Powers of Appointment

Question 1

What is a power of appointment?

Answer 1

An authority created in a donee enabling the donee to designate, within the limits prescribed by the donor, the person who shall take the donor’s property and the manner in which they take it.

Question 2

What is a taker in default?

(comes up in powers of appointment)

Answer 2

Person who takes the property if the donee fails to exercise the power of appointment.

Question 3

What is the purpose of a power of appointment?

Answer 3

Let’s someone make a later choice about how to distribute property [can look at later facts].

Question 4

What are the 4 different categories of powers of appointment?

Answer 4

1. General Power of Appointment: A donee can appoint to herself, her creditors, or her estate. It is as if she owned the property herself.
2. Special Power of Appointment: Donee cannot appoint to herself, and typically she is only able to appoint to a certain class.
3. Presently Exercisable Power of Appointment: Donee can exercise the power right now, in her lifetime.
4. Testamentary Power of Appointment: Donee can only appoint the property by will.

Question 5

What is the first thing to do in a power of appointment problem?

Answer 5

Classify the power.

Question 6

A person has a power of appointment. In her will, all she does is gift her “entire estate” to someone (i.e. doesn’t mention the power of appointment). Does this include the property she had the power to appoint?

Answer 6

Yes, unless the power of appointment itself required that the will specifically refer to the power.

Question 7

Donee has a power of appointment. She executes a will that does not mention the property in the power of appointment, and she does not create a residual beneficiary in the will.

What happens upon her death?

Answer 7

She didn’t exercise the power of appointment, and thus on her death the trustee will distribute the property to the donor of the power’s residuary beneficiaries, or if none, to the donor’s intestacy estate.

Important to recognize that this means the original donor of the power.

Question 8

Which powers of appointment are testamentary substitutes?

How do you treat them for elective share purposes?

Answer 8

General, presently exercisable power of appointment is a T sub.*

More simply: COUNT IT as a T SUB. Full value, because it was all given away and could have been kept.

General testamentary is not a T sub, and neither is a special power of appointment.

Question 9

Can creditors reach the property in a power of appointment?

Answer 9

General Presently Exercisable power of appointment: Yes, she can reach the assets, so creditors can too.

Special, Presently Exercisable Power of Apppointment: Creditors CANNOT reach, because the donee can’t even keep them herself.

General Testamentary Power of Appointment: Donee’s creditors cannot reach this UNLESS:

(1) Donee was both the donor and the donee of the POA
(2) She exercises the power in favor of her own estate

Question 10

What is the RAP rule?

What is suspension rule?

Answer 10

An interest is valid only if it must vest within lives in being plus 21 years.

Suspension rule is NY only: An interest is valid only if there are identified persons, who could, together, convey a fee simple absolute within LIB plus 21 years.

[problem when it intersects with the spendthrift rule]

Also remember the NY perpetuities reform statute

Question 11

What is the process for analyzing powers of appointment under the RAP?

Answer 11

1) Identify the power
2) Is the power itself valid? (always will be yes)
3) Are the interests created by the power valid?

Question 12

How do we analyze general or special testamentary powers of appointment for purposes of the RAP?

Answer 12

1. Identify the power
2. Determine if the power itself is valid (it will be. inquiry is whether the power will be exercised within lives in being +21 years. It will be because the donee is the LIB, and it is exercised upon her death bc its in her will (don’t need to wait 21 years)
3. Determine if the interests created by the power are valid.

Step 3 is most important. Analysis: We treat the power as if the donee filled in the blanks on the donor’s will. I.e., we take the interest that the donee appointed and fill it in as a life estate in the donor’s will.

THEN, use the second look doctrine (wait and see) and look at the people alive and see if the property will vest within 21 years of the donee’s death. (so look out for an age contingency over 21. Although the ny reform statute will fix that).

Question 13

How do we treat present, generally exercisable POAs for RAP and suspension purposes?

Answer 13

1. Identify Power
2. See if power itself violates the RAP or suspension. (not a prob). Look to see if the power itself is acquired within LIB+21.
3. To be valid, the interest that is created from this general and presently exercisable power is measured from the date of the instrument exercising the power, not from creation [don’t fill in the blanks, starting counting from the time the power is exercised].

