Intestacy, Wills, and Trusts Flashcards
Will Contest: Grounds for contest
Defective execution, revocation, lack of tesamentary capacity, lack of testamentary intent, undue influence or duress, fraud, and mistake
Probate: Powers and Duties of a Personal Representative
-Give notice to devisees, heirs, and claimants against the estate
-Discover and collect the decednet’s probate assets an dfile an inventory
-Manage the assets of the estate during administration
-Pay expenses of administration, claims against the estate, and taxes
-Distribute property
Intestacy: Intestate Succession
Intestate succession involves the distribution of a decedent’s assets that are not disposed of by will.
Intestate succession issues arise where:
>Decedent dies without a will
>Decedent’s will does not dispose of all her property
>Decendent’s will is denied probate
Varying statutory schemes - states have varying rules for how decedent’s assets are distributed through intestate succession
Terminology:
>”Heir” vs “beneficiary” - heir is one who takes by intestate succession; beneficiary is one named in a will or trust
>”Issue” and “descendants” - often used interchangeably to describe a decedent’s lineal descendants
>”Gifts,” “devises,” and “bequests” - used interchangeably to refer to property disposed of via a will
>”Estate” - roughly refers to property decedent owned upon death
Intestacy: Per capita intestate distributions
When decedent’s estate does not pass to her surviving spouse, but instead to her descendants, statutes control how distributions are made.
>States vary, but generally use one of the two approaches below
Per capita with representation (modern per stirpes) - majority of states
>Divided at first generation with living takers - estate divided into equal shares at the first generation at which there are living takers
»>Each living person takes a share and each share of a deceased person at that level passes to her descendants
Per capita at each generation - UPC and growing number of states
>Divided at first generation with living takers at the next level
>Avoids situations where takers are penalized for having a bigger family
Intestacy: Children’s inheritance rights
Adopted children - treated the same as a natural child for purposes of intestate succession
>Cuts off adoptee’s inheritance rights from his natural parents
»>exception - adoption by spouse of natural parent
Stepchildren & foster children - generally have no inheritance rights
>Exception - adoption by estoppel or equitable adoption
»>A stepchild or foster child can inherit from or through a step/foster parent as though they were legally adopted where step/foster parent gains custody under agreement with natural parents to adopt the child
Non-marital children - all states permit inheritance from the mother
>Inheritance from father is permitted if paternity is established
Posthumous children - a child in gestation at time of decedent’s death inherits as if they were born during decendent’s lifetime
Intestacy: Simultaneous death & death caused by beneficiary
Simultaneous death - one cannot take as an heir or beneficiary unless she survives decedent
>Issues arise where a decedent an dheir or beneficiary pass at or about the same time
>Two approaches - most states use one of the following two rules:
»>Uniform Simultaneous Death Act (USDA) - property passes as though beneficiary/heir died before the decedent unless there is sufficient evidence decedent died first (applies to distributions of property by any means, including will, joint tenancy, intestate succession, etc.)
»>120-hour rule - beneficiary/heir is only treated as having survived decedent if there is clear evidence that she survived by 120 hours or more (i.e., five days)
Decedent death caused by beneficiary/heir (Slayer Rule) - one who wrongly brings about the death of a decedent forfeits an interest in decedent’s estate
>In such cases, property passes as though the killer predeceased the victim
Intestacy: Disclaimers & Advancements
Disclaimers - one may disclaim an interest that otherwise woul dpass to them from a decedent or decedent’s estate
>Requirements - for fed. tax purposes, disclaimer must be in writing, irrevocable, and filed within nine months of decedent’s death
»>States may impose additional requirements, although most are satisfied by compliance with fed. requirements
>Effect - interest passes as if the disclaiming party predeceased decedent
Advancements - gifts made during testator or decedent’s life with the intent that the gift be applied against any share the heir or beneficiary inherits from decedent/testator’s estate
>Common law - gifts were automatically deducted from beneficiary/heir’s remaining interest
>Modern requirement - in most states, gifts to beneficiary/heir during testator/decedent’s life are advancements only if either:
»>(a) Decedent declared her intent to make the gift an advancement in a contemporaneous writing, or
»>(b) Beneficiary/heir acknowleged the gift to be an advancement in writing
Applicability beyond intestacy - the above rules generally apply to gifts/interests that pass in forms beyond intestacy
Wills: Testamentary Capacity & Intent Requirements
For a will to be valid, testator must have capacity and the requistie testamentary intent.
