SCOTT AND ASCHER ON TRUSTS

Transcription

1 ASPEN PUBLISHERS SCOTT AND ASCHER ON TRUSTS Fifth Edition Successor Edition to SCOTT ON TRUSTS Fourth Edition VOLUME 8 TABLES AND INDEX AUSTIN WAKEMAN SCOTT Late Dane Professor of Law Emeritus Harvard University WILLIAM FRANKLIN FRATCHER Late R. B. Price Distinguished Professor of Law Emeritus University of Missouri MARK L. ASCHER Joseph D. Jamail Centennial Chair in Law University of Texas & Wolters Kluwer Law & Business AUSTIN BOSTON CHICAGO NEW YORK THE NETHERLANDS

2 FIFTH EDITION CONTENTS PART 1 INTRODUCTION CHAPTER 1 THE HISTORY OF THE TRUST Introduction Early English Equity The Development of Uses and Trusts The First Period The Second Period The Third Period The Fourth Period Trusts of Personal Property Trusts in America Analogous Devices in Other Legal Systems Legislation 27 CHAPTER 2 THE NATURE OF A TRUST The Nature of a Trust The Classification of Trusts Other Trusts The Definition of a Trust The Trust as a Relationship Fiduciary Relationship Relationship with Respect to Property Relationship Involving Duties Relationship Arising From a Manifestation of Intention Terminology The Settlor The Trust Property 41

3 SCOTT AND ASCHER ON TRUSTS The Beneficiary The Terms of the Trust Distinctions between Trusts and Other Relationships Trust and Bailment Trust and Executorship Removal and Renunciation Liability of Sureties Requirement of Unanimity Trust and Guardianship Trust and Agency Bank as Trustee or Agent Trust and Mortgage, Pledge, or Lien Trust and Equitable Charge Personal Liability of Transferee Subsequent Transferees of Property Subject to a Charge Kinds of Charges Character of the Relationship The Statute of Limitations Intention to Create a Charge or a Trust Trust and Condition Trust and Debt Intention Determinative The Statute of Limitations Accidental Loss Effect of Insolvency Formalities in the Creation of a Trust or Debt Bank Deposits Ill Stockbrokers Novation Substitution of Debt For Trust 113 VI

4 FIFTH EDITION CONTENTS Novation Substitution of Trust For Debt Trust and Contract to Convey Land Trust and Contract for Benefit of Third Party Promisor as Trustee Promisee as Trustee Consequences of the Distinction between Trust and Contract Trust and Assignment of a Chose in Action Other Relationships 129 PART 2 THE CREATION OF A TRUST CHAPTER 3 THE CREATION OF A TRUST: GENERAL PRINCIPLES Methods of Creating a Trust Declaration of Trust Exercise of Power of Appointment Promise in Trust Other Methods of Creating a Trust Statutory Trusts Capacity to Create a Trust Consideration Not Necessary to Create a Trust Consideration Not Necessary for Declaration of Trust Consideration Not Necessary for Transfer in Trust Consideration for Promise to Create a Trust Active and Passive Trusts The Statute of Uses Active Trusts When Active Trust Becomes Passive Trusts of Personal Property 170 VII

5 SCOTT AND ASCHER ON TRUSTS Uses On Uses Resulting Trusts Constructive Trusts 174 CHAPTER 4 THE INTENTION TO CREATE A TRUST Requirement of Manifestation of Intention Mode of Manifestation of Intention Trust and Successive Legal Estates Communication of Intention Precatory Words The Earlier View The Modern View Family Purposes No Intention to Create a Present Trust Postponement of Enjoyment When Some of the Elements of the Trust Are to Be Determined in the Future After-Acquired Property Promisee as Trustee Whether Trust Subsequently Arises Parol Evidence Rule Fraud, Undue Influence, Duress, or Mistake Fraud Undue Influence or Duress Mistake When Power of Rescission or Right To Reformation Is Lost 225 CHAPTER 5 THE TRANSFER OF PROPERTY TO THE TRUSTEE Lifetime Gifts (Not in Trust) Stashes Transfers for Consideration Change of Position Effect of Donor's Death Lifetime Transfers in Trust No Intent to Make Present Transfer Transfer Incomplete for Lack of Delivery 244 VIII

6 FIFTH EDITION CONTENTS Transfer Incomplete for Lack of Trustee When Settlor Declares Himself or Herself Trustee Testamentary Trusts When Trust Fails for Lack of Trustee Multiple Trustees Notice to and Acceptance by Trustee When Refusal to Accept Prevents Transfer When Trust Fails for Want of Trustee Disclaimer by One of Several Trustees Disclaimer by Trustee of Contract Right Notice to and Acceptance by Beneficiaries Effect of Disclaimer by Beneficiary Reservation and Creation of Powers 272 CHAPTER 6 THE STATUTE OF FRAUDS Writing Not Required at Common Law The Statute of Frauds American Statutes An interest in Land In Case of Declaration of Trust, When Must Settlor Sign? Prior to Declaration After Declaration In Case of Transfer in Trust, Who Must Sign and When? Settlor Prior to or at Time of Transfer Trustee Prior to or at Time of Transfer Trustee After Transfer When Trustee Signs Writing Declaring Different Trust What the Writing Must Contain Intent of Person Who Signs Writing Writing Consisting of More Than One Document 295 IX

