Trust Merger

Trust merger occurs when the trustee and the beneficiary are the same person, leading to the trust's failure because there is no longer a separation of interests. If there is at least one additional beneficiary or co-trustee, the trust remains valid and does not merge.

Alice creates a trust where she is the sole trustee and the sole beneficiary. Since Alice holds both roles, the trust fails by merger. However, if Alice names her friend Bob as a co-trustee, the trust remains valid and does not merge.

One person can't wear both hats; add a buddy to keep the trust alive!

Exams may present scenarios where students overlook the importance of naming additional beneficiaries or co-trustees, leading them to incorrectly conclude that a trust has merged.

Questions often involve fact patterns where a trustee is also a beneficiary, testing the candidate's ability to identify potential merger situations and the implications of adding other parties.