>Contests over the validity of a will often invovle whether testator had the requisite capacity or intent.
Capacity - for a will to be valid, the person executing the will must be 18 or older and have mental capacity
>Age - determined at the time the will is executed
>Mental Capacity - testator, at the time of will execution, must understand:
»>1) Act - nature of his act (i.e., that he is executing a will);
»>2) Property - nature and extent of his property; and
»>3) People - persons who are the natural objects of his bounty
»>4) Nature of Dispostion - how the above three factos relate and formulate a scheme of distribution
>Rebuttable presumption exists that testator had mental capacity
>Physical ailments, drug addition do not raise a presumption of incapacity
Testamentary intent - testator must intend that the instrument operates as his will
>Usuaully established by provisions in the will (e.g., “I, Testator X, hereby declare that this is my last will”)
>Present intent required - testator must have present testamentary intent (i.e., intent to make a will in the future is insufficient)
>Extrinsic evidence is allowed to prove requisite intent or lack thereof
Wills: Wills & Requirements for Execution
A will is an instrument that directs the dispostition of a person’s property when they die (i.e., will direct the dispostion of testator’s property)
>No legal effect before testator’s death - operative upon death
>May be revoked or amended until testator’s death; named beneficiaries have only an expectantcy interest (i.e., no property rights)
Requirements - will is valid if it complies with the state’s specific formalities; generally, in most states a will must be at least:
>1) In writing
>2) Signed by testator - any mark inteded to be a signature sufficies
»>If testator is incapable of signing, must be signed by another in her presence and by her direction
>3) Signed by at least two witnesses - must see testator sign the will and must sign as witnesses in testator’s presence in a reasonable time
»>Licensed notary satisfies this requirement in many states
»>”Testator’s presence” = line or range of senses, although many states require witnesses be in testator’s line of sight
Attestation clause - clause included immediately between testator and witness signatures ina will, which sets forth the above required elements and that they were satisfied
>Constitutes prima facie evidence of the facts recited in the clause (i.e., that execution requirements have been satisfied)
Wills: Witness Requirements & Limitations
Witnesses must be competenet and, in most states, there are limitations on witnesses who stand to benefit from the will.
Competency - witnesses must be of sufficient maturity and mental capacity to understand and appreciate the nature of what they witness and attest to
>I.e., witness could sufficiently testify in court if required
Interested witnesses - where a witness stands to benefit under the will
>At common law, entire will could not be probated (mostly abolished)
>Majority rule - will is valid but gift to witness-beneficiary is void
»>Exceptions - interested witness can still be a beneficiary where either
»»>a) There were two witnesses who disinterested
»»>b)Interested witness would take if there was no will
>UPC - [resnce of interested witness does not invalidate a will or any part of it
Wills: Codilics & Holographic Wills
Codicil - an amendemnt, modification, or alteration to a previously executed will
>Same formalities requires - to be valid, a codicil must be executed with the same formalities required for the will itself
>Effect - when a codicil is validly executed, the original will is treated as repiblished and deemed to have been executed on the date the codicil was executed
Holographic will - handwritten, unwitnessed will
>Not recognized in all states
>Requirements - to be valid, a holographic will must:
»>1) Be in testator’s writing - some states require the entire will to be in testator’s handwriting, while others allow typewritten text if types portion is not material
»>2) Be signed - testator’s signature must be somewhere on the will
»>3) Reflect testator’s intent to make a will - document must, as a whole, reflect that it is testator’s intent to make a will
>Replaces and revokes any prior valid will
Oral wills - not permitted in most states
