Trusts and Estates Flashcards
this is gonna be your JOB Heidi
what is nonprobate property
property that does not pass through the probate court system and is not governed by a will or laws of intestacy
types of non-probate property
life insurance, joint tenancies, tenancies by the entirety, inter vivos trusts, bank account trusts, deeeds, contracts, intervivos gifts
total intestacy
decedent dies without having made a will or their will is denied probate
partial intestacy
decedent’s will does not dispose of all the decedent’s prop
what state’s intestacy law applies for personal property?
the law of the decedent’s domicile at death
what state’s intestacy law applies for real property?
the law of the state where the real property is located
Intestate had three children, Son One, Son Two, and Daughter. Son One predeceased Intestate, survived by two children of his own, Arthur and Brenda, both of whom survive Intestate. Son Two also predeceased Intestate, but Son Two had no surviving descendants.
How would Intestate’s property be distributed applying a per stirpes distribution?
D receives 1/2
A receives 1/4
B receives 1/4
One share is created for each living child of the decedent and one share is created for each deceased child who has at least one surviving relative. Each receives one share and one share passes to a deceased child’s descendants by representation.
Here, there are two shares of the decedent’s estate: 1/2 for D and 1/2 for Son 1 bc he has surviving children. D takes 1/2 and A and B split the 1/2 so each gets 1/4
per stirpes distribution
one share is created for each child and one share is created for each deceased child who has at least one surviving descendant. then the kids of the dead parent split the dead parent’s share equally.
what method does the common law use to compute shares of descendants?
classic per stirpes
what method do the majority of states use to compute shares of descendants?
per capita with representation
per capita with representation
property is divided into equal shares at the first generational level in which there are living takers
If all children are deceased, each grandchild takes an equal share (rather than what the parent would have taken if they were alive)
Intestate had two children, Son and Daughter. Son predeceasedIntestate survived by two children, Arthur and Brenda, both of whom survived Intestate. How would Intestate’s property be distributed applying a per capita with representation distribution?
D receives 1/2, A and B each receive 1/4 (divide at D’s level bc it’s the first gen alive
Intestate had four children, Arthur, Brenda, Charles, and Doris. Both Arthur and Brenda died before Intestate. Arthur was survived by one child, Edward, and Brenda was survived by two children, Fran and George.
How would Intestate’s property be distributed using a
per capita with representation distribution?
Divided into shares at C and D’s level then divided between the kids
E takes 1/4
F and G each take 1/8
C and D take 1/4 each
adoption by estoppel
a child can inherit from a stepparent or foster parent when legal proceedings for adoption failed or were not completed
When can a nonmaritial child inherit from their father?
1) if the dad married the mom after the kid’s birth
2) the dad was adjudicated to be the dad in a paternity suit
3) dad is proved to be the father by clear and convincing evidence after death and during probate
what is an advancement
a gift during the deceased’s lifetime to an heir made with the intent that the gift is applied against the heir’s inheritance from the estate
how does common law view a substantial lifetime gift
Presumes an advancement
how does the modern law view a substantial lifetime gift
A lifetime gift is presumptively not an advancement unless shown to be intended as an advancement
How does the UPC view a substantial lifetime gift?
by the strictest standard:
A lifetime gift is only an advancement if:
1- it is declared as such in a writing by the donor at the time of the gift or
2- is acknowledged as an advancement in a writing by the heir
what is the Uniform Simultaneous Death Act?
when there is no evidence that one person predeceased the other, the property of each decedent is disposed of as if they each survived the other
But if there is evidence that an heir or bene survived the decedent even by minutes -> the USDA doesn’t apply
what is the 120 hour rule?
The rule that the UPC applies
A person must survive the decedent by 120 hours to take any distribution from the decedent
when and how can you disclaim an inheritance or gift?
(most states/common law)
With a written disclaimer, signed by the disclaimant, acknowledged before a notary, and filed with the appropriate court within nine months of decedent’s death or the bene’s 21st bday
when and how can you disclaim an inheritance or gift?
(modern view)
Can disclaim at any time (with the right formalities) as long as you have not accepted or used any benefits from the gift
what is the effect of a disclaimer
the disclaimed property passes as if the disclaimant had predeceased the decedent. The disclaimant cannot choose the recipient of the property
what is the evidentiary standard for applying a slayer statute when there is no conviction of murder?
That the killing was unlawful or intentional by a preponderance of the evidence
Elements for testamentary capacity; the testator must have the capacity to understand
1- the nature of their act (that the testator is executing a will)
2- the nature and extent of their property
3- the people who are the natural objects of their bounty (family members) and
4- the ability to formulate an orderly scheme of distribution
at what point in the will process is capacity measured?
