Priority 2

Question 1

will subsitutues/non probate assets

Answer 1

Will substitutes that avoid probate inlcude:
* life insurance
* joint tenancies
* tenancies by entirety
* inter vivos trusts
* bank account trusts
* deeds
* contracts
* inter vivos gifts

Question 2

When does property pass intestate? 2 ways

Answer 2

Property may pass by intestate succession when:
* A decedent dies without having made a will or their will is denied probate (“total intestacy”)
* A decedent’s will does not dispose of all of the decedent’s property, either because a gift has failed or because the will contains no residuary clause (“partial intestacy”)

Question 3

Which state’s intestacy law applies?

Answer 3

For personal property, use the law of the decedent’s domicile at death.
For real property, use the law of the situs of the property.

Question 4

Intestate share of surviving spouse

Answer 4

• Under modern law, the spouse is an heir.
• In most states, if the decedent is survived by a spouse but no descendants, the surviving spouse takes the entire estate.
• The share of the surviving spouse where the decedent has descendants depends on factors such as the number of children and whether the surviving spouse is the other parent of the deceased spouse’s children

Question 5

Intestate Share of Children

Answer 5

• If all of the decedent’s children survive the decedent each child receives an equal share.
• A descendant of a younger generation (such as a grandchild) cannot take if the older generation (the grandchild’s parent) is still alive.

There are three methods of computing shares when a decedents child predeceases them but the predeceased child also has children:
* Classic Per Stirpes (old/minority)
* Per Capita with Representation (majority)
* Per Capita at Each Generational Level (modern trend)

Question 6

Classic Per Stirpes (old/minority)

Answer 6

Shares are divided equally among first generation, even if no survivors. Any first generation descedents’ shares are then distributed evenly to their survivors

Question 7

Per Capita with Representation (majority) (modern per stirpes)

Answer 7

shares are divided equally among the first generation. If there are any first generation predecedents, their shares will be distributed evenly amongst all the living children of the first generation predecedents.

Question 8

Per Capita at Each Generational Level (modern trend)

Answer 8

shares are divided equally among the first generation. If there are any first generation predecedents, their shares will be distributed evenly amongst all members of the next generation, whether or not their parents are deceased. (All cousins are treated equally)

Question 9

Order of intestate takers if decedent has no spouse or children

Answer 9

The estate passes down this list until takers are found.
1) Surviving parent(s)

2) Brothers and sisters and their descendants
* Note that if one parent and at least one sibling survive, the UPC and some states give the entire estate to the surviving parent. Other states give one-half to the surviving parent and one-half to the sibling or siblings

3) One-half each to paternal/maternal grandparents (both halves to one side if there are no takers on the other side)

4) One-half to nearest kin on each side (all to one side if there are no kin on the other side)

5) estate escheats to the state

Question 10

How are adopted children considered in intestacy?

Answer 10

• adopted children are treated the same as the biological children of the adopting parents.
• adopted children have no succession with biological parents unless they were adopted by a step parent.

Question 11

How are step and foster children considered in intestacy? (adoption by estoppel)

Answer 11

• stepchildren and foster children have no inheritance rights unless adopted by the stepparent or foster parent.
• adoption by estoppel permits - foster or step child can inheret when legal custody of a child is gained under an (unfulfilled) agreement to adopt them.

Question 12

How are non-marital children considered in intestacy?

Answer 12

A nonmarital child always inherits from the mother.
Generally, the child will inherit from their father if:
(1) the father married the mother after the child’s birth;
(2) the man was adjudicated to be the father in a paternity suit; or
(3) after his death and during probate proceedings, the man is proved by clear and convincing evidence to be the father.

Question 13

How are posthumous children considered in intesacy?

Answer 13

If a person is in gestation at the time of the intestate’s death, most states
will allow that person to be an heir.

Question 14

How are half blooded children considered in intesacy?

Answer 14

The UPC and most states make no distinction between half bloods and whole bloods; they inherit equally.

Question 15

Disinheretance clauses and partial intestacy

Answer 15

• At common law and in most states, a will provision expressly disinheriting an heir is ineffective as to any property passing by intestacy.
• However, under the UPC and statutes in several non-UPC states, a testator may exclude the right of an individual to succeed to property passing by intestate succession (a “negative” will provision).

Question 16

Effect of lifetime gifts on intestacy/wills (advancement)

Answer 16

• An advancement is a lifetime gift to an heir with the intent that the gift be applied against any share the heir inherits from the donor’s estate.
• Under moden law, for a gift to be considered an advancement there must be evidence of intent such by written or extrinsic evidence (declared by donor or aknowleged by donee).
• If found to be an advancement, the gift’s value when given is added back into the estate for purposes of calculating shares, and then subtracted from the recipient’s share.

Question 17

Effect of simultanous death on intestacy/wills

Answer 17

Provisions in will control. If no applicable will provision, there are two major approaches:
120-hour rule
* Many states and the UPC require that a person survive the decedent by 120 hours to take any distribution of the decedent’s property.

Uniform Simultaneous Death Act
* If order can be determined, even if difference in time of death is only minutes, regular rules apply.
* If order of death cannot be determined, the property of each decedent is disposed of as if they had survived the other.

Question 18

Disclaimer by heir or beneficiary

Answer 18

• Any heir or beneficiary can disclaim an interest.
• In most states, a disclaimer must be written, signed by the disclaimant, acknowledged before a notary, and filed with the appropriate court within nine months of death (although the time period may vary).
• An interest cannot be disclaimed if the heir or beneficiary has accepted the property or any of its benefits.
• The disclaimed property passes as if the disclaimant had predeceased the decedent.

Question 19

Slayer Statute

Answer 19

• person who feloniously and intentionally brings about the death of a decedent forfeits any interest in the decedent’s estate.
• The property passes as though the killer predeceased the victim.
• In the absence of a murder conviction, the court must generally find that the killing was unlawful or intentional by a preponderance of the evidence

Question 20

What is a will and what are its effects?

Answer 20

• A will is an instrument that directs the disposition of a person’s property at death.
• The only way to avoid intestacy is to leave a valid will disposing of all probate property.
• A will is revocable during the testator’s lifetime and operative at their death.
• A codicil is a supplement to a will that modifies it.
• Most states require strict compliance with formalities, but UPC uses a subsantial compliance test, excusing minor harmless errors. This also applies to the attempted revocation or alteration of a will

Question 21

What is a “savings statute”

Answer 21

Most states and the UPC have a “savings statute,” that is, a will is admissible to probate in a jurisdiction if the will has been executed in accordance with the law of:
(1) that jurisdiction,
(2) the state where the will was executed,
(3) the testator’s domicile at the time of the will’s
execution, or
(4) the testator’s domicile at death

Question 22

Legal Capacity to make a will

Answer 22

testator must be
* 18 year old and
* of sound mind

Question 23

Testamentary Capacity

Answer 23

A testator simply must have the capacity to understand:
* The nature of their act—that is, that the testator is executing a will
* The nature and extent of their property
* The persons who are the natural objects of their bounty (family members)
* The above factors and be able to formulate an orderly scheme of disposition

Remember:
* Capacity is determined at the time of the will’s execution.
* Failing memory, age, or addition do not neceessarily invalidate a will.
* Even a person adjudicated incompetent may be able to execute a will during a “lucid interval.”

Question 24

Testamentary Intent

Answer 24

• The testator must have present intent that the instrument operate as their will.
• testamentary intent will be found only if it is shown that the testator:
  (1) intended to dispose of the property;
  (2) intended the disposition to occur only upon his death; and
  (3) intended that the instrument in question accomplish the disposition.

Question 25

Will Formalities for an Attested Will

Answer 25

The formalities required vary from state to state, but most
states require that:
1) The will or codicil must be in writing. some states permit “e-wills”.
2) The will or codicil be signed by the testator (or an agent) in the physical presence of two witnesses
3) The two witness sign in the physical presence of the testator

Notes:
* Some states and the UPC allow notarization to substitute for the
attestation of witnesses.
* A signature is any mark with intent to authenticate).
* In some states a bequest to an interested witness who is also a beneficiary may be void under a “purging statute”
* Change made after the execution of an attested will are usually not given effect, unless a holographic will is allowed.

Question 26

Holographic Will

Answer 26

• A holographic will is one that is entirely in the testator’s handwriting and has no attesting witnesses.
• A holographic will must contain the testator’s signature.
• Many states do not recognize holographic wills
• Most states that recognize holographic wills also give effect to handwritten changes made by the testator after the will is completed.
• In a jurisdiction that recognizes a holographic will, a modification to an attested will may be construed as a holographice will.

Question 27

Oral Will

Answer 27

• Most states and the UPC do not recognize oral Wills
• Some states recognize them for personal property for soldiers and people in contemplation of immediate death if two witnesses are present.

Question 28

devise/bequest/legatee

Answer 28

devise - gift of real property
bequest - gift of personal property
legacy - gift of personal property in a will (usually money)

Question 29

Specific Devise or Legacy

Answer 29

A specific devise or legacy is a gift of a particular item of property distinct from all other objects in the testator’s estate.

A will becomes effective at the time of death. Therefore, if a specific bequest is not detailed (i.e. “my automobile”) ** the will should operate upon cirumstances and properties as they exist at the time of death**.

Question 30

General Legacy

Answer 30

A general legacy is a gift of a general economic benefit (often a dollar amount) payable out of the general assets of the estate without requiring any particular source of payment. If the designated fund is insufficient, the balance will usually be paid from other assets of the estate.

Question 31

Demonstrative Legacy

Answer 31

A demonstrative legacy is a gift of a dollar amount that is to be paid
from a particular source or fund.

Question 32

Residuary estate

Answer 32

The residuary estate, and hence a gift of the residue, consists of the balance of the testator’s property after paying (1) debts, expenses, and taxes; and (2) specific, general, and demonstrative gifts

Question 33

What is ademption

Answer 33

Ademption refers to the failure of a gift because the property is no longer in the testator’s estate at the time of their death.

