now frustrate the primary intent of the trust; IF SO, then
those directions can be changed by the court.

HYPO 38**: Husband established a trust consisting of his large mansion which was
never to be sold, but which his wife would be allowed to live in during her lifetime, and
on her death the house would pass to his daughter. Over the years, the neighborhood
changed and became a heavy manufacturing area. All houses in the area except for
settlor’s house were torn down and replaced with large factory buildings. Trustee
petitioned to have the restriction on sale of the house removed so the house could be sold
and the proceeds used to buy the widow a house in a more suitable residential
neighborhood.
 Should the petition be granted?
 Primary purpose: provide a house for the lifetime of the wife and then to the
daughter. The instructions where to keep the house. Keeping the house in the new
industrial neighborhood is no longer suitable.
 Therefore, the trustee’s petition should be granted.

(c) The court can authorize the invasion of the principal if the income is not
enough to carry out the settlor’s purpose of the trust.

HYPO 39: George died in 2000, leaving a will that created a trust. Income was to his wife
June for life, remainder to his son Roger. June was eighty (80) years old and suffering
from multiple chronic illnesses. June wanted to move into a retirement home that would

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cost $5,000 a month. The trust corpus was producing only $45,000 a year in income.
That, together with her Social Security income, will not be enough to pay the cost of the
retirement home. June petitioned the court to make annual distributions of principal to
supplement her income. Roger objected, pointing out that the trust did not give the trustee
any power to distribute principal, and that any such distribution would be taking away
“his” money.
 Can the court authorize invasions of principal on June’s behalf? YES, by statute
the court can authorize distribution of principal to carry out the settlor’s trust
purposes.

C) TRUST TERMINATION BY THE SETTLOR:

1. Trusts are hard to terminate in New York; they are irrevocable and unamenable
unless the power to revoke and amend is expressly reserved in the trust instrument.

2. Exception: A settlor can terminate an irrevocable trust if all beneficiaries in being

consent; this is often impossible because no one can give consent for any beneficiary
who is a minor or who is mentally incompetent.

HYPO 40: In 2000 Nancy created a valid irrevocable lifetime trust: “Income to Nancy for
life, and on her death the principal goes to Nancy’s daughter Oria; but if Oria is not then
living to Oria’s then living children.” Nancy now wants to terminate the trust, and Oria
(who has two (2) minor children) agrees.
 Should the court allow the trust to be terminated? NO - because no one can
consent for Oria’s minor children (not even the parent).

HYPO 41: What if Oria has no children but is six (6) months pregnant? Can the trust be
terminated?
 YES – for purposes of trust termination, a child in gestation is not regarded as a
person whose consent is required.

3. Beneficiaries must be born alive to count here; for purposes of trust termination a
child in gestation is not regarded as a person.

4. If a trust gives property to heirs or next of kin, that interest is not considered a
beneficial interest and thus no consent need be obtained from them (as they cannot be
ascertained until the decedent’s death.)

Definition – Heirs or Next of Kin: The people entitled to another’s property by statutory
intestate distribution at the time of a death of a decedent who failed to leave a valid will.

HYPO 42: In 1999 Jim created a valid irrevocable trust: “Income to Jim for life, then to
his daughter Susan for life, and on Susan’s death the principal shall go to Susan’s heir(s)
at law.”
 Can Jim now terminate the trust if Susan agrees? YES – because the remainder
gift is to Susan’s heirs and that is not considered a beneficial interest requiring

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 consent.

IV) TRUST ADMINISTRATION

A) TRUSTEE’S POWERS:

(1) New York Fiduciary Powers Act (FPA) controls. It sets out powers that can be
exercised by a trustee without court order and without express authorization in
the trust.

(2) FPA controls not only what a trustee of a trust can do, but also what an executor
or administrator of a decedent’s estate can do.

Definition – Executor: The person nominated in a testator’s will to act as personal

representative and excecute the will provisions. The executor carries out the will’s
directions regarding disposition of the testator’s estate.