7 SCOTT AND ASCHER ON TRUSTS 6.8. Loss or Destruction of Writing Performance of Oral Trust Declaration of Trust Not Evidenced by Writing Transfer in Trust Not Evidenced by Writing Transfer Wrongfully Obtained Transferee in Confidential Relationship with Transferor Transfer Made as Security Transfer in Contemplation of Death Involuntary Transfer Transfer "in Trust" Part Performance of Oral Trust Who Can Take Advantage of Failure to Comply with Statute of Frauds Trust of Property Other Than Interest in Land Trust of Proceeds of Land 334 CHAPTER 7 TRUSTS CREATED BY WILL: TESTAMENTARY TRUSTS Using a Will to Create or Fund a Trust at Death Incorporation by Reference Independent Significance Pour-Over Wills Disposition in Accordance with Directions of Third Person Secret Trusts Agreement by Devisee Agreement Made After Execution of Will Agreement by Heir or Next of Kin Designation of Beneficiary No Agreement by Devisee When Intention to Create Trust Appears in Will General Observations On Effect of Statute of Frauds and Statute of Wills 377

8 FIFTH EDITION CONTENTS CHAPTER 8 TRUSTS CREATED DURING LIFETIME: INTER VIVOS TRUSTS Creating a Trust During Life Transfer Incomplete at Settlor's Death Trust Property Not Designated Until Settlor's Death Trustee Not Designated Until Settlor's Death Beneficiaries Not Designated Until Settlor's Death Postponement of Enjoyment Until Settlor's Death Declaration of Trust Probate of Written Instrument Statute of Wills Inapplicable to Contracts Settlor's Reservation of Right to Revoke, Modify, or Control When Settlor Reserves Right to Revoke or Modify When Settlor Reserves Power to Control Administration Insurance Trusts Power to Change Beneficiaries by Notice to Trustee Restrictions on Testamentary Disposition Declaration of Trust Trusts of Bank Accounts: "Totten Trusts" Intention of Depositor New York Doctrine of Tentative Trusts Tentative Trusts and the Statute of Wills Revocation of Tentative Trusts Restrictions on Testamentary Disposition 459 XI

9 PART 3 THE ELEMENTS OF A TRUST SCOTT AND ASCHER ON TRUSTS CHAPTER 9 TRUST PURPOSES Trust Purposes In General When Performance Is Illegal When Enforcement Is Contrary to Public Policy Tendency to Induce Criminal or Tortious Acts Tendency to Encourage Immorality Tendency to Encourage Divorce or Separation Tendency to Encourage Neglect of Parental Duties Tendency to Restrain Marriage Tendency to Restrain Religious Freedom Tendency to Restrain Performance of Public Duties Tendency to Influence Beneficiary's Selection of Career or Personal Conduct Remoteness The Rule Against Perpetuities The Rule Against Accumulations Restraints on Alienation Disposition of Property Detrimental To Community Capricious Purposes Interference with Proper Trust Administration When the Purpose Is Fraudulent Defrauding the Government Other Fraudulent Transactions When the Settlor Is Not the Beneficiary When the Consideration Is Illegal When the Beneficiary Is Innocent 531 XII

10 FIFTH EDITION CONTENTS When the Trust Property Has Been Acquired Illegally The Consequences of Provisions That Are Illegal or Contrary to Public Policy Separability of Valid and Invalid Provisions Unenforceable Conditions Subsequent Unenforceable Conditions Precedent When Performance Is Impossible When the Terms of the Trust Are Indefinite 542 CHAPTER 10 THE TRUST PROPERTY The Necessity of Trust Property What Can Be Held in Trust When the Trust Property Ceases To Exist Nonexistent Interests Indefinite Subject Matter Limited Interests in Definite Subject Matter The Necessity That Property Be Transferable Nontransferable Property Limited Transferability Seats on Exchanges Property Nontransferable for Reasons Inapplicable to Declaration of Trust Nontransferable Interest Created in Trust Accruing to Trustee Intangibles Equitable Interests Interests Subject to Divestment Insurance Trusts Contingent Interests After-Acquired Property Expectancies Future Earnings Future Crops and Unborn Animals Other After-Acquired Property Obligor as Trustee 580 XIII

11 SCOTT AND ASCHER ON TRUSTS Life Insurance Companies Are Generally Not Trustees Settlor's Promissory Note Settlor's Check Extent and Nature of Trustee's Estate Why the Extent and Nature of the Trustee's Estate Matter 596 CHAPTER 11 THE TRUSTEE Capacity to Be Trustee Minors Incompetent Persons Aliens Nonresidents The United States or a State Corporations Municipal Corporations Banks and Trust Companies Foreign Corporations Merger and Consolidation Unincorporated Associations Partnerships Beneficiary as Trustee When There Are Several Beneficiaries or Several Trustees One of Several Beneficiaries Can Be One of Several Trustees One of Several Beneficiaries Can Be the Sole Trustee The Sole Beneficiary Can Be One of Several Trustees The Group of Beneficiaries and the Group of Trustees Can Be Identical The Settlor as Trustee Failure of the Trustee When the Trust May Fail For Want of a Trustee 633 XIV