Wills: Integration
Integration issues can arise where a part of a will becomes separated
>Issue becomes determining whether separate pages can be integrated and construed as testator’s complete will
Test - a document will be integrated into a will if:
>1) Physical presence - the document was physically present at the time of the will’s execution; and
>2) Intent of inclusion - testator intended the document to be part of the will
Evidence - witness testiomny and other extrinsic evidence may be used to establish that the requirements have been satisfied
Presumption - requirements are presumed where there is a physical connection of pages or when there is some internal coherence (i.e., pages comprise a compete, orderly disposition when combined)
Wills: Acts of Independent Significance
A will can dispose of property by reference to acts or events occurring after testator executes the will
>I.e., identification of a beneficiary or amount of a gift in a will may be determined by some future act or event
>Valid as long as the act or event has some independent significance during testator’s lifetime other than providing a gift in her will
Identifying beneficiaries - future act or event can involve identification of beneficiaries
>E.g., X’s will leaves “$100 for each person employed as my gardener upon my death”; two years after executing the will, X fires one gardener and hires three others, who remain employed until she dies
»>Valid b/c it is presumed that X would not hire and fire gardeners to change who is a beneficiary under her will, i.e., the employment decisions have independent significance
Identifying property - e.g., X leaves “all automobiles I own at the time of my death to A” and owns three cars at the time of execution; thereafter she sells one and buys two other before she dies, leaving A with a valid bequest for the four automobiles X owns upon her death
>Valid b/c it is presumed that X did not buy and sell the cars for the sole purpose of changing A’s gift
Wills: Incorporation by Reference
Documents extrinsic to the will (e.g., not part of the will) may be incorporated by reference into the will in most states
Requiremetns - document will be incorporated by reference where:
>1) Intent to incorporate - the will manifests testator’s intent to incorporate the document;
>2) Authenticated document - the will sufficiently describes the document such that it can be authenticated; and
»>Description must be such that the document can be reasonably identified
»>Document must correspond to the will’s description
>3) In existence upon will execution - the document must be in existence at the time the will is executed
»>Tangible property exception - in most states, a will may incorporate by reference a document that disposes of testator’s tangible personal property
»»>Document can be prepared before or after execution of the will and can be changed before testator’s death
»»>Requirements: Document must: (i) be signed by testator; and (ii) describe items and to whom they are devised with reasonable certainty
Wills: Revocation by Testator
A person who has testamentary capacity to make a valid will can revoke a will any time before their death.
Revocation by written instrument - a will or any part of it can be revoked or changed as long as there is:
>1) Intent - present intent to revoke; and
>2) Formalities - instrument revoking the will is made with the same formalities required for will execution
Revocation by physical act - a will may be revoked in most states by burning, tearing, or otherwise destroying the will
>Present intent required - testator must intend to revoke at the time of the physical act
>Act by another (revokation by proxy) - a person other than testator may revoke the will by physical act if done at testator’s direction and in testator’s presence
Partial revocation - revocation may be accomplished by making marks of cancellation on the will (e.g., crossing out provisions) in most states
>Where such marks are found on a will known to have last been in testator’s possession, a presumption is created that the marks were made by testator with the requiste intent to revoke
Wills: Revocation by Operation of Law
A will and/or its provisions can be revoked by operation of law upon the happening of certain events, usually involving changes in marital status or children.