Definition – Administrator: A person appointed by the probate court as personal

representative to administer (collect, manage, and distribute) the estate of a person who
dies intestate, or for the estate in a will that does not name an Executor, or the named
Executor is not available.

(3) General approach to trustee’s powers in New York: Trustee can do almost anything
with some clearly-defined specific exceptions.

(a) Trustee(s) CAN:

(i) Sell any real or personal property.
(ii) Mortage property.
(iii) Lease property.
(iv) Make ordinary repairs.
(v) Contest or compromise or settle claims. OR
(vi) Do almost anything to needed to manage the corpus of the trust.

(b) Trustee(s) CANNOT:

Big three (3) things:
(i) Engage in self-dealing ***.
(ii) Borrow money on behalf of the trust.
(iii) Continue running a business that’s in the trust property.

Trustee is liable for losses incurred by the business unless trustee has court approval to
continue the business.

B) SELF-DEALING*****:

The five (5) prohibitions on self-dealing:

1. Trustee cannot buy or sell trust assets to himself or herself.

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 o An absolute rule; no wiggle room.

HYPO 43: Tommy Trustee desired to buy stock held by the trust because he was of the
opinion that the stock would greatly increase in value. He purchased the stock paying the
trust $110 a share. The trading value of the stock on the day of the purchase was $96 a
share.
 Was this a prohibited transaction? YES because a trustee CANNOT buy or sell
trust assets on his or her own behalf.

2. Trustee cannot borrow trust funds.

o Another absolute rule.
HYPO 44: Trustee Ted was in desperate need of funds. He could sell several treasury
bonds to raise the money he needed, but did not want to do so. He borrowed $5,000 from
the trust, giving as security a $10,000 U.S. Treasury Bond. He promised to pay the trust
an annual interest rate of 9%. The current interest rate for bank loans was 7.5%.
 Was this a prohibited transaction? YES – A trustee cannot borrow money from a
trust.
 It’s an absolute prohibition.

3. Trustee cannot lend money to the trust.

o Another absolute rule.
o Any interest earned on such a loan must be returned to the trust, and any
security given for the loan is invalid.

4. Trustee cannot profit from serving as trustee (except for appropriate trustee fees).
o Trustee cannot take advantage of confidential info received while trustee.

5. Corporate trustee cannot buy its own stock as a trust investment.

The two (2) affirmative duties on self-dealing:

(a) Duty to segregate trust assets from personal assets.

Remedy for violation of this duty:

 If commingled funds are used to buy an asset and the asset goes down in value,
there is a conclusive presumption that personal funds were used.
 If the asset goes up in value, there is a conclusive presumption that trust funds
were used.

(b) Duty to earmark trust assets by titling them in trustee’s name, as a trustee.

C) REMEDIES FOR BREACH OF FIDUCIARY RESPONSIBILITIES:

(1) Beneficiary can sue to remove the trustee.

(2) Beneficiary can ratify the transaction and waive the breach.

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HYPO 45: Trustee Tex sells the trust stock in his own “Tex’s Gold Mine” business.
At the time of the sale the trust paid Tex $20 per share over the trading price of the stock
on that date. By the time the beneficiary learned of the transaction the stock in Tex’s
Gold Mine had skyrocketed to $600 a share, six (6) times what the trust paid Tex for it.
 Was this a prohibited transaction? YES
 Does the beneficiary want to rescind the purchase? NO, beneficiary can ratify the
transaction and take the profit.

(3) Beneficiary can sue for any loss: An action to recover losses to the trust is called
SURCHARGE ACTION.

D) NO FURTHER INQUIRY RULE**:

Breach of a fiduciary duty by engaging in self-dealing is an automatic wrong and no

further inquiry need be made.
(1) GOOD FAITH is NOT a defense.
(2) Reasonableness is NOT a defense.