12 FIFTH EDITION CONTENTS Disclaimer by Trustee Conduct Indicating Disclaimer or Acceptance Effect of Inaction Effect of Acceptance or Disclaimer Partial Disclaimer Death of One of Several Trustees Corporation and Individual As Co-Trustees Death Intestate of Sole Trustee Death Testate of Sole Trustee Resignation of Trustee Resignation in Accordance with Terms of Trust Resignation by Consent of Beneficiaries Resignation upon Terms Approved by Court Resignation by Consent of Settlor of Revocable Trust Removal of Trustee Removal of Trustee Selected by Settlor Removal in Accordance with Terms of Trust Removal by Beneficiaries Appointment of New Trustee Appointment of Co-Trustees Appointment by Court Appointment by Third Person Appointment by Beneficiaries Vesting of Title in New Trustee upon Appointment by Court Vesting of Title in New Trustee upon Non-Judicial Appointment Transfer to New Trustee of Property Normally Not Transferable 690 xv

13 SCOTT AND ASCHER ON TRUSTS CHAPTER 12 THE BENEFICIARIES Definite Beneficiary Necessary Unborn Beneficiaries Corporation Not Yet Organized Deceased Beneficiary Several Beneficiaries Sole Beneficiary The Settlor as Beneficiary Trustee as Beneficiary Capacity to Be Beneficiary Corporations Aliens Unincorporated Associations Members of a Definite Class Members of Someone's "Family" Relatives Members of Indefinite Class Indefinite or General Purposes Specific Noncharitable Purposes The Rule Against Perpetuities Tombs, Monuments, and Graves Animals Masses Trust for Maintenance of Building Other Purposes Capricious Purposes Inter Vivos Arrangements That Have No Definite Beneficiary Unrestricted Power of Disposition Incidental Beneficiary The Settlor's Creditors Debts Arising During Trust Administration Direction To Employ Someone Who Are Beneficiaries Whether Settlor Is Sole Beneficiary Whether Someone Other Than Settlor Is Sole Beneficiary 790 XVI

14 FIFTH EDITION CONTENTS Trust for Designated Individual and His or Her Family Class Gifts 797 PART 4 THE NATURE OF A BENEFICIAL INTEREST CHAPTER 13 THE NATURE AND EXTENT OF A BENEFICIAL INTEREST The Nature of the Beneficiary's Interest Whether Beneficiary's Interest Is Real or Personal Property Extent of the Beneficiary's Interest Words of Inheritance Disposition of Income and Principal Discretionary Trusts Trusts for Support Trust for Benefit of Designated Individual and His or Her Family Personal Trusts Invasion of Principal Annuities and Unitrusts Whether an Interest Is Conditional on Beneficiary's Survival Definiteness of Extent of Beneficiary's Interest 852 CHAPTER 14 THE TRANSFER OF A BENEFICIAL INTEREST Power to Make Voluntary Transfers Testamentary Disposition of Beneficial Interest Transfer of Claim for Breach of Trust Capacity to Make or Receive a Transfer Intention to Transfer 86 / Authorization to Receive Trust Property Authorization or Direction to Trustee to Convev 863 XVII

15 SCOTT AND ASCHER ON TRUSTS Consideration Notice to and Consent of Trustee Notice to and Acceptance by Transferee Writing Grounds for Reformation or Rescission Effect of Successive Conveyances of a Beneficial Interest by a Beneficiary Disposition of Beneficial Interest upon Death of Beneficiary When Beneficial Interest Does Not End at Beneficiary's Death Estate pur Autre Vie Death of Beneficiary Without Heirs Disappearance of Beneficiary Surviving Spouse's Elective Share Community Property Creditors Bankruptcy of Beneficiary Methods of Reaching Beneficiary's Interest Creditors of Donee of Power of Appointment Exemptions 892 CHAPTER 15 RESTRICTIONS ON THE TRANSFER OF A BENEFICIAL INTEREST Forfeiture Provisions Forfeiture Provisions Relating to Settlor as Beneficiary Spendthrift Trusts Direct Restraints on the Alienation of a Beneficial Interest Bankruptcy of Beneficiary Whether It Is Necessary to Restrain Both Voluntary and Involuntary Alienation Intent to Restrain Alienation Extent of Restraint on Alienation of Income Interest 919 XVIII

16 FIFTH EDITION CONTENTS Contract to Assign Beneficiary's Interest Restraint on Alienation of Principal Absence of Ownership Equivalence Release or Disclaimer by Beneficiary of Spendthrift Trust Discretionary Trusts Rights of Creditors and Assignees Support Trusts Self-Settled Trusts: When the Settlor Is Also a Beneficiary Rights of the Creditors of a Settlor Who Has Reserved a General Power of Appointment Rights of the Creditors of the Settlor of a Revocable Trust Discretionary Trust for the Settlor Determining Who Is the Settlor Particular Classes of Claimants Dependents of the Beneficiary Claims for Necessaries Furnished to a Beneficiary Benefits Conferred on the Beneficiary's Interest Claims of the Government TortClaims Disability of Beneficiary of Spendthrift Trust 70/ Death of Beneficiary of Spendthrift Trust Solvency as Condition Precedent Indefinite or Contingent Interests 1014 PART 5 TRUST ADMINISTRATION CHAPTER 16 TRUST ADMINISTRATION: GENERAL PRINCIPLES Duties and Powers of the Trustee Impossibility 1025 XIX

