The Bar Exam - Gifts, Wills and Trusts Outline Cheat Sheet
The Bar Exam - Gifts, Wills and Trusts Outline Cheat Sheet
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Date Created: 03/06/14
Introduction Terms Personal representative person charged with administering decedent s estate Executor named in the will Administrator not named in the will Intestate dies without a will Testator person who makes the will Three inctions of administering an estate Collecting assets Paying expenses creditors claims taxes and other charges Distributing the remaining assets to the decedent s successors Limits on testamentary freedom four major ones Constitutional limits Hodel V Irving Escheat provision of Indian Land Consolidation Act constitutes a taking without just compensation Complete abolition of both the descent and devise of a particular class of property may be a taking Public policy and the dead hand Duration Rule Against Perpetuities no interest is good unless it must vest if at all not later than twentyone years after some life in being at the creation of the interest Conditions Property can be tied up for up to 21 years after the death of persons living at the time of testator s death Upheld if designed to induce bene ciary to engage in or refrain from speci ed behavior US Nat l Bank of Portland v Snodgrass Decedent requires that daughter not marry Catholic before turning 32 Upheld despite public policy argument Courts must guard against being intolerant of intolerance Recognize 1 freedom of opinion and 2 freedom to dispose of property as one sees t Don t disturb will unless it violates a legal rule Decedent could have disinherited daughter during his lifetime for the same reason Conditions not unduly intrusive unlike case where decedent lists all possible husbands Restrictions on marriage are ordinarily valid unless they pose an unreasonable restriction on the opportunity to marry Capricious conditions raze the house not upheld if they stem from the apparent whim of the testator Protection of the family Taxation Federal income tax State death taxes Federal estate gift and generationskipping transfer taxes Intestate Succession Terms Lineal descendants issue children grandchildren Lineal ascendants parents grandparents Collateral siblings aunts uncles Two ways to determine priority of succession Parentelic system lines of descent Issue rst then parents and their issue then grandparents and their issue Gradual system degrees of consanguinity Each generation counts as a degree Count up to the nearest ancestor then back down P 54 Principle of representation permits the living descendants of a predeceased relative to represent their ancestor for purposes of inheritance Intestacy statutes Historically 13 to spouse and 23 to surviving kids if no kids 2 spouse and 2 heirs at law UPC 5657 priority Surviving spouse check conditions Lineal descendants Parents Parents lineal descendants Grandparents Grandparents lineal descendants State Heir must survive decedent for 120 hours by clear and convincing evidence De nition of surviving spouse Common law marriage recognized by many jurisdictions Individual may reasonably believe marriage is valid Unmarried cohabitants not treated as married in succession law Sarnesex marriage depends on the laws The debt owed by a decedent is not charged against the intestate share of any individual except the debtor UPC 2110 Simultaneous death Uniform Simultaneous Death Act some states if there is no suf cient evidence that the persons died other than simultaneously the property of each shall be disposed as if he had survived Presumption of nonsurvival Assume H survived W for H s will and that W survived H for W s will UPC 2104 enhanced survival requirement Any individual who fails to survive the decedent for 120 hours is deemed to have predeceased the decedent Presumption can be rebutted by clear and convincing evidence that 120hour period was met Added to revised Uniform Simultaneous Death Act Representation among descendants After share is set aside for surviving spouse remains go to descendants Parents cut off children priority for degree of consanguinity Methods of representation 65 Per stirpes all children even predeceased get equal share then children of the predeceased split up that share The initial division occurs at the children s level even if some are dead Ato B C andD If all dead then E and F split B s share G H andI split C s share K takes D s share Different grandkids get different amounts Per capita initial division occurs at the nearest generation that has living descendants If at least one surviving child results are the same for either system If only grandchildren then start divvying up from there Divide equally among E F G H andI After the initial division then revert to per stirpes system UPC per capita at each generation equally near equally dear Start with per capita system After initial division instead of allocating deceased shares to descendants combine the share of all deceased members and reallocate among living descendants Successors related to decedent in equal degree receive equal intestate shares If F and H are dead combine their shares and divide equally among next generation Ancestors and collaterals No distinction between matemalpatemal maternal uncles in third degree get priority over patemal cousins in fourth degree Some states divide estate equally between either side then divvy from there so a fourth degree matemal cousin could get half while third degree patemal aunts split the other half Halfblood collaterals generally treated like illbloods Children Adopted children 76 Treated as children of the adopting parents and cut off from inheriting from natural parents UPC 2114 Adopting parents can also inherit from adopted child In the case of stepparent adoption child may still inherit from natural parents UPC 2 1 14b But not the other way around In re Estates of Donnelly adopted child cannot inherit from natural grandfather Chain of inheritance is broken by adoption Equitable adoption informal requires by clear and convincing evidence An agreement between the natural parents and the foster parent for adoption of the child Performance on the part of the natural parents in giving up custody Performance on the part of the child in living in the foster parents home Partial performance by the foster parent in treating the child as an adopted child Foster child may inherit from foster parents in CA if 1 the relationship began during child s minority and continued through their joint lifetimes and 2 clear and convincing evidence establishes that foster parent would have adopted the child but for a legal barrier Nonmarital children 88 Reciprocal rights of inheritance between nonmarital children and their mothers and matemal kindred Generally father can only inherit from nonmarital child if he has openly treated the child as his own and has not re ised to support the child UPC has this requirement for all children UPC recognizes all children regardless of marital status Relationship may be established under the Uniform Parentage Act Man is presumed to be the father if he is married to the mother and the child is bom during the marriage or within 300 days of its termination Posthumous children 95 Generally child must be in existence at the time of decedent s death in gestation is okay Presumed period of gestation is 280 days Woodward v Commissioner Limited circumstances under which in vitro child can inherit from intestate father Genetic relationship exists Decedent affirmatively consented to posthumous conception and support of any resulting child Even if these are established time limitations may preclude commencing a claim for succession rights Proposed revision of UPC 2108 posthumous child may inherit if The child lives for 120 hours after birth The decedent provided sperm or eggs that resulted in the birth and parental rights have not been terminated The decedent gave written consent to posthumous conception and A judicial proceeding to determine the child s status is commenced within three years after death and before nal distribution of decedent s estate Disquali cation for misconduct applies intestate and if there s a will Breach of parental obligations UPC 2114c inheritance from a deceased child is permitted only if the parent has openly treated the child as his own and has not re ised to support the child Breach of marital obligations Not in UPC but in many states a surviving spouse who abandoned or cheated on the decedent is barred from inheriting Spouses who merely live apart can still inherit divorce bars all Invalid divorce becomes valid for probate purposes if one spouse remarries Homicide slayer statute Almost all states have slayer statutes UPC 2803 killer forfeits all In the absence of a criminal conviction the question is settled in a civil proceeding Standard feloniously and intentionally killed Includes voluntary but not involuntary manslaughter Preponderance of the evidence standard Then killer is treated as if he predeceased the victim f a person should not pro t from his wrong il conduct In re Tarlo s Estate Father kills daughter and himself is daughter s estate distributed to father s administrator or her grandfather nextofkin Father in order to be barred from inheritance the murderer must be found guilty in a court of law and sentenced Advancement release and assignment Advancement gift given by parent to child during life in anticipation of the child s intestate share of the parent s estate When parent dies the amount of the advancement is charged against the child s share Advancement is valued at the time of transfer Charged against issue if child predeceases the decedent Math on p 121 add advancement back into pool then divvy then charge Presumption is that there is no advancement unless there is something in writing indicating that it is or if the gift was the exact same thing as in the will Written evidence can be informal letter Not required to return anything if you received more than your intestate share UPC 2l09a p 122 property given is considered an advancement if for ill or partial intestacy The decedent declared in a contemporaneous writing or the heir acknowledged in writing that the gift is