Wills and Trusts Essay Example for Free

Wills and Trusts EssayFacts tomcat is organized religionee of a entrust created by Abe in 1986.The head teacher consists of stocks and bonds deserving $150,000, an flat tire house appraised at $650,000 in a neighborhood which is becoming increasingly industrial, and a vacant lot. Yearly net income from the stocks and bonds is $12,000, and from the flatcar house is $36,000. tom has held the lot for five years, non lacking(p) to sell it at a sacrifice because of the uncertainty of zoning and the location of a proposed highway. The trust promoter directs turkey cock to pay the income from the trust to Abe for life and, at Abes death, to divide the head between Abes children, Ben and Cathy to create twain trusts. The two trusts are to continue for Bens and Cathys lives and then to be break downd to their children who are living when Ben or Cathy die.At the break of 1991, Tom sold the vacant lot for $50,000, the fair market value. He also sold or so stocks for $35,00 0, realizing a $10,000 gain. Tom used this money along with $25,000 of accumulated renting income to stimulate an addition to the a opusment house. In another 1991 transaction Tom sold for $25,000 stocks that had been purchased in 1989 for $25,000, and lent the proceeds to PO Corp. at 1% below the prevailing affaire rate. The loan is secured by a first mortgage on unimproved realty worth $30,000. For several years, Tom has performed substantial services for PO Corp. as a consulting engineer. He owns 100 shares of its common stock. There are 1,000,000 PO shares outstanding.In 1992, Tom allowed Ben to move into the apartment building. Ben got Tom to reduce the rent by $200 per month. Since Ben is an eventual(prenominal) beneficiary of the trust, he argued that he would entirely let Cathy have more of the Trust money when Abe died to balance things out.Issue (1)Whether or not Tom breached his duties as trustee and, if so, what are his liabilities to the beneficiaries?Rule The issu e in the case at bar is cover by the law on Trusts, which is basically formed by an arrangement whereby a property or a wealth owned by a soulfulness is managed by one person or an organization for the benefit of an individual or an organization. Relevant to this rule are the rights, duties and responsibilities of the settlor the person creating the trusts, the trustee the person for whom the property is entrusted, and the beneficiary the individual for which the benefits of the trust is reposed.Analysis It bears stressing at this point that an examination of the rights and duties of the parties, specially that of the trustee, to a trust is imperative in solving the instant issue. As trustee, Toms indebtedness is to declare out the express terms of the trust. To be fitting to do the express terms of the trust, he is avocation bound to defend the trust, to prudently invest the trusts assets, to be impartial with respect to the beneficiaries, keeping them informed about the tr ust and to administer the same in the best interest of the beneficiaries. Additionally, Tom has the duty not to delegate, the duty not to profit and not to engage in activities that may result in conflict of interest position. With the forgoing considerations and upon close perusal of the facts of the case, Tom has breached his duties as a trustee. The express duty of Tom is the talking to of the income of the trust to Abe for life. As it is, Tom performed acts that prejudiced Abes interest in the income of the trust. When Tom sold whatever of the stocks and realized a $10, 000 gain, he should have relieveed the same to Abe since it forms part of the income of the trust. The same is true with the accumulated rental income. It should not have been used to build an addition to the apartment house since it forms part of the income which should be delivered to Abe. Tom is also liable for engaging in activities resulting to conflict of interest position. Notwithstanding the amount inv olved, his act of bring at 1% below the prevailing interest rate the proceeds of the sale of stocks to PO wad for which he renders services as a consulting engineer constitutes a breach of obligation on his part as trustee. In the first place, he is not authorized by the express letters of the trust to grant loans using the properties in trust. The breach was further aggravated when he lent the money to a corporation for which he owns shares of stocks and for which he is rendering substantial services. Furthermore, the act of Tom in renting the apartment building to Ben at $200 per month less than the prevailing rent is also violative of his duties as a trustee. This would result in the reduction of the income from the apartment building by $2400 per annum to the detriment of Abe. The fact that Ben is an eventual beneficiary is of no moment. Ben has a future interest in the property but this does neither acknowledge the right to present possession nor enjoyment of the property. S ince Abe is still living, it is only he who has the right to the income and enjoyment of the principal as well as the income of the trust.Conclusion Based on the analysis made above, it is clear that Tom has breached his duties as trustee. His only liability is to Abe who was not able to receive all the income of the trust. As intimated above, Tom has no liability whatsoever to Cathy for like Ben, she is merely a remainderman who has a future interest in the corpus of the trust. She can neither possess nor enjoy the fruits of the trust age Abe is still living.Issue (2) Whether or not Abe received all the income to which he is entitled?Rule The rule applicable to this issue is the express cooking of the trust puppet itself. The trust instrument directed Tom to 1) deliver all income from the trust to Abe while the latter is still living 2) divide the corpus between Ben and Cathy, Abes children upon the demise of the latter and 3) distribute the same to their children who are livin g when Ben or Cathy die(Palermo).Analysis A perusal of the facts of the case reveals that Abe was not able to receive all income that is due him. He was deprived of the $10, 000 gain realized from the sale of some of his stocks worth $35, 000. He was also deprived of the $25, 000 accumulated rental income. Both income were used by Tom to build an addition to the apartment house, when what he should have done according to the clear letters of the trust is to deliver the same to Abe. Abe was also deprived of $200 per month when Tom reduced the rent by verbalise amount to the apartment building when Ben, an eventual beneficiary, moved in.ConclusionBy not adhering to the letters of the trust instrument, Tom has in effect deprived Abe of the income that the latter is supposed to be entitled to. The trust instrument clearly directed Tom to deliver all income of the trust to Abe for life.ReferencePalermo M. (2006). Crash Course in Wills And Trusts. Electronic article http//www.mtpalermo.c om/httoc.htm