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Trusts
& Estates Fall 2000 Father Raymond O’Brien Outline by Christopher S. Lee Course Elements – Property Transfers 1) Gift 2) Will Substitutes 3) Intestate - Probate 4) Testate – Probate Gifts 1) No Strings Attached 2) Absolute Transfer 3) Gift Tax, lower than Estate Tax – Not Tested – Encourages gift giving Will Substitutes 1) Dominates as major means of property transfer in U.S. 2) Types of W/S a) IRA’s b) Life Insurance c) Joint Savings/Checking d) Joint House e) Property Assignments Wills 1) Provides for burial at death 2) Addresses Simultaneous Death possibility – Each estate receives individual property. 3) Directs Distribution of Property a. Give to next generation to avoid future taxes b. Generally, don’t leave to parents, otherwise they will have to pay taxes upon their death. 4) Based on a. Survivorship Laws b. Contract Law 5) Benefits Unmarried Couples – “Marginalized Relationship” Living Trust 1) Settlor – Estate Trust 2) Same as W/S 3) Contrast to Probate, which is costly Health Care Directive – Living Will 1) Not the same as a Living Trust 2) No extraordinary means to keep self alive a. Extraordinary i. Survival with respirator ii. Feeding Tube b. Not Extraordinary – Survival without respirator 3) Catholic Laws – Presumption of life with rebuttable consideration, looking at all circumstances. 4) State-Specified actions to take 5) See Also a. State Health Care Directive b. Death with Dignity Groups Durable Power of Attorney 1) Incapacity triggers DPA 2) List specific person as DPA 3) “Springing DPA” – Only when incapacitated a. C/L – POA ceases on Incapacity of Principal b. Springing DPA – Triggers on Incapacity 4) Cal. – Procedure to determine Incapacity 5) May be included in LW&T Health Care Directives 1) Last Will & Testament 2) Durable Power of Attorney Intestate 1) Statutory 2) Not gift, W/S, Testate Succession 3) Probate Estate Includes a. Testate b. Intestate 4) Probate costs in terms of fees, paperwork & forms 5) In 40 states a. Spouse - 1st $200,000 + of Augmented Estate b. Parents – of Augmented Estate (ROI) 6) Marital Exemption - Spousal Inheritance exempt from Estate Tax 7) New UPC – Wife gets Everything 8) Issue & Children Trump Parents 9) PreTermitted Heirs a. See DHL case i. 17 illegitimate kids - $17 million to each ii. All non-marital kids b. Law
in Intestate Succession – All are treated equally c. Cannot assume all children are from marriage. d. NY – Adoption not valid if sleeping with Adoptee 10) Look for valid marriage before benefits. 11) Per Stirpes a. Take by representation b. Take Through 12) If no survivors, property escheats to the state, and goes to a general fund. Doctrine of Advancement 1) C/L – If a significant gift given to a child by a parent, a presumption arises that gift was an advancement and the gift is treated as if is part of intestate share. Child must contribute value if presumption cannot be rebutted. 2) Hotch Pot – Split equally among surviving siblings 3) To eliminate disputes a. Create will, in writing b. Sign affidavit of intent Testate
Succession 1) Witnessed
Will a. Best
to have 3 or more witnesses. b. 48
states require only 2 witnesses. 2) Holographic
Will a. Handwriting
of Decedent b. Dated c. Signed d. Contains
Death Talk
i.
“Upon death, all money goes to…”
ii.
“Everything I have now and forever is yours…”
iii.
H/W could be written on mirror in lipstick 3) Revocation by physical act permitted 4) Hodel
v. Irving a. Inheritance is a Property Right b. Right to Bequeath c. Right to Inherit d. Devolution - # of descendents increases as time progresses e. SC – Property is a 4th Amendment right, and cannot be taken without due process 5) Forced Heirs – Cannot be Disinherited a. Spouse b. Children if not specifically removed – See DHL case 6) Use Trusts to manage large inheritances 7) Taxes – Not on Exam a. Inheritance Tax i. Paid to State ii. Paid by recipients iii. Paid out before recipients receive sum b. Incident of Ownership – Anything over which c. Gift Tax During Life Time – Use Irrevocable Trusts to avoid taxes d. Right to Revoke e. Always send copies, never originals f. 10 – 20 Death Certificates g. Bases i. Fair Market Value at date of death ii. No Capital Gains Taxes for Personal Property iii. Capital Gains Taxes only with Real Estate Restrictions
on Testate Instructions 1) Public
Policy 2) Spouses
and children 1) Public Policy – Balance with Reality a. Waste b. Practicality c. Criminal Statutes d. Examples i. Pets – Inhumane to bury healthy pets with dead. ii. Cremation – Unsanitary to scatter over city. iii. Taxidermist – Health issues iv. Satellite Burial – Permitted v. Pet inheritance – Permitted e. Shapira
v. Union National Bank i. Will leaving property to son only if he marries within the faith by a certain age. ii. Poor drafting, should use carrot approach, property given at: 1. Marriage 2. Birth of child(ren) iii. CT – Testator free to exercise right to practice religion iv. Must be reasonable v. Must have some options available vi. Fraud on estate not permissible 2) Spouses & Children a. Spouse – Check for Legal Marriage i. Ceremonial ii. Common Law b. Economic Partner – Divorce allows sizeable allotment of marital property c. Right of Election i. Wife may trump other claims ii. Wife may surrender option 1. Pre-nuptial Agreement 2. Surviving Spouse Unilaterally decides to surrender right. iii. or 1/3 of Augmented Estate, depending on Jurisdiction iv. UPC Right of Election – Based on Length of Marriage 1. $50,000 + % based on length of marriage 2. 3% per year if more than one year of marriage. 3. 50% for 15 years or more of marriage. d. Children i. Anyone may disinherit a child; but they tend to become ugly contestants after death of testator. ii. See David Margolix – Undue Influence iii. Cannot Divorce Child – See Duke case
iv.
Methods of Disinheritance 1. Kill
the child 2. Effective
Release a. Provided
during lifetime b. Proportional
Consideration 3. Intestate
Inheritance Allocation – so that child loses nothing if estate were
distributed intestate EXAM: If Child Lacks Standing, then doesn’t
qualify for Intestate Inheritance Allocation Transfer of Decedent’s Estate 1) Probate a. Intestate b. Testate 2) Non-Probate a. Gift b. Will Substitutes i. POD – Payable Upon Death ii. IRA, Life Insurance 3) Personal Representative a. Family b. Friend c. Selected by Creditors d. Fee – 6% of Probate Assets i. Bequest – Inheritance Tax ii. Fee – Income Tax iii. POD accounts are NOT part of probate fees iv. Billable hours may be permitted by CT if 1. Previously agreed upon before death, and 2. Mentioned in LW&T e. Real – Devise f. Bequeath – Legatee – Personal Property 4) Opening Probate a. Amass death certificates b. Go to local probate office of decedent’s domicile i. Death certificate ii. Will naming PR or Next of Kin c. Bond d. Notice in local Newspaper i. Publication ii. 6 weeks iii. Use least expensive newspaper iv. Keep copy e. Type Form i. Value of Property ii. Property Itemized iii. Beneficiaries – Names & Addresses iv. Make copies f. Letters Testamentary – Permits account closures, transfers,… g. Open Escrow Account i. Pays expenses ii. Receives distributions from POD’s iii. FDIC Insured and Interest bearing h. Approximately 9 months Later i. CT – Final Accounting ii. Assets – Bills = Remainder i. Approximately 1 year – Completion j. Ancillary Jurisdiction i. Real Estate in other jurisdictions ii. Domicile controls probate for Personal Property iii. Situs controls probate for Real Estate iv. Probate happens where ever land is located k. Timeframes i. Up to 3 years to probate estate ii. Up to 1 year to contest estate iii. Claims against settled estate decided in Equity CT’s l. Appraisers – Wexler recommended i. Keep Rolodex ii. Consignment iii. Reputable 5) No probate if Spouse inherits entire estate, but still required to pay debts. Intestate
Succession 1) Prototype/Schema 2) Applies to all states 3) Majority of Property transfers in U.S. are W/S 4) C/L – Requires intent to be married 5) Ask
Questions: a. Is
there a Spouse? b. Are
there Parents? c. Are
there Issue or Children?
i.
Issue – Inclusive 1. Children 2. Grandchildren 3. Great
Grand Children…
ii.
UPC – Decedent = Issue 6) If
there are parents, siblings, or issue, only they take. 7) If
there are no parents, spouse or issue, lineal descendents take 8) Old
UPC a. Spouse
gets first $200,000 + of the Augmented Estate (AE) b. Remaining
AE goes to
i.
Issue; and if no issue, then to
ii.
Parents
iii.
Pregnancy 1. Counts
as issue as long as survives 5 days after decedent 2. Issue
in gestation counts as issue & trumps 2 parents
iv.
Collateral – Brothers or Sisters
v.
Lineal – Nieces or Nephews 9) Questions
to ask: a. Is
there a surviving spouse? – If so, make distribution and give % b. Is
there issue? – Then issue trump parents c. Are
there Collateral? d. Are
there Grandparents? e. Are
there Grand Uncles/Aunts? f.