an advancement OR The decedent s contemporaneous writing or the heir s written acknowledgement otherwise indicates that the gift is to be taken into account in computing the division of the intestate estate Release or assignment of expectancy Release to living owner of expectancy Assignment to third party Can t be a gratuitous gift Enforceable in equity if made for fair and adequate consideration E g D gives Blackacre to Daughter C in exchange for C s release of all rights to inherit from D Disclaimer an affirmative re isal to accept a gratuitous transfer of an interest in property Relates back to the time of the gift causing it to fail entirely or to take effect as if the disclaimant died immediately before the giving of the gift Keeps gift out of reach of disclaimant s creditors maintains eligibility for public assistance and avoids taxes Usually passes right on to disclaimant s children If you accept any bene t from the property you lose your right to disclaim it Also can t exercise control over it or borrow against it Can t disclaim a federal tax lien Uniform Disclaimer of Property Interests Act now part of UPC p 125 Disclaimer must be in writing Declare the interest being disclaimed Signed by disclaimant Delivered to personal representative of the decedent 9 month time limit Protection of the Family various statutes compel and encourage testator to make provisions for surviving spouse and children Statutory allowances Survivors generally entitled to allowances from decedent s estate for homestead exempt property and family support Take priority over creditors claims Cannot be defeated by will safeguard against disinheritance UPC 2402 p 136 Homestead allowance to guarantee the continuance of a home by exempting a xed dollar amount from the claims of creditors Real property Exempt property and family allowance set aside for support during the period of administration 10000 worth of tangible personal property imiture clothing personal effects for exempt property Family allowance a reasonable allowance for minor children Generally exempt from creditors If estate is insolvent family allowance is subject to a oneyear time limit Social security Surviving spouse dower and elective share Dower pretty much nonexistent now Surviving spouse has the right to claim a life estate in a speci ed portion of all land owned by the decedent at any time during the marriage Three disadvantages May still be inadequate Attaches only to land and not intangible personal property Prospective purchaser of land must inquire as to seller s marital status impairs land value Some states allow statutory elective share instead of dower Applies not just to land but to all property tangible and intangible Traditional elective share Surviving spouse can claim a share of property on the condition that the spouse renounce the decedent s will But there must be a will Traditionally 13 of estate if there are descendants 2 if there are none Must le within 6 months of probate Newman v Dore Decedent tried to pass all property to trustees at the exclusion of his wife By putting it in trust it wasn t part of the probate estate so wife couldn t touch it through elective share These changes were made while testator was alive so to what extent does statute protect the wife s expectancy interest Court nds that the conveyance was a mere mask for screwing his wife he never actually intended to divest himself completely of the property since he retained control over the trustees Illusory transfer rather than Good Faith divestment Davis v KB amp T Similar situation property transferred to living trust before death upheld this time Mere power of the settlor to control the trust during his lifetime is insufficient to show that it was illusory and simply designed to disinherit wife Intent to deprive is per se fraudulent but that s not the case here the trust is a bona de trust designed to provide for the couple in case of incapacity Legislative response test should be objective rather than subjective look at the objective control that testator maintained over assets Little or no control suggests legitimate donative intent Augmented estate UPC approach to elective share Response to the series of intent to disinherit cases simply include the trust in the pool of assets What comprises the augmented estate 157 Probate estate Nonprobate transfers to others Property owned or owned in substance Property subject to general power of appointment Joint tenancy property Payondeath accounts Life insurance proceeds Property transferred during the marriage in which decedent retained lifetime right of possession or power of general appointment Property transferred within two years of death including Life insurance policies Gifts exceeding 10000 Nonprobate transfers to surviving spouse Surviving spouse s property Elective share is simply a speci ed portion of the augmented estate UPC elective share amount is the greater of either 1 a supplemental amount of 50000 or 2 an elective share of the augmented estate p 15657 If amount willed to wife is less than her elective share the UPC does not require her to renounce the will Simply take from the other bene ciaries proportional to their respective interests to make up the shortfall Math on p 158 Elective share is elective either you take it or you accept other gifts Funding the elective share from the augmented estate Step 1 determine the value of the augmented estate Probate assets joint tenancy property payondeath accounts life insurance surviving spouse s property Step 2 determine of augmented estate that surviving spouse is entitled to p 156157 Step 3 ind the elective share Consider priority p 157 Property passing from decedent to surviving spouse Surviving spouse s own property multiplied by twice the elective share Property passing from decedent to bene ciaries other than spouse with liability apportioned in proportion to value of their respective interests Example Assets Will 120000 of probate assets 100000 to charity 20000 to wife Also 30000 payondeath account to wife and 300000 revocable trust to nephew Wife s assets 150000 Step 1 augmented estate 120000 30000 300000 he had general power over the trust 150000 600000 Step 2 determine the elective share 15year marriage 50 elective share 300000 This is our target elective share Subtract gifts to wife 20000 in will 30000 in payondeath account Now we re down to 250000 Add double the elective share of spouse s property 100 X 150000 150000 Now we re down to 100000 Step 3 1nd the elective share Total assets to take from 400000 300000 trust 100000 willed to charity Determine proportions CharityTotal assets X Shortfall 100000400000 X 100000 25000 from charity 75000 from revocable trust Waiver prenups StatutesUPC limit enforceability of waivers UPC p 161 not enforceable if involuntary or unconscionable Hook v Hook Husband with prenup dies leaving wife nothing wife claims prenup was invalid bc husband failed to disclose 1ll value of property Prenup upheld Prenups may completely disinherit but there are 4 considerations p 163 including ill disclosure of assets Upheld b c wife voluntarily entered into agreement with ill knowledge of value of husband s property She wasn t misled even if she didn t illy understand the prenup Surviving spouse bears burden of proving invalidity UPC 2213 Surviving spouse community property Common law model each spouse owns what s in hisher individual name Most states with this model permit spouse to claim dower an elective share in a speci ed portion of decedent s property Traditional community property spouses have equal concurrent interests in property eamed during marriage All property acquired during marriage other than by gift bequest devise or descent quali es as community property in which both spouses have equal concurrent interests EXceptions gifts bequests property owned before marriage When one spouse dies surviving spouse keeps half of all property No need for dower or elective share in a community property system Right to 5 0 attaches when income is eamed not at death unlike for elective share Estate of Bray Dead husband purchased bonds and siphoned off assets of community property to son during life without wife s knowledge wife wants it back Judgment for wife there was no consideration given by son in eXchange for this transfer of community inds son worked for father s business Omitted heirs Son hardly knew of the accounts Husband may not give away any portion of community property Son must return half to wife If one spouse disposes of both halves of community property by will it is only enforceable as to his half Children Generally no restrictions on disinheriting children Many states save an intestate share for a child omitted inadvertently Only if it appears that omission was not intentional In CA applies only to children not grandchildren Children not provided for are presumed forgotten and will receive intestate share unless testator intended to disinherit Extrinsic evidence permitted if it s not clear from the face of the will Goff v Goff Decedent was unaware of his children and grandchildren Weren t provided for in the will phrases I have no children and Give 1 to anyone who contests this will is insufficient Treat decedent as having died intestate in regards to P s UPC s pretermitted heir provision limited to children born or adopted after the execution of the will 2302 p 187 or in rare cases if child was believed to be dead The child gets intestate share An express disinheritance must be accompanied by an effective affirmative gift to other bene ciaries In cases of partial intestacy treat disinherited child as if he disclaimed UPC 2 l 0 l b Surviving spouse different from elective share here the exclusion is unintentional If surviving spouse married decedent after execution of will and is therefore not mentioned she is entitled to receive no less than the value of the share she would have received under intestacy UPC 230la p 191 unless Aftermarried spouse gets nothing under the UPC if she was provided for outside the will with the intent that the transfer be in lieu of a testamentary provision Grounds for contest Incapacity undue in uence fraud duress and mistake Capacity General insanity dif cult to