II. REVOCABLE TRUSTS, OTHER ARRANGEMENTS Flashcards
revocation?
In Texas, all inter vivos trusts are revocable and amendable by the settlor unless expressly made irrevocable and unamendable.
revocation method
Where a trust is created by written instrument, any revocation or amendment must be made in writing; an oral revocation is ineffective.
revocation
Settlor creates revocable trust, later becomes incapacitated:
Guardian does not have authority to revoke the trust; only a court can revoke the trust upon finding that revocation is in ward’s best interest.
revocation
divorce
Divorce revokes all revocable trust provisions in favor of a former spouse and relatives of a former spouse who are not relatives of the settlor unless the trust is re-executed or a contract or court order provides otherwise.
The testamentary gift
The testamentary gift to the trust, called a pourover will, provides a means for adding testamentary assets to a trust created by the testator during lifetime. [Feb. 1995] By statute, such a pourover gift is valid (i) even if trust is subject to revocation and amendment and is later amended, (ii) even if trust is unfunded (eliminates concern about “trust property” in an unfunded life insurance trust).
The trust need not be in existence before or executed concurrently with will; it can be created after the will is signed.
life insurance policy trust to minor but don’t want it to be lump sum, how?
create an unfunded revocable life insurance trust, and name the trustee as beneficiary. But this would result in additional legal fees for preparation of a trust; and Sam’s present will already establishes a trust for minor’s benefit. Instead, Sam could name “the trustee named in my will” as policy beneficiary. Such a beneficiary designation is expressly validated by statute.
- [July 1993] Donna deposits funds in a joint bank account that names her sister Sarah as joint owner. The account signature card provides that “upon the death of either party, the bank is authorized to pay the funds on deposit to the survivor.” Donna dies leaving a will that devises “all my property” to her son John. There is $84,000 in the joint bank account at Donna’s death. [Stauffer v. Henderson, Tex. 1990]
Does Sarah take the amount on deposit by right of survivorship?
[Feb. 1996] Is extrinsic evidence admissible to show that Donna actually intended to create a right of survivorship account?
Would Sarah be entitled to the amount on deposit if the signature card said “on the death of one party, all sums in the account shall vest in and belong to the surviving party” or said “with right of survivorship” [or similar wording]?
***Would a valid right of survivorship have been created if the account agreement stated (simply) JT, or JTWROS, or [Feb. 2013] “as Joint Tenants”?
- no; invalid creation of ROS, John takes the account by will
- no; language on agreement controls
- yes
- no; need to spell out
no; need to spell out
A durable power of attorney,
A durable power of attorney, which must be signed and acknowledged before a notary public, authorizes another person (agent, attorney-in-fact) to act on behalf of the principal.
The agent’s authority is not affected by the principal’s incapacity if it states that “this power of attorney is not affected by my subsequent disability or incapacity,” or contains words of like effect. The principal can grant a springing durable power: “This power of attorney becomes effective upon my incapacity.”
Third parties who rely on a durable power without actual knowledge that it has been revoked or that the principal has died, are protected. A durable power given to principal’s spouse terminates on divorce, but not on principal’s bankruptcy. [July 2001] Appointment of guardian of the estate for principal terminates the durable power. But for many families, a durable power of attorney to a child or trusted friend may eliminate the need to have a guardian appointed.
- On October 11, 2014, Winkie Waters transfers securities worth $500,000 to her brother Ted as trustee of a revocable, amendable trust: Income to Winkie for life, and on Winkie’s death the trustee shall distribute the trust principal to her son Steve. The trust instrument is signed by Winkie and by Ted, but is not witnessed. On the same day, Winkie duly executes a will that, after making various bequests, bequeaths her residuary estate “to Ted Waters, as trustee, to be added to and administered under the terms of the trust that I executed on October 11, 2014.”
This is a valid trust and [July 1994] can be useful arrangement to provide for management in event of settlor’s future incapacity, avoiding expenses and restrictions of a guardianship administration. [Feb. 1995] As long as there are one or more trust beneficiaries besides the settlor, a trust is not void as an attempted testamentary disposition (i.e., doesn’t have to be executed with formalities of a will) even though settlor retains any one or more of the following rights and powers:
- Income for life.
- Power to revoke, alter or amend the trust.
- Power to control trustee in the trust’s administration.
- Power to add property, life insurance proceeds, employee benefits to the trust.
- [July 1994] Settlor can name herself trustee, to serve as long as she has capacity.
20a. [Feb. 1991] Shortly before her death, Winkie typed and delivered to Ted a signed but unwitnessed note: “This is to amend my trust agreement with you. On my death please distribute the trust property 1/2 to Steve and 1/2 to my church, the First Baptist Church.”
________ Is this a valid amendment to the trust, meaning that the church takes 1/2 of the securities and residuary estate, even though effect was to indirectly change Winkie’s will without attesting witnesses?
yes; trust law (to amend: in writing and signed, no witness required) controls not wills law
The right of survivorship in a joint bank account is valid if the signature card (i.e., account agreement) was signed by the party who has died, even if the survivor didn’t sign—
unless
[Feb. 2013] the survivorship account between husband and wife was funded with community property, in which case both spouses must sign the signature card. During the parties’ lifetimes, ownership of a joint bank account is in proportion to each party’s deposits.