E) ACTIONS AGAINST A THIRD PARTY WHEN TRUSTEE ENGAGES IN

SELF DEALING:

(1) If trustee engages in a prohibited transaction, such as self dealing, and sells trust
property to a third party the beneficiary cannot sue the purchaser of property from the
trustee if that purchaser was a bona fide purchaser (BFP) for value without notice.

HYPO 46: A testamentary trust named Theodore as trustee. Theodore borrowed $250,000
from the trust, giving the trust a six-month note at 10% interest. The then prevailing bank
rate for loans was 9%. Theodore took the money and bought a rental property with the
$250,000. Six (6) months later he sold the property to Teresa for
$300,000.
 Was the transaction by Theodore acceptable? NO – he borrowed $ from the trust.
Self – dealing is not permissible.
 Can the beneficiary sue Teresa? NO - if she did not know that she was dealing
with a self-dealing trustee. (Teresa is a BFP and not liable)

(2) To keep the purchaser from being a BFP and thus making the purchaser liable to the
beneficiary, the purchaser not only has to know that she was dealing with a trustee, but
that the trustee was engaged in self-dealing.

F) INDIRECT SELF-DEALING:

Self-dealing rules also apply to loans or sales to a relative of the trustee; or to a business
of which the trustee is an officer; employee; partner; or principal shareholder.

HYPO 47: What if Teresa was Theodore’s sister? Teresa did not know that Theodore
bought the property with improperly borrowed money from the trust.

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  Is Teresa protected from suit by the beneficiary? NO, because the self dealing
apply to relatives or to business associated with the trustee.

G) EXCULPATORY CLAUSES**:

1. Cannot be used to shield trustee(s) from liability for breach of a fiduciary duty in a
testamentary trust because relieving an executor or testamentary trustee from
liability for negligence is void as against public policy.
2. But exculpatory clauses can be used in a lifetime (inter vivos trust)

V) LIABILITY OF TRUSTEE IN CONTRACT AND TORT

A) PERSONAL LIABILITY OF TRUSTEE IN CONTRACT:

1. How trustee signed contract is key to determining liability:

1. If trustee signed only on behalf of the trust, no personal liability.

2. If trustee signed personally, and merely mentioned trust, then trustee has personal
liability.

HYPO 48: Trustee signed contract as “Mary Jones, Trustee of the Jonathan Jones
Trust.”
 Personal liability of trustee? Yes, because she just noted that she was trustee of
the Jonathan Jones Trust.

HYPO 49: Trustee signed contract as “Jonathan Jones Trust, by Mary Jones, Trustee.”
 Personal liability of trustee? NO, because this language shows the contract was
with the trust, not the trustee.

HYPO 50: Trustee signed contract as “Mary Jones, as Trustee of the Jonathan Jones Trust
and not individually.”
 Personal liability of trustee? NO, the contract is with the trust.

2. Even if there is personal liability the trustee will be reimbursed by the trust if two
things are satisfied:
(a) The contract was within the powers of the trustee, AND
(b) Trustee was acting in the course of proper administration of the trust.

B) PERSONAL LIABILITY OF TRUSTEE IN TORT:

(1) Trustee is personally liable for all torts by trustee or trustee’s employees.
a) An absolute rule, no exceptions.
b) To deal with this liability trustee should buy liability insurance and charge
the cost to the trust.

(2) Trustee can get reimbursement from the trust for any tort claims if two requirements
are satisfied:

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 (a) Trustee must have been acting within trustee’s powers when the tort was
committed, AND
(b) Trustee was not personally at fault.

HYPO 51: Tommy Trustee’s employee was negligently driving a truck carrying trust
files to a storage facility when the truck collided with plaintiff’s vehicle. Plaintiff was
seriously injured. Plaintiff sued Tommy Trustee for the negligence of his employee and
received a judgment of $1 million.
 Can Tommy Trustee get reimbursement from the trust for this judgment? Apply
two-part test:
o Was the trustee acting within his powers when the tort was committed?
YES; trust files were being taken to storage.
o Was trustee personally at fault? NO - the negligence was by trustee’s
employee.
 So is reimbursement justified? YES – because both requirements were satisfied
and thus the trustee CAN get reimbursement from the trust for the tort liability.

