Trust and Estates Flashcards
Intestate Succession
“Any part of a decedent’s estate not effectively disposed of by will passes by intestate succession to the decedent’s heirs.” “A decedent’s surviving spouse takes a share of the intestate estate as provided by state law.”
Only a spouse or spouse with their kids: 100%
Spouse + parents: $300K + 3/4 of estate
Spouse + kids: $150K + 1/2 of estate
Distribution:
Per Stirpes divided into equal shares at 1st generation
Per Capita shares of deceased are combined and equally distributed at the next level
Incorporation by Reference
Under the doctrine of incorporation by reference, a will may refer to an unattested written document and incorporate its terms into the will so long as that written document was in existence at the time the will was signed, and the evidence is clear that the testator intended to incorporate its terms into the will
Trustee Duties
“A trustee is responsible for administering the trust. A trustee must adhere to fiduciary duties when carrying out the terms of the trust established by the settlor. Failure to do so constitutes a breach of trust. These duties include the duty of care, the duty of loyalty, and the duty of good faith.
Duty of Loyalty: Must not engage in transactions involving a conflict of interest
Duty to diversify investments: Must diversify investments for income and disbursement purposes
Duty of Care: Be a good reasonably prudent person
Duty Act in Good Faith: Must not act in a way that hinders the purpose of the trust
Devises to Classes
A class gift exists when a testator makes a gift to a number of persons as a group, and the group may increase or decrease in number. Generally, the courts employ the rule of convenience, that a person must be born before the period of distribution in order to share in the class gift. A class closes when one person becomes entitled to possession of the remainder interest, or at the time of distribution.
Creation of Express Trusts
Trusts are governed under UTC and applicable State statutes. “A trust is established when (1) the settlor has capacity and indicates an intention to create a trust, (2) the same person is not the sole trustee and sole beneficiary, (3) the trust has a definite beneficiary, (4) the trust has identifiable trust property and (5) is created for a valid purpose.”
“A trust need not be evidenced by writing and may be created orally. However, if a trust is created orally, its terms may be established only by clear and convincing evidence.”
Judicial Modification of Trusts
Under common law, a court may modify a trust when an unanticipated change in circumstances occurs that defeats the purpose of the trust. However the terms of the trust must be modified such that no one with a valid interest in harmed by the modification.
Cy Pres Doctrine: allows the court to modify the trust such that the settlors wishes are served once their current wishes prove to be impossible/impracticable
Lapsed Legacies
“If a beneficiary predeceases the testator, a bequest to an intended beneficiary will lapse unless an anti-lapse statute applies. An anti-lapse statute typically allows the gift to pass to the predeceased beneficiary’s descendants unless stated otherwise in the will.”
Revocation of Will by Physical Act
A will can be revoked by burning, tearing, canceling, destroying any part of the will, or directing another to destroy the will. An insignificant tear or light char is sufficient to revoke the will it was the intent of the testator to revoke it.
A will can also be revoked by the issuance of a new will.
Will Execution Requirements
For a will to be valid the testator must have the testamentary capacity, be at least 18 years old, of sound mind, and be capable of knowing and understanding the extent of their property, the disposition they are making of that property, the relations to the beneficiary and how these elements relate to one another. Additionally, the testator must have the testamentary intent - the decedent must intend that the document to be a will.
Testamentary Intent can be challenged by fraud, undue influence, or mistake.
Lastly, the will must be in writing, signed by the testators, and signed by two witnesses.
Rules Against Perpetuities
Governing Law
While each state has its own laws governing wills and intestate succession, the Uniform Probate Code fills in where the law has not been codified in statute. Additionally, the Restatement Third of Property: Wills is also applicable.
Trust Revocation
Under common law, trusts are presumed to be irrevocable unless the settlor explicitly reserves the right to revoke. However, under the Uniform Trust Code (UTC), trusts are presumed to be revocable unless expressly stated otherwise in the trust document.”
Types of Trusts
Spendthrift: A spendthrift trust includes a clause preventing a beneficiary from transferring their interest in the trust and protecting the trust assets from the beneficiary’s creditors until a distribution is made.” Other exceptions, court order, criminal offense resulting in injury, and necessaries.
Charitable: A charitable trust is established to benefit a charitable purpose rather than individual beneficiaries, is exempt from the Rule Against Perpetuities, and can be modified by the court under the doctrine of cy pres if its purpose becomes impractical or impossible to achieve.
Support: A support trust is created to provide for a beneficiary’s support in the lifestyle to which they are accustomed, and the trustee is required to make distributions for the beneficiary’s maintenance and support.”
Discretionary: a discretionary trust, the trustee has the authority to determine when and how much of the trust’s income or principal will be distributed to the beneficiaries, which protects the trust assets from beneficiaries’ creditors until distribution.”
Testamentary: A testamentary trust or pour-over will is a type of trust created in the testator’s will, which directs the testator’s assets upon death into a trust established during the testator’s lifetime.”
Holograhic Wills and Codicils
Holographic: a will that is in the testator’s handwriting and signed but has no witnesses.
Codicil: additions to, or alterations of a will that must be executed with the same formalities of a will.
Dependent Relative Revocation
A rarely applied doctrine that holds that a testator may revoke an old will with the intention of executing a new will. If the new will is not made or is invalid or defective the original will is revived.