prove but it invalidates entire will If testator lacked capacity at the time he executed his will and if it affected the disposition then the entire will is invalid Barnes v Marshall Decedent leaves 5 to daughter she argues that he was crazy Testamentary capacity is the lowest level of legal capacity requirements General knowledge and understanding of the property owned Knowledge of what is being done with the property Understanding of where and to whom the property is going Understanding of the concept and purpose of the will Will invalidated in this case You can have capacity even if you don t control your own nances or are incapacitated although this is relevant Can uctuate daytoday Burden of proof if you have a will and it was witnessed it is a selfproving will So long as witnesses swear that they believe the person had testamentary capacity then there is a presumption that the will is valid Person challenging the will would have to prove lack of capacity Insane delusion person is generally okay but they have insane delusions about one particular thing Test was the testator s belief rational In re Honigman s Will Husband convinced that wife is unfaith il disinherits her Wife must show that l husband was delusional and 2 his delusions directly affected the will causation Jury nds for wife belief was irrational dissent argues that unsound reasoning does not equal delusion Matter of Estate of Boniean Crazy bitch disinherited siblings who had her involuntarily committed upheld The act of suicide is not per se proof of insanity Decedent s resentment for her family provides a rational explanation for their disinheritance Undue in uence arises when a testator is induced by another person to make a will that does not re ect the testator s true testamentary wishes In the absence of a con dential relationship contestor must show Testator was susceptible to undue in uence Bene ciary had an opportunity to exert undue in uence Bene ciary was inclined or disposed to exercise undue in uence and The terms of the will re ect the coveted result People under undue in uence still have testamentary capacity But other forces have intervened to cause the person to draft the will in such a way that they don t intend Person contesting the will bears the burden of persuasion but he is aided by the presumption of undue in uence that arises om a con dential relationship Moses Guardian trustee caregiver lover clergy nursing home staff Remedy ignore the tainted provisions give effect to the remaining In re Will of Moses Decedent leaves her estate to her lawyer Lawyer had 1 a con dential relationship with decedent and 2 a role in creating the will These two factors combine to create a presumption of undue in uence This presumption was not overcome by the fact that decedent had independent counsel and acted on her own volition Independent counsel was a mere scrivener Haynes v First Nat l State Bank of New Jersey Decedent originally planned to give equal shares to two daughters when one died she moved in with the other and gave her all dead daughter s children contest their disinheritance Second will drafted by living daughter s attomey Buttermore rather than longtime family attomey Presumption of undue in uence wrt Buttermore con dential relationship con ict of interest Daughter must now demonstrate clear and convincing evidence that second will was not the product of undue in uence Fraud tortious interference and mistake Elements of fraud only strike fraudulent portion of will False representation Knowledge of falsity Intent that intestate would rely on the representation Actual reliance by the intestate Elements of tortious interference Existence of an expectancy Intentional interference with the expectancy Tortious conduct involved with the interference e g fraud Reasonable certainty that the expectancy would have been realized Damages Lathan v Father Divine Mistake Wills Decedent s cult prevented her from changing her will which she wanted to do and then killed her New will had been drafted but not nalized Not a valid theory for invalidating a will Probably a valid tortious interference case The proper remedy is to create a constructive trust no relief in probate proceeding Matter of Snide Husband and wife accidentally signed each other s will Genuine mistake according to all evidencewitnesses No danger of fraud in simply correcting the mistake Narrow holding though these were identical wills signed simultaneously with statutory formality Generally speaking there is no remedy to reform mistakes in will Snjide is an exception where mistake is clean Formalities of execution Attested wills In general will must be 1 in writing 2 signed by the testator and 3 witnessed by at least two disinterested witnesses Two disinterested witnesses is suf cient if a third witness is interested he is irrelevant will stands UPC 2502 p 270 Liberally construed and applied to promote its underlying purposes and policies Witnesses General requirements of witnesses Generally competent 16 or 18 sober able to testify as to what happened when will was signed Presence and sight requirement witnesses must sign in testator s presence but don t necessarily need to see testator sign Weber But if will fails under 25 02 there s still 2503 valid if established by clear and convincing evidence that decedent intended the document or writing to constitute his will 302 Bums v Adamson Witness 1 signs rst later testator and witness 2 sign outside of presence of witness 1 Not validly executed must have two or more attesting witnesses Witness cannot attest a will which the testator has not signed and who did not see the testator sign In re Estate of Weber Witnesses stood behind closed bank window and waved at testator but could not see the document he signed no verbal communication Will is invalid Purpose of witnesses is to prevent the substitution of a fake will Testator may sign outside the presence of witnesses but he must then acknowledge the signature to the witnesses This acknowledgement may be inferred rather than express Order of signing doesn t matter if it s all in a single transaction But generally testator must sign rst temporally witnesses are signing that they saw the testator sign Bums Three types of presence Testator signs in presence of witnesses Not universally required testator may merely acknowledge his signature Witnesses sign in presence of testator Most often required 10 Witnesses sign in presence of each other Sometimes required Interested witnesses nancial or other interests may be considered in determining credibility but it is not a ground for exclusion gives rise to presumption of undue in uencefraud Some states don t care others the will is voided p 286 Executors and spouses almost always allowed to be witnesses even if interested UPC 2505 an individual generally competent may witness interest does not invalidate the will Modem solutions Purge the gift that the witness receives beyond intestate share UPC do nothing There are other ways of attacking the will eg undue in uence Interested witness cannot simply disclaim his gift We look at interest at the time the will was signed doesn t matter if he doesn t want the gift now Harmless errors in formality Two solutions Substantial compliance were the basic formalities observed Use this where testator forgot to sign the will but where all other formalities were met Dispensing power did the testator intend for this document to be his will This can validate the will even in the absence of witnesses Essentially dispenses with formalities altogether Use this when there was no formal process to begin with e g testator died before drafting formal will no witnesses if his intent can be shown In re Will of Ranney Witnesses sign selfproving af davit but not will itself Suf cient af davit was part of the will because testator intended it to be substantial compliance Selfproving affidavits attest that the signatures on the will are those of the witnesses foreclose issues of validity Durable power of attorney granted when testator wants someone to continue to be his attomey no matter what Not automatically revoked if the grantor of the power becomes incapacitated Incapacitated person can designate two powers to another Asset management Health careendoflife decisions e g burial instructions Holographic wills written in the testator s handwriting and signed by the testator attestation is unnecessary but there must be intent UPC 2502b p 314 valid even without witnesses if the signature and material portions of the document are in the testator s handwriting c for holographic wills intent can be shown by portions of the document not in testator s handwriting Signature need only be some mark made by the testator with the intent to authenticate the instrument Date a few states require it but not all But then a typewritten will with a date will take priority over an undated holographic will Letters of instructions to attomeys are not holographic wills 326 Nor are rough drafts of wills not signed by testator ll Wills written in contemplation of a journey generally upheld even if testator survives the journey is viewed merely as an inducement for making the will In re Estate of Muder Valid holographic will where testator merely lled in the blanks on a preprinted form In re Estate of Kuralt Decedent wrote secret holographic will leaving property to lover in official will he didn t mention lover or property Holographic will was valid letter written before death confirmed decedent s intent Noncupative wills declared orally in the presence of witnesses Practically obsolete no mention in UPC Require that testator be in his last sickness two witnesses Must be written down within 10 days What constitutes the will Integration the process of embodying the testator s will in one or more writings which are physically present at the time of execution and are intended to be included in the will In the case of holographic will integration may involve several letters written over a period of time Republication by codicil Codicil written instrument which modi es or supplements an existing will Republication causes the will to be treated as if it were reexecuted at the time of the codicil E g newborn child