Second Look Doctrine does NOT apply. NY reform does.

SUSPENSION RULE:

General Rule: When you have an income interest built upon another income interest, it is generally ok for RAP but normally violates suspension rule.

But note NY reform statute normally saves it.

If an interest cannot be saved:

If an interest is not good, throw it out and accelerate to the remainderman.

Question 14

Short answer:

What do you do to analyze RAP and testamentary powers of appointment?

Answer 14

Measure from the DATE OF CREATION of the power of appointment [earlier, fill in the blank]

Second look doctrine APPLIES.

Question 15

Short answer:

What do you do to analyze RAP and general, presently exercisable powers of appointment?

Answer 15

Measure from the time of EXERCISE of the power of appointment.

Second Look Doctrine DOES NOT APPLY.

Question 16

Will the plain meaning of a will be overturned by extrinsic evidence that the text of the will contains a mistake?

E.g., saying $20,000 instead of $30,000

Answer 16

Mistake

No, absent suspicious circumstances, it is conclusively presumed that the testator read the will and intended its consequences.

The plain meaning of the will will not be overturned.

Question 17

Can extrinsic evidence be used to fix a latent ambiguity in the will?

Answer 17

Yes. A latent ambiguity is a misdescription, where the error is not evident by looking at the will.

Example: Gift to nephew John Paul Jones, when nephew’s name is John Peter Jones.

Extrinsic evidence can be used to clarify T’s words. Types of extrinsic evidence allowed:

1. Facts and circumstances evidence (facts about testator’s family, habits, etc)
2. Evidence of testator’s declarations of intent to third parties (testator told friend he gifted 10k to JPJ)
3. Evidence of the testator’s statements to the attorney who prepared the will

If extrinsic evidence does not cure the ambiguity, the gift fails because there is no ascertainable beneficiary.

Question 18

Can extrinsic evidence be admitted to fix a patent error in a will?

Answer 18

A patent error is a obvious error on the face of the will.

Ex. “I gift twenty five dollars ($25,000).”

Extrinsic evidence is admissible as follows:

1. Facts and circumstances evidence (facts about testator’s family, habits, etc)
2. Evidence of testator’s declarations of intent to third parties(testator told friend he gifted 10k to JPJ) NOT ALLOWED [can’t have a third party contradict what the will says!)
3. Evidence of the testator’s statements to the attorney who prepared the will

Question 19

What is the law for conditional wills?

Meaning, wills that expressly say they are only to be operative upon the happening of a certain event?

Answer 19

Example: “I am going on a fishing trip to the bermuda circle. If anything happens to me on the trip, I gift everything to my friend Matt.”

Must argue both sides:

1) The will is a conditional will, and probate should be denied because the condition did not occur.
2) The testator’s reference to the trip only explains his motive for making the will, not when it should be operative.

Question 20

What is a joint will?

What is the common issue?

Answer 20

A will of two people in one document.

Common issue is whether the joint will was executed pursuant to a contract that the survivor would not revoke the joint will afer the death of the other spouse.

Result: Court will only find that a joint will makes a contract of non-revocation IF an express statement of intent that the will’s provisions are intended to constitute a contract between the parties

Merely using words like “we and us” is not enough.

What happens if the survivor breaches?

Breaching would mean executing a later will with inconsistent provisions.

Result: Probate Will 2 (to catch any new assets going to new beneficiaries), but make a constructive trust for the beneficiaries of will1 with the will 1 assets.

Question 21

What testamentary capacity must a testator have?

Answer 21

Testator must have sufficient capacity to

1. Understand the nature of the act (that he is writing a will)
2. He needs to know the nature and approximate value of his property
3. Know the natural object of his bounty (know who is family members and loved ones are), AND
4. Has to understand the dispositions (gifts) he was making.

Note: The court can find that the testator executed the will during a lucid interval [had all the elements of capacity for a short period].

Question 22

Can someone adjudicated incompetent make a will?

Answer 22

Yes, making a will requires less capacity than entering into a contract. The court can find that the testator executed the will during a lucid interval [had all the elements of capacity for a short period].

