trusts and estates

The will execution ceremony is the procedure by which a testator makes known how he wants his property to be handled after his death through his will.  The execution ceremony has formal requirements such as the signature, attestation and writing requirements.  The will is valid only if these formalities a

The net probate estate is the entirety of a decedent's estate that goes through administration by the probate court.  It excludes will substitutes.

A descendant is a person born in a direct biological line.  For example, a person's children, grandchildren and great-grandchildren are their descendants.

An inter vivos transfer is a transfer of property made during a person's lifetime.  It can be contrasted with a testamentary transfer, which is a transfer made in a will after death.  A revocable trust is considered an inter vivos transfer even though the benefit of the trust is not enjoyed by the beneficiary until after the death of the donor beca

The federal gift tax is a tax levied by the federal government on a donor who transfers property to a donee without the donee giving consideration in return.  The gifted property must be in an amount above the limit set by the federal government in order to be subject to the tax. 

 

The Modern Portfolio Theory is the theory currently guiding the Prudent Investor Rule for trust administration by the trustee. The Modern Portfolio Theory judges prudence not on investment strategy on individual investments but on the portfolio as a whole. Under the former Prudent Man Rule, there was no duty to diversify. Judges would analyze each investment decision and decide if it was prudent or speculative based on that single investment.

The Prudent Investor Rule says that a trustee must act prudently when investing the trust property. The Prudent Investor Rule has changed over time to reflect the Modern Portfolio Theory.

The No Further Inquiry Rule applies to cases of self-dealing by a trustee. It makes all self-dealing transactions entered into by the trustee per se voidable by the beneficiaries, requiring no proof that such transactions were unreasonable or harmful. The trustee must act for the sole benefit of the beneficiaries.

 

Trustees have certain legal duties in relation to the management of the trust.  The most important duty is the duty of loyalty. Since trustees are the legal owners of the trust property, the duty of loyalty prevents the trustee from taking advantage of the legal ownership to use the trust property for his own benefit. The trustee must act in good faith when entering into transactions and invest prudently. See also: fiduciary duty.

Definition