no longer considered afterbom Formalities Same as formal will must either have witnesses or be holographic Can mix and match typewritten will and holographic codicil May republish old will that has since been revoked if recent and formal codicil references it Facts of independent signi cance Legacy to anyone in my employ at the time of death List of employees has independent nontestamentary signi cance ie for tax purpose etc to my daughterinlaw even if son isn t married at time of execution but is at time of death Incorporation by reference Will directs the estate to be distributed in accordance with the terms of a second writing Eg inter vivos trust agreement Mere act of incorporation makes it effective if UPC 2510 p 33334 The document exists at the time of execution The language of the will manifests this intent The document is described sufficiently to permit its identi cation Or a reference to list of items UPC 2513 p 334 Must be signed by testator describe items with reasonable certainty although it may be prepared after execution Clark v Greenhalge Will incorporates written bequests found in notebook valid because testator s intent was clear Pourover will property given to trustee of inter vivos trust and disposed of in accordance with terms of the trust pour over assets distributed by terms of trust and not by intestacy remainder etc UPC 2511 p 341 Testamentary pourover to inter vivos trust is valid even if the requirements of incorporation are not met need only be identi ed in the will and terms set forth in a written instrument prior to death 12 Trust instrument need not have been in existence at time will was executed and trust need not be inded or operative until testator s death Revocation and Amendment Types of wills Joint will common will for two people Usually husband and wife gets probated twice But power to revoke is part of freedom of testation so if one dies the other may still change and courts are reluctant to intervene Mutual will two different wills but with mirror provisions Must include express language preventing one spouse from changing his will after the other s death it s a contract that becomes enforceable upon the death ofone Promise not to change will is consideration for the other party s reciprocal promise To revoke one party must simply give notice while alive CA allows for revocation of both joint and mutual wills Contractual restrictions on revocation Freely revocable during testator s life But promises made for valid consideration and not in violation of public policy are enforceable UPC 2514 p 345 will must reference 1 the provisions of the contract 2 the contract and extrinsic evidence providing the terms or 3 a writing signed by the decedent evidencing the contract Garrett v Read Wife tries to change mutual will after husband s death Court imposes duty on wife threepart agreement They could use what they needed while alive They must share among children equally But they could do what they want among their own heirs Oral contracts courts must look at objective facts the actions and statements made by the deceased promissor during his lifetime to determine the existence of the agreement Methods and effects of revocation Expressly or writing subsequent will UPC 2507 p 356 Codicils should expressly reference the past will and the provisions to be modi ed Generally these only revoke the will to the extent that the new provisions are inconsistent with the will Codicils that make a complete disposition are interpreted as revoking the original will Express revocation clause in codicil will do just that Gilbert v Gilbert Codicil written on back of business card and pay stub this is merely a codicil not a new will because it doesn t contain a revocation clause Two documents treated as one since they were found together in the same envelope Unlikely testator meant to revoke his original fancy will with a single sentence on a pay stub Revocation by physical act if the intent was to revoke it 25072 p 356 Harrison v Bird Decedent instructed attomey to destroy the will he tore it up and sent it back but no evidence of the pieces was ever found If decedent had possession of will before death but not afterwards we presume she destroyed it 13 Rebuttable by evidence that will was lost or destroyed without testator s knowledge UPC must be performed by testator or in testator s presence If will was last seen in testator s presence but now can t be found there s a rebuttable presumption that testator revoked through destruction If lawyer has copy it may be admitted but you have to be able to rebut presumption of destruction Physical alterations must otherwise leave the remaining terms intact otherwise they will be ignored Revival Does the revocation of the second will revive the rst UPC 2509 p 367 no unless it is evident from the circumstances that testator intended to revive the original will If the second will only partly revoked the rst however then revive the first unless evidence shows the decedent did not want revival Extrinsic evidence is allowed only where second will was revoked by physical act not by subsequent will Codicil can revive a past will Eg wills in 1997 and 2005 which revokes 1997 if 2008 codicil references 1997 will then it is revived Dependent relative revocation where testator makes sufficient revocation but it tums out to be based on mistaken assumption of fact or law disregard the revocation Schneider v Harrington Decedent made mathematical error in amending the allocation of his estate Amendments were invalid revocation is dependant on the subsequent document or change being affected Go back to original Mistake of fact mistakenly thinking a child is dead Can only invoke doctrine of dependent relative revocation if decedent expressed how he would have left his estate had he known the true facts Revocation by operation of law changed family circumstances Divorce revokes all provisions for the former spouse UPC 2508 p 374 Applies equally to former spouse and relatives of former spouse Clymer v Mayo What effect does divorce have on various will provisions Terminate trusts whose purpose was to qualify for an estate tax marital deduction Interpretation of wills Ambiguity and mistake Courts routinely admit extrinsic evidence other than direct declarations of intent Testator s habits nancial condition personal relationships Patent ambiguity on its face No extrinsic evidence allowed under common law it s ambiguous on its face U of SoCal aka UCLA Latent ambiguity not clearly ambiguous on its face Extrinsic evidence allowed two bene ciaries of the same name Equivocation same name for two objects Misdescription description appears ne but there is no object or person that matches the description but there is one that almost matches it e g typos in address numbers Mahoney v Grainger Testator willed to her heirs at law thinking it meant her many cousins tums out her aunt alone gets priority 14 Tough shit heirs at law is a clear legallyde ned term we only introduce extrinsic evidence where the testamentary language is not clear Personal usage exception to the plain meaning rule where a particular word or expression in the will re ects the testator s idiosyncratic use of language eg nicknames In re Estate of Russell Bitch willed half her fortune to her bitch court found that she actually meant to do this and therefore it was void and it should pass to plaintiff niece Changes in property holdings Types of devisesgifts 399 Speci c identi able and distinguishable item of property General gift of certain amount paid from general assets of the estate Demonstrative gift of certain amount paid from a designated source war bonds Residual gift of whatever remains Ademption if property has been destroyed or disposed of before death the gift fails Where the bequest was speci c and now nonexistant not demonstrative Eg a goldplated dildo If already given gift is satis ed if no longer in decedent s possession gift fails Antiademption statutes UPC 2606 p 405 devisee has the right to Unpaid balance owed by purchaser at time of death Unpaid condemnation award Unpaid insurance proceeds Property acquired as a result of foreclosure Replacement real or tangible personal property In re Estate of Nakoneczny Decedent wills tavern to son earlier however he sold the tavem and used the proceeds to buy bonds Son doesn t get the bonds there had been an ademption the gift was speci c not demonstrative not you get proceeds from the tavem But see 2606a5 p 405 In general will is construed at time of execution in some statutes bene ciary can convince court to construe will at time of death rare where bene ciary will received gift worth substantially more Eg Honda replaced by Lamborghini where will says you can have my car Satisfaction basically advancement in the will context Legacy may be satis ed by an inter vivos gift if the testator so intends E g T makes gift of 25000 after executing will giving 50000 may satisfy partial satisfaction Abatement when not enough money to go around payments to creditors taxes etc paid in the following order of indsz Property not disposed of by will Residuary gifts Generaldemonstrative gifts Speci c gifts generally do not abate unless there are serious creditor problems Exoneration Devisee of land is also entitled to exoneration from the residuary estate of liens securing the decedent s personal obligations Get to take extra money to pay off mortgage UPC and CA reject this 2607 p 409 bene ciary takes real property with all attachments and liens l5 Gifts Lapse A bequest fails if the intended bene ciary predeceases the testator For speci c or general gifts they become part of the residuary estate If sole residuary predeceases the rest passes by intestacy What about for class gifts where some members die At common law dead shares are redistributed Antilapse statutes if one of many bene ciaries die his share doesn t go into intestacy but rather the deceased bene ciary s issue Most statutes require the deceased bene ciary to fall within a group of testator s close relatives Apply to class gifts as well UPC 2605 p 41 1 original In re Estate of Bums Decedent s three bene ciaries all die Court applies antilapse statute and splits gift among children