Continue process until escheats to estate Variations of Rules 1) UPC Old – 1969 (Prof. O’Brien prefers) 2) UPC New – 1990 3) Next of Kin (NIK) 4) Strict – 1887 UPC Old 1) 1st
line of survivors 2) Per
Capita Distribution 3) Then
Per Stirpes distribution at each succeeding line Per Capita – Take in of by myself Per Stirpes – Take through someone Laughing Heirs – States cut off distribution at certain point Problem – similarly related people are not treated the same UPC New 1) 9
States 2) Mostly
in West, Newer states 3) Fairer
System 4) Treats
similarly related people equally 5) Process a. Go
to 1st Line with survivor b. Per
Capita Distribution c. Then
Per Capita Distribution throughout Strict 1887 1) Originally used in Cal.; no longer 2) Per Capita/Per Stirpes Distribution on the 1st Line, regardless of surviving issue Property 1) Separate Property 2) Community Property 1) Separate Property a. Types i. Gift ii. Devised iii. Bequest iv. Maintained as separate property by 1 of 2 spouses b. Property obtained prior to marriage is separate property c. Property obtained during marriage is community property, unless otherwise specified d. Electing against a will in C/P state, spouse gets own property accumulated before marriage, and of C/P property e. Benefits do not travel for i. Civil Unions ii. Reciprocal Beneficiaries Simultaneous Death 1) Uniform Simultaneous Death Act no longer applicable 2) Burden of Proof to show X survived Y 3) UPC – 5 Day/120 Hour Rule 4) If
there was Simultaneous Death, then distribute property as if two did not know
one another. Shares of Decedents 1) Old UPC - Negative Disinheritance – Give son $0, must distribute to another 2) New UPC – Permits Negative Disinheritance 3) Laughing Heirs – Defeats speedy distribution of property 4) Half Blood – UPC treats whole and half bloods equally Children 1) Posthumous Children – Born after decedent dies 2) Any child in gestation has right of succession 3) Child dying w/in 5 days/120 hours – Apply Simultaneous Death Rule 4) UPC – Natural Parents & Step Parents have inheritance rights; promotes adoption 5) MD – Only Step Parents have inheritance rights 6) Foster Parents – Paid by state, no inheritance rights 7) Non-marital children may inherit equally with marital children. Problem – Determining paternity 8) Step-Parents inherit if there are no blood relatives 9) Cal & PA a. Irrebuttable Presumption b. Best Interest of Child O’Neal
v. Wilkes 1) Equitable Adoption – NC, not GA 2) Inequitable Estoppel 3) History – Evil relative with limited contact with child. Child raised by “relative” but never formally adopted. 4) GA SC – No K between natural parents and adoptive parents 5) Dissent
– Look to actions of adoptive parents; Equitable Adoption – parent-child
relationship appears to exist for a period of time although formal adoption
never occurred. C&C
Evidence. Hecht
v. Superior Court (Cal.) 1) Cal. – Sperm is property & may be bequeathed 2) May have non-marital child even after death of testator Advancement Doctrine 1) C/L – Equality among children 2) Substantial gift to child should be considered Intestate Succession 3) BOP to show gift & not advancement 4) Advancement – Give it now, not later 5) Gift – Given w/o regard to time frame 6) Only applies in Intestate Succession 7) Donor’s intent – Wide range of evidence admitted 8) New UPC a. Equality among Individuals (not parent, child) b. Look for contemporaneous writing Transfer of Expectancy 1) Ex-wife may be offered and accept a future LW&T estate transfer in lieu of child support. 2) CT – Effervescent Expectations; future Testate distributions may not materialize; Child support is real 3) Permissible Transfers of Expectancies a. Exchange for Services – Nursing home services in exchange for future inheritance b. Mutual exchange – unilateral exchange not permitted Managing Child’s Property 1) Guardianship – Caretaker for child 2) Custodian, Conservator – Caretaker for property 3) Trust Letters 1) Permitted to appoint guardian 2) Not permitted to revoke will 3) Not permitted to appoint PR Bars to Succession 1) Intentional Felonious Assault 2) May not profit from own wrongdoing 3) Intentional Assault = No Inheritance 4) CT’s create constructive trust and award estate to relative 5) UPC - Applies regardless of criminal conviction 6) EXAM: Argue C/L to bar W/S succession 7) Bars to Inheritance a. Domestic Violence b. Abandonment c. Adultery d. Abuse Disclaimer – Umbrella Phrase 1) Release a. Don’t want anything from estate; effective disclaimer during lifetime of decedent for consideration b. Pre Nuptial – Most common form of release c. Gives up right to contest will d. Elements i. Fair ii. Writing iii. Equitable Consideration 2) Renunciation a. After Death b. W/in 9 months of date of death or probate of will; heirs renounce anything he would take c. Helps
with tax planning d. No Consideration e. Troy
v. Hart i. Certain individuals may not renounce or release ii. Medicare recipients may not refuse funds iii. Medicaid recipients may spend down to receive funds iv. Assignment of expectancy makes funds non-releasable 1. Between 3rd party and expectant heir 2. Fair & Equitable consideration required v. Cannot constantly renounce & release vi. Beware of renouncement and release in: 1. Bankruptcy 2. Tax Liens Right of Election 1) Must be personal to holder 2) Gov’t cannot force right of Election Types
of Wills 1) Holographic a. In
handwriting of Decedent b. Dated c. Signed d. Holographic
UPC Old & New
i.
Material portions and signature in handwriting of
decedent
ii.
No Date Requirement e. In conflicting Wills – None are contested f. Permits form-based wills 2) Witnessed
Will a. Witnessed
Signature b. Presence
i.
Witnesses saw testator sign; AND
ii.
Testator saw witnesses sign; AND
iii.
Witnesses saw each other sign. c. Logical
End
i.
Signed at logical end of will;
ii.
Not signed at physical end of will d. Substantial
Compliance
i.
Attempt to substantially comply with will should
permit validity
ii.
Takes away from harshness of rules
iii.
Ex) 2 of 3 witnesses sign e. Line of Sight Test f. Conscious Presence Test g. 48 States & DC require 2 witnesses for validity h. NH & LA Require 3 witnesses i. SOLUTION: Always have 3 witnesses j. Don’t use felons or interested parties are witnesses Intentionality 1) Age a. 18 or 21 minimum age for will b. If younger, will is not valid c. Key – Age at time of Ratification 2) Testamentary Capacity a. Deminimus Test b. Can be placed in mental institution and still write valid LW&T c. Lack of Testamentary Capacity defeats will – Goes to Intestate Distrib 3) Undue Influence a. Must affect mind of testator b. Presumption if beneficiary is one or more of the following: i. Priest ii. Attorney iii. Doctor iv. Guardian v. Relationship of Trust c. Delusion i. Form of Undue Influence ii. May overcome with rational bases for delusion 4) Fraud a. Intentional misrepresentation of material fact upon which parties rely on b. Rare 5) Mistake a. But For Mistake – would have received portion of the estate b. CT’s don’t like to rewrite wills 6) Primary Intent - Fixes problem areas & formalities Pre Mortem Probate (PMP) 1) Formality a. Rebuttable presumption b. Attestation Clause c. Permitted in 20 states 2) Self-Proving Affidavit – Separate paper attached to will Containing: a. Witness Signatures b. Notary Public Seal c. Testators Signature 3) Makes all formalities rebuttable 4) Protects against Presence element failure 5) Intentionality 6) Allows for Irrebuttability of Intentionality 7) Testator goes before probate clerk 8) Probate before death Undue
Influence 1) Emphasis on UNDUE a. Influence is okay b. Undue Influence is BAD 2) KEY: Mind of Testator a. Decedent’s
mind is key b. Influencer’s
mind is not key 3) Burden
of Proof always on Contestant a. Unless there is a presumption of UI b. Arises in i. Surprise Circumstances
ii.
Confidential Relationships 1. Priest
– Penitent 2. Attorney
– Client 3. Doctor
– Patient 4. Guardian
– Ward (legal relationship by CT) 5. Trust
Relationship a. Blind Trust b. Accountant c. Subjective Factors 4) Exam a. Undue b. Affecting
Mind c. BOP
on Contestant d. Unless
there is presence of UI e. Based
on Confidential relationship f.
Presumption of UI is rebuttable if the mind of testator
is free of UI g. Fraud
i.
Typical – Child Contests
ii.
