Pg 30 Flashcards
What is a pour-over will?
A will that names the trustee of a trust as the beneficiary of the entire probate estate, or of the residuary estate after specific or general devisees. Even though the will pours over into the trust, it still needs to be probated, although if it just says that everything should go into the trust, there isn’t much to probate. It’s unlikely the will will be contested since most of the major provisions are in the trust, and not the will. This is a will that pays out to a trust as its heir.
What is an example of a pour-over will?
“I give my residuary estate to the acting trustee under the trust agreement executed on October 20, 2019, and known as the 2019 Revocable Trust (that I am the trustee of and Bob is named as the successor trustee), to be added to the trust estate and held under the trust agreement as in effect at my death.“
What is the trade off by using a pour-over will?
Probate is not entirely avoided, but by having the will pour over into the trust, you get the benefit of unified estate planning that has all of your assets.
What are the theories that validate pour-over wills?
– incorporation by reference: the will can incorporate by reference documents in existence at the time of the will’s execution
– acts of independent significance: the will can dispose of property by referring to some act or event that has significance apart from disposing of probate assets.
So by referencing a trust that disposes of property transferred to the trust during life, the trust doesn’t have to be in existence when the will is executed, it just needs to have some property in it before the testator’s death.
What is the rationale behind pour-over wills?
They are a backstop for estate planning to ensure that any after-acquired assets make it into the trust or anything that the grantor forgot to transfer. The downside is that it involves probate.
What are some of the limitations of pour-over wills?
The will cannot pour into a trust that is created or modified after the will is created. Incorporation by reference requires that the document be in existence when the will is executed. Although acts of significant independence can allow the will to refer to something that happened after the will was executed or after the testator died, as long as it has significance apart from distributing property at death.
At what point does a trust go into effect?
When there is trust res that is made subject to the trust.
If a trust isn’t funded until a testator dies, what does that mean?
It isn’t created until death, so it is testamentary, and not inter vivos
What is the exception regarding pour-over wills under the Uniform Testamentary Additions to Trust Act (UTATA)?
This avoids the traditional limitations for pour-over wills by eliminating the requirement of incorporation by reference and acts of independent significance. This allows a will to pour into a trust that is created after the will is executed and the trust can be modified after the will is executed too. The trust doesn’t need to be funded until death, and it will still be deemed an inter vivos trust, so you do not need court oversight. It basically allows pour-over wills to work. ** extra points on essay.
On a fact pattern where a will tries to pour over into a trust that wasn’t created or funded until after the will is executed, what should you talk about?
The UTATA exception to the limitation of incorporation by reference and acts of independent significance. All you need under this is a will and a trust. If the fact pattern has one document (a will) that pours assets into another (a trust) then consider whether you UTATA is available to relax the requirements of incorporation and acts of independent significance to allow maximum flexibility in unified estate planning.
How do you figure out what the rights are of a beneficiary under a trust?
Look first to the trust language where the beneficiary’s rights are created
What are the three major categories of trusts?
– mandatory trust
– discretion guided by standards
– absolute or pure discretion
What is a mandatory trust?
This is when the trustee has a mandatory obligation to make distributions to the beneficiaries according to the terms of the trust. He has zero discretion because all of the obligations are specified in the trust. He cannot refuse to make payments or make any changes. The beneficiary here has a concrete property interest in the trust.
If a settlor specifies that the trustee will invest trust property and pay annual income to the beneficiary, if the trustee doesn’t pay for three years, what happens?
That is a violation of the mandatory trust, and the remedy depends on the property in the trust and the interest that it earned. If the res was $100,000 that earns 10% annually, the trustee has to pay $10,000 per year. If he doesn’t, the beneficiary can get a court order that compels him to do that
Why is it not always good for a beneficiary to be able to compel trust payments under mandatory trusts?
If the beneficiary has a right to distribution from the trust, it is considered his property, so he may have to pay taxes on it and that may count as income for figuring out Medicaid eligibility and other benefits