Statute applies where decedent apparently did not contemplate that all would predecease Gifts conditional on the bene ciary s survival no not trigger the antilapse statutes decedent clearly contemplated that potential Let the rest pass through residuary clause or intestacy Real property Gift of land requires three things Donative intent intent to give away without consideration Delivery of written instrument that satis es the statute of frauds Grantor must intend to divest himself of title Acceptance lack of af rmative rejection Presumed unless the receiver rejected it Partial performance exception Mertz Where bene ciary takes possession and makes improvements in reliance on the oral gift and It would be substantially unjust to take away Deeds must be notarized in order to be recorded If A deeds to B but B does not record B still owns property But if C records C may have a stronger claim Recording does not make you the owner it merely protects title in case the grantor tries to give it to someone else Mertz v Arendt If you pay property taxes you can have the land when I die oral transfer of property upheld P also occupied continuously adversely etc Statute of frauds does not necessarily defeat a parol gift of real property Party claiming land bears burden of proving each element of a valid gift Delivery To agent of donor is not valid e g his lawyer To agent of donee is valid Constructive delivery symbolic delivery e g keys requirements Physical delivery is dif cult or impractical painting land There is donative intent Lenhart v Desmond Mere possession of the deed does not equate to delivery daughter retrieved deed from safe deposit box prior to father s death deed is invalid Delivery requires the grantor to manifest an intent to presently divest himself of title Merely giving bene ciary access to the safe deposit box does not imply delivery Also failed to satisfy intent prong l6 Personal property Inter vivos gifts To succeed donee must prove The alleged donor s intent to make a gift and The delivery of either The subject matter of the gift or An instrument of gift Constructive symbolic delivery a key for example Unlike gift in will an inter vivos gift requires the owner to make an irrevocable present transfer of property If the intention is to make a testamentary disposition effective only after death Gruen the gift is invalid unless made by will Can t take back a gift after it s made Gruen v Gruen Father gave son painting but never delivered it it stayed with father until he died no physical possession although there was clear intent Stepmom points to fact that father never led a gift tax retum Actual delivery not necessary when it would be impractical here constructive delivery was suf cient bc there was donative intent Gifts at death Resembles a will but required formalities are those applicable to inter vivos gifts Distinct om inter vivos gift Made in apprehension of death Automatically fails if donor recovers om the apprehended peril if the gift is unconditional it is inter vivos Revocable by the donor Automatically fails if the donee predeceases Subject to claims of donor s creditors if the estate is insolvent Limited to personal property not land Effectuated by delivery in the same was as inter vivos Scherer v Hyland Decedent left note giving away her property then committed suicide a few hours later court says this is a valid gift Was there suf cient intent imminent death and delivery The major purpose of the delivery requirement is evidentiary where the facts clearly show the gift was intelligently made the relative importance of delivery is diminished Constructive delivery she endorsed the check and bene ciary was the only one with access to her apartment where the note was left Presumption of acceptance may apply even when donee does not learn of gift until after death Although he is ee to reject it then The elusive distinction between life and death transfers Typical example inter vivos trust Parent retains control during life even though child bene ts om it so when is the gift made Testamentary instrument is one that operates only upon death and up to that time it is ambulatory the maker has parted with no rights In a trust on the other hand something passes immediately to the trustee Butler v Sherwood Inter vivos gift was of a testamentary character and thus invalid because it did not comply with statutory requirements of a will Did not convey anything merely a 1ture bequest No effect prior to death Deed No Nothing passed during lifetime only at death Gift No Revocable and thus no delivery 17 Trust No No intent to create trust Will No Did not comply with Statute of Wills formalities Farkas V Williams A cognizable legal right did pass duciary duties of doctor Trust created Trusts Introduction Trust one person trustee holds legal title to a piece of property for the bene t of another bene ciary see de nition below Burdens of ownership go to trustee bene ts to bene ciary Once trustor hands over the property his role is over Trustee has legal control over the property e g power to withdrawinvest money But only the bene ciary can reap the bene ts No trust will fail for want of a trustee common law will create a trustee Methods of creating trusts Transfer in trust A settlor transfers property to B trustee in trust for C bene ciary Declaration of trust A declares himself trustee of the property for C bene ciary Requirements of a valid trust Intent to create Writing if trust contains land Statute of Frauds Presently existing trust res legally cognizable presently existing property Except un inded pourover trusts Identi able bene ciaries unless it s charitable Two ways to modifyterminate a trust Restatement Third of Trusts Section 65 p 567 look it up All bene ciaries agree to the change and the change won t frustrate the basic purpose of the trust Changed circumstances not anticipated by the settlor would frustrate the purpose of the trust Trustees Duties of trustee preserve and protect property pay taxes on behalf of the estate maintain insurance obtain accountings keep the bene ciary informed and make distributions as provided in the trust Multiple trustees Must make decisions unanimously but trust instrument can say otherwise Resignation trust instrument govems this process If it is silent then all bene ciaries must agree on a new trustee Removal of trustee Breach of trust or duciary duty Insolvencyinsolvencyun tness Excessive compensation Lack of cooperation or failure to act etc Express trusts Restatement 3rd of Trusts Section 2 p 479 Trust duciary relationship arising from manifestation of intention to create that relationship and subjecting the person who holds title to the property to duties to deal with it for the bene t of charity or one or more persons at least one of whom is not the sole trustee Elements of a trust Bamette v McNulty A competent settlor and trustee Clear and unequivocal intent to create a trust An ascertainable trust res Suf ciently identi able bene ciaries l8 Revocable v Irrevocable trusts Revocable can be revoked by settlor at any time Avoids probate Settlor is the trustee basically a repository for assets Settlortrustee also maintains bene cial interest unlike for irrevocable where bene ciaries have this Terrninates at the death of the settlortrustee All revocable trusts are inter vivos Creditors can reach it Modi cations look to the instrument If silent then you just have to sign it No legal requirement of notarization How to ind it Real estate Bank account Can t use life insurance policy retirement plan Not good for asset protection settlor s creditors can still get at assets Irrevocable settlor does not have power to revoke or amend Purposes Tax bene ts no gift or estate tax Asset protection bene ciary s creditors can t reach it Control when bene ciary receives the money Revocable whenever the trust instrument says Bene cial interest in the hands of the bene ciaries Modi cation If all bene ciaries consent they can compel modi cation on petition to the court Granted unless the continuation of the trust is material to the purpose of the trust If settlor and bene ciaries agree no need to go to court Court may modify trust if unforeseeable circumstances have arisen Trust can be terminated if it has too low principal Asset protection Spendthrift clause so bene ciaries creditors may not reach the assets held in the same way that they can personal property Limited lifetime power of appointment Limited testamentary power of appointment prevent creditors from being able to reach the assets at his death Discretionary distributions rather than mandatory because when distributions are made they are reachable by creditors trustee can tum off the spigot if he knows that the bene ciary has a creditor who will just attach anything distributed bene ciary s creditors can t access anything in the trust but they can once it is distributed settlor s creditors can t reach the assets in an irrevocable trust because they no longer belong to him Declaration of trust settlor declares that he is holding property in trust for one or more bene ciaries at least one of whom is not the settlor Taliaferro V Taliaferro Trustor created declaration of trust where he was trustee and bene ciary wife claims he failed to transfer title Valid where the settlor executes a declaration of trust he need not transfer legal title He already has the property this would be a mere formality Transfer in trust settlor transfers property to third party trustee 19 Restatement Third Sec 16 p 488 Essential that the transfer actually occurs unlike in declaration of trust Also a failed inter vivos gift will not be considered a declaration of trust Trusts created by precatory words wish desire Modem trend court reluctant to create trust unless intent and terms are clearly expressed Matter of Estate of Bollinger No trust created where will merely gave all property to decedent s parents with the understanding and expectation that they will take care of decedent s children Decedent merely meant to advise or in uence his parents they retain complete discretion over property Levin v Fisch Decedent leaves money to kids with stipulation that they give a speci c dollar amount to aunt every year Express