Incentive v. Deceit h. Mistake
– Primary Intent Suspicious Circumstances 1) Testator has been “marginalized”; AND a. Infirmed b. Old Age 2) Shift in Beneficiaries – Massive Shift 3) Rebuttable level of proof 4) Preponderance of the evidence – Lowest level 5) BUT if more than one relation benefits then use Clear and Convincing Evidence 6) BOP on contestants unless in suspicious circumstances 7) Mind of Testator is Key No Contest Clauses 1) Totally ineffective; unless something significant is left 2) Gets attention from non-attorneys Bequest to Attorneys 1) Permitted in lieu of fees 2) General rule – don’t leave anything 3) Potential Undue Influence scenario 4) Cal. – Non-relative attorneys get nothing 5) Refer testators to another attorney Attorneys as PR’s 1) Permitted with Disclaimer 2) 6% of net Probate of Estate 3) Performed as job 4) Potential UI claim can be overcome by disclaimer 5) Alternative – Use Trustee Tortious Interference with an Expectancy 1) Contest a. Intentionality b. Formality 2) Doesn’t require standing 3) Doesn’t have to be Intestate Heir 4) Not barred by Tort Formalities 1) Presence
Requirement – 99% of time a. Testator signed in presence of witnesses i. Witnesses saw testator sign ii. Testator saw witnesses sign iii. Witnesses saw each other sign 2) Reasons for Formalities a. Provide for safe execution of will b. Do the best possible 3) UPC – Liberal statute 4) Conscience Presence a. Phone b. Video c. Sight Test d. Will Revocation by proxy e. Acknowledgement via Phone Okay f. Acknowledgement via Signature Okay 5) UPC a. Writing b. Signature by Testator c. 2 witnesses sign & saw d. NO presence requirement 6) Presence a. Majority – Sight b. Minority – Conscious Interested Witnesses 1) Takes more under will than under intestacy or prior will 2) UPC
– No Interested witnesses 3) Interested – Takes more 4) Standing – Takes Less 5) Key: Don’t use interested witnesses 6) Approaches a. UPC – No Interested Witnesses Problem b. Old Cal. Code – Interested witnesses have no legal status c. Statute – Witnesses loses what he would take under will, but will remains valid Formalities
– Strict Approach 1) In
re Pavlinko’s Estate 2) Husband & Wife accidentally sign each other’s wills 3) CT
– does not allow correction of mistake – Strict rules applied 4) Conservative approach 5) Dissent – Look to intent Formalities
– Primary Intent Approach 1) In
re Will of Roney 2) Forward thinking Court 3) Harmless
Error (UPC) = Substantial Compliance (Langbein) 4) Clear & Convincing Evidence 5) Mistake
– Primary Intent 6) Self-Proved Will – Pre Mortem Probate – Moves BOP Holographic Wills 1) C/L Approach a. Valid in Jurisdiction; AND b. Handwritten, Dated & Signed 2) UPC a. Material portions in handwriting; AND b. Signed (no date or witnesses required) 3) Most
litigation – Was it a love letter or a Holographic Will 4) Strict Approach – If no phrase “LW&T” handwritten, then doesn’t contain testamentary intent, and fails. 5) Will with scratch out a. Strict – No property conveyed b. Testamentary Intent – No additional gain beyond what was originally typed c. UPC – Permits changes Dependent
Relevant Revocation 1) Intent to revoke $50,000 was dependent to give $300,000 2) Kimmel’s Estate a. Love Letter v. Holographic Will b. Kid’s argue only love letter; seek probate c. CT – favors beneficiaries of natural will, family Revocation of Wills 1) Physical Act a. Tearing b. Burning c. Obliterating d. O’Brien – Cross out last page and hand sign “I revoke last page” e. Lost Will – Often occurs i. Nursing Homes, fires, yard sales ii. Physical Act Revocation iii. RULE: IF a will may be traced to a testator and at the date of death can’t be found, then the presence of physical act revocation presides and may be rebutted by a sliding scale of evidence. iv. Rebuttable – No act to destroy will v. Sliding Scale – Easier to keep will valid 2) Subsequent Instrument a. Express – “I revoke all wills made by me” b. Implied – Can’t give same thing to different people. Only final LW&T valid c. EXAM: Can’t revoke will unless it was
originally valid. 3) Revocation by Operation of Law a. Wills Act – Will revoked at marriage b. C/L i. Marriage & Birth of Child ii. Replaced by Pretermitted Heirs & Spouse(s) iii. Significant change of circumstances; Goes from poor to rich… c. UPC – Divorce i. Only portions in favor of former spouse & former spouses relatives no longer relatives ii. Issues 1. Applies to W/S 2. Separation – Still considered spouse iii. Parts 1. Separation – Bed & Board 2. Final Decree iv. Moral – Upon separation, sign release & post nuptial agreement v. Complete property settlement entered into after or in anticipation of separation or divorce operates as a disclaimer of the spouse’s elective share. Revival 1) New
Will 2) Republication
by Codicil 3) Revoke
the revoking Will a. C/L – Automatic Revival b. Ecclesiastical Approach – Non Automatic c. UPC Approach – Same as Ecclesiastical approach, Use Intent/Evidence 4) Dependent
Relative Revocation a. Mistake
ignored and revoked will admitted to probate b. Judicial
remedy for result that does not conform to testator’s actual intent, but
attempts to find a preferred result c. Contingent on Probate of Subsequent Instrument d. In Subsequent Instrument not probated, revives physical act revocation 5) Re-Execution
of the prior will – Bad Idea Revocation Review 1) Physical Act a. Lost Will b. UPC – No touching required c. Other states, must touch writing 2) Subsequent Instrument a. Express b. Implied 3) Revocation by Operation of Law a. Wills Act – Revocation at marriage b. C/L – Marriage & Birth of Child c. Significant Changes d. Divorce or Annulment – Primary method for ROL Revival Review 1) New Will – Preferred Method 2) Republication by Codicil a. Marriage or Remarriage b. Separation/Divorce 3) Dependent Relevant Revocation – EXAM Possibility a. Intent to revoke LW&T conditioned on subsequent LW&T b. Modern – Use Mistake 4) Revoke Revoking Will – If 2nd will lost, previous will automatically revives 5) Re-Execute a. “Going to Hell” b. Creates Havoc for takers UPC 2-507 1) Revoke in Whole = Revoke in Part Power 2) 3) Presence for Proxy Signature permitted/required 4) Proxy to destroy & execute will okay with presence 5) Partial revocation by physical act Probate of a Lost Will 1) May Use copy of lost will 2) Secretary’s notes 3) Person’s memories 4) Thompson
v. Royal a. Mistake & Primary Intent requires Clear & Convincing Evidence b. Substantial Compliance requires Beyond a Reasonable Doubt 5) Carter
v. 1st United Methodist a. Testator dies when updating 2nd will b. DRR – Physical Act Revocation c. Can’t revoke old will if new will can’t be probated d. Mistake – Didn’t realize 2nd will couldn’t be probated e. Revival of 1st will 6) Estate of Album a. DRR b. Testator would not have revoked 2nd will if she didn’t know it would not have revived 1st will Components of a Will 1) Incorporation by Reference a. Refers to the documents outside the will b. “in existence” 2) Legal List – UPC 2-513 a. Does not require existence b. Requirements i. Writing ii. Signed; AND iii. Can be changed frequently c. List of items going to heirs d. Work in Progress e. Only applies to Personal Property f. Does not apply to money or real estate 3) Independent Significance a. Ex) X gets all stock, including splits b. Ex) Auto possessed at the date of death Integration of Wills – All pages seen as part of will predated 1) Republication by Codicil 2) Will takes Date of Codicil Incorporation
by Reference – UPC 2-510 1) Document
may be made part of the will for certain purposes 2) Any
sort of document may be incorporated 3) Item
must be in existence at execution of will 4) “Writing in Existence” 5) Clark
v. Greenhalge 6) Cannot incorporate what is not in existence 7) Can’t piggy back without a valid pig Legal Lists 1) UPC 2-513 2) Must be Signed 3) Johnson
v. Johnson a. NY – If will lacks proper formalities, codicil and holograph cannot make will valid b. Dissent – Not valid codicil or will c. See also Incorporation by Reference Independent Significance 1) “At my death” 2) “Given at death” Contracts related to Wills 1) Rule: Will always probated if valid 2) K is remedied as a creditor action Analytical Principle 1) Visualize Occurrences 2) Spot Issues 3) Area 3 – Vesting, Contingent, Defeasance Via v.
Putnam 1) Stepparent & 2 Kids 2) Pretermitted Spouse – UPC = $100,000 + of Estate 3) CT – Permits pretermitted spouse & Intestate Succession Construction of Wills If a will is valid and not using it (corporate, legal significance,…) what can affect the writing of the will? 1) Plain Meaning Rule – If language is plain, cannot admit extrinsic evidence to alter meaning. a. Clear Statement b. Clear & Convincing evidence to defeat primary intent, mistake 2) Latent Ambiguity a. Extrinsic Evidence permitted b. Used when more than one definition results from LW&T 3) Patent Ambiguity a. Extrinsic Evidence permitted b. Mistake on Instrument c. Harmless errors fix formalities d. Uncertainty on the face of the will Revoking a Will 1) Physical Act 2) Subsequent Instrument 3) Operation of Law Correcting Mistakes 1) Primary Intent 2) Clear and Convincing Evidence Erickson
v. Erickson 1) Will written days before marriage, with clear indication that marriage is pending. 2) Rule: If scrivener makes a mistake which affects the intent of the decedent, then extrinsic evidence may be introduced. 3) “Voodoo” Decision – Revocation by Operation of Law nullifies will Latent
Ambiguity permits extrinsic evidence Mistake
permits primary/probable intent Formality
= Substantial Compliance or Harmless Error Plain Meaning Rule – What may be introduced 1) Strict - Nothing 2) Voodoo – Erickson case 3) Latent/Patent Ambiguity 4) EXAM: Primary/Probable Intent Antilapse 1) If someone in a valid will makes a bequest to a relative and the relative predeceases the testator, survived by issue, the issue take per stirpes. 2) If not survived by issue, distribution by Intestate or Residuary Clause 3) Relative – Anyone related by blood 4) Not Relative – Spouse 5) Think Horizontally 6) Relatives must die in 1st or 2nd timeframes 7) UPC- Antilapse applies to W/S; Also permits Revocation by Operation of Law 8) If testator requires “survivorship” antilapse does not apply 9) Powers of Appointment – Protected by antilapse if survived by issue 10) Checklist a. Will b. Relatives c. 1st & 2nd timeframes d. Class Gift e. Issue f. Will Substitute g. Powers of Appointment 11) Notes a. Cannot have antilapse unless you have a valid will or W/S b. Predeceased must be relative of testator – AND NOT Spouse c. Check timeframes – 1st and 2nd d. Antilapse applies to class gifts – classes must be capable of both increasing and decreasing e. Issue – includes in gestation, adoption f. Issue – Does not include marital stepchildren g. W/S – Antilapse applies (IRA’s, 401K) h. Powers of Appointment – Antilapse Applies; Special & General i. Vesting – Only in Area 3 Cases 1) “Living brothers & sisters” – Not a class, therefore A/L does not apply 2) Jackson
v. Schultz a. Rule in Shelley’s case – When making a bequest AND followed by “and heirs”; the “and heirs” do not take the remainder. Principal has a fee simple only. Heirs receive nothing. b. X and Heirs X has fee simple only. Heirs get nothing c. If A/L does not apply, property passes intestate d. If there are no issue or relatives, property escheats to the state e. Voodoo Law decision 3) Dawson