When the will was executed
what is testamentary intent?
the testator has the present intent that the instrument operate as their will
elements of testamentary intent
When it is unclear whether an instrument was meant to be testamentary
Must show that the testator
1- intended to dispose of the property
2- intended the disposition occur upon his death, AND
3- intended that the instrument in question accomplish the disposition
Will formalities
Requirements to create a valid will
- A writing
- Signed by the testator (or by another at the testator’s direction and in their presence) in the presence of
- two attesting witnesses
- who sign in the testator’s presence
Common law interested witness rule
A witness who was a bene was not competent and could not serve as an attesting witness unless there were two other noninterested witnesses
conscious presence test
Presence requirement of will formation is satisfied if each party (testator and witnesses) was conscious of where the other parties were and what they were doing and the act of signing took place within the general awareness and cognizance of the other parties
scope of vision test
presence requirement of will formation will be satisified only if the person was so close to the other party that they could have seen the signing had they looked
self-proving affidavit
document that recites that all the elements of will formation were properly performed as sworn by the testator and witnesses before a notary public at will formation; helps to streamline the probate process bc all elements are deemed satisfied
Some states and the UPC allow ________ to substitute for attestation of witnesses
notarization
By what standard does the proponent of a will have to establish to prove that the testator intended the document to be their will
clear and convincing evidence
holographic will
will that is entirely in the testator’s handwriting, has no attesting witnesses, and is signed by the testator
UPC holographic will rule
UPC and some states will accept a holographic that contains some typewritten text as long as the non-handwritten portion is not material
what is a devise
gift of real property
recipient of a devise is a devisee
what is a bequest
gift of personal property
what is a legacy
a gift of personal property in a will, usually of money. The recipient is a legatee
What is a specfic devise or legacy
A gift of a particular item of property distinct from all other objects in the testator’s estate
what is a general legacy
a gift of a specified amount of money or general property not attached to a specific asset. Paid out of the general assets of the estate
“I leave $10,000 to my son, John”
what is a demonstrative legacy
A gift to be paid from a specific source or fund. If that source is insufficient, the gift can be paid from the general assets of the estate
“I leave $5k to be paid from my savings account at Chase Bank to my niece, Heidi”
what is a residuary legacy
A gift of the remainder of the estate after all debts, taxes, expenses, and other legacies have been paid
“I leave the residue of my estate to my wife”
ademption by extinction
the failure of a gift bc the property is no longer in the testator’s estate at the time of their death
what types of divises does ademption apply to?
specific devises and bequests
common statutory exceptions to the ademption doctrine
- replacement property if the testator replaced the gifted item with another similar item
- balance of purchase price: testator sold the gifted item and purchaser still owes money to testator –> bene can receive the remainding money
- bene can receive condemnation award or casualty insurance proceeds if they are paid after the tesator’s death
- if testator became incompetent and the specifically devised property was sold by a guardian, the bene may be entitled to money equal to the amount of the proceeds
ademption by satisfaction
testator gives a gift to the bene during their lifetime with the intention that the gift be deducted from the bene’s share of the estate
The intent for the gift to be a satisfaction must be present at the time the gift was made
UPC requirements for ademption by satisfaction
1- satisfaction is provided for in the will or in a contemporaneous writing or
2- the devisee acknowledges the gift as a satisfaction in a writing
what does the bene receive after a stock split occurs in their specific bequest of stock? (common law)
Bene gets any additional shares produced by the stock split but does not include shares produced by a stock dividend
what does the bene receive after a stock split occurs in their specific bequest of stock? (UPC and majority)
Bene gets any additional shares produced by the stock split and any shares produced by a stock dividend. WIll also take an increase in securities froma merger or corporate reorg
Exoneration of liens for the bene (UPC and majority)
Liens on specifically devised property are not paid off with estate funds (exonerated) unless the will says so. Bene takes the prop subject to the debt
Exoneration of liens for the bene (common law)
Liens on specifically devised property can be paid off with estate funds (exonerated) at the request of the bene
abatement
the process of reducing testatmentarygifts where estate assets aren;t enough to satisfy all gifts and debts
order of abatement (abate first to last)
- property passing by intestacy
- residuary estate
- general legacies
- demonstrative legacies
- specific bequests and devises
IRGDS (I run gosh darn slow)
when does a gift lapse
if the bene predeceases the testator
how does an anti-lapse statute work
the statute saves the gift if the dead bene was related closely enough (statute determines this) to the testator and left descendants that survived the testator. The descendants will take by substitution. Applies unless the will says otherwise
most states -> words of survivorship enough to negate anti-lapse statute
UPC -> mere words of survivorship not enough
