REVIEW QUESTIONS 1. What are the more usual objects of trusts? What is the effect on the trust when the object has been fulfilled? What legal limit is there in your state to the duration of personal trusts? Is a trust for business purposes so limited? Would the limitation apply to a charitable trust? 2. What is meant by "entail"? In your state how long can an estate be kept in the family? Is there any difference as to duration between a trust estate and a legal estate? Can a spendthrift trust be created in your state? 3. Do the courts favor accumulation of income? What is the rule in your state? 4. What is a perpetuity? What is the economic objection to perpetuities? What is the attitude of the law? What tends to break up large estates now? 5. What is the legal meaning of "charity"? What charitable trusts do you know of? Does the rule against perpetuities apply to charitable trusts? CHAPTER XLII PARTIES TO TRUSTS 8 374. Who May Create a Trust It may be broadly said that everyone who is competent to make a will or to enter into a contract is competent to create a trust. Ownership of property and power to transfer it are all that is required to make a trust. If any solvent person has full title to property and has capacity to contract, he can transfer the legal title to a trustee and either retain the equitable title himself or transfer the equitable interest to someone else. A person who is insolvent could not create a trust that would put his assets out of reach of his creditors. A person incompetent to contract by reason of minority, lunacy, or some other incapacity, could not, as a rule, create a trust that would bind him. The trust so created would be voidable. Married women are practically under no disabilities in this country and may create trusts at their discretion. The state itself, by legislation or by its duly authorized officers, may create a trust, convey property, and appoint trustees.1 § 375. Corporations May Create Trusts An individual has unlimited powers and may engage in any business or do any other thing he desires to do. A corporation is an artificial being created by the law of the state, and its power is limited by its charter. It may engage only in such business as its charter specifies and may do only those things 1 Perry on Trusts. § 30. that tend to promote and carry out the particular undertakings so authorized. A corporation may enter into contracts and may sell or mortgage its real and personal property so far as is necessary to carry out its corporate purposes. If the creation of a trust tended to promote the purposes for which the corporation was created, it could undoubtedly lawfully create such a trust and its action would be sustained. There are not many cases, however, where the creation of a trust would be an appropriate corporate action, and the question of corporate capacity to create a trust seldom arises, except in those cases where it executes a deed of trust to secure its bondholders. In such cases, the trustee is usually a trust company, and the law governing is not relevant to the purposes of this part, which deals only with the law of voluntary and testamentary trusts. § 376. Trusts Created by Minors, Lunatics, or Aliens A trust created by a minor is good until the infant chooses to repudiate it, as is the case with the sale of his own property by a minor. If a minor owned property he could create a trust, but he could avoid it whenever he desired, and a court of equity would not hold him to his transfer to the trustee. In any state where minors of a certain age can make a valid will, a testamentary trust so created would be enforced. A deed or trust created by a person adjudged insane would be void. A deed or trust created by a person not under guardianship and in control of his property would be good until avoided either by the lunatic or one of his friends, or by his representatives. If an insane person had not been declared so by a competent court, he could make a trust and this would be good until made void by the proper court. Courts of equity, however, will not usually avoid a trust so created if the contents are reasonable and fair. When an alien can hold real estate, he can create a trust and appoint a trustee. The trustee will take whatever legal title the alien had, and no more. In some states an alien may hold land only so long as the state does not interfere. Any trustee he might appoint would hold by no better title. An alien can own personal property and deal with it in all respects as a citizen can. He can therefore create a trust of personal property. § 377. Who May Be a Trustee The following statement from an English work sums up the qualifications necessary for a trustee: A person to be appointed trustee should be (1) a person capable of taking and holding the legal estate, and (2) possessed of legal capacity and natural ability to execute the trust, and (3) domiciled within the jurisdiction of the court.' Any person or corporation capable of taking the legal title to property may take it subject to a trust and in that case would become a trustee. If afterwards the person or the corporation was not capable of performing or executing the trust, the court of equity having jurisdiction would execute the trust by decree, or it would remove the trustee named and appoint some other who was capable. It is a rule that admits of no exception, that equity never In making appointments the court will have regard to the wishes of the person creating the trust, if possible, and would not appoint one who was objectionable to the creator. Neither would a court appoint a person who was not likely to be impartial as between those interested in the trust, for it is the essence of a trustee's duty to hold an even hand between all Lewin on Trusts, p. 27. 'Perry on Trusts, 38. the beneficiaries. Courts will always have a regard to the promotion of the trust and endeavor to appoint someone who will carry the trust into execution. § 378. Corporations as Trustees At the present day, corporations of every description may take and hold property, as trustees, for purposes not foreign to the objects for which they were created. Corporations are confined by the terms of their charters to certain purposes therein specified, and cannot do things which their charters or the laws of the state do not authorize. On this account. they can act as trustees only in such directions as will tend to further the general purposes for which they were specifically created or incorporated. A corporation acting as a trustee is under the jurisdiction of courts of equity and will be compelled to carry the trusts into execution, and the process of the court may be called for in case of failure. If a corporation has not been given power by the state to hold lands, it cannot properly hold them as a trustee, but where such is the case it could hold against everyone but the state. In other words, such an act is ultra vires, but no one but the state has the right to bring action against such trustee. In some cases of this kind where land is left in trust to a corporation or organization not capable of holding it as trustee, the court will appoint a capable trustee or will enforce the trust against the heir to whom it might go. In other cases such an attempt is null and void and the property goes to the heirs free from the trust. If such a trust is to be created, skilled counsel should be consulted. § 379. Other Corporate Bodies as Trustees Municipal corporations, towns, school boards, and other governmental bodies may be trustees for educational, philan |