Opinion ID: 1317933
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Heading: Validity of the Trust Agreement

Text: The principal issue at trial was whether the trust agreement was illusory and invalid as an attempted testamentary disposition. It is well established that the settlor may reserve extensive powers of control over the administration of the trust corpus. See Denver National Bank v. Von Brecht, 137 Colo. 88, 322 P.2d 667 (1958); Estate of Brenner, Colo.App., 547 P.2d 938 (1976); Hageman v. First National Bank, 32 Colo.App. 406, 514 P.2d 328 (1973); Note, 30 Rocky Mt.L.Rev. 517 (1958). See generally, Huff, An Aspect of Estate Planning in Colorado: The Revocable Inter Vivos Trust, 43 D.U.L.J. 296 (1966); Meyer, The Revocable Trust as a Will SubstituteA Coming of Age, 39 U.Colo.L. Rev. 180 (1966). Only when the trust is completely illusory, such as when the putative settlor reserves possession and control in all particulars, will it be deemed invalid. Compare Dunham v. Armitage, 97 Colo. 216, 48 P.2d 797 (1935), with Denver National Bank v. Von Brecht, supra , and Hageman v. First National Bank, supra . See also Dessar v. Bank of America National Trust and Savings Association, 353 F.2d 468 (9th Cir. 1965). In the instant case, the settlor's retention of the power to revoke or modify the trust agreement and to exercise a veto over substantial investments by the trustee did not eliminate the substantial duties of the trustee with respect to the trust corpus. See Thomas v. Dye, 117 N.E.2d 515 (Ohio Ct. Com.Pl.1953); [2] rev'd on other grounds, 127 N.E.2 228 (Ohio App.1954); 1 Scott, Trusts § 57.2 (2d ed. 1956); Restatement (Second) of Trusts § 57 (1957); Huff, supra. A more delicate question is presented by the trust provision that the trustee shall keep securities and property registered in the settlor's name. A basic axiom of trust law is that [i]n order to create a trust of any description, the [settlor] must indicate with reasonable definiteness an intention to sever the legal from the equitable estate. Walton v. Wormington, 89 Colo. 355, 2 P.2d 1088 (1931). In Hageman v. First National Bank, supra , a trust in shares of stock, which had been endorsed in blank and which had not been transferred upon the issuer's books, was upheld because there was effective transfer of title as between the parties. We find the same reasoning applicable in this case: the settlor transferred possession of the securities, accompanied with endorsement assignment forms, and with a recitation sufficient to establish a present and unequivocal intent to vest the trustee with title. Under these circumstances, the registration provision of the agreement did not constitute a fatal defect in the creation of the trust corpus which was comprised of the securities in issue. See Smith v. James Irvine Foundation, 277 F.Supp. 774 (C.D.Calif.1967); Davis v. Rossi, 326 Mo. 911, 34 S.W.2d 8 (1930).