v. Yucus a. Individual v. Class Gift b. Individuals do not take. Only classes take c. A/L does not apply, not a relative Surviving Spouses 1) General Public Policy – Criminals & Felons cannot inherit 2) Protection of Children – Including Pretermitted heirs 3) Protection of Spouse/Pretermitted Heirs – Right of Election 4) Gift, devise, or bequest – Separate Property 5) Stock portfolio – Separate property if established prior to marriage – Growth belongs to the owner, not the spouse 6) Transmutation – Transmute separate property into community property assets 7) Reimbursement – Only for amount invested. For use in separate property 8) Community Property – During marriage, unindividually owned by both parties Community
Property 1) Divorce 2) Death a. Intestate b. Testate 3) Death in Community Property State a. Must have lawful marriage b. Right to contest or “Elect” against will c. Elective Share – 50% of Community Property i. Wife receives 50% of Community Property ii. Others receive 50% of Community Property & Decedent’s share d. Elective share is less than Intestate share e. Spousal Exclusion = 100% Common
Law Property 1) Divorce 2) Death a. Intestate b. Testate 3) Separately owned property 4) Equitable distribution of Property – MD Bar Exam 5) Restitution or Rehabilitation Alimony – Money to eat and live, then spouse should establish own career 6) Testate – Election a. $50,000 + 3% * Number of Years married b. Right of Election not good in C/L states for women c. Right of Election Only good for Probate Assets, not Divorce Assets 7) Intestate – All given to surviving spouse, if all the children are from the union a. Parents – Receive remainder after widow(er) receives $200,000 + Remainder b. Children from prior unions receive $150,000 + Remainder 8) Key – System Works 9) Augmented Estate to provide true equity by mirroring Community Property System Social Security & Pension Funds 1) Based on who is married at the date of death. 2) The surviving spouse takes everything 3) Children from previous wives take nothing, unless there are dependent children under 18 Family Allowance 1) Disabled Spouse 2) Support for Children or Until Probate completed Augmented Estates 1) C/L state attempting to provide for same property in Community Property states 2) Parts a. Probate Estate – Box 1 i. Intestate ii. Testate b. Reclaimable Estate – Box 2 i. Retains right to reclaim ii. Life Estate iii. Will Substitutes c. Absolute Gifts – Box 3 i. Accrued within 1. < 2 Years; and 2. > $10,000 3) Rules a. Deplete Box 1 before Box 2 b. Assume Pro Rata Distribution c. Cannot take anything away from Gift d. Cannot take from A/E & Will at the same time 4) 18 states use Augmented Estate System 5) DC & MD do not follow, although MD may consider in January 2001 6) Illusory Transfer a. Only permitted in Reclaimable Estate – Box 2 b. Pay X for life & one other not a Spouse c. “Illusion” of transfer d. Included for purposes of Election e. Will Substitute – Treated as Probate asset for Election f. Probate – Subjective, may be treated differently 7) Testamentary - Defines W/S as testamentary to pull property into Probate Estate to create more assets for election 8) Reimbursement a. One spouse transfers property without approval of other spouse. b. Spouse may be reimbursed. Elective Share 1) or 1/3 + $50,000 + % based on length of marriage 2) Rationiale a. Married couple contributes to marriage b. Election on property transfers to 3rd party c. Helps spouse get value of transferred property 3) States without A/E & Equitable Divorce, spouse receives more in divorce than death of other spouse 4) Right of Election personal to holder. 5) May not use Power of Attorney to exercise Election, unless on public assistance 6) Some states permit guardian to exercise Right of Election if it is in the best interests of the surviving spouse 7) Cannot Elect on Prenuptial agreement a. Effective Release b. Disclaimer Estate Tax 1) Personal Deduction a. $675,000 goes to Children untaxed b. Remainder goes to Spousal Deduction untaxed 2) Life estate qualifies for marital deduction 3) Supports dependency of Women 4) Surviving spouse MUST accept life estate In re
Estate of Cross 1) CT – Best Interest Rule, Allows Right of Election 2) Right of Election personal to Individual, Unless recuperating on public assistance. 3) Disclaimer negates Right of Election 4) Solution – Post Nuptial agreement waiving Right of Election In re
Estate of Cooper 1) Domestic partners are not permitted Right of Election 2) Vermont and Hawaii have new laws a. Hawaii i. Equal benefits for all couples married ii. Reciprocal Partnership iii. Intestate Succession iv. Right of Election v. Pretermitted Spouse vi. Reciprocal Beneficiaries vii. Register marriage, Pull register for divorce b. Vermont i. Common Beneficiaries Clause ii. Civil Unions iii. All benefits of married couples available to partners iv. License, priest, ceremony, divorce Property Subject to Elective Share 1) Illusory Trust – Voodoo 2) Issue: Reclaimable Estate may be incorporated for purposes of Election Election v. Intestacy Shares 1) Election - $50,000 + % of Augmented Estate 2) Intestacy - $200,000 + of Augmented Estate Prenuptial Agreements Valid if 1) Fair – Provides for more as marriage goes forward 2) Full Disclosure 3) In Writing 4) See Uniform Prenuptial Agreement Act – Must be in writing 5) Waiver = Disclaimer 6) Releases require Consideration In re
Reynolds 1) Minute elements may be moved from Gifts (Box 3) to Reclaimable Estate (Box 2) 2) Permits taking with A/E 3) Creates trust with Remainder 4) Can be avoided with Prenuptial agreement 5) Trust tries to avoid taxes, but ruling creates tax burden instead Right of Election 1) In C/L states, the surviving spouse may elect against the LW&T 2) Options for Election a. Pretermitted Spouse b. Contest the will c. Destruction of the Will 3) Elective Amendments a. of Augmented Estate - Majority b. 1/3 of Augmented Estate – Majority c. $50,000 + % of Augmented Estate based on length of marriage – UPC Intestate Succession 1) C/L – UPC New – Spouse takes everything if all the children are theirs 2) If he has children from a prior marriage - $100,000 + Augmented Estate 3) If she has kids from a prior marriage - $150,000 + of Augmented Estate Intestate Succession & Community Property 1) Spouse has own property 2) Spouse takes Community Property 3) C/L rules to divide deceased spouse’s property a. Right of Election; AND b. Augmented Estate Property takes status of Marital Domicile Situs characterizes Real Property Marital Domicile characterizes Personal Property Property where acquired maintains character of property When one spouse dies, law of marital domicile controls New UPC
Pretermitted Spouse - $150,000 + of Augmented Estate 1) Designed to avoid unintentional failure of a testator’s natural and probable intention of including all descendants. 2) Interpreted liberally in favor of the omitted person 3) Permits taking of Intestate share Azcunce
v. Estate of Azcunce 1) Will takes date of codicil, if added or republished 2) Child loses because pushed out of will by codicil date 3) Child sues lawyer, but lacks “privity” 4) Privity – only decedent can sue lawyer 5) Estate can sue for negligence and damages 6) New UPC – Pertermitted heirs get Per Capita Distribution Trusts 1) Parties a. Settlor – Creates Trust b. Trustee – Owns legal Title c. Beneficiaries – Owns Equitable Title 2) Trust must have a purpose 3) Beneficiaries a. Private Beneficiaries – Subject to the Rule Against Perpetuities b. Charitable Beneficiaries c. Honorary Beneficiaries i. Pets – Covered under RAP ii. Cemeteries – Public interest, Exempt from RAP 4) Res = Property 5) Trustees hold legal title for the benefit of beneficiaries 6) Beneficiaries have equitable title enforceable under a trust purpose such as care, education,… 7) Structures Permitted a. Settlor/Trustee Beneficiaries b. Settlor Trustee/Beneficiaries (result back to settlor) c. Settlor Trustee Beneficiaries d. 2
persons required to create a trust e. Trust
will not fail due to lack of trustee 8) Structures not permitted a. Settlor/Trustee/Beneficiary – all one person b. If husband & wife are S/T/B, and one dies, trust is invalid Revocable Trusts 1) Settlor retains rights to revoke 2) Provides control over assets 3) In most states, unless there is an express revocation, the trust is automatically irrevocable 4) Inter vivos trust 5) Will Substitutes & Dispositive Instruments on Settlor’s death Irrevocable Trust Benefits 1) Tax Advantages 2) Cannot be used in Augmented Estates Revocation 1) Trusts cannot be ripped up and destroyed like a will 2) Trustee tends to have multiple copies of trust agreement 3) Cannot revoke an Inter vivos trust by physical act 4) Can revoke an Inter Vivos will by operation of law Marital Trusts 1) Impacts woman’s rights 2) Life Estate for spouse 3) Qualifies for IRS spousal exclusion 4) a.k.a. – QTIP Trust Trust for Incompetent Persons 1) Important – may possibly drain trust of all assets 2) Should compartmentalize trust based on number of beneficiaries 3) See Also – Spend Down Trusts Trusts for Minors - $10,000 per person per year Dynasty Trusts 1) For issue, until issue runs out; and then to X when issue runs out. 2) MD, DE, ND, WI – Abolished RAP; permits Dynasty Trusts 3) In RAP sates, dynasty trusts are not permitted Discretionary Trusts 1) Most Commonly used 2) Discretion of Trustee to disburse funds Spendthrift Clauses 1) Type of discretionary trust 2) If assets assigned…Trustee is not required to pay 3) Tort victims, and other public policy matters trump Principles to Investment 1) Return on Investment – Rate of Return 2) Security 3) Liquidity Intent to Create a Trust 1) Was there intent to create enforceable duties? 2) Gift v. Trust 3) Latent Ambiguity equivalent to Percatory Language 4) Extrinsic Evidence 5) Clear & Convincing Standard 6) Key: Has there been an establishment of enforceable duties? Unthank
v. Rippstein 1) “bind my estate” indicates gift; no trust 2) If established at death, then it is a will 3) Trusts must be established at life 4) Proof of holographic or witnessed will, may create testamentary trust Resulting Trusts 1) By Operation of Law 2) Contrast with Reversion = Future Interest 3) Beneficiary dies – Results to estate 4) Purpose of Trust accomplished – Results to estate 5) Constructive Trusts - Give estate to rightful persons under equity a. Bad Acts b. Unjust Enrichment c. Adultery d. Domestic Violence e. Elder Abuse Brainard
v. IRS Commissioner 1) Cannot have valid trust unless property exists at the moment of creation 2) Trust must be formed during life 3) No property was ever ascertained 4) “I’m going to make money for you” doesn’t identify property 5) Must identify property in trust 6) Trust created when identified on books 7) Totten Trust – Similar to W/S a. Settlor owns money until date of death b. Settlor pays taxes on account c. Beneficiary receives money after Settlor’s death Speelman v. Pascal – The Pygmalion Case 1) Contract rights are enforceable to create a trust interest in the future 2) Elements
needed to create a trust a. Property b. Present
Transfer c. Beneficiary d. Settlor Grantor Trust – More control by grantor. IRS views as income of grantor, not grantee Oral Trusts 1) Created during life, or in LW&T, affecting Land 2) Deed/Will doesn’t affect Oral Arrangement 3) Inter vivos or Testamentary 4) Involves real estate & Dispute over real estate 5) Issue Spotting a. Land – Real Property such as ranch, gas station, apartment,… b. Valid Instrument – Deed/Will c. Ambiguity i. Permitting introduction of oral arrangement ii. “to do as agreed to” d. If not Statute of Frauds Jurisdiction – then requires Clear & Convincing Evidence e. Statute of Frauds Jurisdiction i. Created writing
ii.