trust was created through decedent s positive directive which imposed an obligation on children Ct looked at surrounding evidence to derive intent Trust can be created without saying trust it s the intent of the settlor that matters But the wish of a testator is not necessarily a command If person promises to create trust and then reneges court will enforce only if there was consideration Distinguishing trusts from contracts Pierowich v MetLife Decedent lists children as bene ciaries on his life insurance policy insurance company was to retain the inds until children tumed 21 When he dies wife tries to get money since she s the guardian of the kids and needed the cash Court this is a contract not a trust relationship is more of debtor to creditor rather than settlor to trustee no intent to create trust Wife can t modify it since she s not a party Insurance company has no duty to the wife whereas in trust it would have a duciary duty to look out for the interest of the bene ciaries the kids Trust inds can be accelerated in certain circumstances not contract inds though Totten trusts tentative trusts recognized despite their testamentary nature Form of inter vivos trusts not subject to general trust rules Depositor sets up account in his name for a bene ciary Revocable depositor may withdraw without constituting breach Essentially replaced by payondeath accounts But payondeaths can only be revoked through express writing to the bank Tottens can be revoked in several ways Contrary will provision supersedes Totten Trust Removing money and Closing the account Some act or declaration of disaf rmance Estate is insolvent amp can t pay out giftsdebts of estate If bene ciary dies depositor holds the deposit free of trust In re Rodgers Estate Decedent created tentative trust but indicated that she may have revoked it referred to money as my money Tentative trust depositor retains complete control during life but bene ciary receives the outstanding balance on death Revocable at will Through will 20 By depositor s unequivocal act or declaration of disaf rrnance no formalities necessary Restatement Third Sec 26 p 505 Insolvent estate upon death Revoked by either of these last two Trust res any property right that can be subject to trust General rule there must be a presently existing trust res for the trust to be valid Farmer s Loan V Winthrop Trustee executed deed of trust gave trust 5000 but died before it was transferred Upon her death trust was supposed to be distributed among her children No present interest Alienability of a benefieiary s interest Spendthrift trusts individual receives a speci ed amount of income for a speci ed purpose settlor puts restraint on alienability of bene ciary s interest by terms of the trust Effectively prevents bene ciary om accessing trust assets for unsanctioned purposes Bene ciary may not anticipate or assign rights to receive iture payments Creditors can always reach payments once they re made Can be terminated if all bene ciaries and the settlor agree Even if material purpose is incomplete Sligh v First National Bank Assets of spendthrift trusts may be gamished to satisfy the claims of tort judgment creditors Four exceptions where spendthrift trust can be reached By wife or child for support or alimony For necessary servicessupplies rendered to the bene ciary For services supplies rendered which preserve the interest of the bene ciary By the US or a state to satisfy a claim against the bene ciary But the court nds a public policy exception and says spendthrift is not immune om intentional tort creditors So there s a fth exception intentional tort creditors Schreiber v Kellogg Did lawyer s work for family qualify under third exception services rendered Yes Discretionary trusts trustee has discretion to make or not make certain types of distributions Opposite of mandatory distribution where trustee must make distribution upon il llment of a condition or occurrence US v O Shaugnessy Bene ciary of a discretionary trust does not have property or right to property for taxable purposes in the nondistributed trust principal He can t control the assets so they are not available to him Selfsettled trust trust for one s own bene t e g revocable inter vivos trust A to B for bene t ofA Most are invalid as frauds on creditors Spendthrift provisions are ineffective against creditors Cohen v Commissioner of Division of Medical Assistance P was ineligible for Medicaid bene ts when he has discretion to disburse the ill principal and income of the trust State Street Bank and Trust Co v Reiser Bank may reach the assets of an inter vivos trust in order to pay a debt owed to the bank D basically tried to put money in revocable trust so that it would be unreachable to creditors upon his death 21 Termination of trusts Termination pursuant to the terms of the trust Many trusts terminate simply when the predicted event occurs income to my wife for life remainder to children trust terminates when spouse dies Most are terrninablerevocable by the settlor This can be done informally and orally if no method is set forth in the instrument CA settlor may revoke unless instrument expressly provides that the trust is irrevocable Barnette v McNulty Trust was effectively revoked by the settlortrustee when he spoke orally to his lawyer Even though trust listed ways to revoke and orally wasn t one of them the list wasn t exhaustive Termination by completion of purpose When the purpose for which an express trust is created ceases the estate of the trustee also ceases Frost Nat l Bank of San Antonio v Newton Trust did not complete its purpose and should not have been revoked Even though husband died and two kids had had their college paid for As long as some identi able purpose remains the trust does not terminate Termination by impossibility illegality contrary to public policy p 563 Termination by consent Restatement Third of Trusts Section 65 p 567 see above Sole bene ciary may terminate trust if not inconsistent with a material purpose Bene ciarysettlor may compel termination regardless In re Bayley Trust Okay to terminate trust where it would not frustrate a material purpose liquidation of paintings bene ted museum and gave bene ciaries more than they would have received under trust Doctrine of worthier title Hatch v Riggs Nat l Bank Lady creates irrevocable trust where she is the sole settlor and bene ciary then tries to modify its terms The Statute of Frauds Writing not required for a constructive or resulting trust Oral trusts Fairchild v Rasdall D gave title to land to bro on bro s promise to give land to D s wife and kids D wanted to enforce oral promise on bro Unenforceable oral trust needs to be in writing because it is a transfer of land Extrinsic evidence excluded Constructive trusts and unjust enrichment Implied in law court may impose it on a transaction despite the intent of the parties Equitable remedy to prevent unjust enrichment Create constructive trust where malfeasance transferred the trust to the wrong person Sullivan v Rooney Constructive trust created duciary relationship reasonable reliance on D s promise to retitle house unjust enrichment if there wasn t constructive trust Resulting trusts Implied in fact no trust language but we imply that in this set of facts a trust must have been intended Three types of situations 22 When a trust has become impossible of il llment Evans V Abney When a trust is illy performed without exhausting the trust property When one person pays the consideration for property and directs the transfer of title to another Title holder is deemed to be trustee for bene t of purchaser Rebuttable presumption that it was a gift if the titleholder is a near relative of the purchaser The bene ciary Inde niteness Morice V Bishop of Durham The words benevolence and liberality do not create charitable intent Today interpreted more broadly No identi able bene ciaries necessary Charitable trusts A trust can be inde nite if it s a charitable trust Types of charitable trusts Charitable remainder trust income to a bene ciary designated by the settlor and the remainder to charity Charitable lead trust charity is the income bene ciary for a period of years then remainder goes to heirs Charitable purposes very broad de nition Charitable per se if it ts one of the purposes on 590591 Or other purposes that are bene cial to the community Rest 3rd of Trusts Sec 28 Crucial test it must be for public not private bene t Scholarship for a particular person not charitable Generally any time the recipient is identi ed by name it s a gift Purpose need not be realistically achievable e g charity to convince all alcoholics to stop drinking is still a charity Noncharitable motives like selfpromotion are okay e g names on the side of the Galen Center Objective standard of bene t to the community Not charitable if only intended to honor the donor eg annual march on ann y of death Recipients too small a class will defeat the charitable purpose e g an employer can t set up a charitable trust for his 10 employees Le cowitz v Cornell University A restricted gift to a charitable corporation does not necessarily create a charitable trust Subsequent acts do not overcome lack of charitable intent Advantages of charitable trust No tax on trust s income No property tax on land owned by trust Estate tax exemptions to donor Enforcement by state AG Exempt from RAP Cy pres if the purpose fails or becomes impossible then the court will apply the purpose that is closest to the donor s intent Test Can the trust be performed as written Yes trust continues Wilson No 9 Trammel Evans Did the settlor have a general charitable intent No trust terminates Evans Simmons Yes 9 What is the nearest charitable purpose 23 Trust assigned to that purpose Trammel When a private trust fails we revert to the trustor or heirs But with charitable trusts there is a public policy favoring keeping the inds available So courts can get creative But court must make a nding of general charitable intent Donor must have had speci c charitable purpose Restatement nd a new purpose unless donor expressly provided reverter So if there s a charitable gift in the document and there s no clause reverting inds back to family