Marriage following execution of a will (omitted spouse) - no effect on the existing will in most states
>Variation - under the UPC, where a person marries after executing a will and spouse survives testator, omitted spouse will tkae a share of decedent’s estate equivalent to what their intestate share would be
»>Not applicable if will provides for the omitted spouse, was made in contemplation of marriage, or otherwise makes clear that the omission was intentional
Divorce following execution of a will - revokes all bequests made in favor of the former spouse, unless the will expressly provides otherwise
>Remainder of the will remains valid
>Effect - will is treated as if the former spouse predeceased testator
Pretermintted children - arises where testator’s will does not provide for children born or adopted after the will was executed
>Most states give the pretermitted child a share of testator’s estate equal to what they would have received through intestate succession
Wills: Reviving Revoked Wills & Dependent Relative Revocation
Revival - where a will is revoked and the revoking instrument is subsequently revoked, the original will is presumptively revived
>Exception - revoked will is not revived if testator’s statements or other evidence make clear she did not intend to revive the prior will
>Re-execution - a revoked will may be re-executed by a subsequent will or codicil if testamentary formalities are satisfied
Dependent Relative Revocation (DRR) - court doctrine under which a court disregards a revocation that was done to create an alternative disposition to the original will, but was based on a mistake of fact or law
>Court will apply DRR and revive the recoked will if doing so would come closer to giving effect to what testator tried, but failed, to do than would intestate succession
>Requirements - court may apply DRR (ignore will revocation) where:
»>1) Revocation was premised on some mistake of law or fact;
»>2) Revocation would not have occurred absent testator’s mistaken belief that some other plan for disposition of property was valid; and
»>3) The originally revoked will is closer to testator’s preference than would be intestate succession
Wills: Lapsed Gifts & Anti-Lapse Statutes
A gift provided in a will lapses where the beneficiary predeceases testator
>Absent application of an anti-lapse statute, the gift will go back into the residue of testator’s estate
Anti-lapse statutes - a gift that would otherwise lapse vests in the predeceased beneficiary’s descendants, who becomes substitutes
>Application - lapsed gifts will be saved if predeceased beneficiary was: (1) a relative of testator (usually descendants only); and (2) had descendants
>Who may be substituted - some states allow only testator’s descendants, while others (and UPC) allow any of testator’s relatives
Lapse in the residue - can arise where a bequest is made to a person who predeceases testator and the anti-lapse statute does not apply (e.g., predeceased beneficiary was not testator’s relative)
>Common law - lapsed gift passes to testator’s heirs via intestacy
>Modern view - residuary beneficiaries who survive testator and deceased beneficiary take the deceased beneficiary’s share
Class gifts - if a will makes a gift to a class of people and a class member predeceases testator, surviving class members take predeceased’s gift absent an alternative provision in testator’s will
>Exception - if an anti-lapse statute applies to the predeceasing class member, gift vests in predeceased’s descendants, not the class
Wills: Ademption
Under the doctrine of ademption, a gift of specific property in a will fails if it is no longer in testator’s estate at death
Applies to specific devises only - ademption only occurs with specific gifts that are satisfied only by giving the actual described property
Not applicable to general or demonstrative devises
>General devise = gift of a dollar amount payable from estate’s assets
>Demonstrative devise = gift of a general amount that identifies some asset as a source of the payment (e.g., certain stock holding)
>Where a general or demonstrative gift fails (e.g., stock is not worth as much as provdided in a demonstrative legacy), estate generally must sell off other property to satify the gift
Exception - in intent theory states, adeemed gifts may be saved
>a minority of states apply the intent theory of ademption, under which an adeemed bequest is saved if evidence establishes that ademption would be inconsistent with testator’s intent
>Effect - benefiticary gets montetary value of the specific bequest or gets property that was acquired as a replacement for the adeemed gift
Wills: Abatement
Where an estate’s value is insufficient to pay its obligation and provide for disposition of property under a will, it must reduce (abate) gifts in order to pay the obligations and satisfy some bequests and devises.
Requirements to pay obligations - estate must always pay off obligations before distributing assets
>Abatemetn occurs when, after doing so, the estate lacks sufficient funds to carry out disposition of property under terms of the will
Order of abatement - testator’s will may set out an order of abatement
>Absent provisions in the will, most state statutes provide for an order of abatement setting a priorirty as to which categories of property in the estate will be sold off first
>Order - most states abate estate property in the following order:
»>1) Property not disposed of by will (intestacy)
»>2) Residuary estate
»>3) General devises - abate pro rata
»>4) Specific devises and bequests
Wills: Contracts involving wills, joint & mutual wills
Valid Ks to make, not make, or revoke a will are generally enforceable
>Governed by K law and Ks regarding wills are not considered wills
>K requirements must be satisfied
Writing required - most states require Ks involving wills to be in writing
>Additional requirements - UPC and some states require either:
»>a) Provisions in the will state the material provisions of the K,
»>b) Express reference in the will to the K and extrinsic evidence proving the K terms, or
»>c) Writing signed by decedent/testator evidencing the K
Remedy for breach - constructive trust
>Upon breach of a K to make a will, court usually probates the will and imposes a constructive trust in favor of the intended beneficiary under the K
Joint will - will or two or more people executed in a single document
>Admissible to probate upon death of either testator