Question 34

The effect of Ademption in the case of specific bequests

Answer 34

Most states follow the “identity” approach: If secifically bequeathed property is not in the testator’s estate at death, the bequest is adeemed and the beneficiary takes nothing. No substitute or value.

Some states have an “intent test”: beneficiary will get a substitute if they can show that the testator intended them to take substitute property

Some states have statutes modifying ademptions, such as allowing the benefiary to take:
* a replacement item if the testator replaced the gifted item with a similar item
* the balance of the purchase price if the gift was sold
* the condemnation award or inusrance if loss occured after testators death
* the proceeds from sale if item was erroneous sold by guardian or conservator.

Question 35

Ademption by satisfaction

Answer 35

• A testamentary gift may be satisfied in whole or in part by an intervivos transfer from the testator to the beneficiary after the execution of the will, if the testator intends the transfer to have that effect.
• Most states require a writing or specific instructions in the will before the gift is deemed a satisfaction.
• Anaglous to advancement in intestacy

Question 36

Securities Acquired After Will Execution

Answer 36

stocksplits/dividends: At common law, a specific bequest of stock includes any additional shares produced by a stock split but does not include shares produced by a stock dividend. Today, the UPC and nearly all states also include stock dividends.

DRIPs:The beneficiary does not take new securities that have been purchased or acquired by the reinvestment of dividends.

Question 37

Exoneration of liens

Answer 37

• The UPC and a large number of states provide that liens on specifically devised property are not exonerated (paid off with estate funds) unless the will so directs. This means the beneficiary takes the property subject to the debt.
• Under common law liens are exonerated first.

Question 38

Abatement - not enough money

Answer 38

Abatement - reducing testamentary gifts in cases where the estate assets are not sufficient to pay all claims and satisfy all bequests and devises.
If the testator does not set out an order of abatement in the will, testamentary gifts will usually abate in the following order:
* Property passing by intestacy
* Residuary estate
* General legacies
* Demonstrative legacies
* Specific bequests and devises

Question 39

Lapsed gifts and anti lapse statutes

Answer 39

A gift lapses if the beneficiary predeceases the testator or disclaims.

Who receives a lapsed gift is controlled by:
* The express terms of the will
* Rule of law (such as an anti-lapse statute)
* Residuary clause
* Intestacy

Notes
* Most states have anti-lapse statutes that prevent lapse by substituting the descendants of the predeceased beneficiary for the beneficary.
* Antilapse does not apply to non-blood-relatives (doesn’t apply even to spouses!)
* In most states, words of survivorship in gifts to be split among a class are considered a contrary will provision, and the anti-lapse statute will not be applied.
* In many states, the rules that apply to lapsed gifts also apply to void gifts such as gifts to people who are deceased at execution.

Question 40

Who can raise will interpretation and construction issues?

Answer 40

• personal representative of testator
• beneficiares/heirs who don’t like the will as written

Question 41

Basic rules of will construction if intent is not clear

Answer 41

• Avoid intestacy
• Among two or more contradictory provisions in a will, the later one prevails
• The will is construed as a whole, not from isolated parts out of context
• Words are given their ordinary meaning unless intended otherwise
• Technical words are given their technical meaning unless intended otherwise
• Attempt to give effect to all words the testator included in the will

Question 42

Interpreting a facial ambiguity - can extrinsic evidence be used?

Answer 42

• Extrinisic evideince is admissible to address ambiguity but not blanks or omissions.

Question 43

Interpreting a latent ambiguity - can extrinsic evidence be used?

Answer 43

The court will consider extrinsic evidence to resolve the ambiguity.

Question 44

Interpreting an alleged mistake- very strict.

Answer 44

Several schools:
* Plain meaning rule - no extrinsic evidence under any circumstances
* Modern rule - extrinsic evidence permitted if it speaks to testators intent, but only available in case of scriviners error

Question 45

three recquirement for Incorporation of a document into a will by reference

Answer 45

A document may be incorporated by reference into a will, provided:
(i) The will manifests an intent to incorporate the document
(ii)The document is in existence at the time the will is executed; and
(iii)The document is sufficiently described in the will

Many states dispense with the existence requirement for personal property

Examples of incroporated document: A list specifying the distribution of items of tangible personal property.

Question 46

references in a will to acts or facts of independent significance (such as boxes)

Answer 46

• A will may reference the disposition of a certain box and its contents, even if the contents may change after the will is written.
• However, law may require certain items represented by title documents to be transferred in a particular manner such as real property, stock certificates, and bank accounts.

Question 47

Conditional Wills

Answer 47

• A conditional will is one that provides that it is to be operative only if a certain event occurs or does not occur. Must very clear in the will itself.
• Courts will construe wills as general, not conditional, if possible.
• Parol evidence is not admissible to show that a will absolute on its face was intended to be conditional.

Question 48

Codicil

Answer 48

• A codicil modifies a previously executed will and must itself be executed with the same formalities.
• Any addition, alteration, interlineation, or deletion made after the will has been signed and attested is ineffective to change the will, unless the will is reexecuted with proper formalities (or the changes qualify as a holographic codicil where such codicils are recognized).
• A validly executed codicil is generally viewed as impliedly incorporating a defective will by reference, thus validating the will.

Question 49

the doctrine of republication by codicil

Answer 49

The will and codicil are treated as one instrument speaking from the date of the last codicil’s execution.

Question 50

Pour over provision

Answer 50

• A pour-over provision is a provision in a will making a gift to an inter vivos trust.
• Despite the fact that the fact that the trust may be amended or revoked after execution of the will.
• The trust does not have to be funded prior to the testator’s death.

Question 51

Integration of a will

Answer 51

• The pages present at the time of execution must be those present at the time of probate.
• Physical attachment, internal coherence of pages, or an orderly dispositional plan raise a presumption that the pages were present and intended to be part of the will when it was executed.
• Proof of integration can also be provided by testimony or other extrinsic evidence.

Question 52

Contractual Wills

Answer 52

• A contractual will is a will executed or not revoked as the consideration for a contract. A contract to make, not to make, or not to revoke a will is valid.
• Contract law controls.
• Modern law requires a writing, and many states have enacted statutes requiring that these contracts be in writing or be specifically mentioned in the will.
• The contract becomes irrevocable upon the first testator’s death.
• If one testator repudiates the contract while alive after substantial performance by the promisee, the promisee may seek damages, quantum meruit, or equitable relief.
• If one party party dies in reliance on a contract not to revoke, the court will usually create a constructive trust in favor of the intended beneficiaries of the contractual wills.

Question 53

Power of appointment

Answer 53

• A power of appointment is an authority granted to a person, enabling that person (the donee of the power) to designate, within the limits prescribed by the creator of the power, the persons who shall take the property and the manner in which they shall take it.
• general power of appointment - donee can give property to anyone, including themselves.
• special power of appointment - exercisable in favor of a limited class of appointees. Does not include the donee, their estate, their creditors, or the
  creditors of their estate.
• power not subject to spouse’s elect share or donee’s creditors.
• power can be found by implication unless specifically mentioned elsewhere.

Question 54

Revocation of wills

Answer 54

• A person with testamentary capacity may revoke their will at any time
  prior to death.
• A will may be revoked by operation of law, by subsequent instrument, or by physical act with intent to revoke.
• Even a will that the testator has contractually agreed not to revoke may be revoked, but the beneficiaries may then have a breach of contract action against the estate
• The revocation of a will revokes all codicils to it, but revocation of a codicil to a will does not revoke the entire will.
• Most states allow partial recovation (crossing out) but not additions without the proper formalities.
• A subsequent instrument may expressly revoke the earlier will (“this is my last will” - insufficient, but may revoke by inconsistency)
• If the new instrument completely disposes of the testator’s property, the old will is completely revoked by inconsistency. If the new instrument partially disposes of the testator’s property, the old will is revoked only to the extent of the inconsistent provisions.

Question 55

Presumptions as to revocation

Answer 55

If a will is found in a “normal location” and there are no suspicious circumstances, there is a presumption that the testator did not revoke it.

If a will last seen in the testator’s possession or under their control cannot be found after their death or is found in a mutilated condition, a rebuttable presumption arises that the testator revoked it.

Question 56

Lost or destroyed Wills

Answer 56

If a will is lost or destroyed (and the presumption that the testator revoked it is overcome), it may be admitted to probate if the following can be proven:
(1) valid execution;
(2) the cause of nonproduction (that is, proof that the will was not revoked); and
(3) the contents of the will (2 witnesses or photcopy)

Question 57

Implied Conditional Revocation or Dependent
Relative Revocation

Answer 57

Testator excutes will 1, then revokes will 1 for will 2, but will 2 turns out to be invalid.

DDR applies to hold to the testators intent that the earlier will is preferable to intestacy.

The more similar the provisions of the two wills, the more likely the
court will apply DRR.

Question 58

Effect of marriage on a Will

Answer 58

Most states- no effect
UPC- new spouse takes an intestate share as an “omitted spouse” unless:
* The will makes provision for the new spouse
* The omission was intentional, or
* The will was made in contemplation of the marriage

Question 59

effect of divorce on a will

Answer 59

• divorce or annulment following execution of a will revokes all gifts and fiduciary appointments in favor of the former spouse inlcuding appointments as executor, guardian, or trustee.
• UPC extends revocation to the former spouse’s relatives who are not relatives of the testator.
• remarraige un-revokes

Question 60

Pretermitted Children Statute and child disinheretance.

Answer 60

• A testator may intentionally disinherit their children
• A petermitted children statute provides a statutoty share for a left out child on the assumption that the testator would have made provision for the child.
• Most states provide a forced share for a child who was born or adopted after the will was executed. Usually same calcuation as intestate, except the portion of the estate to which the pretermitted child is entitled is limited to the provisions made to the other children
• Not applicable if whole estate is left to pretermitted child’s other parent
• An amendment of any sort after a child is born creates a presumption that the child was intended not to be in the will.
• Children mistaken to be dead will share in the estate as though they were an omitted afterborn child.

