Trust Law 101: Class Notes

Module 1: Introduction to Trusts

● A trust is a legal relationship where a settlor (grantor) transfers property to a trustee, who
holds and manages it for the benefit of beneficiaries.
● Essential elements: Settlor, Trustee, Beneficiary, Trust Property (Res), Intent to create a
trust.
● Types of trusts:
○ Revocable: Settlor can modify or terminate during their lifetime.
○ Irrevocable: Cannot be altered once created, often used for tax planning.
○ Charitable: Benefits a charitable organization or cause.
○ Special Needs: Provides for a beneficiary with disabilities without affecting their
government benefits.
● Trusts can be used for asset protection, estate planning, tax benefits, and charitable
giving.

Module 2: Creation of Trusts

● Settlor must have legal capacity and intent to create a trust.

● Trust property must be identifiable and transferable.
● Beneficiaries can be individuals, organizations, or even pets (in some jurisdictions).
● Trustee can be an individual, a professional trustee, or a corporate trustee.
● Trusts can be created through a will (testamentary trust) or during the settlor's lifetime
(inter vivos trust).

Module 3: Trust Administration

● Trustee has a fiduciary duty to act in the best interests of the beneficiaries.
● Trustee's powers are defined by the trust instrument and state law.
● Trustee must invest trust assets prudently and diversify investments.
● Trustee must make distributions to beneficiaries according to the trust terms.
● Trustee must keep accurate records and account to the beneficiaries.

Module 4: Fiduciary Duties

● Duty of loyalty: Trustee must put the interests of beneficiaries above their own.
● Duty of prudence: Trustee must act with reasonable care, skill, and caution.
● Duty of impartiality: Trustee must treat all beneficiaries fairly.
● Duty to inform and account: Trustee must keep beneficiaries informed and provide
regular accountings.
● Duty to avoid conflicts of interest: Trustee must avoid situations where their personal
interests conflict with the interests of the beneficiaries.

Module 5: Common Issues in Trust Administration

● Modification/termination: Trusts may be modified or terminated under certain
circumstances.
● Trustee removal/replacement: Court can remove a trustee for breach of fiduciary duty or
other reasons.
● Breach of fiduciary duty: Beneficiaries can sue the trustee for damages if they breach
their duties.
● Trust litigation: Disputes may arise over trust administration, interpretation of trust terms,
or validity of the trust.
● Tax considerations: Trusts have unique tax implications that must be considered in
planning and administration.