>If one testaor revokes the joint will, it remains valid as the other’s will
>May be interpreted as K for a will, particularly if executed pursuant to a promise between each party not to revoke
Mutual will - separate wills of two or more people containing reciprocal or substantially similar provisions
>Usually not interpreted as a K to make a will or a K not to revoke a will
Wills: Will contests & no-contest clauses
A will may be contested for any number of reasons challenging its validity
Common grounds for contesting a will:
>Lack of capacity or testamentary intent
>Defective execution
>Undue influence, fraud, or mistake
>Will has been revoked
Standing to contest a will - generally only those with a pecuniary interest have standing to contest
>Includes beneficiaries, someone who should be a beneficiary, or someone who would benefit if decedent had died intestate
No-contest clauses - clause in a will providiing that a beneficiary loses their interest under the will if they contest it
>Does not apply to suits challenging executor appointment, jurisdiction, or asking the court to interpret the will
>Application - states vary on how strictly they apply no-contest clauses
»>Majority - no forfeiture of interest if beneficiary challenges in good faith and on the basis of probable cause
»>Minority - no-contest clauses given full effect regardless of challenging beneficiary’s cause or intent
Wills: Undue Influence & Fraud
Undue influence - a will is invalid if executed while testator was subject to undue influence that effectively overrode testator’s free will
>Requirements - will contestant has burden of proof and must show
»>1) Influence was exerted on testator;
»>2) Testator’s mind and free will were overpowered; and
»>3) Testator’s will would not have been executed absent undue influence
>Presumption - a presumption of undue influence arises if:
»>1) A confiendential relationship (e.g., attorney-client) existed between a testator and beneficiary, who exerted influence; and
»>2) Beneficiary particiated to a significant degree in executing, drafting, or procuring testator’s will
»Once established, burden shifts to propoent of the will to prove the will was not induced by undue influence
Fraud - where a will or one or more of its provisions are the result of fraud, the will or the provision is invalid
>Requirements - must be shown that:
»>1) Testator has been intentionally deceived as to:
»»>a) Character or content of the will or its provision, and/or
»»>b) Facts extrinsic to the will that would induce the will or a particular provision or disposition in the will
»>2) Testator acted in reliance on the misreprentation
Wills: Mistake
Mistakes may be made in execution of the will or inclusion of its provisions
>Mistakes can arise in varying circumstances
>Relief is oftentimes not available
Mistake as to nature of instrument - extrinsic evidence may be permitted to show that tesator was mistaken as to the nature of the instrument he signed (e.g., he did not know he was signing his will)
>Mistake may nullify the testamentary intent requirement
Mistake in inducement - no relief is availabel if a mistake relates to the reason testator made a will or made (or did not make) a gift in the will
>Note - relief may be available if there is a separate ground for contesting the will
Mistaken omission - no relief is available and no extrinsic evidence is admissible to show that a will mistakenly omitted a provision or contains provisions that do not reflect testator’s intent
>Note - relief may be available if there is a separate ground for contesting the will
Reformation for a mistake - UPC allows a court to reform terms of a will to conform to testator’s intent
>Requirements - must be shown by clear and convincing evidence that a mistake of law or fact affected the will and testator’s intent
Wills: Non-Probate Transfers
The following are common methods of transferring property outside of probate
Inter vivos gift - a gift given by a living person to another living person
>Requirements - intent, delivery, and acceptance
»>Gift is valid if 1) donor intends to make a gift; 2) donor delivers gift (can be actual or contructive delivery); and 3) donee accepts
Joint tenant bank account - a surviving joint tenant is generally entitled to money in a jointly-held account when the other joint tenant dies
>Usually arises where the account is in the name of two or more people with the “right of survivorship”
Totten trust or POD (“Patable on Death”) account - deposit of funds in one’s own bank account held in trust for another
>Creates a valid revocable trust, even though depositor has control
>Funds pass to designated beneficiary upon trustee’s death
>Revocable by trustee-depositor by withdrawing funds before death or revoking the trust by will
Life insurance - K made between policyhodler and insurance company under which beneficiary is named
>Unless K provides otherwise, policyholder cannot change the beneficiary through a provision in their will
Wills: Power of Appointment
Power of appointment is authority granted to a person (donee) enabling donee to designate a new owner of property and how they take it
>Usually arises with wills that create testamentary trusts
General vs. special - power of appointment can be general or special
>general - donee can exercise her power in favor of anyone, including herself, her estate, her creditors, etc
>special - power is exercisable in favor of a limited class of appointees (cannot include donee, her estate, creditors, or creditors of her estate)
Present vs. testamentary power - appointment power may be exercisable during donee’s life or only exercisable by donee’s will
>Presently exercisable - one exercisable by donee during her life
>Testamentary power - exercisable only by the donee’s will
Wills: Probate and Estate Administration
In a probate proceeding, a personal representative is appointed to carry out adminstration of decedent’s estate
Executor - one named in decedent’s will to be the personal representative
>no executor - if no executor is named in a will or decedent dies intestate, court appoints a personal representative (called an adminstrator) (usually a surviving spouse or heir of decedent)
>Capacity - any person with the capacity to contract can be a personal representative
Responsibilities - generally, a representative/executor handles all matters associated with winding up decedent’s estate
>e.g., filing paperwork, paying creditors, notifying beneficiaries and devisees, managing property distributions, etc.