Question 61

Spouses elective share statutes - override will

Answer 61

• Common law marital property states have elective share statutes that give the spouse an election to take a statutory share of the decedent’s estate in lieu of taking under the decedent’s will.
• Spouse gets option to have a statutory share regardless of the will.
• amounts vary widely
• usually calculated from the decedent’s net estate (probate estate minus expenses and creditors’ claims).

Question 62

Homestead statutes

Answer 62

statutes that protect the family residence from creditors’ claims. Often allow decedent’s spouse or dependent children to occupy for life despite the disposition of the residence in the decedent’s will.

Question 63

Family Allowance

Answer 63

Provide support for decedent’s family during probate administration, and usually takes precedence over all claims other than funeral and administration expenses.

Question 64

Exempt personal property for surviving spouse

Answer 64

A surviving spouse usually entitled to petition to set aside certain items of tangible personal property (ex. household furnishings, personal effects) as exempt from claims against the estate. These items are in addition to the amounts passing by will, intestacy, or elective share.

Question 65

7 grounds for Will Contests

Answer 65

Only interested parties have standing
The will contestant has the burden to prove the will is invalid.

Grounds for challenge are:
(1) defective execution,
(2) revocation,
(3) lack of testamentary capacity,
(4) lack of testamentary intent,
(5) undue influence or duress,
(6) fraud, and
(7) mistake

Question 66

Insane delusion challenge to testamentary capacity

Answer 66

Insane delusion destroys testamentary capacity only if there is a connection (nexus) between the insane delusion and the property disposition.

Question 67

undue influence challange to will validity (high bar)

Answer 67

Requires more than badgering. Mere pleading, begging, nagging, cajoling, or even threatening do not constitute undue influence. Susceptibility is not sufficient to establish. The free will of the testator must be destroyed.

To establish undue influence, the contestants must establish that:
1) The influence existed and was exerted
2) The effect of the influence was to overpower the mind and free will of the testator (so that the will reflects the desires of the person exerting the influence instead of the testator); and
3) The resulting testamentary disposition would not have been executed but for the influence (causation)

Circumstantial evidence to prove undue influence includes:
* Unnatural dispositions, such as cutting out close family
* Opportunity or access to testator
* Confidential or fiduciary relationship between parties
* The ability of the testator to resist
* The beneficiary’s involvement with the drafting or execution of the will

Presumption of undue influence if
1) there was a confidential relationship between the testator and a beneficiary,
2) that beneficiary was active in procuring, drafting, or executing the will.

No automatic presumption between spouses.
Gifts to attorney-drafter-beneficiary are void.

Question 68

Fraud challange to will validity

Answer 68

Elements of Fraud
1. False representation made to the testator
2. Knowledge of falsity by person making the statement
3. The testator reasonably believed the statement
4. The statement caused the testator to execute a will or make a particular disposition that the testator would not have made but for the misrepresentation

Fraud in the execution (Factum) - misrepresentation as to the identity or contents of the instrument. Fials testementary intent.

Fraud in the Inducement - misrepresentation as to extrinsic facts that would induce the will or a particular disposition. The will or the particular gifts affected by the fraud must be set aside.

If a testator is fraudulently prevented from making a will, some courts will impose a constructive trust against the intestate beneficiaries in favor of those
who would have taken had the will been made.

Question 69

No-Contest Clause

Answer 69

A clause in a will providing that a beneficiary forfeits their interest in the
estate if they contest the will and lose.

Under majority rule will be enforced unless the beneficiary had probable cause for bringing the contest.

Question 70

Mistake challange to will validity

Answer 70

A mistake is an error that was not caused by evil conduct.

Mistake in Execution (factum): testator is in error regarding the identity or contents of the instrument and thus lacks testamentary intent. Extrinsic evidence is admissible to prove. **Court will grant relief **where nature of the mistake is obvious.

Mistake in inducement: the testator is mistaken as to
some extrinsic fact and makes their will based on that erroneous fact. No relief.

Question 71

Duty of Trustee

Answer 71

A trustee is a fiduciary and thus:
(1) must deal with the property with reasonable care;
(2) must maintain the utmost degree of loyalty; and
(3) is personally responsible if their conduct falls beneath required standards.

Question 72

Two types of Express Trusts

Answer 72

Private—private beneficiaries (certain ascertainable persons)

Charitable—charitable beneficiaries (indefinite class of persons or the public in general)

Question 73

Two types of Trusts Created by the Operation of Law

Answer 73

Resulting Trusts - Resulting trusts arise from the presumed intention of the owner of the property.
Constructive Trusts - Constructive trusts are an equitable remedy used to prevent unjust enrichment.

Question 74

What are the 8 elements of a valid Express Trust?

Answer 74

(1) a settlor with capacity to convey,
(2) who has a present intent to create a trust relationship (split legal and equitible title),
(3) names a competent trustee with duties (inter vivos only),
(4) names a definite beneficiary,
(5) the same person is not the sole trustee and beneficiary
(6) the trust contains property
(7) the trust has a valid purpose (not illegal, against public policy, or violative of the RAP)
(8) complies with the mechanics and formalities

If no property when instrument executed, trust arises when funded and intent remanifested.

Question 75

Requirements for Intent to create a trust

Answer 75

• Capacity is the same as for a will (lower than contract)
• Intent may be manifested by written or spoken words or by the conduct of the settlor—unless the Statute of Wills or the Statute of Frauds applies.
• Intent must be expressed at the time the settlor owns the property.
• The settlor’s intent must be that the trust take effect immediately, not at some future time (otherwise it is a gratutious promise).
• Precatory language does not create a trust. Must be definite and precise.
• Failure to name a trustee, or a promise to name a trustee
  in the future, may evidence a lack of present intent and
  prevent delivery of the res.

Question 76

Beneficiary requirement for a trust

Answer 76

• An ascertainable beneficiary is necessary to the validity of every trust except charitable and honorary trusts
• A beneficairy can disclaim. If a valid disclaimer is made, the trust is read as though the disclaimant was deceased as of the relevant date.
• Beneficiaries may be “definite” even though not yet ascertained (for example, unborn children). Beneficiaries must be ascertainable (cannot be to “friends”)
• Under the UTC, a settlor may empower the trustee to select the beneficiaries from an indefinite class. Failure to exercise the power gives rise to a resulting trust in favor of the settlor or their successors.
• If a trust fails for lack of a beneficiary (for example, because the beneficiaries are not ascertainable), a resulting trust in favor of the settlor or their successors is presumed

Question 77

disclaimer of a trust

Answer 77

• If a valid disclaimer is made, the trust is read as though the disclaimant was deceased as of the relevant date.
• cannot dislcaim if beneficiary has exercised any dominion or control over the interest or accepted any benefits under the trust.

Question 78

Anti Lapse Statutes and Trusts

Answer 78

• Most anti lapse statues apply only to testamentary gifts.
• Therefore, the default rule is that the law will not apply the benefits of a trust to the children of relative beneficiaries who die before their interest matures.
• However, several states and the UPC do apply the anti-lapse statute to future interests created in trusts

Question 79

Divorce and Trusts

Answer 79

A final decree of divorce or annulment revokes all beneficial gifts and fiduciary appointments in favor of a former spouse. The UPC and several states have extended the “divorce revokes” rule to beneficiary designations of individuals who are related to the former spouse but not the settlor.

Question 80

Requirement of Trust purpose

Answer 80

A trust may be created for any purpose unless it is:
* Illegal
* Impossible
* Intended to defraud the settlor’s creditors or based on illegal consideration
* against public policy

Question 81

What if there is a conditition violative of public policy in a trust?

Answer 81

Whether it is a condition precedent or subsequent, the condition is invalidated but the trust continues without it.

Question 82

Trusts and RAP

Answer 82

RAP generaly applies. Howerver, many states have abolished trusts from RAP.

Question 83

Grounds for removal of a trustee

Answer 83

Grounds for removal include:
(1) a serious breach of trust;
(2) serious lack of cooperation among co-trustees;
(3) unfitness, unwillingness, or persistent failure to administer; or
(4) a substantial change in circumstances.

The basic factor considered is whether continuation in office would be detrimental to the trust.

Question 84

mechanics and formalities of inter vivos trust (is writing required?)

Answer 84

• Transfer (Delivery) of Property to Trustee.
• writing required for trusts of land (statute of frauds). Note an otherwise invalid oral trust of land may be enforced by imposing a constructive trust.
• Most states do not require a writing for a trust of personal property but oral trusts of personal property may be established only by clear and convincing evidence.
• If the holder of the legal title acts as if they are a trustee, part performance will preclude the Statute of Frauds defense.
• Parol Evidence Rule - Most states allow extrinsic evidence where an ambiguity appears on the face of the writing

Question 85

Mechanics and formalities of pour over trust

Answer 85

• under the modern view - no problem if trust executed after will, so long as trust is executed before settlor/testator’s death.
• The trust must be clearly identified from language in the will.
• The trust may remain unfunded during the settlor’s lifetime. The pour-over property can be the initial trust funding if 1) The trust is identified in the will, and 2) The trust is executed before the testator’s death
• Such a trust can be created by someone else! Even if unfunded

Question 86

revocability of inter vivos trust

Answer 86

• Under the UPC an inter vivos trust is revocable by the settlor
• Power to revoke also inlcudes power to amend or make later additions

Question 87

Testamentary trust

Answer 87

• Testamentary trusts are created for the first time through the settlor’s valid will.
• Trust terms must come from the will itself, from a writing incorporated by reference into the will, or from the exercise of a power of appointment created by the will.

Question 88

what is a “secret trust”?