if charitable purpose fails then assume that donor had charitable intent and nd another charitable purpose for the inds Uniform trust code only consider a reverter if 1 the donor is still alive or 2 died within 20 years So if it s a really old will just give everything to charity Gifts to universities are usually not generally charitable the university is speci ed Enforced by state attomey general or sometimes heirs of grantor Reasons charitable trusts may fail Not enough money Too much money Impossibility Re isal of the trustee Charity no longer exists Evans v Abney Trust intended for whites only public park Purpose failed trust should revert to decedent s heirs Cy pres inappropriate because decedent was insistent that the park remain segregated it was central to its purpose Trammel v Elliott trust for poor whites had general charitable purpose cy pres applied Matter of Estate v Wilson scholarship for boys could be maintained by removing state actor trust continues Simmons v Parsons Money designated for needy students at two colleges at time of death however one of the colleges didn t exist Trust failed cy pres not applied because trustor included a reverter clause in case of failure Other school does not get all the money Since testator anticipated failure there was no general charitable intent Jackson v Phillips Trust created for creating public sentiment in support of the freeing of slaves decedent dies after slaves are already freed Court allowed trust to be used for the education of the freed slaves testator s general purpose was to better the condition of the African race in this country Honorary trusts Generally used for The erection of maintenance of tombs and monuments The saying of masses The bene t of speci c animals In re Thompson Furthering of fox hunting is not a charitable purpose 24 Administration of Trusts and Estates Three things that court does in probate process or any one of these three things Determine document Determine representative Supervise administrative process The probate process Starts with a petition for probate Establishes two things The governing document if any The personal representative Purpose is to determine validity of the will Was this the last document and was it duly executed Appoint temporary administrator While battle is going on over the will administrator must preservemanage the estate Jurisdiction Restatement 2nd of Con ict of Laws Sec 314 will may be admitted to probate in a state Where decedent was domiciled at time of death Where there are assets of the estate at time of death Where there is jurisdiction over person or property of one alleged to have killed the decedent 315 administrator may be appointed in any state in which a will may be admitted to probate ll domicil is a place usually a home to which the Con ict of Laws accord determinative signi cance because of the person s identi cation with that place Every person has a domicil at all times but no more than one at a time UPC 3202 domicil determination is made by the first court to take jurisdiction Testator may also choose state law in his will in some states Ways to avoid jurisdiction conflicts Sever connections to previous state when you leave memberships etc Remove all property Transfer all property to relatives but retain control Put outofstate property into trust for heir with yourself as admin State in will the state where you re domiciled and state choice of law that applies Establishing the validity of the will Basic process Provide Proof of death death certi cate Establish Jurisdiction of the court Show Notice was given to the interested parties Show the most recent Will and that it meets the formalities of the Statute of Wills Must Prove Witnesses Signature they stand for validity of Testator s sig i send letter 9 handwriting sample ii get duplicate signatures when they initially sign iii selfproving af davit Testamentary Capacity in CA contestants must prove incapacity Title to real property passes at death title to personal property passes only after probate process Decedent to personal representative to bene ciary Hausen v Dahlquist a will is a valid instrument at the time of death probate is not necessary to make it of cia Eckland v J ankowski Conveyance to heirs in intestacy upheld where will was subsequently discovered and admitted to probate several years later Allen v Dundas debtors need only pay in one probate proceeding no need to be required to pay debts a second time in subsequent proceedings Family Settlement Agreements If all bene ciaries agree to redevise a will no need to probate 25 But will must not be invalid on its face Creditors Inventory UPC 3706 within 3 months of appointment duciary must prepare an inventory of estate assets Claims of creditors UPC 3803 All valid claims which arose prior to death are barred against the estate unless presented within the earlier of the following One year after decedent s death or P 661 Statutes require notice to creditor by publication in local newspaper Postdeath creditors traditional rule require claimants to sue an executor administrator guardian or trustee in the duciary s personal capacity rather than as duciary Onanian v Leggat Vance v Estate of Myers The duciary and the bene ciaries The duciary Appointment and quali cation Will should always specify one or more individuals to act as personal representative or trustee Otherwise court appoints one administrator usually starting with surviving spouse Court will almost never disqualify a representative even if all bene ciaries veto Removal and resignation Court may remove duciary for malfeasance breach of duty or un tness to serve if to do so would be in the best interests of the estate or its bene ciaries Compensation UPC 3719 duciary entitled to reasonable compensation The supervisory role of the court Court always has at least a minimal supervisory role even when will directs otherwise Estate of Stillman at what point does the absolute and uncontrolled discretion of trustees to withhold invasion of principal become an unreasonable abuse of discretion Trustees overprotected bene ciaries by re ising to distribute principal against wishes of testator But mistake was in good faith Restatement 3rd of Trusts trustee s exercise of power is subject to supervision by the court only to prevent abuse of discretion The duciary duty of loyalty Certain duciary duties if violated render the duciary personally liable for resulting losses Duties to keep and render accounts exercise reasonable care and skill retain control of and preserve the property enforce claims Duty to avoid all con icts of interest re administration of trust Should never engage in any transactions with the trusttrust property If trustee is a lawyer do not do legal work with the trust unless trust says that it is OK If trustee is an accountant do not do accounting work for the trust unless trust says that it is OK Nor with any of the bene ciaries Never engage in a competing business or take away business opportunities Never manage another trust that competes with the trust Exception If all the bene ciaries consent to the transaction then it s ok Also if the trust says that any of the above is OK then it can y When in doubt look to trust instrument and then to court for instruction 26 If con ict is demonstrated burden is on D to show no bad faith No Further Inquiry Rule if duciary makes pro t in trading in the subject matter of the trust even if there s no breach of duciary duty there s no irther inquiry pro t must be given to the trust Restatement 2nd of Trusts Sec 203 trustee is accountable for any pro t made through the administration even though the pro t does not result from a breach of trust Matter of Estate of Rothko Conduct of executors is shocking sold all 798 paintings in three weeks and with just two contracts Expressly against the will s direction to sell up to 35 paintings a year Also sold to people with whom they had a selfinterest Duties with respect to duciary investment Prudent investor rule Uniform Prudent Investor Act Sec 2 Trustee shall invest as prudent investor would considering the terms of the trust and exercising reasonable care skill and caution Investment decisions must be evaluated in the context of the trust portfolio as a whole not in isolation Things to consider p 695696 Should not be judged in hindsight Mordem portfolio theory prudent man doesn t invest for return but merely to maintain value May invest in riskier stocks but then diversi cation is necessary Trust instrument can always set different standard Duty to diversify ask is the purpose to simply receive income or to grow In re Trust Created by Inman Family farm held in trust for children Trustee wanted to purchase acreage from farm in his own name Couldn t agree on fair price Other bene ciaries thought price was unfair Can t scheist the trust Duty to conserve trust property In re Trusteeship Agreement with Mayo Speci c provision in trust allows only for investment in conservative real estate investments allowed to deviate when there is a depression Duty to treat bene ciaries impartially Rest 3rd of Trusts Sec 79 trustee has a duty to administer the trust in a manner that is impartial with respect to the various bene ciaries of the trust Unless trust instrument declares otherwise Examples of partiality Extending loan to a bene ciary below the rate of interest Dennis v Rhode Island Hospital Trust trustee provided income to bene ciaries but let building deteriorate harming remaindermen breach of duty Duty of confidentiality Terms of the trust are private Trustee may not disclose terms or nature of assets to anyone but bene ciaries Unless its necessary to prove the identity of the trustee in which case only the relevant portion may be shown In petition to the court don t attach copy of the entire trust instead state that it s a private trust submit to court for in camera inspection Duty with respect to delegating obligations Standard of due care in the selection and supervision of agents attomeys and advisors Rest 3rd ofTrusts Sec 80 p 738 Uniform Prudent Investor Act Sec 9 739 27 Can t just delegate away everything Duty to earmark and the prohibition against commingling Rest 3rd of Trusts Sec 84 740 trustee