1. The surviving or remaining trustee or trustees. The instrument should also provide explicitly as follows: 1. The time, occasion, or event that will vacate a trustee ship. 2. The persons who may be appointed to fill the vacancy. 3. The manner of making the new appointment. REVIEW QUESTIONS 1. How are trustees appointed? In a voluntary trust or testamentary trust, who names the trustees? How can a man make himself a trustee? If an appointed trustee declines to act, what is done? 2. If a court appoints trustees, what does it try to do? 3. Can a man be made a trustee of an express trust against his will? How can he avoid serving? How can he accept? If a trustee takes over trust property, what is the effect? 4. Why should the duties of an executor and a trustee be distinguished? 5. How may a trusteeship be terminated? When may a trustee be removed? Would a trustee be removed for insolvency? Can a trustee resign at pleasure? 6. What is a self-perpetuating board? Against what contingencies should a trust instrument provide? 7. Who may be authorized to fill vacancies? What other provisions may be made? CHAPTER XLIV EXPRESS TRUSTS § 391. Declaration of Trust It is usual to create a trust by an instrument in writing called a "declaration of trust." The general rule is that a trust may be created by word of mouth if it concerns only personal property. In Georgia this is not the case. Nearly every state has enacted the Statute of Frauds, .which prescribes that all instruments transferring a trust or confidence in lands shall be evidenced by some writing signed by the creator or that such transfer be created by his last will in writing. The statute does not apply to a trust of personalty, but a trust of any kind should be shown by a written instru ment. The instrument creating a trust may be a will, a trust agreement, or a declaration of trust. For an example of a trust instrument see Form 7. § 392. A Trust Instrument Cannot Be Partly Oral A written trust agreement of any kind cannot be varied by oral evidence. A trust created by will is subject to the rules governing wills, by which a will cannot be affected by other evidence as to the testator's intentions. What is called a "latent ambiguity" in a will can be explained. That is, if a trust were created in favor of Henry Brown of Salem, and it were claimed by two parties of that name, evidence could be adduced to show that one was a friend and the other was a transient acquaintance. If, however, the language was ambiguous and it was doubtful whether or not a trust in favor of Henry Brown had been created, that would be a patent ambiguity and could not be explained by oral evidence as to what the testator intended, but would have to be construed by the rules of legal interpretation. In any case, where an express trust relative to lands is to be proved, it must be established by written evidence and cannot be varied by oral evidence. § 393. Testamentary Trusts Any trust created by will is a testamentary trust. It is the commonest form of trust. Its object is usually to provide a safe income for dependents with no risk of losing the principal. The property, clearly described and indicated, is left to the trustee or trustees by the usual words of bequest or devise, and then are added the words "in trust" or "to hold the same in trust," and then follow any words necessary to describe the cestuis que trust and to prescribe how the trust is to be administered, what disposition is to be made of the income, and how the trust is to be terminated. Any special powers or specific directions should be clearly and briefly set forth, such as to: Sell said real estate at public or private sale at such time or times and on such terms as in the discretion of said trustees shall be best and the proceeds of such sales shall be invested in properly diversified preferred stock and bonds of established industrial and transportation corporations and said trustees may sell any such securities, and may reinvest the proceeds at their discretion and shall not be responsible save for negligence or bad faith. In regard to any such trust, it is necessary that the will by which it is created shall conform to the laws of the state in which the land is situated. If these formalities are not observed, the will cannot be admitted to probate and in such case the trust fails and is a nullity. The trust in all such cases depends on the validity of the will. Any testamentary trust should be clearly set forth and all essentials should be given so that there may be no confusion as to the property, the trustees, the cestui que trust, the effect of the trust, or the final disposition of the property. § 394. Voluntary Trusts A man before he dies may make a voluntary trust for the benefit of his dependents, for any educational or philanthropical institution, or for himself. If it is personal property, this is done by executing a declaration of trust, if real property by executing a deed of trust. The term "voluntary trust" implies that the creator of a trust acts voluntarily, of his own initiative, and not for a consideration or because of a contract obligation. In case of a voluntary trust, it does not become binding until it is executed and carried into effect. A declaration of trust in shares of stock and bonds would not take effect until they had been turned over by signatures and transfer. A deed of trust would have to be executed with all the formalities pertaining to conveyances of land and delivery to the trustees or record on the public register. After a trust has been executed in this manner, the fact that the trustee 1 refused to act would not defeat the trust. A court of equity will not allow a trust to fail for want of a trustee, but will remove one who will not do his duty and will appoint one to fill any vacancy, however caused. For a form of deed or declaration of trust see Form 7. § 395. Reserving the Right to Revoke a Trust 1 A voluntary trust, as its name implies, is not a matter of obligation, but having once been carried into effect and the trustee having been placed in possession, it is an executed trust and cannot be recalled, save by the voluntary assent of both the trustees and the cestui que trust. 1 O'Neil v. Greenwood, 106 Mich. 572. In some cases there is trouble in telling when a trust has been perfected so that the creator cannot recall it. There is some conflict in the decisions on this point. When a deed of trust has been executed and delivered and nothing more remains to be done by the grantor, the trust is complete and beyond recall. In case of stocks and bonds, a duly executed transfer and delivery to the trustee would complete the trust. A deposit in a savings bank in the name of the depositor as trustee for a named beneficiary, accompanied by notice to the beneficiary or to somebody representing him, would be sufficient to create a trust. A voluntary deposit of one's own funds nominally as trustee for another, but without notice to that other, will not create a trust. In New York it is held that such a deposit without notice to the beneficiary could be revoked at any time before death, but that at death the gift would go to the beneficiary. A delivery of the pass-book to the beneficiary at any time would pass the title and end any right to revoke. In all such cases the creator should do whatever he intends to do, positively and completely. If such an arrangement is not to be permanent, the creator of the trust should reserve the right to revoke it. If this is done, the trust may be terminated at any time during the life of the creator. The usual language in such cases is "reserving, however, the right to revoke and recall such trust at any time during the life of said grantor." Any language that expressed clearly the same intention would suffice. A man may create a trust for himself, the funds being placed in the hands of a financial corporation, usually in trust, to pay the income of the same to the creator during his life and after his death to other beneficiaries, or at his death. the whole property to be transferred to persons or institutions designated by the creator of the trust. The power to revoke should be expressly reserved if it is so desired. |