Answer 88

• kind of a failed/incompetent testamentary trust.
• Reliance of the testator is the key element.
• A sectret trust occurs when the settlor agrees with a will beneficiary that the beneficiary will hold the property in trust for someone else—and relies on the beneficiary’s promise—but the will does not state the trust nature of the gift.
• If the intended beneficiary can establish the settlors intentions with clear and convincing evidence the court will impose a constructive trust.
• A constructive trust will be imposed in even if the will beneficiary did not make the promise until after the will was executed.
• Reliance of the testator is the key element.

Question 89

What is a semi secret trust?

Answer 89

• Also a kind of failed testamentary trust
• The will makes a gift that is clearly supposed to be a trust, but fails to name the beneficiary.
• The gift fails, and the named trustee holds the property as a resulting trust for the testator’s successors in interest.
• Extrinsic evidence not allowed to determine intended beneficiary.

Question 90

Can a beneficiary transfer their interest in a trust?

Answer 90

• Absent restrictions by statute or by the trust instrument (such as a spendthrift provision), a beneficiary may freely transfer their interest in the trust. The assigned interest remains subject to all previous conditions and limitations.
• Default - the beneficiary’s creditors may reach the beneficiary’s interest in the trust. The interest is subject to judicial sale. To avoid this, a court may order the trustee to pay the beneficiary’s income to the creditors until the debt is satisfied

Question 91

In what situation can a trust always we reached by a certain kind of creditor?

Answer 91

The court can always force a trustee to satisfy a judgment or order against the beneficiary by the government or for the support or maintenance of the beneficiary’s child, spouse, or former spouse

Question 92

What is a discretionary trust?

Answer 92

• In a discretionary trust, the trustee is given discretion whether to apply or withhold payments of income or principal (or both) to a beneficiary.
• Generally, creditors cannot reach a discretionary trust but may be entitled to proceeds if the trustee decides to make a payment to the beneficiary.

Question 93

What is a spendthrift trust?

Answer 93

• A spendthrift trust precludes the beneficiary from voluntarily or involuntarily transferring their interest in the trust, and the beneficiary’s creditors are precluded from reaching it to satisfy their claims.
• This is a valid restraint on alienation.
• The beneficiary’s creditors cannot reach the beneficiary’s trust interest until income or principal has been paid to the beneficiary.
• Exception: A creditor can generally reach a spendthrift trust if the settlor is a beneficiary.
• A restriction on involuntary alienation only would probably be invalid.

Question 94

What is a “domestic asset protection trust”

Answer 94

• In most states, a settlor cannot use a spendthrift trust to protect their own property from their own creditors by naming themselves as a beneficiary.
• Some states allow this.

Question 95

What is a support trust?

Answer 95

• A support trust directs the trustee to pay only so much of the income or principal (or both) as is necessary for the beneficiary’s support.
• The trustee is required to pay or apply so much of the trust as is necessary for the support of the beneficiary, especially the income.
• May be mandatory or discretionary.
• Support trusts are non-assignable and impliedly spendthrift.
• If no details in the trust agreement, the level of support is decided by the court based on the settlor’s intent.

Question 96

What happens if a trust is terminated?

Answer 96

If the trust is terminated the trustee must wind down the trust and distribute the trust property to the remainder beneficiares or as agreed by the beneficiaries.

Question 97

When may a trust be terminated/modified by the beneficiaries?

Answer 97

Beneficiaries may terminate the trust
* When the settlor revokes it with consent of all the beneficiaries
* When the all of the beneficiares consent AND no material purpose of the trust would thereby be frustrated.

All beneficiaries must consent, including **unborn **and unascertained beneficiaries, as well as beneficiaries of future interests, no matter how uncertain or contingent. Most state do not allow guardians to constent to termination on behalf of unborn beneficiaries.

The following provisions in a trust usually preclude termination/modification by beneficiaries based on a violation of material purposes:
* Support of beneficiary
* Spendthrift provision
* Payment at certain ages
* Payment at certain dates
* Discretionary trust

Question 98

When may a trust be terminated by operation of law?

Answer 98

The trust may terminate by operation of law:
* when the trust property has been exhausted
* If legal and equitable titles merge

Question 99

When may a trust terminate by its own terms?

Answer 99

The trust may terminate by its own terms:
* when term or expiration date in the agreement has occured.
* when all of the purposes of the trust have been accomplished or have become unlawful, contrary to public policy, or impossible to achieve.

Question 100

When may a trust be terminated/modified by the settlor?

Answer 100

• Generally an inter vivos trust is revocable during the life of the settlor.
• If the trust is irrevocable by its terms, then the settlor can revoke it only with consent of all the beneficiaries

Question 101

When may a trust be terminated/modified by the court?

Answer 101

the trust may be terminated by the court:
* if modification by agreement of beneficiares is available and the intests of the nonconsenting beneficiares could be adequately protectted.
* if uninanticipated circumstances threaten the purposes of the trust.
* if continuation of the trust is impraticable or wasteful.
* if the value of the trust is insufficient to justify administering it.

Question 102

When may a trust be terminated/modified by the trustee

Answer 102

• somes states: if trust property is less than $50,000 and the amount is insufficient to justify the cost of administration. Must provide beneficiaries with notice.
• the trustee can combine several trusts into one trust or divide one trust into several trusts, provided doing so does not frustrate any purposes of the trusts or impair the rights of any beneficiary. Must provide beneficiaries with notice.

Question 103

When may a trust be subject to judicial reformation?

Answer 103

In some states, the court can reform the terms of a trust to reflect the settlor’s intent if a mistake in the terms is shown by clear and convincing evidence.

Question 104

The sources of the trustees power

Answer 104

1. Express power from terms of trust
2. Powers granted by state law
3. Implied powers necessary to manage trust including the powers to:
   * Sell trust property
   * Lease trust property
   * Incur reasonable expenses
   * Hire agents
   * Mortgage trust property
   * Repair

Question 105

The powers of joint trustees

Answer 105

Unanimity preferred.
In many states joint trusteees may act by majority if unanimity cannot be reached

Question 106

What are mandatory trustee powers?

Answer 106

• Trustees are required to exercise mandatory or imperative powers.
• If a trustee fails or refuses to perform under an imperative power, a court will, upon petition, order the trustee to exercise the power as required by the trust instrument

Question 107

Discretionary trustee powers

Answer 107

• Powers that the trustee may use.
• Trustee must exercise a discretionary power in good faith.
• The beneficiary of a discretionary trust cannot interfere with the exercise of the trustee’s discretion unless the trustee abuses her power.
• Exercise of discretionary power is still reviewable by court, but usually only in cases of bad faith or dishonesty.

Question 108

What are the duties of the Trustee?

Answer 108

• Duty to administer the trust
• Duty of loyalty
• Duty to report
• Duty to Separate Trust Property and Keep Records
• Duty to Enforce Claims and Defend Trust from Attack
• Duty to Preserve Trust Property and Make It Productive

Question 109

Trustee’s duty to administer trust

Answer 109

trustee must:
* personally administer the trust in good faith, prudently, and** in accordance with the terms and purposes of the trust instrument and the interests of the beneficiaries**.
* Act impartially with respect to multiple beneficiaries.

Question 110

Trustee’s duty of loyalty

Answer 110

• Essentially a duty of fairness towards to the trust and beneficiaries.
• duty to act in the best interest of the trust in good faith andavoid conflicts of interest (Trustee cannot put their interests or the interests of third parties above the interests of the beneficiaries).

For example, the trustee:
* cannot deal with trust in their individual capacity
* cannot buy or sell trust assets
* may not sell property of one trust to another trust of which they are also a trustee.
* may not borrow trust funds nor loan their personal funds to the trust
* cannot use trust assets to secure a personal loan.
* cannot personally gain through their position as trustee.
* cannot invest in its own stock as a trust investment.

Question 111

Beneficiary’s Rights in Case of Prohibited Transaction by Trustee

Answer 111

A transaction involving trustee self-dealing is voidable by the beneficiary affected by the transaction unless:
(1) a court or the terms of the trust approved it;
(2) the beneficiary failed to bring suit within the prescribed time period;
(3) the beneficiary gave their consent, ratification, or release; or
(4) it involves a contract or claim arising before the trustee became trustee

Question 112

Trustee’s Duty to report

Answer 112

A trustee must:
(1) provide the qualified beneficiaries with the trustee’s details
(2) respond to beneficiary requests for information ; and
(3) furnish an annual accounting of the trust.

Question 113

Trustee’s duty to Separate and Earmark Property

Answer 113

• Trust assets must be kept physically separate from trustee’s personal assets and assets of other trusts; i.e., no commingling.
• Trustee is liable for any resulting losses or profits

Question 114

Trustee’s duty to Preserve and Make Trust Property Productive

Answer 114

• Trustee must use reasonable care to invest the property (prudent investor rule), collect claims due, lease or manage land, record documents, pay taxes, and secure insurance.
• Trustee is liable for losses resulting from breach and for any profit that would have accrued to the trust but for the breach, plus interest

Question 115

Trustee’s investment responsibilities - Uniform Prudent Investor Act (UPIA).

Answer 115

As a default, Trustee’s investment responsibilities are governed by the Uniform Prudent Investor Act (UPIA).
Standard of Care – A trustee must exercise reasonable care, skill, and caution when investing and managing trust assets.
Portfolio Approach – Prudence is Evaluated as to Overall Investment Strategy, not individual investments
Factors Considered in Making Investment Decisions – inlcude purpose of the trust, general economic conditions, tax consequences, role in overall portfolio income, appreciation, etc.
Diversification – A trustee generally must diversify the investments
Relevance of Skill of Trustee - A skilled trustee, professional trustee, or attorney may be held to a higher standard. A lack of skill does not excuse compliance with basis standards.
Review of trust property - If imprudent investments are discovered by a successor trustee, the successor trustee must bring the trust into compliance and may need to sue the prior trustee for breach of duty.
Impartiality - trustee must not preference one beneficiary over another. This inlcudes preserving the trust for future beneficiaries.
Delegation – A trustee may delegate investment and management functions but a trustee must act prudently in 1) deciding to delegate 2) selecting an agent and scope of delgation, 3) reviewing the delegation.