17 SCOTT AND ASCHER ON TRUSTS Illegality Change of Circumstances Deviation Without Court Authorization Liability for Failure to Apply to the Court for Authorization Effect of Power of Revocation Effect of Presently Exercisable General Power of Appointment or Right of Withdrawal Effect of Power to Direct or Control Trustee Application for Instructions 7070 CHAPTER 17 THE TRUSTEE'S DUTIES Duty to Administer the Trust Duty of Loyalty Sale of Trust Property to Trustee Individually Remedies When Trustee Does Not Fix Sale Price Sale to Third Person for Trustee's Benefit When Trustee Has Personal Interest In Purchase When Purchaser Is No Longer Trustee Purchase of Trustee's Own Property by Trust Use of Trust Property for Trustee's Own Benefit When Trustee Borrows Trust Funds Deposit by Individual Trustee in Bank in Which Trustee Has an Interest Loan by Trustee to the Trust Purchase of Adverse Interest from Third Person Bonus, Commission, or Other Compensation Competition with the Trust 1126 xx

18 FIFTH EDITION CONTENTS Other Situations Implicating the Duty of Loyalty The Terms of the Trust Court Approval When the Beneficiaries Consent Corporate Trustees Deposit by Corporate Trustee in its Own Banking Department Mortgage Participations Common Trust Funds Proprietary Mutual Funds Investment in Shares of Stock of Corporate Trustee General Observations on Conflicts of Interest on Part of Corporate Trustees Duty of Trustee Under Separate Trusts The Trustee's Duty in Respect of Delegation Delegation of Entire Administration Delegation of Authority to Do Particular Acts Power to Cooperate With Others Delegation by Corporate Trustees Duty to Keep and Render Accounts 7/ Duty to Furnish Information 7/ Duty to Exercise Reasonable Care and Skill Duty to Take and Keep Control 72/ Duty to Preserve Trust Property Duty to Enforce Claims Duty to Defend Actions Duty to Keep Trust Property Separate Duty Not to Mingle Trust Property With Trustee's Own Property Duty Not to Mingle Funds of Separate Trusts Duty to Earmark Trust Property Taking Title in the Name of a Third Person 1237 XXI

19 SCOTT AND ASCHER ON TRUSTS Duty with Respect to Bank Deposits Negligent Selection Deposit in Personal Account Leaving Funds on Deposit for an Unreasonable Time Restrictions on Withdrawals Duty to Make the Trust Property Productive Duty to Distribute or Apply Income and Principal in Accordance with Terms of Trust When Beneficiary Is Under Incapacity Duty of Impartiality Duty with Respect to Co-Trustees 7262 CHAPTER 18 THE TRUSTEE'S POWERS The Extent of a Trustee's Powers Conditional Powers Power to Incur Expenses Preservation of the Trust Property Repairs and Improvements Employment of Agents Expenses of Judicial Proceedings Expenses of Management When Trustee Improperly Incurs Expense Power to Lease Reasonableness of Leases Duration of Leases The Terms of the Trust Building Leases Oil, Gas, and Mining Leases PowerofSale The Terms of the Trust Power of Court to Authorize Sale Consent of Beneficiaries XXII

20 FIFTH EDITION CONTENTS Manner of Sale Power to Sell On Credit Power to Sell Options Power to Exchange Power to Mortgage Power to Purchase Property Subject to Mortgage Power to Borrow Without Security Power to Compromise. Arbitrate, and Abandon Claims Power to Disclaim or Make Gifts or Other Transfers of Trust Property Without Consideration Powers With Respect to Shares of Stock Duty of Trustee In Voting Shares When Trustee Has Controlling Interest Voting by Proxy Deposit of Shares With Protective Committee Control of Discretionary Powers Methods of Control When Trustee Fails to Use Judgment When Trustee Acts Dishonestly Improper Motive Trustee With Discretionary Power to Distribute to Self Reasonableness of Trustee's Exercise of a Power When Powers Are Exercisable by Several Trustees / When Powers Are Exercisable by Suniving Trustees When Powers Are Exercisable by Successor Trustees 7378 XXIII

21 CHAPTER 19 SCOTT AND ASCHER ON TRUSTS THE INVESTMENT OF TRUST FUNDS The Trustee's Investment Duties In General Trust Investments in England Trust Investments in the United States Requirement of Care Requirement of Skill Requirement of Caution Kinds of Investments Selection of Investments Questions Relating to Life Insurance Combining Trust Funds in Making Investments Mutual Funds Investments Outside the State Terms of the Trust Moral Considerations in Investing The Duty to Diversify Extent of Liability Duty With Respect to Initial Trust Assets Time of Disposal Diversification Terms of the Trust Duty to Wind up Testator's Business Investments That Subsequently Become Inappropriate Diversification Changes in Trust Investments 1457 CHAPTER 20 PRINCIPAL AND INCOME Impartiality Between Successive Beneficiaries Allocation of Receipts and Expenses to Principal or Income Receipts Expenses Terms of the Trust When Income Begins Specific Bequest 1496 XXIV

