Trusts and Estates Flashcards
Trust Formation
Priority: High
A valid express trust requires:
1. a beneficiary that is reasonably ascertained now or in the future
2. a settlor with capacity
3. intent to create a trust
4. trustee that is not also the sole beneficiary
5. valid trust prupose
6. trust property (res)
7. compliance with formalities
- A trustee that refuses or dies will not invalidate a trust. The court will appoint a new trustee
- A trust only becomes valid when it has property, but the instrament can be valid if it will recieve the res later, even after death.
Revocable and Irrevocable Trusts
Priority: High
All trusts are revocable unless explicitly stated otherwise. All trusts become irrevocable upon the death of the settlor.
Pour over Will
Priority: High
A pour-over provision in a will gifts property to a previously intervivos trust. It cannot be used in conjunction with a testamentary trust.
- A revocation of the trust during the testator’s life causes the gift to the trust to lapse.
Discretionary Trusts
Priority: High
A discretionary trust occurs when a trustee has absolute discretion over how much of the trust property is distributed to the beneficiaries. The trustee’s discretion must be in good faith.
Cy Pres Doctrine
Priority: High
When a testator had a general charitable intent, courts will modify a charitable trust to be consistent with and “as near as possible” with the settlor’s or testator’s intent, if the purpose of the trust or bequest is frustrated.
Spendthrift Trusts
Priority: High
A spendthrift trust prevents the interest from being sold or assigned by the beneficiary and prevents creditors from collecting against it. A spendthrift provision in a trust is valid only if it restrains both voluntary and involuntary transfers, but does not protect mandatory transfers. Creditors may be able to collect if:
1. judgement creditor is on ewho provided services for the protection of a beneficiary’s interest in the trust
2. furnishes necessities
3. order for child support or alamony
4. claim by a state or federal government
5. self-settled trust
Rights of Creditors
Priority: High
A court may authorize a creditor to attach to present or future distributions to the beneficiary. A creditor cannot compel distribution from a discretionary trust, though a court can compel to pay for child support or alamony.
Termination of a Trust
Priority: High
There are five ways in which a trust can be terminated:
1. revoked or expires pursuant to its terms
2. material purpose of the trust has been achieved
3. trust has become unlawful or contrary to public policy, or impossible
4. settlor and all beneficiaries consent
5. all beneficiaries consent and the court decides continuance is no longer necessary
6. termination will futher the purpose of the trust
7. court applies the cy pres doctrine
8. court or trustee determines that the value of the trust property is insufficient to jusitfy the cost of administration
Trustee Duty to Administer
Priority: High
A trustee owes the beneficiaries the duty to act with care, skill, and prudence. At all times, the trustee must act with good faith and in accordance with the terms and purposes of the trust.
Trustee Duty of Loyalty
Priority: High
A trustee must administer the trust solely in the interest of the beneficiaries and cannot engage in self-dealing. Any transaction that benefits the trustee is voidable by the beneficiary and the beneficiary may seek damages.
Investments and Prudent Investor Rule
Priority: High
A trustee must exercise the degree of care, skill, and prudence of a reasonable investor investing his own money or property. This includes diversifying trust assets, avoiding risky investments, monitor investments, sell and reinvest investments as necessary to keep the trust assets productive.
Principal and Income Allocations
Priority: High
Income:
1. rental payments
2. money received from an equity (dividends and interest)
3. ordinary expenses and repairs
Principal
1. proceeds from the sale of a principal asset
2. all other property received
3. extrodinary expenses and repairs
Remainer Beneficiary of a Trust
Priority: High
Remainder trust beneficiaries are not entitled to receive trust property until the termination of the trust.
Powers of Appointment
Priority: High
A general power of appointment is granted when the testator does not leave any conditions or restrictions as to the appointment of the property.This leaves the the donee the power to appoint the property to anyone, including himself.
A special power of appointment is one in which the donee can only give the property to a limited class of persons authorized by the donor.
Appointments that violate the donor’s wishes are ineffective and pass to the taker in default if one was named, or to the donee or the donee’s estate.
- Look to the document to determine the limits on the donee.
Rule Against Perpetuities
Priority: High
For an interest to be valid under the common law rule against perpetutities, it must vest within a life in being at the time of the grant plus 21 years.
- Class gifts are vested when the class closes and all conditions for every member of the class is satisfied.
Class Gifts
Priority: High
A gift to a group of persons described collectively. A class gift generally closes upon the death of the testator. A gift to an unnamed group of people will be divided among those surviving members of the class, while gifts to a class of specifically named individuals will lapse for pre-decesased class members unless there is an anti-lapse statute.
Intestate Succession
Priority: High
Any property not passing by a valid will or operation of law will be governed by a state’s intestate statute.