Notes:
* Compliance with the UPIA is determined in light of the facts and circumstances existing at the time of the trustee’s decision or action. Substantial compliance is sufficent.
* Watch for a fact pattern containing a revocable trust and a settlor directing the trustee to make nondiverse investments. Because the trustee of a revocable trust owes their duties to the settlor in many states, such a directive may relieve the trustee of their duty to diversify.
* social investing not allowed as a default.

Question 116

Questions to ask when determining compliance with the fiduciary obligation

Answer 116

• Was the act one that the trustee was authorized to perform by the instrument, by state law, or by implication?
• If the act was proper to perform, did the trustee do so with the appropriate care, skill, and caution?

Question 117

Beneficiaries Remedies for Trustees Breach of Trust

Answer 117

The Court may order:
1. Specific performance of the trustee’s duties
2. Enjoinment of breach
3. payment of money or restoration of property
4. suspension or removal of trustee

Question 118

Remedies to beneficiares for self dealing by the Trustee

Answer 118

The beneficiary may have a choice of the following remedies:
* Affirm the transaction if the trust profited
* Set aside the transaction if the trust lost money
* Trace and recoup profits from the trustee if the trustee profited

The trustee is liable to the beneficiaries for the greater of:
* The amount necessary to restore the trust property and distributions to what they would have been absent the breach, or
* The trustee’s profit from the breach

Question 119

The effect of exculpatory clauses in a trust agreement

Answer 119

Exculpatory clauses are void if they relieve the trustee of liability or breach of trust committed in bad faith or with reckless indifference

Question 120

When may a trustee be removed?

Answer 120

The court may remove a trustee on its own motion or upon request by the settlor, a beneficiary, or a co-trustee.
Basically, a court has broad discretion to remove a trustee if the trustee’s continuation in office would be detrimental to the trust, for example, for the following reasons:
* Incapacity
* unfitness
* serious breach of trust
* serious conflict of interest
* insolvency
* extreme hostility with beneficiaries
* lack of cooperation with co-trustees

Question 121

Liability for Contracts on Behalf of Trust estate

Answer 121

• The general rule is that a trustee may sued on the contract in the trustee’s fiduciary capacity.
• A third party may sue the trustee personally only if the trustee, in entering into the contract, failed to reveal the fiduciary relationship.
• The trustee is entitled to indemnification or reimbursement from trust property for properly entered transactions.

Question 122

Liability for Contracts on Behalf of Trust estate

Answer 122

• A third party injured in tort can sue the trust estate by proceeding against the trustee in their fiduciary capacity.
• The third party may also sue the trustee personally for their own torts, but not by reason of respondeat superior.

Question 123

Allocation of reciepts and expenses between income and principal accounts (adjustment power)

Answer 123

Uniform Principal and Income Act (UPAIA) contains the default allocation rules and gives the trustee an adjustment power to reallocate investment portfolio return by characterizing items such as capital gains, stock dividends, etc., as income rather than principal if the trustee deems it appropriate or necessary to carry out the trust purposes. Trustee should use balancing test to decide to what extent to exercise the adjustment power.

Question 124

Which recipts are characterized as income for a trust?

Answer 124

• rents
• interest
• cash dividends
• proceeds from insurance against loss
• 10% of payment from a pension
• 10% of proceeds received from a liquidating asset (e.g., patents, copyrights)
• 10% of proceeds received from a working interest (e.g., oil and gas interests)

Question 125

which expenses are characterized as negative income for a trust?

Answer 125

• 50% of regular compensation of the trustee and investment services
• 50% of all expenses for accountings, judicial proceedings, and other matters affecting income and remainder interests
• Ordinary expenses
• Insurance premiums covering loss of a principal asset

Question 126

Which recipts are characterized as principal for a trust?

Answer 126

• proceeds from sale of trust assets
• Stock dividends & captial gains
• proceeds from a life insurance policy
• 90% of payment from a pension
• 90% of proceeds received from a liquidating asset (e.g., patents, copyrights)
• 90% of proceeds received from a working interest (e.g., oil and gas interests)

Question 127

which expenses are characterized as negative principal for a trust?

Answer 127

• 50% of regular compensation of the trustee and investment services
• 50% of all expenses for accountings, judicial proceedings, and other matters affecting income and remainder interests
• Expenses of a proceeding that concerns a principal interest
• Payments on the principal of a trust debt
• Estate taxes
• Disbursements related to environmental matters

Question 128

Rules for a Charitable Trust

Answer 128

a charitable trust:
* must have a charitable purpose (poverty relief, eduction, religion, health, government purposes, etc.)
* does not require specific language to create
* must have indefinite beneficiaries who are not narrowly limited (may name a specific charity as the beneficiary because the ultimate beneficiaries are indefinite).
* may be perpetual in duration
* the cy pres doctrine applies to charitable trusts (“equitable approximation” of intent) the court has discretion to determine the settlor’s primary charitable intent.
* RAP does not apply to charitible trusts.
* enforcement can generally be brought by settlor, a qualified beneficiary, or the state’s attorney general.

Question 129

What is an honorary trust

Answer 129

• A trust that is not for a charitable purpose and has no private (human) beneficiaries.
• Honorary trusts are commonly established for the benefit of pets or for the maintenance of burial places.
• the trust is enforceable by someone named in the trust instrument or appointed by the court.
• unless for the life of an animal, may not be enforced for more than 21 years.
• Excess distributed to settlor or successors.

Question 130

What is a resulting trust?

Answer 130

A resulting trust can be created:
* to carry out the settlors intent if the settlor failed to create an express trust, the intended benificiary is dead or cannot be located, or cy pres cannot be applied to a charitable trust
* a trust’s purpose is fully satisfied yet there is excess corpus,
* a party supplies of purchase money to a seller, but a third party takes title to the purchased item with the understanding that the third party is holding the title for the supplier of the purchase money (claiming party must prove with clear and convincing evidence that they supplied the consideration. This creates a rebuttable presumption for the trust unless the parties are closely related.

details of a resulting trust:
* The settlor is the beneficiary of a resulting trust.
* If the settlor is deceased, the settlor’s successors in interest (heirs or beneficiaries under the settlor’s will) are the beneficiaries.
* a resulting trust will not be formed if (1) the trust instrument specifically or implicitly provides for disposition of trust property when the trust has failed or been completed; (2) the settlor was given consideration for their original transfer in trust; (3) the settlor created the trust for an illegal purpose.

Question 131

What is a constructive trust?

Answer 131

This is not a trust. It is an equitable remedy designed to prevent unjust enrichment in cases such as:
* theft and conversion,
* fraud,
* duress,
* undue influence,
* breach of a fiduciary duty,
* breach of promise by one in a confidential relationship,
* homicide with slayer statute,
* homicide joint tenancy,
* breach of promise by the decedent’s devisee or heir to hold property for the benefit of a third person.

Notes:
* Essentially one party took something from another that cannot be staightforwardly returned.
* A constructive trust must be requested as a remedy in a court action.
* A constructive trust is not automatic; it must be pled and proved.
* Acts necessary to establish a constructive trust must be proved by clear and convincing evidence.
* Once the court has declared such a trust to exist, the trustee’s sole duty is to convey legal title to the beneficiary.

Question 132

what is the power of appointment?

Answer 132

the power of appointment is an authority created in a donee enabling the donee to designate, within any limits prescribed by the donor of the power, the persons who shall take certain property and the manner in which they shall take it.

Question 133

What is a general power of appointment?

Answer 133

the donee may exercise the power of appointment in favor of anyone including herself, her estate, her creditors, or the creditors of her estate

Question 134

what is a special power of appointment?

Answer 134

the donee may exercise the power of appointment in favor of a specified class of persons not including herself/creditors

Question 135

What is a testamentary power?

Answer 135

• A testamentary power is a power exercisable by a donee only through their will, because the settlor wishes to limit the class of objects to his children and issue of decreased children.
• You can create a special testamentary power of appointment to allow you wife to leave some assets of a trust to your children in her will.

Question 136

Lawful execution of a deed

Answer 136

Lawful Execution requires:
(1) writing signed by grantor
(2) unambiguous description of the land
(3) Identify Parties
(4) Words of Intent (“grant”)
(5) Delivery and acceptance by grantee

• To pass title must be LEAD: “Lawfully executed and delivered.”
• Deliver & Oral Conditions - A delivery made unequivocally under an oral condition is still valid however the oral condition drops out,

Question 137

Covenants for title

Answer 137

There are three types of deeds used to convey property interests other than leaseholds:
* the general warranty deed
* the special warranty deed
* the quitclaim deed.

Question 138

Quitclaim Deed

Answer 138

• Grantor isn’t even promising that he has title to convey. Worst deed. No covenants.

Question 139

The General Warranty - what are the 6 covenants?

Answer 139

• Warrants against all defects in title, including those attributable to grantor’s predecessors. Best deed. 6 major covenants:

Present Covenants – breach that occurs at delivery
* 1) Seisin: Grantors own land
* 2) Right to convey: Grantor can transfer land.
* 3) Against encumbrances: No servitudes/liens

Future Covenant – breached if grantee disturbed in possession (runs with land)
* 4) Quiet enjoyment: No 3rd party lawful claims
* 5) Warranty: Grantors will defend against reasonable claims of title by a third party and to compensate the grantee for any loss sustained by the claim of superior title.
* 6) Further assurances: Grantor will do whatever is needed to perfect grantee’s title if it later turns out to be imperfect.

