The Georgia Trust Code, revised in 2010, governs trusts created in Georgia. It is referred to as “The Revised Georgia Trust Code of 2010.” See O.C.G.A. § 53-12-1(a).
The terms “settlor,” “grantor” and sometimes “trustor” identify the person deemed to be the creator of a trust.[1] A settlor has capacity to create an inter vivos trust if he or she has capacity to transfer title to property.[2] A settlor has capacity to create a testamentary trust to the extent he or she has capacity to devise or bequeath property by will.[3] The conveyance of property into trust must be effective or no trust is created.[4] The settlor’s reservation in himself or some other person of the power to revoke or modify the trust, or respecting trust administration, does not invalidate the trust;[5] reservation of such powers will, however, impact analysis of the trust under tax and public benefits laws. They may also impact asset protection goals.
Where land is involved, a written instrument is required to satisfy the Statute of Frauds.[6] Where the trust is created by testamentary disposition, compliance with the Statute of Wills is required.[7] As a general rule, self-settled Medicaid Trusts are inter vivos trusts; most dead people don’t need Medicaid.
It is important to indicate a trust is intended. In that regard, typical language at the beginning of a trust might look like this:
I, “________”, of “______” County, Georgia, the undersigned Grantor, as of the _______ day of _______________, 20____, do hereby give, transfer, assign and convey to the hereinafter named Trustee, in trust for the beneficiaries and upon the uses and trusts hereinafter set out, the property described on Exhibit “A” attached hereto, to be known as “THE “________” IRREVOCABLE TRUST”.
Notes:
1. O.C.G.A. § 53-12-2(11); Restatement (Second) of Trusts, § 3(1). The term “Grantor” frequently refers to the person who has tax liability for the trust’s income. See generally Internal Revenue Code of 1986 (“IRC”) § 671 to 678. For somewhat obvious reasons it’s generally best to avoid referring to the Settlor as “the Creator.”
2. O.C.G.A. § 53-12-23; Restatement (Second) of Trusts, §§ 18 and 19. Comments to the Restatement make it clear that capacity to create a trust is not the same as legal capacity. Although legal capacity would be necessary, a person with no power to transfer or convey property lacks power to create a trust relating to that property. In Hayes v. Clark, 242 Ga. App. 411 (2000), this language supported the proposition that a court has power to create a trust if it has capacity to transfer title to property. The Uniform Trust Code (UTC) envisions express trusts created by judgment or decree. See UTC § 102, Comment; UTC, § 401 (1). The POMS similarly indicate that a grantor is someone with a legal right to the property or otherwise be qualified to transfer it. See POMS SI 01120.199.E.3. In addition, the parent of a minor child may represent and bind a child if (1) no guardian or conservator has been appointed and (2) there is no conflict of interest between parent and child. See O.C.G.A. § 53-12-8. A person with a power of appointment over property has authority to create a trust if he has authority to appoint it free of trust. Restatement (Second) of Trusts, § 21.
3. O.C.G.A. § 53-12-23; Restatement (Second) of Trusts, § 20.
4. Restatement (Second) of Trusts, §§ 31 and 32. A conveyance that transfers the property to another, but which fails to create an express trust, might nonetheless cause a resulting trust to arise if the disposition was under circumstances which raise the inference that the transferring party did not intend for the recipient to have the beneficial interest in the property. Restatement (Second) of Trusts, § 404. Query whether a resulting or constructive trust is created when an executor fails to fund a testamentary trust.
5. Restatement (Second) of Trusts, § 37.
6. Restatement (Second) of Trusts, §§ 40 to 52.
7. Restatement (Second) of Trusts, § 53.