Question 23

Will a will created under an insane delusion be enforced?

Answer 23

No.

Question 24

When can undue influence prevent enforcing a will?

Answer 24

Undue influence is when the testator has testamentary capacity but is subject to, and controlled by, a dominant influence of power.

The will contestant has the burden of proving:

1. The existence and exertion of an influence
2. The effect of such influence was to overpower the mind and the will of the testator
3. The product is a will or a gift in a will which would not have happened but for that influence.

UNLESS the inference is rebutted

Question 25

What evidence can be offered of undue influence?

What evidence will satisfy the burden of proof for undue influence?

Answer 25

The following alone are insufficient to show undue influence:

1. The opportunity to exert influence
2. Susceptability to influence because of age or illness
3. Unequal Dispositions

The following will satisfy the burden of proof for undue influence:

1. If a will makes a gift to a person in a confidentia relationship
2. The person was active in preparing the will

Question 26

How are bequests in a will to a drafting attorney treated?

Answer 26

Court will AUTOMATICALLY inquire into the bequest and apply Putnam Scrutiny to determine whether the bequest was voluntarily made.

(all we need to know. Know the phrase Putnam Scrutiny)

Question 27

What happens when a will names the drafting attorney as the executor of the estate?

Answer 27

NY Law:

1) A drafting attorney who is named as executor of the estate must give written disclosure that :

1. Any person can be named as an executor, not just an attorney
2. An executor receives a statutory commission
3. The attorney will also be entitled to legal fees for representing the estate.

2) The testator must sign the written disclosure in the presence of 2 witnesses.
3) If the atty fails to comply with the statute, the attorney receives HALF of the statutory commissions.

Question 28

What is a No Contest/In terrorem clause?

General Rule?

Ny rule?

4 exceptions?

Answer 28

A clause in a will that says if anyone objects to my will they will get nothing.

General Rule: Given full effect, unless case is brought in good faith and with probable cause.

New York Rule: The clause is given full effect, even if there is probably cause to challenge the will. [testator can protect his reputation against post-death attack].

Exceptions to the NY Rule:

1. If the will contest is claiming forgery or that the will was revoked by a later will, if the surrogate’s court finds there is probable cause. [There is no exception for suit about revocation by physical act]
2. Will contest is filed on behalf of an infant or an incompetent. [Actions taken by a third party should not work a forfeiture].
3. A “construction proceeding” to construe the terms of the will. **
4. There is an objection to the jurisdiction of the court. (bc in that case not really contesting will, just saying it should be probated in a different jurisdiction)

NOTE: The Safe Harbor Provisions allow a person contesting a will with a no-contest clause to examine in discovery:

1. The person who prepared the will
2. The attesting witnesses
3. The will proponents
4. The nominated executors
5. ****A recent COA case said the court has discretion to allow the deposition of a person with info of potential value or relevance, but a no contest clause can be drafted strictly to disallow this as well.

Question 29

What are the safe harbor provisions regarding no contest clauses?

Answer 29

The Safe Harbor Provisions allow a person contesting a will with a no-contest clause to examine in discovery:

1) The person who prepared the will
2) The attesting witnesses
3) The will proponents
4) The nominated executors
5) ****A recent COA case said the court has discretion to allow the deposition of a person with info of potential value or relevance, but a no contest caluse can be drafted strictly to disallow this as well.

Question 30

What are powers of attorney?

How long do they last?

Answer 30

Document authorizing an agent to act on behalf of the grantor of the power.

Non-Durable Powers of Attorney: Power is revoked at the grantor’s death or incapacity, at the time that agent receives notice of the death or disability.

Durable Powers of Attorney: Extends beyond the grantor’s incapacity unless it has specific language that it is terminated by the grantor’s incapacity.

Question 31

What is a health care proxy?

Answer 31

A type of durable power of attorney that allows the agent to make health care decisions on the grantor’s behalf. It kicks in upon disability.

It must be

1) Inwriting
2) Signed by the grantor or another at his direction
3) Witnessed by at least 2 adults

Question 32

What is a living will?

Answer 32

States that an individual desires to have live saving treatment withdrawn or administered.