Question 140

The Special Warranty Deed

Answer 140

• This deed contains the same covenants as the general warranty deed, but here the grantor makes those promises only on behalf of himself. (Grantor makes no representations on behalf of his predecessors in interest.)
• seisin (grantor owns)
• right to convey
• against encumbrances
• quiet enjoyment
• warrany (defense and compensation against claims)
• further assurances

Question 141

Statutory Special Warranty Deed

Answer 141

• Default if a deed does not state its type
• Usually contains two limited assurances against acts of the grantor (not her predecessors):
• (1) The grantor has not conveyed the same estate anyone other than the grantee
• (2) that the estate is free from encumbrances made by the grantor.

Question 142

race statute

Answer 142

• Buyer wins if they record first before other (3rd party title holder).
• Notice is irrelevant.
• No BFP requirement
• Statutory Language: A conveyance of an interest in land shall not be valid against a subsequent purchaser for value unless the conveyance is first recorded
• These are uncommon today.

Question 143

Notice Statute

Answer 143

• Buyer wins if they are the last BFP to PURCHASE THE LAND. Even if the other party records after.
• Recording always gives notice, so does possession.
• Statutory Language: A conveyance of an interest in land shall not be valid against a subsequent purchaser for value, without notice thereof, unless the conveyance is recorded.
• The Last BFP to purchase doesn’t even need to record.

Question 144

Race-Notice statute

Answer 144

• Buyer wins if they are a BFP AND they properly record BEFORE A. (They are the first BFP to record).
• Statutory Language: A conveyance of an interest in land shall not be valid against a subsequent purchaser for value, without notice thereof, unless the conveyance is first recorded.

Question 145

Bona Fide Purchasers (BFP)

Answer 145

• Purchaser or a mortgage lender for value (even low value, but not by will, or gift transfer) without notice of prior conveyance. (Or subsequent conveyance[s] if the issue is who recorded first).
• You can be a BFP even if you were the first to hold an interest granted by a double dealer who later sold the same property that you first purchased.
• Recording acts do not protect a subsequent purchaser against interest that arises by operation of law (e.g. implied easements, title by adverse possession) because there is no instrument.
• ADVERSE POSSESSION DEFEATS BFP.

Question 146

Merger

Answer 146

Once the closing occurs, the contract “merges” with the deed and the buyer can only sue on the deed at that point.

Question 147

3 Forms of Notice

Answer 147

• Actual notice – when a party has actual knowledge of prior conveyance prior to closing.
• Inquiry notice (constructive) – reasonable inspection would’ve revealed evidence of prior conveyance
• Record notice (constructive) – when a deed is properly recorded in chain of title it creates constructive notice.

Question 148

shelter rule (BFP)

Answer 148

• Anyone who takes (buys, inherits, etc.) from a BFP will prevail against any interest the BFP would’ve prevailed against.

Question 149

Wild Deed

Answer 149

• A recorded deed that isn’t connected to chain of title (incapable of giving constructive notice.)
• Recording a wild deed is like not recording at all

Question 150

estoppel by deed

Answer 150

• Grantor purports to convey to grantee property they do not own but the grantor later acquires title to the property.
• Title automatically vests in grantee.
• But look out for wild deed issue.

Question 151

Purchase-Money
mortgage

Answer 151

lender’s security interest (lien) is in the very realty they are helping to finance.

Question 152

Elements of Mortgage Creation

Answer 152

• 1) Debt
• 2) Lien on debtor’s realty to secure the debt.
• 3) In writing (Statute of Frauds)

Question 153

Transfer by mortgagor (assumption and subject too)

Answer 153

The grantee either
* 1) Assumes the mortgage (grantee agrees to be primarily personally liable on the mortgage note in addition to the grantor still being secondarily personally liable as a surety), or
* 2) Takes the property subject to the mortgage (the mortgagee’s only recourse is foreclosure or suit against grantor – they cannot maintain a suit against the grantee, who assumes no personal liability).

Question 154

The order of priority for allocating mortgage foreclosure sale proceeds

Answer 154

1) Expenses of the sale, including attorneys’ fees, and court costs;
2) Pay debt toforeclosing party
3) Pay debt of junior lienors
4) surplus to mortgagor (or deficiency action)
* However, if the landowner enters into a modification agreement with the senior mortgagee the junior mortgage will be given priority over the modification.
* If the creditor takes and sells the land and their interest is not fulfilled, they will proceed against the debtor in a deficiency action.
* Foreclosure does not affect any interest senior to the mortgage being foreclosed. The buyer at the sale takes subject to such senior interest.

Question 155

Which parties are necessary in a foreclosure?

Answer 155

• Necessary Parties in foreclosure. Junior lien holders + debtors.
• Proper Foreclosure extinguishes any junior liens on the property.
• However, the mortgagor will still be personally liable to the senior mortgagee.

Question 156

Equitable redemption

Answer 156

• Mortgagor can redeem reality by paying off the mortgage + accrued interest and costs if accelerated
• If not accelerated, just missed payments + accrued interest and costs
• Equitable redemption is universally recognized up to the date of foreclosure sale.

Question 157

Statutory Right of redemption

Answer 157

• Many states give the mortgagor a statutory right to redeem for some fixed period after the foreclosure sale has occurred (usually six months or one year).
• The amount to be paid is usually the foreclosure sale price, rather than the amount of the original debt.

Question 158

Easement

Answer 158

• An easement is a grant of a nonpossessory property interest entitling holder to use/enjoyment of another land.
• An easement is presumed to be of perpetual duration unless the grant specifically limits the interest.

Question 159

Easement Appurtenant (relevant/useful to)

Answer 159

• An easement is appurtenant when it benefits its holder, and he is in use/enjoyment of his own land.
• Dominant
• Servient

Question 160

Easement Appurtenant Transfer

Answer 160

• The appurtenant easement passes automaticallywith transfers of the dominant tenement, regardless of whether it is even mentioned in the conveyance. The failure to record does not affect the validity of the easement.
• The purpose of most recording statutes is to provide notice to a burdened party.
• The burden of the easement appurtenant also passes automatically with the servient estate, unless the new owner is a bona fide purchaser without notice of the easement.

Question 161

Easement in Gross

Answer 161

• Holder has personal or commercial advantage unrelated to the use/enjoyment of their own land.
• Servient land burdened
• There is no dominant parcel as no benefit is acquired.

Question 162

Easement in Gross Transfer

Answer 162

• Personal Easement In Gross is Not Transferable. (swimming)
• Commercial Easement In Gross is Transferable. (powerlines)

Question 163

Creation Of Affirmative Easement (PING)

Answer 163

• Prescription (analagous to adverse possesion) C O A H
• Implication
• Necessity
• Grant

Question 164

Easement by Prescription

Answer 164

C O A H:
o C: Continuous and uninterrupted use for the given statute’s period
 Periodic acts that put the owner on notice of the claimed easement fulfill the requirement.
o O: Open and notorious use (discoverable upon inspection)
o A: Actual use that need not be exclusive
o H: Hostile use (meaning, use without the servient owner’s consent)
 Permission defeats the acquisition of an easement by prescription.
 Generally, prescriptive easements cannot be acquired in public land
 There is no adversity required to make an easement by prescription.

Question 165

Easement by Implication

Answer 165

Easement Implied from Preexisting Use (“quasi-easement”)
* Party owns two lots and sells one.
* The previous (prior to division) use on the servient part was apparent and continuous AND
* The parties expected that the use would survive division because it is reasonably necessary to the dominant tenement’s use and enjoyment

Easement Implied Without Any Existing Use
* Subdivision Plat
* Profit à Prendre

Question 166

Easement by necessity

Answer 166

Easement will be implied when a landowner conveys a portion of her land with no way out except over some part of the grantor’s remaining land. The owner of the servient parcel has the right to locate the easement.

Question 167

Easement by grant

Answer 167

Grant
* Memorialized in writing signed by owner of servient property unless outside of the statutes of fraud.
* If permission is granted but not written, the using party only has a “license” (i.e., a revocable privilege) to use the land.

Question 168

8 methods of Termination of an Easment

Answer 168

Estoppel–Occurs when the servient owner materially changes position in reliance OR the dominant easement owner lacks need for the easement. (construction in path of easement in reliance)

Necessity–Ends when the need that led to the easement ends unless the easement was expressed in writing.

Destruction–Destruction of the servient land, other than by the willful conduct of the servient owner.

Condemnation–Condemnation of the servient land by eminent domain. (compensation may be required)

Release–Release by holder to servient owner (must be in writing: statute of frauds)

Abandonment–Physically Abandoned. Must show by physical action (for example, building a structure that blocks access to easement on adjoining lot) an intent to never use the easement again.
* Nonuse alone is insufficient for abandonment.
* An easement may be abandoned if the holder manifests an intent never to use the easement again, evidenced by either physical acts or oral expressions of a desire to abandon accompanied by a long period of nonuse.

Merger–Easement and servient land held by the same person.

Prescription–Prescription by servient owner. When servient owner engages in continuous interferences with easement in a manner that is open notorious and hostile.
* Opposite of creating an easement by prescription.

• An oral expression of an intent to abandon an easement isn’t enough without written release of abandonment.

Question 169

5 Requirements to establish a Covenant

Answer 169

(1) Writing

(2) Intent Intent to run with land

(3) Touch & Concern – when the promise pertains to the use of the land (not payment or personal activity not related to land itself).

(4) Horizontal & Vertical Privity (running with the land – analyze the burdened side first)
* Horizontal - At the time the original promisor entered into the covenant with the promisee, the two must have shared some interest in the land independent of the covenant. Ex. grantor-grantee. Horizontal privity is not needed for benefits to run.
* Vertical - non-hostile nexus, such as contract, devise, or descent. Only absent via adverse possession.

(5) Notice – successors to the burdened lot must have had notice. (actual, inquiry, or record notice).