HYPO 52: Same facts, except now Tommy Trustee was driving the truck.
 Can Tommy Trustee get reimbursement from the trust for this judgment? NO -
because trustee was personally at fault.

C) TRUSTEE’S INVESTMENT POWER:

(1) Trustee must manage the property of the trust on behalf of the beneficiary, and this
means the investment of the corpus of the trust.

(2) New York has adopted the Uniform Prudent Investor Act (UPIA); this gives a broad
latitude to trustees to choose investments.

(3) Trustee can pursue what UPIA calls the MODERN PORTFOLIO theory of
investment, where the trustee creates a custom-tailored investment strategy for this
particular trust.

(4) Two (2) key factors to remember:

(a) Trustee must consider the role each investment plays within the overall
trust portfolio.
(b) Trustee must consider the expected total return from income and capital
gain.

(5) Trustee does not have to justify the prudence of each investment looked at by itself;
can balance off risky speculative investments against safe, conservative investments.

(6) Specific things to remember:

(a) Prudence is not measured by high insight look at the decision to invest when
made, not later; trustee does not have to have a crystal ball.
(b) Trustee can exercise adjustment power and allocate capital gains to income.

22
  Trustee can switch capital gains into the income category if necessary to
protect the income beneficiary, and vice versa.
 End goal is fairness to all beneficiaries.

(7) The key to the UPIA is flexibility to shape the investment strategy for maximum
total return, along with the flexibility to adjust income between the income and
remainder beneficiaries to be fair to each of them.

VI) THE RULE AGAINST PERPETUITIES (RAP) – limiting the duration of trusts

A) Quick Property Law Review:

Definition of the Rule: No interest is valid if it could vest later than any life in being
(LIB) at the time of the creation of the interest, plus 21 years.

(a) An interest is vested when there is no condition that has to be satisfied, and the exact
identity of the taker is known.
(b) If there is any possibility, no matter how remote, that an interest could vest later than
lives in being plus 21 (LIB + 21) years, it is VOID.

New York has a perpetuities reform statute that automatically reduces all age
contingencies to 21 years, thus saving the gift.

HYPO 53: John conveyed Blackacre to his son Ralph for life, remainder to the first of
Ralph’s children to reach thirty.
 Does the gift over to the first of Ralph’s children to reach thirty violate the Rule
Against Perpetuities?
 MBE: The answer is yes – this will violate RAP – the vesting can take longer,
 NY: On the New York essays the answer is NO, because of the New York RAP
reform statute automatically reducing an age contingencies to 21.
o To reduce the age from 30 to 21 – the first child to turn 21 will take the
remainder.
o Any child who reaches 21 – if at all – that child has a valid right.

B) RAP AND TRUSTS:

HYPO 54 ***: John conveyed Blackacre to the First National Bank, in trust, to pay the
income to my grandson Ronald for life, and then to pay the principal to any child of
Ronald who reaches 30.
 Does the income interest of Ronald violate RAP? No – because his interest is
vested now.
 Does the principal interest in a child of Ronald who reaches 30 violate RAP?
o At common law: YES – the interest is not vested (there is no identifiable
beneficiary within 21 yrs).
o The gift would violate the rule against perpetuities.
o NY: NO, because the reform rule reduces the age contingency to 21

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C) THE N.Y. RULE AGAINST SUSPENSION OF THE POWER OF
ALIENATION:

(1) Definition of the Rule: Any interest is void if it suspends the power of alienation of
for a period longer than lives in being plus 21 years (LIB + 21), that is, when there are no
persons who could, together, transfer fee simple title.

(2) Suspension of alienation is a concern when either:

(a) Spendthrift income interests are in the trust (quite considerable given New York’s
automatic spendthrift protection when trust is silent about income alienation); OR
(b) A life estate is created in a spendthrift, or in an open class that may possibly
include unborn persons.