Manifested and Proved Writing 1. Concurrent
with ownership – Evidence 2. Always
Concurrent with will 3. Not
always concurrent with deed 4. Interest
must be concurrent with evidence f. Constructive Trust i. Relationship ii. Unjust Enrichment iii. Confidential iv. Equity - Fairness v. Rebuttable with Clear & Convincing Evidence Discretionary Trusts 1) Contrast with Mandatory Trust – specific amount paid to beneficiary a. Ex) $1 million in trust, income to be paid… b. Discretionary – income OR principle to be paid… 2) Affirmative duty of Trustee to inquire about B’s needs Spendthrift Trusts 1) Trustee may withhold income and principal may not be attached, garnished, or assigned. 2) Honor debts v. Needs of Beneficiary and Intent of Trust 3) Discretion on Trustee to withhold funds 4) Spendthrift trusts are valid unless Public Policy is violated 5) Public Policy Violations a. Alimony b. Child Support c. Medical emergency assistance d. Federal Tax Liens e. Self-Settled trusts f. Necessary Support g. Food, shelter, clothing 6) Settlor owns money – Driving Force behind Spendthrift Trusts 7) Pension Trusts covered under ERISA follow same general rules Modification
and Termination of a Trust 1) Settlor
terminating trust may only do so if retains right to revoke AND all
beneficiaries agree to termination.
Unascertainable beneficiaries cannot revoke. 2) Trustee
may terminate trust if settlor has power to distribute principal 3) Beneficiaries
may terminate trust only if all beneficiaries agree with settlor OR if the
material purpose has been accomplished Changing Trustees 1) Trustee has not produced income 2) Material Breach a. Needs of Beneficiaries not met b. No Investment c. Lack of Cooperation d. Senility/Unfit e. Completed Performance Will Substitutes – Non Probate Transfers 1) Something given away during lifetime 2) Established during lifetime 3) Transferred during will or IV Trust 4) Valid K – Payable on Death 5) UPC New permits A/L to be applied if W/S transfer fails 6) UPC – Revocation by Operation of Law applies 7) Cook
v. Equitable Life a. Revocation by Operation of Law does not apply to W/S b. ROL applies to divorce & LW&T c. Should have sought release at divorce/separation d. ROL = Divorce Multiple Party Accounts 1) Totten Trust a. S/T B b. Revocable c. Settlor’s creditors can seize assets d. Beneficiary’s creditors cannot seize assets e. “baby trust” – Not real trust 2) Common for elderly to establish for younger issue Joint Tenancies 1) Same as multiple party accounts 2) W/S rules apply 3) In Community Property Juris. – No Tenancy by the Entirety Revocable Trusts = Living Trusts 1) Reclaimable Estate 2) Gross Estate for Estate Tax Purposes 3) Most people use this to avoid probate 4) Forbes
v. Williams a. Forbes buys stock as trustee for Williams b. CT – Valid W/S c. Revocable trust not at issue d. Available under A/E e. Trust payable at death f. Established during lifetime g. Valid IV Trust when i. Revocable; AND ii. Agreement signed POD 5) In
re Estate & Trust of Pilafas a. Trust cannot be revoked the same way as a will b. LW&T Revocation Options i. Physical Act ii. Substitute Instrument iii. Revocation by Operation of Law c. Trust – Requires separate, specific method to revoke d. Trust
Revocation
i.
Settlor may revoke trust if he retains the right
ii.
Assume no revocation instrument – may permit Physical
Act Revocation
iii.
Revocation Clause = Intention
iv.
No Revocation Clause
Revocation Intent
v.
Intent Matters in IV Trusts
vi.
Intent less important in LW&T
vii.
New UPC – Permits ROL in W/S
viii.
New UPC – Permits A/L to W/S 6) Wills IV World a. IV Trusts consider Intent b. LW&T – Intent is of limited significance c. CT seeks means to preserve trust for children 7) Once a means of revocation is established, then that is the only means to revoke a trusts 8) Cannot borrow wills revocation when intent/revocation clause is included 9) Therefore include other existing means to revoke trust 10) EXAM: IV Trust cannot be revoked by
LW&T options UNLESS Settlor agrees, OR Statute has become applicable
(UPC). State
Street Bank v. Reiser 1) If you have right to revoke a W/S, then Creditors may seize those assets 2) May give away assets, but cannot defraud creditors 3) Similar to Spendthrift Trust 4) S/B/B T 5) With revocable trusts, assets can be used to pay creditors 6) “Assets held under convenience” 7) Public Policy permits some parties to collect a. Child Support b. Alimony 8) Settlor may isolate creditors 9) Settlor may not isolate Public Policy Pour-Over Will 1) Unfunded IV Trust – At death, assets pour over into trust 2) Permits Settlor to see how trust runs 3) Provides for children and issue 4) W/S can pour over into trust; but beware of RAP 5) Creates independent significance for giving property to IV trust 6) Independent Significance – Done something during lifetime Clyman
v. Mayo 1) Voodoo Law 2) Trust A - Joint & Mutual will – Intent, marriage, Life Estate, G/T/PA 3) Trust B – to Nieces & Nephews 4) CT – Revocation by Operation of Law (ROL) 5) ROL can be used if nothing happens to trust until death Will Substitutes 1) Cost Efficient 2) No Probate 3) No 6% PR Fee 4) No Publication 5) No Personal Inventory Listing 6) No Delay in time to use – Instantaneous access to assets 7) Provides secrecy 8) No problems with pretermitted heirs Dynasty Trusts 1) RAP prevents Dynasty Trusts; BUT 2) Some states have abolished RAP; permitting Dynasty Trusts Incapacity 1) Assisted Suicide – Prescription 2) Refusing Life Support – Withholding 3) Quality of Life v. Technology 4) Medicaid Spend down 5) Long Term Care Insurance 6) Disability Insurance 7) Durable Power of Attorney – POA continues throughout incapacity 8) Springing Power of Attorney – Only triggers upon incapacity 9) Health Care Directive (Package) a. Durable POA b. Living Will 10) Franzen
v. Norwest a. Be Specific in defining POA b. List specific abilities of trustee Powers
of Appointment 1) Parties a. Donor
- Creator b. Donee
– Power Holder c. Appointee
– Person Donee Appoints d. Appointment e. Taker
in Default – Takes (has property interest) when the power is not effectively
exercised 2) Types a. Testamentary
– Given in LW&T b. Inter
Vivos – Given During Life
i.
General
ii.
Special 1. Exclusive 2. Non
Exclusive 3) IV
Trust unless specifically stated as testamentary 4) General
Power of Appointment may pay a. Self;
or b. Creditors;
or c. Estates 5) Special
Power of Appointment – Appoint to ANYONE else a. Exclusive
i.
Pick & Choose appointees
ii.
Option to EXCLUDE others b. Non
Exclusive - Cannot exclude ANYONE c. Generally
look for S/T/E/PA 6) Taker
in Default – If Donee does not exercise 7) Donee
may exercise in Testamentary or IV trusts a. Personal
to Donee b. Not
a fiduciary c. No
duty to exercise PA d. Authority
is presumptively UNLIMITED e. Extrinsic
Evidence standard 8) Inter
Vivos – Presently Exercisable 9) General
– Donee may exercise for self, creditor, estate = self = yours 10) Special –
Donee cannot exercise for self, creditor or estate Special
Powers 1) Exclusive
– Donee may exclude; pick & choose 2) Non-Exclusive a. Operates
like trust b. Share
& Share alike c. To
each equally 3) Donee
is usually a beneficiary – General 4) UPC
– Taker in Default is critical 5) If
appointment can be to self – it is general; otherwise exclusive 6) Appointment
during life – Inter Vivos 7) Appointment
after life – Testamentary Relation
Back Doctrine = Spend Thrift Trusts 1) Money belongs to Donor until Donee receives distribution 2) Look to Creator/Settlor 3) Spectrum a. Inter Vivos ----------------------------------------- S/T/E/PA b. Donor ----------------------------------------------- Donee Irwin
Union Bank v. Long 1) C/L Rule – ex-wife cannot get access to G/IV until donee exercises power 2) Power owned by donor until donee exercises power 3) Augmented Estate concept – must exhaust personal assets first 4) If Donor/Donee are same person, cannot hide from creditors 5) G/IV/PA a. Included in gross estate b. different from creditors c. Reclaimable Estate Assets 6) NY Statutes a. G/IV – Creditors permitted seizure b. G/T – Creditors not permitted seizure 7) Federal Bankruptcy Act a. G/IV Power cannot be reached by trustee in bankruptcy b. Mirrors IV Rule c. May be changed by Congress soon Intent to Create Power 1) To be donee – must have discretion 2) Sterner
v. Nelson a. Rule of Repugnancy b. Fee Simple cannot be “qualified” c. Should have said “in fee simple absolute in trust” d. Mistake may correct problem with i. Primary Intent ii. C&C Evidence to overcome burden Release of PA 1) Disclaimer 2) Renunciation 3) Donee does not have ability to release testamentary power 4) Statutes permit release in testate and intestate succession 5) Release requires consideration 6) Prenuptial is most common form of release 7) Seidel
v. Werner a. Husband has G/T/PA b. Promises 2nd wife Power for 2 kids c. Upon death, exercises power for 3rd wife d. Issue: May agreement during life T/PA be enforced? NO e. CT – Agreement void, no appointment to kids f. 3rd wife takes everything g. If Husband had released, then kids would have taken Exercise of PA 1) Open
ended residuary clause 2) Assets are owned by Donor until Donee exercises 3) No specific naming of power of Donee 4) Donee
may exercise power a. During
life – Inter vivos – Most powerful exercise b. After
Death – Testamentary – Requires valid will 5) Attempted
Appointment before Creation of Power – A PA may not be effectively exercised
before the power is created or before a condition precedent to the power’s