Question 170

Negative v. Affirmative Covenant

Answer 170

Affirmative Covenant – Promise to do something (related to the land)
(Negative/Restrictive Covenant) –Promise to refrain from doing something (related to the land)
* remedy can be injunction or damages

Question 171

Equitable Servitude

Answer 171

• An equitable servitude is a promise that equity will enforce against successors of the burdened land regardless of whether it runs with the land at law, unless the successor is a bona fide purchaser
• The remedy is injunction
• same requirements as a covenant but without horizontal privity requirement

Question 172

4 Requirements for Equitable Servitude

Answer 172

(1) Writing – Generally promise must be in writing (except common scheme)
(2) Intent to run with land – a writing must demonstrate an intent to create a covenant that runs with the land (bind successors).
(3) Touch & Concern – when the promise pertains to the use of the land (not payment).
(No Privity required in equity)
(4) Notice – successors to the burdened lot must have had notice. (Actual, inquiry, or record notice)

Question 173

The implied equitable servitude (Common Scheme Doctrine)
Two Elements

Answer 173

• Implied based on division of a property into lots.
• The two elements of the general or common scheme doctrine:
• When the sales began, the subdivider:
  (A) When the sales began, the subdivider had a general scheme of residential development which included the defendant’s lot (the scheme may be evidenced by: a recorded plat, a general pattern of restrictions, or oral representations to early buyers); and
  (B) The defendant lot-holder had notice of the promise contained in those prior deeds when it took.
• Court will imply an equitable servitude to a term of a promise that is not contained in a deed if it is contained in all of those predecessor deeds to predecessor lot holders or other lot holders whose lots were carved from the same property with the same general scheme in mind (reciprocal negative servitude).

Question 174

Termination of a Covenant

Answer 174

• (1) written release from the benefit holders,
• (2) merger of the benefited and burdened estates, or
• (3) condemnation of the burdened property.

Question 175

The four Elements of Adverse Possession

Answer 175

COAeH

(1) Continuous – Uninterrupted, not intermitted, but an adverse possessor can tack her own possession onto the periods of adverse possession of her predecessors.

(2) Open and Notorious – Apparent to put owner on notice.

(3) Actual and Exclusive –Physical occupation to exclusion of the owner
* Occupation of only a portion of property can create a claim on the whole property described in a deed through “constructive possession” if the occupier enters under color of title (meaning by invalid deed).
* Without color of title, as long as there is a reasonable proportion between the portion actually possessed and the whole of the unitary tract.
* Possession can be multiple people, in which case they would gain title as tenants in common.
* A minority of states require the adverse possessor to pay property taxes.

(4) Hostile – without the true owner’s consent.
* Permission defeats hostility.
* Possessors state of mind is irrelevant.

Question 176

Requirements of Land Sale Contract

Answer 176

(1) In writing
(2) signed by defendant
(3) identify parties
(4) describe property
(5) state consideration

Question 177

Doctrine Part Performance for Oral Land Sale Contract

Answer 177

Allows buyer to enforce oral contract by specific performance if (i) Contract is certain and clear and (ii) Acts prove existence of contract.
Satisfied by 2/3 of the following acts by buyer:
* possession
* paid purchase price or significant portion.
* making substantial improvements.

Question 178

Joint Tenancy requirements for creation and severance

Answer 178

Creation
* Must use magic words “with right of survivorship”
* Joint tenants must share 4 UNITIES in creation
o T- same TIME **
o T- same TITLE**
o I- Identical/Equal INTEREST (%)
o P- EQUAL Right to POSSESS whole.

Severance:
Transfer by one tenant severs the joint tenancy as to the transferee, because it violates the four unities, however, the other original tenants still have a joint tenancy between them.
Partition (Amicable or Judicial)
Mortgage(encumbrance/lien, not a transfer of title) – usually no severance (sometimes tested)
* majority of states use a lien theory of mortgages (no severance)
* minority of states use title theory of mortgages (severance)
* If co-tenant who took out the mortgage dies, the ownership goes to the other joint tenant free and clear of the mortgage.

Question 179

Doctrine of Equitable Conversion

Answer 179

Legal Title – Deed gives Buyer the right to possess.

Equitable Title (held during Escrow) – Buyer bears the risk of loss unless the contract says otherwise. Can buy insurance.

• Once contract is signed, seller or their estate must go through with sale.
• Once the parties have entered into a valid land sale contract, the rights of the parties are fixed. A deceased buyer’s interest passes to the taker of the buyer’s real property interests, who can compel specific performance and demand a conveyance of the land. In addition, under the traditional common law rule, the taker of the real property interest is entitled to exoneration out of the personal property estate.

Question 180

Tenancy in Common

Answer 180

• Two or more (concurrent) own without the right of survivorship.
• Co-tenant owns individual part (not necessarily equal) + right to possess whole.

Question 181

The tenancy for years

Answer 181

• Lease for a known, fixed period of time (any duration).
• Termination automatic at end date
• No notice needed to terminate.
• contract must be in writing if term is for more than 1 year (statue of frauds)

Question 182

Tenancy by the Entirety

Answer 182

• Default when a property is deeded to spouses
• A protected marital interest between spouses with the right of survivorship
• No unilateral encumbrances.

Question 183

The Tenancy at Will

Answer 183

• No fixed duration.
• Terminable at will of either party.
• Needs to be explicitly “at will” or it will be construed as periodic tenancy.

Question 184

The Periodic Tenancy requirement for formation and termination.

Answer 184

• Continues for successive intervals, automatically renews, until property terminated.

Formation
* Expressly (“from month to month”)
* Implication (no mention of duration or end date)
* A tenancy for years in oral form violating statute of fraud become a periodic tenancy based on intervals of rent tender.
* Landowner decides to holdover tenant after lease ends.

Termination
* requires notice, not automatic
* Common law: requires notice at least equal to length of period (unless parties have agreed otherwise)
o Month to month: 1 month notice.
o Week to Week: 1 week notice.
o Year to year: 6 months common law; 1 month under Restatement (bar examiner prefer restatement).

Question 185

The Tenancy at Sufferance

Answer 185

• Tenant wrongfully holds over past lease expiration.
• Landlord proceeds to recover rent.
• Terminates when landlord (i) moves to evict or (ii) holds tenant to new tenancy.

Question 186

The Holdover Doctrine

Answer 186

• The length of the new tenancy generally mirrors the way the rent was computed under the lease that has ended. The maximum tenancy that can be created by the election to hold the tenant to another term is a year-to-year tenancy. The various promises made by the landlord and the tenant in the original lease become part of the tenancy for the additional term.
• In commercial leases, the new tenancy will be year-to-year if the original lease term was for one year or more.

Question 187

Tenant’s two main Duties

Answer 187

• A tenant has two primary duties: (1) to repair, and (2) to pay rent.

Duty to repair
* If lease is silent:
o Maintain premises. In reasonably good repair (make routine repairs). Excludes ordinary wear and tear repairs.
o Waste Prohibited.

Duty to pay rent
* If the tenant breaches and remains on premise the landlord can:
o Move to Evict
 Landlord entitled to rent until tenant vacates
 No self-help remedy is allowed. (don’t change the locks!)
* Tenant wrongfully vacates with time left. Three options
o Surrender: end lease
o Ignore: Do nothing (hold T liable for rent) (not always available)
o Relet: Majority rule is that the Landlord must attempt to establish a new lease to mitigate damages.

Question 188

Landlord’s three main Duties

Answer 188

• Duty to deliver possession
• Implied covenant of quiet enjoyment
• Implied Warranty of habitability

Question 189

Implied covenant of quiet enjoyment

Answer 189

Tenant has right to quite use & enjoyment without interference from Landlord. (Residential & Commercial).

Triggered By:
* Wrongful eviction
* Constructive eviction (SING)
(1) Substantial Interference – Landlord causes a chronic/permanent problem with the premise
(2) Notice – Notify Landlord and they fail to remediate
(3) Get out – TENANT MUST VACATE

Question 190

Implied Warranty of habitability

Answer 190

• Exception to general rule that landlord is not liable to the tenant for damages caused by the landlord’s failure to maintain the premises.
• Premise must be fit for basic human habitation. Standard is governed by case law and local housing code
• Residential Property Only – not commercial

Tenants’ options if Landlord breaches:
* MAY Move (optional)
* Repair & Deduct
* Reduce or withhold rent (place in escrow).
* Remain and seek damages.

Question 191

Rights and duties of co-tenants

Answer 191

Possession – No ouster (wrongful exclusion from part/whole)

Rents and Profits – Unless there has been an ouster, a co-tenant in exclusive possession is not liable to the others for rent.

Fair share of rent: (proportional) division of rent income if leased to 3rd party.

Adverse Possession – No adverse possession unless an ouster occurs; hostility element is absent so adverse possession is inoperative.

Carrying Cost (taxes and mortgage interest payments) – Each pays fair share.

Repairs – fair share contribution for reasonably necessary repairs with notice.

Unilateral Improvements – No contribution for unilateral improvement owed.
* At dissolution, the improver gets a credit equal to any value increase, or debit equal to any diminution, caused.

A co-tenant must not commit waste. All actionable.
* Voluntary Waste – Willful destruction
* Permissive Waste – Neglect (forgot to close windows)
* Ameliorative Waste – Unilateral change increasing value.

A joint tenant or tenant in common has a right to bring an action for partition (three types above) – court prefer partition in kind if physically feasible. Right to partition may be temporarily restrained by court.

Question 192

anti-descrimination legislation in housing

Answer 192

• The Civil Rights Act bars racial or ethnic discrimination in the sale or rental of all property
• The Fair Housing Act protects tenants and potential tenants from discrimination based on race, color, religion, national origin, sex, or disability, as well as familial status (except in senior housing)
• Exemptions:
  (1) Owner-occupied buildings with 4 or fewer units.
  (2) Single-family homes of owner who owns no more than 3.

Question 193

Assignment of Leashold

Answer 193

• An assignment is a transfer of the entire remaining term of a lease.
• Assignee Tenant - in “privity of estate” with landlord (possessory interest) and each is liable to the other on all covenants in the lease that “run with the land.”
• Original Tenant – retains privity of contract with landlord (but not estate). remains liable for original lease obligation (including paying rent if assignee does not).
• Privity of Contracts extends to the original tenant and the last assignee. Anyone in between doesn’t count.
• Slight majority view: reservation of a right of reentry does not result in a sublease, but rather is still an assignment.