- Surviging Spouse w/o Issue = Spouse gets 100%
- Suriving Spouse w/ Issue = Spouse and Issue split at certain percentages
- No Spouse w/ Issue = Issue get 100%
- No Spouse & No Issue:
1. Surviving parents equally
2. Surviving parent’s issue equally
3. More remote ancestors
4. Issue of more remote ancestors
- Majority of states use Per Capita at Each Generation approach.
Will Execution Formalities
Priority: High
UPC:
1. writing
2. signed by testator
3. signed by at least 2 individuals in the testator’s presence or notarized
Interested Witnesses
Priority: High
A will witnessed by an interested person will have their gift voided unless:
1. the interested witness is an heir receiving no more than their intestate share
2. if there are at least two other disinterested witnesses present.
Codicils
Priority: High
A codicil is made after a will is executed that modifies, amends, or revokes a will. A codicil must statisfy the same formalities as the will and is considered to republish the will with regards to the date of publish. However, if a will was invalid when originally published, a codicil cannot cure the invalidity
Holographic Wills & Codicils
Priority: High
A handwritten will that is not witnessed and signed by the testator. Only recognized in a minority of states.
Incorproation by Reference
Priority: High
A document or writing may be incorproated into a will by reference if:
1. it was in existence at the time the will was executed
2. it is sufficiently described in the will
3. the testator intended to incorporate it into the will
Revocation of a Will
Priority: High
A will is revoked if the testator intended to revoke the will by burning, tearing, destroying or canceling it in a physical way.
A subsequently executed will or codicil may expressly revoke a will or, if not express, then only to the extent the previous will conflicts with the new.
Dependent Relevation Revocation Doctrine
Priority: High
The Dependent Relevation Revocation Doctrine cancels a previous revocation that was made under a mistaken belief of law or fact by the testator. The doctrine applies when the testator would not have revoked his original will or bequest but for the mistken belief that another will he prepared would be valid.
Advancements/Satisfaction
Priority: High
Common Law: gifts to heirs during a testator’s lifetime are considered advancements on their intestate share of the estate and are deducted during distribution.
UPC: gifts to heirs are only considered advancement if the testator clearly indicated in writing that the gifts were to be deducted from the value of the devise.
Lapsed Gifts
Priority: High
Under common law, all gifts in a will are conditioned on the beneficiary suriving the testator unless specifically stated otherwise. Gifts to persons who did not survive were considered lapse and returned to the residuary clause.
Antilapse statutes provide for the distribution of a gift to a pre-deceased beneficiary’s surviving issue if the beneficiary is also a decendendent of the testator.
Ademption
Priority: High
A gift is considered adeemed if the property to be devised no longer exists or is no loner owned by the testator at the time of death.
Abatement
Priority: High
A creditor against an estate always has priority over the beneficiaries. The amount of any gift will be reduced after paying the creditors. Abatement order:
1. property passing by intestacy
2. residuary gifts
3. general gifts
4. specific gifts.
- When applying the abatement order, satisfy all in the category before moving to the next.
Slayer Statute
Priority: High
An individual who feloniously and intentionally kills the decedent forefits all benefits and entitlements to the decedent’s estate. A conviction is conclusive, but otherwise it can be based on a perponderance of the evidence proven during a probate hearing.
Disclaim
Priority: High
A person who renounces their legal right to a gift must do so within a reasonable timeframe by completing a signed writing that adequately describes the interest or power disclaimed and delivering or filing it with the executor.
Adequately disclaimed gifts pass as if the person pre-deceased the testator.
Divorce Revocation
Priority: High
A divorce degree revokes any disposition or appointment of property made to the former spouse in a prior made will. However, gifts or appointments in the former spouse’s relatives remain intact.
Preterminated Children
Priority: High
A child who was not born or not known to the testator at the time the will was created is entitled to an intestate share of the decedent’s estate unless the child was intentionally omitted.
Preterminated Children
Priority: High
A child who was not born or not known to the testator at the time the will was created is entitled to an intestate share of the decedent’s estate unless the child was intentionally omitted.
Testamentary Capacity
Priority: High
In order for a will to be valid, a testator must be capabl eof knowing and understanding:
1. the nature and extent of his property
2. natural objects of his bounty (relatives and friends)
3. disposition that he is making of the property
4. ability to connect the above elements together to form a coherent plan.
- Mental capacity is presumed and the burden of proof is on the person challenging the will.
Undue Infleunce
Priority: High
A will may be invalidated in whole or in part if a person exerts influence on the testator in a way that overcomes their free will and judgement.
A prima facie case is established if:
1. testator had a physical, mental, or financial weakness
2. wrongdoer had access to the testator and opportunity to exert influence
3. wrongdoer actively participated in the drafting of the will
4. there is an unnatural result