22 FIFTH EDITION CONTENTS General Bequest Residuary Bequest Income From Property Used in Paying Bequests, Debts, and Expenses Bequest of Share of Residuary Estate Apportionment of Receipts and Disbursements at Beginning of Trust or Income Interest Apportionment When Income Interest Ends Annuities and Unitrusts Receipts From Shares of Stock Ordinary Cash Dividends Extraordinary Distributions, Including Stock Dividends Distributions of Property Other Than Cash or Corporation's Own Shares Dividends on Preferred Stock Subscription Rights Distributions From Mutual Funds Undistributed Earnings Allocating Distributions at Beginning or End of Income Interest Terms of the Trust Effect of Rules Relating to Principal and Income on Investments by Trustee Wasting or Overproductive Property Terms of the Trust Bonds Purchased at Premium Minerals and Other Natural Resources Timber Depreciation Liquidating Assets Unproductive or Underproductive Property Terms of the Trust Discount Bonds Allocation of Sales Proceeds Upon Delayed Conversion Mortgages in Default 1573 XXV

23 SCOTT AND ASCHER ON TRUSTS Equitable Adjustments Equitable Adjustments Relating to Taxes Equitable Adjustments Relating to Investments Total Return Unitrusts 7583 CHAPTER 21 THE TRUSTEE'S COMPENSATION The Trustee's Compensation In General Trust to Carry on Business Extra Services Terms of the Trust Passive and Informal Trusts Agreement With Settlor Agreement With Beneficiaries Waiver Double Commissions Several Trustees When Trustee Fails to Complete Administration The Effect of a Breach of Trust on Compensation CHAPTER 22 THE TRUSTEE'S RIGHT TO INDEMNITY Expenses Properly Incurred Lien for Indemnity Spendthrift Trusts Trustee in Default Terms of the Trust Expenses Improperly Incurred Benefit to Trust Estate Separable Transactions Contractual Liability Tort Liability Liability as Title Holder Indemnity From Beneficiaries When Trust Estate Has Already Been Conveyed 1643 XXVI

24 FIFTH EDITION CONTENTS CHAPTER 23 ACCOUNTING The Settlement of Accounts 7645 PART 6 THE LIABILITIES OF THE TRUSTEE AND THE BENEFICIARIES TO EACH OTHER AND TO THE TRUST CHAPTER 24 THE TRUSTEE'S LIABILITIES TO THE BENEFICIARIES AND TO THE TRUST The Nature of the Beneficiary's Remedies Historical Background Action at Law in Tort Action at Law for Breach of Contract The Beneficiary's Legal Remedies When Money Is Due to Beneficiary When Trustee Is Under Duty to Convey Personal Property to Beneficiary Whether Legal Remedy Is Exclusive The Beneficiary's Equitable Remedies Specific Enforcement of Trust Injunction Redress for Breach of Trust Appointment of Receiver Removal of Trustee Persons Other Than the Beneficiaries The Settlor and the Settlor's Successors in Interest Co-Trustees and Successor Trustees Transferee of Beneficiary's Interest Court Acting on its Own Motion What Constitutes a Breach of Trust Following Trust Property into its Product 768/ Accountability for Profits in the Absence of a Breach of Trust Nonliability for Loss in the Absence of a Breach of Trust...' Liability in the Case of a Breach of Trust 7685 XXVII

25 SCOTT AND ASCHER ON TRUSTS When Loss Would Have Occurred in Absence of Breach of Trust Power of Court to Excuse Breach of Trust Liability for Interest Liability for Breach of Duty of Loyalty Liability for Breach of Trust by Selling Trust Property Value at Time of Suit Accountability for Proceeds Specific Reparation When Trustee Has Power of Sale Liability for Breach of Trust by Failing to Sell Trust Property Liability for Breach of Trust by Purchasing Property Liability for Breach of Trust by Failing to Purchase Specific Property Liability for Breach of Trust by Failing to Invest When Loss Would Have Occurred in Any Event, as Illustrated by Three Cases Involving Multiple Breaches of Trust Wrongful Sale and Wrongful Purchase Wrongful Purchase and Wrongful Failure to Purchase Wrongful Failure to Sell and Wrongful Failure to Purchase Effect of a General Increase or Decrease in Market Values Balancing Losses Against Gains Several Beneficiaries Choice of Remedies Liability of Trustee Under Incapacity Consent of Beneficiary Consent by Beneficiary of Spendthrift Trust Several Beneficiaries When Consent Is Ineffective 1767 XXVIII

