1.Founder of trust conveys property to trustee, who takes legal title, for the benefit of beneficiaries. Trustee manages the assets of the trust and pays proceeds (interest or profit) from the assets to the beneficiaries as provided in the document that created the trust.
2.In the usual trust:
a.Trustee manages property for benefit of beneficiaries.
b.Trustee takes the entire legal interest.
i.Ordinarily fee simple interest held by the trustee
ii.Trustee has a fiduciary relationship to the beneficiaries
iii.Trustee has a duty to administer the trust solely in the interest of the beneficiaries
iv.Trustee prohibited from making transactions that benefit trustee and not beneficiaries
c.Trustee has the power to:
ii.Reinvest proceeds from sale
i.The founder wants to keep the beneficiaries hands off the principal of the trust to protect the principal from beneficiary squandering the principal
b.OK to restrain alienation under a spendthrift trust
c.The intent of the founder to limit ability of beneficiary to alienate the property held in a spendthrift trust is the most important factor
d. Two Rules
i.English Rule– restraint on alienation not enforceable
ii.American Rule – intent to restrain alienation by the founder respected
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