Wills: Living Wills & Durable Healthcare Powers of Attorney
Living wills and durable healthcare powers are forms of advanced healthcare directives, which are instructions regarding an individual’s health if they become unable to make such decisions on their own
>Creation - states vary on requirements, but most are similar to those needed for will execution: writing, signed by testator or principal or another at his direction, and witnessed by two adults
>Revocation - both a living will and durable healthcare power of attorney can be revoked
Living will - document specifying life-sustaining and pain-alleviating measure one does or does not want if he is indefintiely incapacitated
>I.e., directs what measures one wants if they become terminally ill or in a persistent vegetative state
Durable healthcare power of attorney - document that appoints an individual as agent to make healthcare decisions on behalf of principal
>Becomes effective onyl if principal is incapacitated
>Extends to all healthcare questions, unless otherwise limited
Family consent - most states have laws that come into play where a person becomes termianally ill or otherwise indefinitely incapacitated and there is no living will or one wiht durable healthcare power of attorney
>close relatives, usually in an order provided by statute, may act as surrogate decision-makers
Trusts: Trusts Basics & Types of Trusts
A trust is a fiduciary relationship in which one party (trustee) holds legal title to property for the benefit of designated beneficiaries
>Settlor = person who created the trust, giving trustee legal title to hold, manage, and adminsiter trust proerty for beneficiaries
>Revocability - trusts are generally revocable under modern statutes, unless the terms expressly state the trust is irrevocable
Express trusts - created with property owner’s express intent
>Private trust - created for the benefit of certain defined and/or ascertainable persons
»>May be created iner vivos (during settlor’s life) or as a testamentary trust (created by will)
>Charitable trust - created for the benefit of an indefinite class of peopel or the public generally
Resulting trust - trust implied or imposed by law, most often when an express trust fails for some reason
>Settlor usually becomes beneficiary and trustee conveys title back to settlor or, if settlor has died, settlor’s estate
Constructive trust - not a trust, but rather an equitable remedy used in cases to rectify unjust enrichment or wrongful conduct
>Court imposes constructive trust on propertly in wrongdoer’s possession
Trusts: Express Private Trust Elements
A valid express trust requires the following elements:
1) Settlor with capacity to convey
>Same capacity as required to create a will
2) Settlor has clear present intent to create a trust relationship
>Intent must be absolutely clear and settlor must understand the nature of their act
>Writing not required unless as required by the Statute of Wills or Statute of Frauds
3) Competent trustee with duties - must name a trustee, but once established, a trust will not fail solely b/c trustee does not exist
>In such cases, a trustee will be appointed
>Trustee capacity - in most states anyone who can hold title to property can act as a trustee
4) Definite beneficiary - at the time of trust creation, settlor must either:
>a) Specifically identify the beneficiaries by name, or
>b)Sufficient describe how beneficiaries will be ascertained
»>Does not apply to charitable trusts
»>Sole trustee cannot be a sole beneficiary of a trust
5) Present and clear disposition of settlor’s specific property in trust
>I.e., owner has specifici property they want to place in trust
>Trust property (“res”) must be specifically described or ascertainable with certainty from its description
6) Valid trust purpose - can be for any purpose that is not illegal, impossible, or contrary to public policy
Trusts: Trust Creation: Inter Vivos vs. Testamentary Trusts
Trusts are generally created inter vivos (during settlor’s life) or via testamentary trusts (trust created by will)
Inter vivos - creation requires either:
>a) Transfer of property - property owner transfers property to another as trustee, or
>b) Declaration of trust - property owner declares himself trustee for another
»>Delivery - if property owner delcares another as trustee, property must be delivered to trustee
>Formalities - writing not required, not an oral trust and its terms can only be established by clear and convincing evidence
»>Land as property - writing required under Statute of Frauds
Testamentary trusts - trust created by will
>Trust intent, essential terms, and indentification of beneficiaries must be ascertainable by either:
»>a) Terms of the will itself,
»>b) Incorporation by reference - an existing writing properly incorporated by reference into the will, or
»>c) Power of appointment
Pour-over provisions - provision in a will that devises property to a previously existing trust
>Does not create a trust; transfers property to a separate, stand-alone trust.