26 FIFTH EDITION CONTENTS Discharge of Liability by Release or Contract Discharge of Liability by Ratification or Subsequent Affirmance / Laches and Statutes of Limitations Laches Statutes of Limitations Judicial Discharge Trustee's Discharge in Bankruptcy Exculpatory Provisions Distinction Between Exculpatory Provisions and Provisions that Enlarge the Trustee's Powers Exculpatory Provisions Strictly Construed Extent to Which Exculpatory Provisions Are Against Public Policy Exculpatory Provision Improperly Inserted Liability of Successor Trustee When Successor Trustee Permits Continuation of Breach When Successor Trustee Fails to Compel Predecessor to Delivery Trust Property When Successor Trustee Fails to Compel Predecessor to Redress Breach of Trust Liability for Co-Trustee's Breach of Trust Liability for Acts of Agents Liability for Incorrect Distributions Liability for Distributions Under Invalid, Amended, Revoked, or Ineffective Trust Instruments Contribution or Indemnity From Co-Trustee Trustees Not Equally at Fault Benefit to One Trustee Breach of Trust Committed in Bad Faith 1837 XXIX

27 SCOTT AND ASCHER ON TRUSTS CHAPTER 25 THE BENEFICIARIES' LIABILITIES TO THE TRUSTEE, THE TRUST, AND EACH OTHER Liability of Beneficiary to Trustee Individually Liability of Beneficiary to Trust Estate Beneficiary's Indebtedness to Settlor Contractual Obligations to Trust Beneficiary Who Deals Wrongfully with Trust Property Beneficiary Who Receives Overpayment Change of Position Rights of Trustee and Other Beneficiaries Beneficiary Who Receives Advance or Loan of Trust Funds Advances to Beneficiary of Spendthrift Trust Beneficiary Who Consents to Or Participates in Breach of Trust When Consenting Beneficiary Profits from Breach of Trust When Consenting Beneficiary Agrees to Indemnify Trustee Participation by Beneficiary in Breach of Trust Impounding Trustee-Beneficiary's Share Spendthrift Trust Trustee-Beneficiary's Creditors Transfer of Trustee- Beneficiary's Interest Beneficiary's Duty to Other Beneficiaries 7866 XXX

28 FIFTH EDITION CONTENTS PART 7 THE RIGHTS OF THIRD PARTIES CHAPTER 26 THE RIGHTS OF THIRD PARTIES AGAINST THE TRUSTEE OR THE TRUST PROPERTY The Trustee's Liability in General Contractual Liability Terms of the Trust Implied Warranty Personal Liability of Trustee to Creditor When Trustee is Liable to Trust Estate Tort Liability Liability as Owner of Trust Property Taxes Assessments on Shareholders Environmental Cleanup Costs Other Liabilities When Trust Estate Is Insufficient to Indemnify Trustee The Power of a Creditor to Reach the Trust Property When Trustee Is Entitled to Exoneration When Trustee Is Not Entitled to Exoneration Priority Over Trustees" Personal Creditors When Trust Estate Has Benefitted When Terms of Trust Provide for Liability of Trust Estate When Contract Binds Trust Estate When Equity Requires Specific Enforcement of Duties to Third Persons Specific Performance of Contracts Injunction Against Torts Protection of Third Party's Interest Trust Property 7973 XXXI

29 SCOTT AND ASCHER ON TRUSTS CHAPTER 27 THE RIGHTS OF THIRD PARTIES AGAINST THE BENEFICIARIES The Beneficiaries' Liability to Third Parties 7977 PART 8 THE LIABILITIES OF THIRD PARTIES CHAPTER 28 PARTIES ACTING ADVERSELY TO THE TRUSTEE Actions by the Trustee How the Trustee Sues Joinder of the Beneficiaries Successor Trustees Actions by the Beneficiaries When the Trustee Fails to Sue When the Trustee Is Not Subject to Jurisdiction Disposition of Proceeds Recovered Several Beneficiaries 1948 CHAPTER 29 TRANSFEREES OF TRUST PROPERTY General Principles Bona Fide Purchaser Conveyance of Equitable Interest Creation of Equitable Interest in Trust Property Transfer by Transferee to Bona Fide Purchaser Transferee with Notice Donee Devolution on Death of Trustee Transferee in an Illegal Transaction Extent of Liability of Transferee With Notice Restitution of Trust Property 1977 XXXII

30 FIFTH EDITION CONTENTS Recovery of Value of Trust Property Recovery of Proceeds of Trust Property Lien on Property or Its Proceeds Credit for Purchase Price Credit for Expenditures to Improve Trust Property Choice of Remedies Election by Beneficiaries to Affirm When Trust Funds Are Used to Improve Property of Another Extent of Liability of Donee Gratuitous Transfer by Donee Before Notice Trust Money Spent by Donee Before Notice Transfer by Donee After Notice Credit for Expenditures to Improve Trust Property When Trust Funds Are Used to Improve Property of Another Extent of Liability of Transferee in an Illegal Transaction Who Can Maintain Action Suit by Beneficiary Suit by Trustee Suit by Co-Trustee Suit by Successor Trustee Choice of Remedies Against Trustee and Transferee Effect of Judgment Notice to the Transferee of Trust Property Notice Under Recording Statutes 2008 XXXIII