exercise has been satisfied. 6) Donor should require Donee to mention power if Donee 7) If Donee doesn’t mention – goes to Taker in Default 8) Rules – MEMORIZE FOR EXAM a. Vast Majority Rule – Open-Ended Residuary Clause is presumed not to exercise PA b. NY i. Open-Ended Residuary Clause does exercise POA; ii. Benefits creditors iii. Old UPC Rule c. Open-Ended Residuary Clause i. Exercises PA unless Donor has created Taker in Default ii. UPC New Rule 9) Keys a. Memorize 3 Rules of Decision b. State Laws to Apply c. Apply to Genera & Special? Beals
v. State Street Bank 1) Trust with PA 2) Settlor/Donor a. Life Estate to Wife b. Life Tenancy for 3 daughters c. At daughter’s death; to appoint by LW&T – G/T/PA 3) Daughter (Isabella) wants to change PA with Partial Release to S/T/E/PA 4) Problem: No reference to changing PA from G to S 5) CT – Applies NY Rule to permit change 6) Open-Ended Residuary Clause a. Issue: When is power exercised? When donee leaves LW&T with open-ended residuary? b. No General or Special PA with Open-Ended Residuary Clause Antilapse 1) Applies to PA 2) Issue: Should A/L apply when donee exercises for someone else? a. Yes if relative of Donor/Donee – New UPC b. Yes if relative of Donee – Old UPC c. No requirement of survivorship 3) New UPC – Issue of predeceasing taker may take 4) A/L permits PA to non-permissible appointees 5) A/L should not apply in S/PA unless issue are members of permissible class 6) If there is no A/L statute, the appointment by donee to a person who is dead is ineffective Limitations on Exercise of S/PA – Look for what best accomplishes intent of Donor Fraud on S/PA 1) Look to intent of Donor 2) CT – May set aside trust, create an Implied Trust Implied Trusts – Donee attempts exercise and fails 1) Only in S/PA 2) Created when Donee of S/PA attempts to exercise & fails 3) Attempt & Ineffective Implied Trust 4) Takers a. Taker in Default b. Remaining Donees c. Results back to Donor 5) Attempt to accomplish what Donor wanted 6) Special Power = Trust 7) Taker in Default – Remainder 8) Antilapse does NOT apply to Taker in Default 9) Non-Exclusive Power – No right and power to choose a. B-Line b. Vesting c. Subject to Possession 10) Exclusive Power – Right and Power to choose a. No Vesting b. Possible Exercise by Donee c. To Take 11) Exclusive = Live 12) Taker in Default Class Gifts 1) A Class must be able to a. Increase in Class size b. Decrease in Class size 2) NOTE: Simultaneous Death Capture
– ON EXAM 1) G/PA 2) Donee
attempts to exercise, but fails due to RAP 3) Apply
Capture 4) Goes
accordingly to Donee’s estate (instead of resulting back to donor) 5) Donor
gives Donee ownership 6) Give
to estate of Donee 7) Attempt
to exercise special power Loring
v. Marshall 1) Implied Trust Case 2) Ability to appoint income – runs out 3) Nothing said regarding distribution of principle 4) Principle must be divided – Ineffective exercise of S/T/E/PA 5) CT – No Taker in Default 6) CT – Creates Implied Trust for remaining family Creditors and PA 1) Creditors may get access to General Power funds 2) Creditors may NOT get access to Special Power funds Issues 1) Are
there Taker(s) in default? If
not then 2) Are
there appointees vested at this point? a. C-Line
– Distribution b. B-Line
– Death-takers c. Non-Exclusive;
Special Interest – Rare 3) If
there is no attempt by Donee to exercise
Results to Donor’s estate Exam –
Question 1 (Parts 2-4 are based on Ineffective Release) 1) RAP 2) Intestate
Succession 3) PA 4) Doctrine
of Capture Class Gifts 1) A class may increase or decrease without words being added 2) X, Y, Z are not a class 3) Children of X, Y, Z are a class 4) Inclusive v. Exclusive 5) Wait & See Doctrine – Used instead of RAP. If 26 years after the death of the last life in being there is still any other measuring lives to violate the RAP, then RAP applies. 6) Corpus v. Income issue 7) Intent of Settlor v. Mistake 8) CT may permit great-grandchildren to be included in class of grandchildren, because the lineal descendents/issue would take with RAP violation & Intestate succession. Per Stirpes Distribution 1) Intestate Distribution (only New & Old UPC are on EXAM) a. Old UPC b. New UPC c. Strict d. Next of Kin 2) Cal. – Old UPC 3) NY – New UPC 4) Ex) Life estate to x. Upon his death, to issue per stirpes – means intestate succession Old New (A) B (C) 1/3 1/3 – B | | | D EF GHI 1/9 Ea. 1/6 to DGHI Adopted Children 1) Totally by Statue 2) Natural Child of Decedent 3) Equitable Adoption – NC is the last state to adopt a. Intestate only for Decedent b. Equitable adoption permits non-direct adoption to take c. Pretermitted heir status not permitted d. Social Security Benefits not permitted 4) Step Parent Adoption – 90% of cases a. Parents – Permits inheritance from 3 sources i. Natural Mother ii. Natural Father iii. Adoptive Parent(s) b. Permits heir to be foist upon settlor 5) Often used by childless beneficiary/Donee to keep interest in family 6) Childless beneficiary/Donee adopts individual to keep trust running UPC New 1) Everyone is a winner 2) Unless Donor states otherwise 3) Minary
v. Citizens Bank a. Husband adopts wife to retain benefits b. KY CT – Adoption not permitted; can’t have sex with adopted adult c. Cal – Permits 1 adoption per year to limit establishment of cults 4) In
re Trust of (Doris) Duke a. Doris adopts adult woman Chandi b. Later tries to disinherit c. CT – Cannot disadopt a child 5) Estate of Woodworth a. Elizabeth has a contingent interest b. If not, then to heirs-at-law c. Vesting Estate d. Antilapse Issue e. Take at death of decedent – Elizabeth; not at other person’s death f. Treat heirs-at-law with vested interest subject to defeasance g. Minority Rule – Take at time property enjoyed at death of life tenant h. CA follows minority rule Not on Exam 1) Doctrine of Worthier Title – Remainder interest a. X for life then to issue; but if no issue then to heirs-at-law b. Comes back as fee simple to heirs-at-law; not remainder c. Heirs-at-law remainder becomes fee simple 2) Rule in Shelley’s Case a. To X & heirs in fee simple b. Heirs mean nothing! Vesting Interests 1) Contingent – Yours if you make it happen 2) Vested – Yours outright 3) Vested subject to Defeasance – Yours, but you must come take it away. Class Closing Rule 1) Possibilities a. Increase of class b. Decrease of class 2) Rule of Administrative Convenience – Whenever any beneficiary may demand his or her share of the corpus, the class will close 3) Very convenient for those who can take 4) Very inconvenient for those who afterborn 5) Examples a. To the children of G Beneficiaries may come later b. To each of the children of G Must have beneficiaries 6) Decrease of Class a. Lapse or Vesting
b. To X for life, then to X’s children i. Distribution at C-Line ii. No A/L; No Vesting c. To Children of G to be paid at G’s Death i. Distribution at B-Line d. Vesting – Goes to estate, not to issue e. New UPC – “survive, and I really mean survive” f. A/L – Testamentary, NOT IV g. Vesting – IV h. Lux
v. Lux i. Open-Ended Residuary Clause - Permits flexibility ii. Someone who can command share of the corpus – therefore class closes (because may demand share of corpus) iii. Whenever youngest child turns 21, class closes. Even if more children can be born. iv. Child in gestation counts in the 21-year period Impermissible Appointment in Special Power Implied Trust 1) Taker in Default? 2) If no, then Appointment to Appointee Exam
Checklist 1) Is
there a valid instrument? a. If
not, then Intestate Distribution b. If
so, then continue 2) Does
it violate the Rule Against Perpetuities? 3) How
do you distribute the property? Rule
Against Perpetuity 1) Statement
of the Rule (Memorize) – Standing at the creation of the interest is there
any possibility that any interest will not vest within a life in being plus
21 years? 2) Standing Line a. IV Trust – A-Line b. Revocable Trust – B-Line c. Testamentary Trust – B-Line 3) Vesting a. Contingent – To X for life, then to issue surviving. b. Vested – To X for life, then to Issue. c. Vested subject to defeasance – To X for life, then to issue, if no issue, then to Y. 4) RAP – Absolute vesting is only permitted 5) Ask – When does Vesting occur? 6) On EXAM – Vesting is at C-Line (usually, but double check) 7) Life in Being – Human life in being at time of creation of interest a. IV Trust – A-Line b. Revocable Trust – B-Line c. Cannot use a pet to measure a life in being d. May use an unrelated 3rd party to measure as life in being 8) Measuring Lives a. Person or event at which vesting occurs b. Must have been alive or in gestation when the interest was created 9) Coterminality – Lives in being are co-terminus with measuring lives; the two must overlap perfectly. 10) If the possible measuring life is not a life in being, then there is a RAP violation 11) Drop-Kick Rule – If there is a possible lack of coterminality, there may be a possible RAP violation 12) C/L – Whether a future interest in property is certain to vest or fail to vest within the time allowed (the perpetuity period). 13) “Must vest if at all” – Contingencies must be guaranteed to be finally resolved within the perpetuity period. Conversely, RAP validates interests that must vest or terminate within the perpetuity period. RAP
Checklist 1) Statement
of the Rule 2) Vesting 3) Life
in Being 4) Measuring
Lives 5) Possibility
of Violation 6) Saving
Classes a. Wait
& See b. UPC
– 90 Year Rule c. Cy
Pres Example 1) X in valid LW&T leaves $3 million to Y, as he shall appoint in his valid LW&T 2) G/T/PA 3) At B-Line, can power be exercised beyond a LIB + 21 years? a. Y is a measuring life b. Y was a LIB at B-Line c. Therefore, no RAP Violation 4) Capture in appointment G/T/PA 5) Power valid, however power invalid when exercised 6) If you have anything other than a G/IV/PA, you must commence in inquiry regarding RAP at creation by donor; not exercise by donee. 7) Judge at time of creation in light of the facts at the time of exercise PA & RAP Violation Process 1) Apply Capture 2) Otherwise use Saving Clauses 3) Check: May want to apply RAP and no saving clause - Capture Examples 1) Irrevocable/IV/T – A-Line 2) Revocable/IV/T – B-line 3) LW&T – B-Line Fertile Octogenarian 1) Possibility of a measuring life who is not a life in being 2) NY Stat. – Woman over 55 cannot bear children; Adoption not considered as possibility 3) Example – To E for life, and then to her children, and then her surviving GC a. Measuring Lives – Children b. Problem – Potential lack of Coterminality 4) Dickerson
