Wills and Trusts

Wills and Trusts (NAME

Facts

Tom is trustee of a trust created by Abe in 1986

The corpus consists of stocks and bonds worth 150 ,000 , an apartment 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 apartment house is 36 ,000 Tom has held the lot for five years , not wanting to sell it at a sacrifice because of the uncertainty of zoning and the location of a

proposed highway . The trust instrument directs Tom to pay the income from the trust to Abe for life and , at Abe 's death , to divide the corpus between Abe 's children , Ben and Cathy to create two trusts . The two trusts are to continue for Ben 's and Cathy 's lives and then to be distributed to their children who are living when Ben or Cathy die

At the end of 1991 , Tom sold the vacant lot for 50 ,000 , the fair market value . He also sold some stocks for 35 ,000 , realizing a 10 ,000 gain Tom used this money along with 25 ,000 of accumulated rental income to build an addition to the apartment 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 interest 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 beneficiary of the trust , he argued that he would simply 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 issue in the case at bar is covered by the law on Trusts , which is basically formed by an arrangement whereby a property or a wealth owned by a person 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 , Tom 's duty is to carry out the express terms of the trust To be...