31 SCOTT AND ASCHER ON TRUSTS When Transferee Is Chargeable with Notice of Breach of Trust Notice of Existence of Trust Notice of Terms of Trust Notice of Deviation from Terms of Trust Negotiable Instruments Debts Incurred During Trust Administration Notice to Transferee's Agent Purchase in Trustee's Name Value Present Value Payment of Value Prior to Transfer Payment of Value After Transfer Payment of Value After Notice Promise as Value Partial Payment Satisfaction of Antecedent Debt as Value Security for Antecedent Debt as Value Assignee for Creditors Trustee in Bankruptcy Creditors of Trustee Purchaser at Judicial Sale Transfer of Title to Trust Property Contract to Transfer Trust Property Transfer After Notice Notice Before Transfer but After Trustee Has Completed Breach of Trust Estoppel of Beneficiaries Rights of Creditors When Beneficiaries Are Estopped Rights of Equitable Claimants When Beneficiaries Are Estopped Rights of Transferee When Beneficiaries Consent to Transfer Transfer by Bona Fide Purchaser Transferee from Bona Fide Purchaser 2065 XXXIV

32 FIFTH EDITION CONTENTS Retransfer by Bona Fide Purchaser to Trustee Retransfer by Bona Fide Purchaser to Transferee with Notice Retransfer by Bona Fide Purchaser to Donee Retransfer by Bona Fide Purchaser on a New Trust Transfer in Restitution for a Wrong 2070 CHAPTER 30 PARTICIPATION IN BREACH OF TRUST OTHER THAN BY RECEIVING TRANSFER Misapplication of Payments Made to Trustee Payment with Notice Payment to One of Several Trustees Release of Claim Against Third Person by Trustee Set-Off of Claim of Third Person Against Trustee Depositories of Trust Funds Deposit in Trust Account Deposit in Personal Account Permitting Withdrawals Application of Deposit to Depositor's Individual Indebtedness to Bank Registration of Transfer of Securities Held by Trustee Others Dealing with the Trustee 2/ Sales to Trust Estate Brokers Directors and Officers of Corporate Trustee Attorneys and Other Agents Others Dealing with Trustee General Observations 2128 XXXV

33 SCOTT AND ASCHER ON TRUSTS CHAPTER 31 EFFECT OF LACHES AND STATUTES OF LIMITATIONS Rights of Beneficiaries When Trustee Is Barred by Laches or Statute of Limitations Persons Acting Adversely to Trustee Transferees of Trust Property 2134 CHAPTER 32 DISCHARGE BY BENEFICIARY AND SET-OFF OF CLAIM AGAINST BENEFICIARY Discharge by Beneficiary of Claim Against Third Person Set-Off of Claim of Third Person Against Beneficiary 2743 PART 9 TERMINATION AND MODIFICATION CHAPTER 33 TERMINATION AND MODIFICATION: GENERAL PRINCIPLES Termination Pursuant to the Terms of the Trust Termination or Modification by Trustee Termination or Modification by Beneficiary Termination or Modification by Third Person Termination or Modification by Settlor When Accomplishment of Trust Purposes Is Impossible or Illegal When Continuing Trust Administration Becomes Uneconomic Termination or Modification on Account of Unanticipated Circumstances Termination or Modification to Save Taxes Loosening the Standards for Termination and Modification 2200 XXXVI

34 FIFTH EDITION CONTENTS CHAPTER 34 TERMINATION AND MODIFICATION BY CONSENT Consent of Beneficiaries Successive Beneficiaries Spendthrift Trusts Postponement of Enjoyment Support Trusts and Discretionary Trusts When Beneficiary Is Under Disability That Subsequently Ceases Compromise Agreement Partial Termination Consent of Beneficiaries and Settlor When Settlor Is Sole Beneficiary When Some of the Beneficiaries Do Not or Cannot Give Binding Consent Contingent Interests That Are Certain Never to Vest Partial Termination Merger Acquisition of Legal Title by Beneficiary of Spendthrift Trust When Sole Beneficiary Does Not Become Sole Trustee Conveyance by Trustee to or at the Direction of the Beneficiaries Spendthrift Trusts Conveyance by Beneficiary to Trustee 2270 CHAPTER 35 TERMINATION AND MODIFICATION PURSUANT TO SETTLOR'S POWER TO REVOKE OR MODIFY Revocation by Settlor When No Method of Revocation Is Specified When Method of Revocation Is Specified 2285 XXXVII

35 SCOTT AND ASCHER ON TRUSTS When Power to Revoke Is Subject to Consent of Beneficiaries When Power to Revoke Is Subject to Consent of Trustee When Power to Revoke Is Subject to Consent of Third Person Partial Revocation When Creation of Trust Is Incomplete Assignment for Benefit of Creditors Trust for Particular Creditor Trust with Multiple Settlors Modification by Settlor Whether Power to Revoke Includes Power to Modify Whether Power to Modify Includes Power to Revoke Power of Revocation or Modification Omitted by Mistake 2375 CHAPTER 36 ADMINISTRATION AFTER TERMINATION Power and Duties of Trustee on Termination of Trust Duty of Trustee to Transfer Title or Possession on Termination of Trust Delay in Making Conveyance Trustee's Lien To Whom Trustee Should Convey Direction To Convert Mode of Distribution Specific Provisions in Trust Instrument No Specific Provisions in Trust Instrument Land Personal Property Termination of Trust in Part When Property Is to Be Distributed to Several Trusts 2347 XXXVIII