v. Union National Bank a. Status Person – Any “status” person(s) b. Unborn Widow – non-life in being at B-Line c. For J for life, and then to widow, then at death of latter, to his heirs-at-law d. No vesting until life in being dies e. Issues i. Widow Clause ii. 25 Years – Potential RAP Violation iii. No Coterminality f. Saving Clause – Refer to person in being at B-line, instead of allowing RAP Violation 5) Saving Clause (see below) – Apply Wait & See Doctrine to see if child is born Exam 1) A/L
only applies to Wills 2) A/L
does not apply to Trusts Slothful Executor – Could event take place beyond a life in being + 21 years? RAP Applied to Class Gifts 1) Exam – See Cramer case – exception to the RAP 2) Rule – If any member of the class violates RAP, all violate & entire interest fails 3) If some children are not lives in being, but may be possible, violates RAP class gift rule. 4) Rule of Convenience – Closes a class when the property must be distributed. 5) All or Nothing Rule – Does not permit some class members to have valid interests while others have invalid interests. 6) Subject to RAP 7) Either completely valid or completely invalid 8) Case 8 - IR/IV/T – A-line – Must be a Life in Being 9) Ward
v. Vander Loeff a. Wife given S/T/E/PA b. Wife has vested interest c. Nephews & Nieces are Takers in Default d. Codicil – Class can get vested interest in trust by being born at any time e. Problem – Class may increase violating RAP f. CT – Implied trust; Nephews & Nieces are Takers in Default g. Codicil revokes LW&T; does not revoke Takers in Default h. Rule of Administrative Convenience – If anyone can demand share, class closes. 10) American
Security Trust v. Craemer a. C-Line, death of last child of Sarah b. Exception to the RAP Class Gift Rule c. Voodoo Law – each child taken individually, and treated as sub-classes d. Could have used Wait & See – UPC 90 year Rule, Wait until death of last life in being +21 years, then distribute among remaining. Application of RAP to PA – If the PA violates RAP, the power is invalid, and the disposition takes effect as if the PA had never been created. 1) Issue: What kind of power did donor give to donee? 2) Power Options a. G/IV/PA b. G/T/PA c. S/T/IV/PA 3) Relation Back Doctrine a. Applies to i. G/T/PA ii. S/T/IV/PA b. Judge from moment of creation, but not in light of facts at moment of exercise. c. Violation at B-Line d. No violation at B2-Line e. C/L – Because no property interest can vest until the PA is exercised, the requirement of certainty of vesting means the power cannot be exercised beyond RAP. f. USRAP – Power valid if exercised within 90 years after creation. 4) With a Testamentary Power realizing donor held control, then goes back to donor 5) Capture a. If RAP violation, goes to Donee’s estate, only if want to. b. Savings Clause may also permit distribution to go elsewhere c. Ex) Donee given G/IV/PA i. No RAP Violation ii. Doesn’t go back to Donor iii. Goes to Donee’s estate iv. Key: Exercise by Donee Validity of Power – Is the donee’s power exercised within a Life in Being + 21 years? See Also – Validity of Exercise Second
National Bank v. Harris 1) Second Look Doctrine 2) See also Relation Back Doctrine 3) Date power created by donor 4) Ability to Revoke Income w/ IV Trust a. A-Line Irrevocable b. B-Line Revocable 5) Corpus violates RAP a. Vesting will occur in a measuring life, b. Possibly beyond LIB + 21 years 6) CT – Permits income to be kept and vested interest in corpus Saving
Clauses (Not applicable in DC) 1) Cy
Pres a. “Like
Purpose” b. Do
what best accommodates the intent of the Settlor 2) Wait
& See 3) UPC
90 Year Rule - Wait & See for 90 years, even if violating RAP 4) Write into trust – “Dow what best accommodates intent” 5) Designed to Save Interest from RAP Violation 6) Best to use Cy Pres Example 1) To J for life, then to J’s children for life. At death of J’s last child Living GC. 2) LIB – J & Children 3) Measuring Lives – Children – Vesting occurs 4) Possible lack of coterminality 5) Possible for J to have measuring life not LIB outliving Life + 21 years Cy Pres Doctrine 1) Like Purpose 2) Seek to accommodate primary intent 3) Permits court to alter the current purpose if the trust purpose becomes impossible or impractical. 4) NY - #1 Cy Pres jurisdiction in the U.S. 5) To fix prior example – “All vesting must occur at death of last LIB” 6) Eliminate after born measuring lives. 7) Best Saving Clause to choose 8) DC does not recognize Cy Pres, therefore, write into trust Wait & See Doctrine 1) Adopted by Restatement of Trusts 2) Majority of States 3) Wait & See if more children come along 4) Wait until 21 years after LIB end 5) Must be attentive to trust 6) Permits trust to continue 7) High Maintenance – Biggest problem 8) Applied to example above – wait & see if J has more children UPC New – 90-Year Rule 1) Similar to Wait & See Doctrine 2) 90 Years based on Creation 3) Starting from C-Line 4) Either comply with RAP OR Wait 90 years 5) 90 year play period under UPC 6) USRAP a. Instrument complies with RAP b. 90 years pass, then vesting c. Applies when i. Interest created after statute enacted by state ii. Interest may be exercised after statute enacted by state 7) In
re Trust of Wold a. Applies New UPC 90 year rule (rarely applied b. J. Seward Johnson (heir to the Johnson & Johnson fortune) c. Donor creates IV/Irrevocable/S/T/E/PA i. Special – Only appointment to spouse & issue (inclusive) ii. Exclusive – Any iii. Testamentary – LW&T d. Issues i. When the Donor created the power, was there any chance that the donee could exercise beyond LIB + 21 years? No – Donee was alive at A-line, exercised at death. ii. When exercise occurred, did she violate RAP? No. Exercised in favor of child, then GC. Can’t have more children in Area-4 timeframe. iii. Taken as a whole, judged from facts at moment of exercise, but related back to moment of creation, does it violate RAP? 1. Measuring Lives – Children, then GC 2. Possible to have Measuring lives not LIB – RAP Violation e. Steps i. His Creation ii. Her Exercise iii. Overall Application of the Rule iv. Do you want violation fixed? 1. Yes GC 2. No Residual Legatee f. May do anything as long as donor gives permission g. Here – Donor gave permission to appointee h. RAP violation possible i. But new statute created after Trust 1 ii. But Trust 2 exercised after statute enacted i. Contrast G/IV Trust i. Gives donee everything ii. Do not need to go back to creation
j. Unless stated revocable – probably irrevocable k. Capture – General Power l. Implied Trust – Special Power Generation Skipping/Abolition of RAP 1) Many states are abolishing RAP 2) Problem – Money stays in trusts indefinitely – less spreads around REVIEW Means/Methods of Intestate Distribution – Without Spouse, Issue, Parents 1) Next of Kin – 1st line with survivor takes all 2) Old UPC – 1st line with survivor – Per Capita; Per Stirpes everywhere else 3) New UPC – 1st line with survivor – Per Capita; Per Capita everywhere else 4) Strict – Skip 1st line; Top – Per Capita/Per Stirpes Advancement 1) C/L – Any substitute gift from parent to child during life is presumed to be advancement. 2) UPC – No presumption. Only with writing; Coterminous, between decedent and heir. New UPC – Spousal Exclusion Rule Old UPC – 1st $200,000 + of Augmented Estate Children 1) Trump Parents with Intestate distribution 2) Must be legal children of either a. Marital b. Adopted Test 1) Formalities a. Witnesses saw Testator sign b. Testator saw Witnesses sign c. All saw each other sign 2) Intentionalities a. Undue Influence b. Mistake – Primary Intent Issue c. Delusion d. Lack of Capacity e. Fraud Codicil 1) NY – Codicil cannot give will proper testamentary capacity 2) All Others – Codicil can give capacity to will Bar Exam Question 1) LW&T – Valid (Holographic or Witnessed) 2) $50,000 to M, crossed out & replaced with $100,000 3) Issues a. Is the original will valid? b. Cross out = Physical Act Revocation c. Any physical act revokes entire will d. Rebutted with Circumspect – Partial Revocation 4) Ability to revoke in whole = Ability to revoke in Part 5) Holding - $50,000 drops into residuary estate 6) Since crossed out, no longer witnessed, now holographic a. C/L i. Handwritten by Decedent ii. Dated iii. Signed b. UPC i. Signature; AND ii. Material portions in handwriting of decedent 7) Options a. Dependent Relative Revocation i. Try to cross out & revive ii. If original will cannot be revived, use 2nd will b. Mistake – If you can prove testator believed 2nd will was valid, then use mistake to permit revival Antilapse 1) Must have valid LW&T 2) Except in New UPC – where W/S applies 3) Contest - Is the will valid? a. Formalities b. Intentionalities 4) A/L applies to Areas 1 & 2 Only! 5) Look for pre-deceasing relative – Must be Relative for A/L 6) Distribute property Per Stirpes 7) Watch for a. Class Gifts – A/L does not apply to Class Gifts b. “But if predeceased” language Survivors – UPC New requires additional text “and I really mean survivors” 8) If there are no issue, goes to estate 9) Intestate Succession a. New UPC – Per Capita at every level b. Old UPC – Per Stirpes Antilapse with Powers of Appointment 1) Example - $1 million to P for life. Then to P among his living children. 