has a duty to see that trust property is designated or identi able as property of the trust and a duty to keep the trust property separate from the trustee s own property Variables affecting the imposition of liability Identi cation of the duciary Co duciaries liability of one for the breach of the other Must take reasonable steps to prevent co duciary from committing a breach Trustees held to standard of expertise that they have Consent of the bene ciaries Trustee can always protect himself by getting bene ciary consent before or after the act Advice of counsel not blanket immunity but evidence of good faith and due diligence Successive trustees trustee 2 not liable for the acts of trustee 1 Future interests Classification of future interests Future interest present rights to iture possession or enjoyment of property Fee simple present or possessory interest Right to present possession Inde nite duration no iture interests Future interests are subject to the Rule Against Perpetuities Indefeasibly vested remainder A to B for life remainder to C Not subject to RAP If C predeceases B then remainder goes to C s estate There s nothing that can divest C of the property eventually it s indefeasible Remainder vested subject to open A to B for life then to B s children Subject to RAP Class is subject to open to admit new members if B has more children Size of the share must await determination Vested remainder subject to complete defeasance A to B remainder to C but if C predeceases B then to B s children Not subject to RAP Contingent remainder A to B remainder to C if C survives B otherwise to B s children Subject to RAP C s gift is conditional no real distinction except whether or not gift will be subject to rule against perpetuities Executory interests all interests in third parties other than remainders A to B for life then to C for life remainder to D Executory interests are B and C no remainder interests These interests are subject to the RAP The Rule Against Perpetuities interest must vest if at all no later than 21 years after lives in being at creation of interest Or a nonvested property interest is invalid unless one of the following conditions is satis ed a when the interest is created it is certain to vest or terminate no later than 21 years after the death of an individual then alive b the interest either vests or terminates within 90 years after its creation To prevent dead hand control Lives in being includes persons in gestation Thomas v Harrison Half of will held in absolute discretionary trust for son trustees can use money as necessary This violates RAP It wasn t a will it was a trust during lifetime Will was created but clock didn t start ticking until death 28 The remote possibilities test Jee V Audley A gives 1000 to wife then niece and her issue then niece s daughters Daughters interest is not good because their parents can still have children This is a remainder subject to open and therefore subject to RAP Several states have dealt with remote possibilities statutorily Presumptions p 775 Class gifts and the Rule Against Perpetuities Class gifts gifts to a particular group which is described as a group rather than select persons Bob Jane and Jill is not a class gift My children is The class can change by virtue of people being added to the class When might class close When will is written uncommon unless document is really clear that that s what the person wanted my children living on the date of this will When the document becomes irrevocable Leake v Robinson lives in being plus 25 years instead of 21 Court found the entire gift to be void even those in existence for the perpetuities period A class is inseparable for purposes of the RAP Powers of appointment power created by one person the donor in another the donee or reserved by the donor for himself to determine the transferees of property the appointees or the shares the appointees are to take Usually a power to alter the terms or ultimate disposition of the trust Must be in the language of the trust instrument a trust that is silent creates no power of appointment Dictates the powers of the bene ciary to override the distributive terms of the trust and direct the trustee to distribute some of the property outright Appointive property property over which bene ciary has power Appointed property property over which power has been exercised Can be lifetime or testamentary Lifetime may be exercised until bene ciary s death Testamentary can only be exercised at his death General vs Limited power of appointment General can exercise the power in favor of the following entities Himself Creditors Estate Creditors of the estate If the power exists to appoint any of these four entities it s a general power Consequences Property over which there is general POA will be included in estate for estate tax purposes and can also be reached by creditors he essentially owns it Limited Any power that is not general Cannot be reached by taxman or creditors more protection Takers in default people who assume POA when none are listed Accomplished through language in the trust if the trust is silent no POA Does not constitute a 1ture interest but is nevertheless subject to RAP Power of appointment will be void if it could be exercised outside of the rule against perpetuities period 29 Validity General power presently exercisable is valid if it is certain to become exercisable with the period of the Rule General power is invalid if it might be exercised beyond the permissible period Power may extend beyond the period but only if it is exercisable within the period Clock starts ticking when interest subject to the Rule is created Discretionary trusts void if its terms authorize the trustee to make income payment after the expiration of the period of the Rule A Table Illustrating What would happen using the various tools of Estate Planning Age 50 Age 70 Result Creator Entity Legal Title Bene cial Interest Anne Revocable Dies 1lly No probate Testator Estate Personal Bene ciaries trust all to 1nded all to will representative heirs daughter in daughter in decedent no executor guardian ad trust trust will administrator or litem administrator CTA Beth Same Dies house House goes Settler Revocable Trustee settlor settlor not in trust through trust almost always probate the same person pours over then goes to daughter Carol No estate Dies Probate to Settler Irrevocable Trustee Bene ciaries planning intestate heirs trust guardian ad litem Denise Will outright Dies Probate all Court Conservator conservator Conservatee to neighbor to neighbor conservatee ship PVP attorney Probate volunteer panel conservatees attorney Elaine Will Dies Probate to Principal Agency Agent principal testamentary trust for power of trust for nephew attorney nephew order for nal distribution 30 Examples of Codicils 1998 2005 2007 Redate Will Statute Codicil Redate Will Document to be Codicil incorporated Republish Will interested witness Codicil 2 disinterested witnesses now there is no presumption of undue in uence Revive Will 1998 will revoked by act Codicil revives the 1998 will Revive Will ineffective codicil Codicil to 1998 will Revive 1 Will Will Codicil 1998 Will this effectively squeezes out the 2001 will Examples of revocation Example 1997 2000 2003 Result 1 Valid will 1997 will revoked by act Intestacy 2 Valid will Valid will expressly 2000 will governs revokes 1997 will 3 Valid will Invalid will purported to 1997 will governs revoke 1997 will 4 Valid will Valid will 2000 will revoked 6123a 1997 will is by act tears it up revived only if that s the etc testator s intent must be affirmatively shown otherwise INTESTACY 5 Valid will Invalid will 1997 will 1997 will governs un DRR revoked by act because he is 1997 will not revoked counting on 2000 will because he only revoked it while operating under mistake that there was an alternative plan of disposition Which of these problems can happen to each type of bequest Ademption Abatement Advancement Speci c Y N N Pecuniary N Y Y Demonstrative N Y Y Residuary N Y N Recap the Roles of the various players and instruments involved in various estate plans Entity Creator Legal Title duciary Bene cial Interest Revocable trust Settler Trusteesettler Settler Irrevocable trust Settler trustee Bene ciaries Estate Testatordecedant Personal representative Bene ciaries heirs Special administration Testatordecedant Special administrator Bene ciaries heirs Conservatorship Courtconservatee Conservator Conservatee Temporary conservatorship Courtconservatee Temporary conservator Conservatee Agency principal Agent Principal 31 Pros and Cons of different types of trustees Type Advantages Disadvantages Corporate 0 management experience fees generally 1 of the trust assets annually if it s a stability small trust is might be a little more it will go down as investment expertise the amount in the trust increases there may also be an annual at fee special assets anything other than marketable securities will have special fees will be more than the fee schedule because these entail a lot more work 0 mergers can give rise to complications when two companies combine small trusts corporate trustees don t like these don t make enough money for them not worth it special assets they also don t like special assets too much trouble they prefer liquid assets so they can put them in common trust m common trust mds proprietary mutual md they like these because the cost of running them is the same regardless of the amount in them so they want to put as much in them as possible to spread out the cost of running them make more money the problem is that this isn t necessarily in the best interest of the bene ciary 0 less exible with discretionary distributions Individual 0 lowno fee generally family tension 0 knows family understands the sloppy management they don t really know what family dynamics easier for they re doing him to gure out what type of 0 need successor diSCf ti0f1a139Y diS Efib1139Ei0flS 0 lack of expertise may need to hire professionals should be made Private best of both worlds Worst of both worlds more management experience professional but not as much as a corporate trustee etc 32
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