Trusts: Trustee Powers, Resoponsibilities, & Duties
Powers - trustee can only exercise powers expressly or impliedly conferred (most often conferred by trust terms)
>Trustee has powers necessary and appropriate to properly invest, manage, and distribute trust property if not contrary to trust terms
Duties - trustee has a number of duties designated to ensure trust property is secure and fairly adminstrered, most notably:
1) Duty to adminster - trustee must adminster in good faith and in a prudent manner in accordance with trust terms and beneficiary’s interest
2) Duty of loyalty - no self-dealing
>Trustee cannot enter into a transaction in which he is dealing with the trust in his individual capacity, absent court approval or a contrary trust provision
3) Duty to report - trustee must keep beneficiaries reasonably informed of the trust and its adminstration
4) Duty to separate trust property and keep records - trustee must not comingle trust property wiht his own or another’s trust’s
5) Duty to enfoce claims and defend trust - trustee msut enforce claims the trust has and defend the trust against claims
6) Duty to preserve property and make it productive - trustee must preserve trust property, including the duty to make property productive (e.g., invest funds, lease or manage land, collect claims)
Trusts: Discretionary, Support, & Spendthrift Trusts
Discretionary and support trusts restrict beneficiary’s access to trust property by terms of the trust
>Creditor issues - b/c beneficiaries have limited acces to trust property, their creditors are limited in accessing beneficiary’s trust interset
Discretionary trust - trustee has absolute power and discretion to make decisions regard distribution of trust property to beneficiaries
>Beneficiaries have no right to income until trustee exercises discretino to distribute property or income
>Beneficiary’s creditors - cannot reach the trust b/c beneficiary cannot compel payment from the trust
»>but if creditors serve trustee with process, trustee must first satisfy creditor’s claims before distributing funds to beneficiary
Support trust - directs trustee to pay beneficiaries from trust as much as is necessary for beneficiary’s support
>beneficiary’s creditors - have same rights as for discretionary trusts
Spendthrift trust - prohibits beneficiaries from transferring their interests in the trust, either voluntarily or involuntarily
>usually included to protect beneficiary from his own carelessness
>Beneficiary’s creditors - cannot reach beneficiary’s interest in the trust, but distributions to beneficiary are reachable
Trusts: Termination, Revocation, & Modification
Trusts terminate automatically at the expiration of a specified trust term or when its purposes have become accomplished, unlawful, impossible, or contrary to public policy
Private trusts - can be revoked (and thus terminated) or modified by settlor and/or beneficiaries in most states
>By settlor - settlor can modify or revoke unless the terms expresly prohbiti modification or revocation
>By beneficiaries - beneficiaries can modify or revoke upon consent of settlor and all beneficiaries
»>Without settlor consent - all beneficiaries can consent to modify or revoke if doing so would not frustrate a material purpose of the trust
»>”All beneficiaries” includes unborn or unascertained beneficiaries, which can preclude obtaining required unanimous consent
»»>Some states allow appointment of a representative for minor, unborn, or unascertained beneficiaries