2) S/T/E/PA 3) P gives up in LW&T. 4) Exercise in favor of T 5) Issues a. Valid Instrument b. RAP Violation c. Distribution 6) PA Issues a. P cannot exercise beyond own life b. P did not violate exercise c. Relation Back Doctrine - Judged in light of the circumstances, at exercise, but from the moment of creation, does it violate the rule B-Line, creation of the original interest/donor – Not G/IV 7) Perfect Coterminality, no RAP violation 8) Distribution of Property a. A/L can be used in PA b. Problem i. A/L in S/T/E/PA ii. Impermissible Appointees iii. Class children iv. A/L GC c. Not a problem in i. New UPC ii. General PA d. Non UPC Jurisdictions i. Cannot give to GC ii. Donee attempts exercise which fails iii. CT imposes Implied trust iv. Takers – Surviving Children e. Non-exclusive vesting at B f. Exclusive vesting at implied trust exercised by donee g. UPC – A/L applies for relative of Donee OR Donor h. General Power Donee i. Special Power NOT Donee j. Rule i. Created ii. Exercised iii. Distributed Right of Election 1) Must be option of spouse 2) Only spouse can elect 3) Pretermitted spouse parallels Right of Election – Takes intestate portion which is greater than Right of Election 4) Contest a. Formalities b. Intentionalities 5) Community Property a. His b. Hers c. Joint 6) Spouse elects against will and gets of Community Property Augmented Estates in Common Law Jurisdictions 1) Title – Individuals 2) Evidence of Ownership 3) Augmented Estates a. ONLY IN Common Law States b. Approximates Community Property States 4) Probate Estate + Reclaimable Estate + Absolute Gifts a. Probate i. Intestate ii. Testate b. Reclaimable i. W/S ii. Deeds iii. Totten Trusts iv. Stock Accounts c. Absolute Gifts i. Over $10,000, ii. within last 2 years 5) Right of Election - $50,000 + Augmented Estate x 3% for each year married 6) Contrast with Intestate Distribution - $200,000 + Augmented Estate (much larger) 7) Augmented Estate = Probate Estate + Reclaimable Estate + Absolute Gifts 8) Cannot take from Absolute Gifts – Only used for total computation Exam 1) Cover a. Intestate Succession b. Pertermitted Heirs c. Right of Election 2) List a. Options b. Values Collected Intestate Succession in Community Property 1) Spouse receives a. All Community Property b. All of own property c. All of Spouse’s property if all marital kids 2) $100,000 – to child of decedent and not surviving spouse Renouncement - $675,000 to go to kids, with no inheritance tax Land on Exam 1) Never mentioned as land 2) Generally mentioned as house, or store, or gasoline station,… 3) Issues a. Is the instrument valid? b. Is there ambiguity in the will or deed? i. Yes – Use Extrinsic Evidence ii. No 1. No Statute of Frauds a. Prove Oral Trust b. Clear & Convincing Evidence 2. Yes Statute of Frauds a. Prove Manifested & Promised b. Created in writing (harder) c. Was there a confidential relationship? i. Undue Influence ii. Clear & Convincing Evidence iii. Constructive Trust for Oral Beneficiaries EXAM
Notes Exam
Checklist 1) Is
there a valid instrument? a. If
not, then Intestate Distribution b. If
so, then continue 2) Does
it violate the Rule Against Perpetuities? 3) How
do you distribute the property? Exam 1) A/L
only applies to Wills 2) A/L
does not apply to Trusts If
Child Lacks Standing, then doesn’t qualify for Intestate Inheritance
Allocation If RAP
violated, LW&T violated, and distribution via Intestate Succession Law in
Intestate Succession – All are treated equally If
there was Simultaneous Death, then distribute property as if two did not know
one another. Advancement
Doctrine – Only applies to Intestate Succession Trustee
may force beneficiary to take loans out for school Raise
issue of potential Intentional Assault & bar to Inheritance – CT creates
constructive trust Don’t
use interested witnesses Can’t
revoke will unless it was originally valid. Latent
Ambiguity permits extrinsic evidence – More than 1 meaning Patent
Ambiguity - Mistake permits primary/probable intent Plain
Meaning Rule – Clear Statement; C&C Evidence to defeat Formality
= Substantial Compliance or Harmless Error Issues Standing Validity
of the Will Formalities Intentionalities Argue
C/L to bar W/S succession Formalities
– Love Letters 1) Strict
– No Correction of Mistakes 2) Primary
Intent – Mistake – Harmless Error – Substantial Compliance Revocation
of Wills – Cannot revoke unless originally valid will 1) Physical
Act 2) Subsequent
Instrument 3) Revocation
by Operation of Law Revival 1) New
will 2) Republication
by Codicil 3) Revoke
the Revoking Will 4) Dependent
Relative Revocation - Mistake 5) Re-execution
of the prior will Undue
Influence 1) Undue 2) Affecting
Mind 3) BOP
on Contestant 4) Unless
there is presence of UI 5) Based
on Confidential relationship 6) Presumption
of UI is rebuttable if the mind of testator is free of UI Fraud 1) Typical
– Child Contests 2) Incentive
v. Deceit Mistake
– Primary Intent Antilapse
Checklist 1) Will 2) Relatives 3) 1st
or 2nd Timeframes 4) Class
Gift 5) Issue 6) Will
Substitutes 7) Powers
of Appointment Trust
Elements 1) Settlor 2) Beneficiary 3) Property 4) Present
Transfer Oral
Trusts in Statute of Frauds Jurisdiction 1) Concurrent
with Ownership – Evidence 2) Always
Concurrent with Will 3) Not
always concurrent with deed 4) Interest
must be concurrent with evidence Modification
and Termination of a Trust 1) Settlor
terminating trust may only do so if retains right to revoke AND all
beneficiaries agree to termination.
Unascertainable beneficiaries cannot revoke. 2) Trustee
may terminate trust if settlor has power to distribute principal 3) Beneficiaries
may terminate trust only if all beneficiaries agree with settlor OR if the
material purpose has been accomplished 4) EXAM: IV Trust cannot be revoked by
LW&T options UNLESS Settlor agrees, OR Statute has become applicable
(UPC). Capture
– ON EXAM 1) G/PA 2) Donee
attempts to exercise, but fails due to RAP 3) Apply
Capture 4) Goes
accordingly to Donee’s estate (instead of resulting back to donor) 5) Donor
gives Donee ownership 6) Give
to estate of Donee 7) Attempt
to exercise special power 1) Issues 2) Are
there Taker(s) in default? If
not then 3) Are
there appointees vested at this point? a. C-Line
– Distribution b. B-Line
– Death-takers c. Non-Exclusive;
Special Interest – Rare 4) If
there is no attempt by Donee to exercise
Results to Donor’s estate Distribution 1) Intestate a. Spousal
Exclusion Rule; or b. UPC
i.
Spouse – 1st $200,000 + of Augmented
Estate
ii.
Remaining of AE goes to 1. Issue 2. Parents 3. Children
in Gestation – 120 Hour Rule 4. Collateral
– Brothers, Sisters 5. Lineal
– Nieces, Nephews
iii.
Parents – of Augmented Estate (ROI) 2) UPC
Right of Election a. $50,000
+ % based on length of marriage b. 3%
per year if more than one year of marriage c. 50%
for 15 years or more of marriage 3) Old
UPC Pretermitted Spouse - $100,000 + of Estate 4) New
UPC Pertermitted Spouse - $150,000 + of Estate 5) Community
Property State a. Spousal
Exclusion; or b. Elective
Share (less than Intestate Share)
i.
50% of Community Property
Surviving Spouse
ii.
50% of Community Property
Estate 6) Common
Law Property State a. Testate
- $50,000 + 3% * Number of Years Married b. Intestate
i.
Surviving Spouse receives all property, if children
are from marital union
ii.
Otherwise, $200,000 + to surviving spouse
iii.
Parents receive remainder of $200,000 +
iv.
Children from prior unions 1. Spouse
receives $150,000 + Remainder 2. Children
receive Remainder c. Augmented
Estate
i.
Probate Estate + Reclaimable Estate + Absolute Gifts
UPC Old
– Per Capita – Per Stirpes 4) 1st
line of survivors 5) Per
Capita Distribution 6) Then
Per Stirpes distribution at each succeeding line UPC New
– Per Capita – Per Capita 1) Go
to 1st Line with survivor 2) Per
Capita Distribution 3) Then
Per Capita Distribution throughout Intestate Succession 1) Spouse 2) Parents 3) Children or Issue 4) Collateral – Brothers or Sisters 5) Lineal – Nieces or Nephews Variations of Rules 1) UPC Old – 1969 (Prof. O’Brien prefers) – Per Capita-Per Stirpes 2) UPC New – 1990 - Per Capita – Per Capita 3) Next of Kin (NIK) 4) Strict – 1887 Types of Wills 1) Witnessed 2) Holographic Intentionality 1) Age 2) Testamentary Capacity 3) Undue Influence – Unduly Influence mind of Testator a. Priest b. Attorney c. Doctor d. Guardian e. Relationship of Trust 4) Fraud 5) Mistake 6) Primary Intent Revocation of Wills 1) Physical Act 2) Subsequent Instrument 3) Revocation by Operation of Law Revival 1) New Will 2) Republication by Codicil 3) Revoke the Revoking Will 4) Dependent Relative Revocation 5) Re-Execution of the Prior Will Methods of Disinheritance – Child must have standing 1) Kill the Child 2) Effective Release 3) Intestate Inheritance Allocation Augmented Estate 1) Probate Estate a. Intestate b. Testate 2) Reclaimable Estate a. Retains Right to Reclaim b. Life Estate c. Will Substitutes 3) Absolute Gifts a. Accrued within 2 years; and b. More than $10,000 Powers of Appointment 1) Testamentary – Given in LW&T 2) Inter vivos – Given During Life a. General b. Special i. Exclusive (Exam – S/T/E/PA) ii. Non-Exclusive Relation Back Doctrine = Spendthrift Trusts Rule Against Perpetuities 1) Statement of the Rule 2) Vesting 3) Life in Being 4) Measuring Lives 5) Saving Clauses a. Wait & See b. UPC – 90 Year Rule c. Cy Pres Vocabulary Guardianship – Caretaker for child Custodian, Conservator – Caretaker for property Codicil – Properly executed will that amends a primary will but which might not have to stand on its own if the primary will is not effective. Powers of Appointment – Authority, held by non-owner, to designate recipients of beneficial interests in or powers of appointment over the appointive property |
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CHRISTOPHER S. LEE 2001