HYPO 55: O to A and his heir(s) so long as no liquor is consumed on the premises, and if
liquor is ever consumed then to B and her heir(s).
 Is the suspension rule violated by this grant? NO, because A and B together could
TRANSFER a fee simple within their own lifetimes plus 21 years.
 Does the gift over to B violate RAP? YES, because the vesting in B’s interest
might take place beyond the RAP period of A and B’s lifetimes plus 21 years.

HYPO 56: Judith created a trust that provided income to her sister Jane for life, then on
Jane’s death to pay the income to Jane’s children for their respective lives, then
remainder to Bob. At Judith’s death Jane, who is 30 years old, has one child, Jed.
 Is RAP violated? NO – because the contingent over to Jane’s children if at all
during Jane’s life + 21 yrs.
 Is the Suspension Rule violated? YES , because upon creation of the trust Jane
could not join the other beneficiaries to transfer a fee simple absolute, since the
class gift to Jane’s children includes potential unborn children who cannot
presently consent to join in a transfer of a fee simple absolute, (and who will not
have a life in being to validate the duration of their spendthrift income interest).
 As a result, the income interest in Jane’s children is VOID and the Remainder
will go to Bob immediately upon Jane’s death, which is when her own income
interest terminates.

RECAP ON RAP AND THE SUSPENSION RULE:

(1) RAP:
(a) Deals with vesting only.
(b) Just says for an interest to be valid it must vest within lives in being at the
time of the grant, plus 21 years.
(c) Look at facts to make sure there is no way the vesting could come outside
the time period of the rule; if any chance of that then the interest is void.

(2) SUSPENSION RULE:

(a) Does not deal with vesting; is only concerned with the possible suspension
of the ability to transfer a fee simple.

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(b) Look for facts to make sure there are persons identified and alive who
could, together, convey a full fee simple; if you cannot find such persons
who could do this during lives in being plus 21 years, then the interest is
void.
(c) Remember that the perpetuities reform statute provision reducing age
contingencies to 21 years (and all other reform provisions listed in your
Real Property New York Distinctions Supplement regarding the Rule
Against Perpetuities) also apply for saving gifts from suspension rule
violations.

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Glossary of Wills Terms for Trusts Lecture

 Administrator: A person appointed by the probate court as personal representative to

administer (collect, manage, and distribute) the estate of a person who dies intestate,
or for the estate in a will that does not name an Executor, or the named Executor is
not available.

 Decedent: Person who has died with property to be distributed.

 Executor: The person nominated in a testator’s will to act as personal representative
and execute the will provisions. The executor carries out the will’s directions
regarding disposition of the testator’s estate.

 Federal Gift Tax Exclusion: $14,000 annual amount that can be excluded from gift
tax computation for each gift made to a different recipient in a calendar year, and
thereby not be treated as a gift for taxation purposes.

 Heirs/Next of Kin/Intestate Beneficiaries: The people entitled to another’s property

by intestate succession.

 Intestacy: When a decedent dies without a valid will and their estate property is
distributed pursuant to a state statute.

 Probate: The process of proving a will, or having it declared valid and effective
following the death of the testator.

 Probate Court/a.k.a. Surrogate Court: The specialty court that hears and adjusts
matters concerning wills and intestate distribution, including administration of estates
and other aspects of the testamentary process.

 Residuary: Whatever remains in the probate estate after the payment of specifically
designated gifts of items or cash.

 Rule Against Perpetuities: A rule of law that prohibits the creation of future
interests that possibly may vest beyond the period of those lives in being at the date of
its creation plus 21 years. This rule of law indirectly limits the duration of trusts by
placing limits on the creation of future interests within trusts.

 Testamentary Gifts: Gifts made in a will.

 Testator: A person who has died leaving a valid will. The term is also used to refer to
one who has followed the formalities for creating a will but is still alive (and the will
is thus still inoperative).

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