Question 194

Covenants that Run with the Land

Answer 194

• A covenant runs with the land if the original parties to the lease so intend and if the covenant ** “touches and concerns”** the land (that is, benefits the landlord and burdens the tenant (or vice versa) with respect to their interests in the property).

Question 195

Sublease of leasehold

Answer 195

• A sublease is a transfer of a portion of the remaining term of a lease.
• Sublessee has no privity with landlord.
• The original tenant is exclusively liable for any breach. The sublessee can address any breaches in contract with the sublessor not the landlord.
• A sublessee is the tenant of the original lessee
• Rights in a Sublease – A sublessee cannot enforce any covenants made by the landlord in the main lease, except a residential sublessee may be able to enforce the implied warranty of habitability against the landlord.
• Original lessee can sue or implead the sublessee.

Question 196

Landlord’s Tort Liability - 5 exceptions to common law rule

Answer 196

The** common law norm** is: Let the tenant beware (CAVEAT LESSEE). In tort, a landlord was under no duty to make the premises safe.

Five Exceptions:
C - Common areas
L – Latent defects (Landlord must warn (not fix) the lessee of hidden defects)
A – Landlord Assumption of Repairs (negligence standard): Landlord has no duty to repair but if he undertakes repairs then the landlord Assumes the duty to repairs (landlord is liable for negligence)
P - Public Use Rule – the landlord who leases a public use space (convention hall) is liable for any defects on site that proximately injure members of the public.
S – Short-Term Lease of a furnished dwelling – a landlord who leases a short-term dwelling is under stricter duty because the tenant doesn’t have the time or duty to repair.

• Modern Trend: a landlord owes a general duty of reasonable care toward residential tenants and will be held liable for injuries in tort resulting from ordinary negligence if the landlord had notice of a defect and an opportunity to repair it.

Question 197

Fee Simple Absolute

Answer 197

• “To A” or “To A and heirs”
• Absolute ownership of potentially limitless duration
• Freely Devisable, descendible, alienable
• A living person has no heirs, just prospective heirs.
• A’s heirs have no ownership rights until A dies. This is a present possessory interest only.

Question 198

Defeasible Fees what are they and what are the three types?

Answer 198

Defeasible Fees
* Defeasible Fees – Fee simples with a condition attached (defeasance = forfeiture)
* The present owner has a risk of defeasance based on a condition.

Three types:
* Fee Simple Determinable (and Possibility of Reverter)
* Fee Simple Subject to Condition Subsequent (and Right of Entry)
* Fee Simple Subject to an Executory Interest

Rules of construction
* Words of mere desire, hope, intention, expectation, DO NOT create a defeasible fee. Not legally sufficient.
* Absolute restraints on alienation are VOID. Language of condition is stricken and transfer still occurs.

Question 199

Fee Simple Determinable (and Possibility of Reverter)

Answer 199

• Created by clear durational language “so long as,” “while, ” “during,” “until.”
• Terminates automatically on occurrence of condition.
• Devisable, descendible, alienable
• If the prescribed condition occurs, forfeiture is automatic.
• Possibility of Reverter (this is a future interest) – When a defeasible fee is subject to return to the GRANTOR.

Question 200

Fee Simple Subject to Condition Subsequent (and Right of Entry)

Answer 200

• Use of conditional language (as “provided that” “but if” “However if” , “On the condition that”) + explicit right to re-enter.
• Terminates only if the grantor exercises its right to terminate it. This is optional.
• X can have Y, but if C happens (Condition), W can have Y (right of entry = power of termination)
• If the question applies language that combines features of Fee Simple Determinable and Fee Simple Subject to Condition Subsequent construe it in favor of a Fee Simple Subject to Condition Subsequent.

Question 201

Fee Simple Subject to an Executory Interest

Answer 201

• To A, but if X occurs, then to B (shifting executory interest – future interest)
• 3rd party, not a grantor, takes if condition occurs.
• Forfeiture is automatic but in favor of a third party.

Question 202

Life Estate

Answer 202

• Must be measured in explicit lifetime terms (not in term of years)
• To A for life (A = life tenant)
  o If years are used, it is a “tenancy for years” in the leasehold estates section.
• Life Estate Pur Autre Vire – a life estate of another’s life.
• Subject to Possibility of Reversion (back to grantor), or Remainder (to another)

Question 203

Future Interests in Transferor—Reversionary Interests (there are 3)

Answer 203

• **Possibility of Reverter **– accompanies fee simple determinable.
• Right of entry/power of termination – accompanies fee simple subject to condition subsequent.
• Reversion – Accompanies when grantor conveys estate of lesser duration (life estate, term of years) other than above.

Question 204

Future Interests in Transferees–Remainder (how is it different than a reversionary interest?)

Answer 204

• Future possessory interest in third party. Possession upon natural expiration of preceding estate (e.g. expiration of life estate or term of years).
• may be contingent or vested.

Question 205

Future Interests in Transferees–Contingent Remainder

Answer 205

• When none of the takers are not yet ascertainable (ex. unborn), or the interest is subject to condition precedent. (unfavorable under the common law but now constraints have been abolished)
• Not yet ascertainable: to A for life, then to those children of B who survive A.)
• Subject to condition precedent: to A for life, then to B and his heirs if B marries C, otherwise to D and his heirs (alternative contingent remainders).
• Applies to a group who are not yet born or who may not all be alive when the possession is taken
• Subject to RAP

Question 206

Future Interests in Transferees–Vested Remainders

Answer 206

• A remainder created in an existing and ascertained person, and not subject to a condition precedent. 3 types:
  (1) Indefeasibly Vested Remainder
  (2) Vested Remainder Subject to Total Divestment
  (3) Vested Remainder Subject To Open
• Vested remainders are fully transferable, descendible by intestacy, and devisable by will.

Question 207

Future Interests in Transferees – Indefeasibly Vested Remainder

Answer 207

• Not subject to divestment or diminution
• The holder of this reminder is certain to acquire the estate with no strings attached.
• “To A for life, remainder to B.” A is alive. B is alive.
• Not subject to RAP

Question 208

Future Interests in Transferees – Vested Remainder Subject to Total Divestment

Answer 208

• A remainder is subject to complete defeasance: subject to condition subsequent (not precedent).
• “to A for life, then to B and his heirs; but if B dies unmarried, then to C and his heirs.”
• B will get it, but may lose it if the condition later occurs.
  o B has vested remainer. C has a shifting executory interest.
• Where language is ambiguous, the preference is for vested remainders subject to divestment rather than contingent remainders or executory interests.
• Not subject to RAP

Question 209

Future Interests in Transferees – Vested Remainder Subject To Open

Answer 209

• a vested remainder created in a class or group of takers, at least one of whom already qualified to take. (children)
• A class is open when others can still join.
• A class is closed when no one else can demand possession.
• Q: O transfers a life estate to A and then to B and his children. B had 2 children, C and D. When does the class close?
• Rule of convenience – absent explicit provision to the contrary, a class closes at the end of the life tenant’s death or whenever any member can demand possession. Even if B who can still bear children is still alive, because C & D can now demand possession.
  o Our one exception is the womb rule. Under this rule, persons in gestation at the time the class closes are included in the class.
• If C or D predecease A, their share will go to their devisees or heirs.
• Subject ot RAP as long as class remains open

Question 210

Future Interests in Transferees—Executory Interests

Answer 210

• Defeasible fee – is a fee simple with a catch/condition. Cut short prior takers.
  *** Shifting Executory Interest **– Follows a defeasible fee and cuts short the interests of a 3rd Party. “To B, unless X occurs, then to C”
• Springing Executory Interest– executory interest holder receives property from the grantor when the condition arises. O has a fee simple subject to A springing executory interest. “To A, if and when she becomes a lawyer.”
• Predecessor has a fee simple subject to either springing or shifting executory interest.
• Subject to RAP

Question 211

When does the rule against perpetuities (RAP) apply?

Answer 211

• Some future interests are void if there’s a possibility that they might vest more than 21 years after a person alive at the time of the grant, who is relevant to the grant, dies.

Applies to:
(1) Contingent remainders (conditions precedent).
(2) Executory interests
(3) Vested remainder subject to open (Class gifts)

Does not apply to:
(1) Interests in the grantor (Reversions, rights of entry, possibilities of reverter) because they are interests that the grantor keeps.
(2) Vested remainders not subject to open – a remainder subject to complete defeasance or indefeasibly vested remainder.

RAP begins to run when the interest is created

Question 212

What are the 4 steps for RAP?

Answer 212

The four steps for RAP:
* 1) Determine the type of future interest (within RAP?)
* 2) What has to happen for future interest holder to take? What condition?
* 3) Find measuring life (whose life and or death is relevant for the future interest holder to take?)
* 4) When will we know whether future interest holder can take? Will it be within 21 years of measuring lifetime?

Often tested
(A) The executory interest without time limit
* This always violates RAP.
* “O to A and heirs so long as land issued for farming, otherwise to B.”
* This tries to bind all of A’s heirs forever.
* Under common law the condition is voided and A has a fee simple absolute. Under modern construction trends, the condition will be maintained, but it will be a possibility of reverter instead of an executory interest.

(B) Age Contingency Beyond Age 21 in Open Class
* A gift to an open class conditioned on members surviving beyond age 21 violates the Rule. Surviving TO age 21 is ok.

If RAP is violated the violating part is stricken

Question 213

Reform of RAP

Answer 213

Alternate approaches:
* Wait & See – validity determined per facts as they come to be at end of measuring life, rather than invalidating all violating provisions.
* USRAP – provides an alternative to RAP – a 90-year vesting period.
* Cy Pres – Courts can redraft “as near as possible” to grantors intent