36 FIFTH EDITION CONTENTS PART 10 CHARITABLE TRUSTS CHAPTER 37 CHARITABLE TRUSTS: GENERAL PRINCIPLES The Definition of a Charitable Trust Charitable Corporations History of Charitable Trusts in England Charitable Trusts in the United States Collateral Consequences of Charitable Dispositions The Creation of a Charitable Trust Methods of Creating a Charitable Trust Intention to Create a Trust Necessity of Transfer Creation of Charitable Trust by Will Secret Charitable Trusts When Settlor Reserves Power to Revoke, Modify, or Control Inter Vivos Charitable Trust Restrictions on the Creation of Charitable Trusts Restrictions in England on the Holding of Land by Corporations Restrictions in England on Devises of Land to Corporations Restrictions in England on Devises for Charitable Purposes Statutory Restrictions in the United States Agreement by Devisee or Heir to Hold upon Charitable Trust 2401 XXXIX

37 SCOTT AND ASCHER ON TRUSTS When Settlor Retains Power to Revoke or Modify The Administration of a Charitable Trust The Duties of the Trustee Whether Trustee May Convey to or Form Charitable Corporation Extent of Trustee's Powers Deviation From Terms of the Trust Control of Discretionary Powers Several Trustees Removal of Trustee Appointment of New Trustees Investments Trustee's Compensation Who Can Enforce a Charitable Trust Actions Against Third Persons Judicial Instructions Liability in Tort Proprietary Institutions Unincorporated Charities Liability in Contract The Duration of Charitable Trusts Indefinite Duration Revocation and Modification Revocation of Charitable Trust Modification of Charitable Trust Modification of Charitable Trusts by the Legislature Termination of Charitable Trust 2485 CHAPTER 38 THE NATURE OF CHARITABLE PURPOSES What Purposes Are Charitable The Statute of Charitable Uses 2498 xl

38 FIFTH EDITION CONTENTS The Law Relating to Charitable Purposes in America Relief of Poverty General Trusts for the Poor Words Indicating Purpose of Relieving Poverty Destitution Unnecessary Incidental Benefit to Others Limited Classes of Beneficiaries Advancement of Knowledge or Education General Trusts to Promote Education Physical Training Training for Citizenship Dissemination of Beliefs and Doctrines Public and Private Institutions Limited Classes of Beneficiaries Advancement of Religion Methods of Advancing Religion General Trusts for Religion Words Indicating Religious Purposes The Legality of the Purpose Masses When Class Is Too Narrow Promotion of Health Proprietary Institutions Limited Classes of Beneficiaries Governmental or Municipal Purposes General Trusts for Public Purposes Relieving Burdens of Government Promotion of Other Purposes Beneficial to the Community Promotion of Temperance Relief of Animals Trusts for Persons of Limited Opportunities Humanitarian Purposes Patriotic Purposes Unpopular Causes Improving Government Political Objects 2573 xli

39 SCOTT AND ASCHER ON TRUSTS Changes in Existing Law Monuments and Tombs Community Purposes Promotion of Sports Housing and Services for the Elderly and Handicapped Charity Outside the State Indefinite Beneficiaries Definite Beneficiaries When the Number of Recipients Is Limited When the Class to be Benefitted Is Limited Trusts for Relatives Private Profit Illegal Purposes 2630 CHAPTER 39 THE FAILURE OF CHARITABLE TRUSTS CY PRES When Settlor Fails to State Charitable Purpose When Settlor Leaves to Trustee the Selection of Charitable Objects and the Trustee Makes the Selection Failure of Trustee Procedure on Failure of Trustee Gift to Unincorporated Charitable Association Gift to Charitable Corporation Power to Distribute Among Specified Charities Power to Distribute Among Charitable and Other Valid Objects Charitable and Invalid Purposes Indefinite Purposes Not Limited to Charity Specified Objects Failure of Particular Charitable Purpose; Cy Pres Judicial and Prerogative Cy Pres 2705 xlii

40 FIFTH EDITION CONTENTS Exercise of Cy Pres Power Subsequent Failure of Particular Purpose When It Is Neither Unlawful Nor Impossible to Accomplish Particular Purpose Racial, Sexual, and Religious Restrictions The Power of the Legislature Application of Surplus Conditions and Limitations No Reverter for Breach of Trust Conditions Subsequent Limitations Relief Against Forfeiture Gift Over From Charity to Charity Gift Over From Charity to Non-Charity Gift Over From Non-Charity to Charity Gift to Charity Without Intermediate Disposition Provisions for Accumulation Illegal Condition Precedent 2814 PART 11 RESULTING TRUSTS CHAPTER 40 RESULTING TRUSTS: GENERAL PRINCIPLES When a Resulting Trust Arises Distinguishing Resulting Trusts From Express Trusts Distinguishing Resulting Trusts From Constructive Trusts Gratuitous Conveyance Statute of Frauds Transfer bv Beneficiary Transfer by Trustee 2833 xliii