If a will devises the residuary estate to two or more benes and one bene predeceases the testator -> what can the other benes get under common law
Common law rule: the dead bene’s share passes by intestacy (surviving benes can’t split it)
If a will devises the residuary estate to two or more benes and one bene predeceases the testator -> what can the other benes get under the majority rule
The surviving benes divide the dead bene’s share in proportion to their interestsin the residue
BUT if anti-lapse statutes apply those prevail over the surviving benes
Is extrinsic evidence allowed to correct a patent ambiguity? Traditional view
No
Is extrinsic evidence allowed to correct a patent ambiguity? Traditional view
Yes
what is a patent ambiguity
a provision that is ambiguous on its face and doesn’t convey a sensible meaning (I leave my fjdskehr to Heidi)
latent/hidden ambiguity
language of the will is clear on its face but cannot be carried out without further application
“ I leave my car to Hannah” but testator two cars when she died
does a court use extrinsic evidence to interpret a latent/hidden ambiguity
Yes
Incorporation by reference
testator incorpoates an extraneous document into the will by reference to the document in the will
requirements for incorporation by reference
1- will shows an intent to incorporate the doc
2- extraneous doc exists at the time the will was executed and
3- doc is sufficiently described in the will
exception to #2: testator can refer to a list of tangible personal property in the will and then make that list after executing the will
acts of independent significance
actions or events that occur outside of the will and are significant for reasons indepdenent from the will but indirectly affects the disposition of the estate. Allows wills to be flexible and adapt to changes in the testator’s life without the need for constant revision
If a will states, “I leave my car to my niece, Mary,” and the testator buys a new car, the niece will inherit the new car even though it wasn’t specifically mentioned in the will. The purchase of the new car is an act of independent significance because the testator buys cars for personal use, not to alter the will’s provisions.
pour-over provision
clause that directs all or part of a testator’s estate to be transferred into an existing trust upon the testator’s death; usually used with a revocable living trust
contractual wills
A will that is grounded in a contractual agremeent where the parties agree to specific terms regarding the creation, modification, or non-revocation of their wills. The will is based on a mutual agreement where each party provides something of value (consideration) usually a promisenot to revoke, modify a will, or create a will in a certain way.
How to prove the existence of the contractual will at common law
use extrinsic evidence
How to prove the existence of the contractual will at modern law
Requires the contract be in writing and specifically be mentioned in the will
how to revoke a contractual will
By agreemetn between both parties while they are both alive
when does a contractual will become irrevocable?
upon the first testator’s death
What is the remedy if a testator dies in breach of a contractual will?
Court may grant a constructive trust for the benefit of the promisee
effect of marriage on an existing will (majority view)
no effect in most states
effect of marriage on an existing will (UPC and minority)
The new spouse will take an intestate share as an ommitted spouse unless the will makes a provision for the new spouses, the provision was intentional, or the will was amde in contemplation of marriage
effect of divorce or annulment on an existing will
revokes all gifts and fid appointments that were in favor of the former spouse. Will is read as if the ex-spouse predeceased the testator
proxy revocation requirements
1- testator directs someone else to destroy or cancel the will
2- proxy does so (if a physical act) in the testator’s presence
revocation by physical act requirements
- testator has the intent to revoke concurrent with the act
- testator burns, tears, cancels, or obliterates a material portion of the will
revocation by inconsistency
new instrument partially disposes of testator’s property
Old will is revoked only to the extent of the inconsistent provisions
revocation by inconsistency
new instrument completely disposes of testator’s property
the old will is completely revoked by inconsistency
what is required for a rebuttable presumption of revocationm by the testator?
the will was last seen in the testator’s possession or under their control, or cannot be found after their death, or is found in a mutilated condition
extrinsic evidence allowed to overcome the presumption of revocation
dependent relative revocation
applies when a testator made a will under the mistaken belief that another disposition of their property would be effective, and **but for ** that mistaken belief, the testator would not have revoked thr will.
The other disposition fails, the revocation fails, and the original will remains
To determine whether DRR applies, we ask the following questions:
* *Was the revocation of Will 1 impliedly conditioned on the validity of Will 2?
* Would Testator have preferred Will 1 over intestacy?
The more similar the provisions of the two wills, the more likely the court will apply DRR. The more different the wills, the more likely the testator would have preferred intestacy to Will 1, so the court will not apply DRR.
Grounds for contesting a will (general 7 grounds)
- defective execution
- revocation
- lack of testamentary capacity
- lack of testamentary intent
- undue influence or duress
- fraud
- mistake
Undue influence elements
Contestants must establish that:
1- the influence existed and was exerted on the testator
2- the influence overpowered the mind and the free will of the testator that the will reflects the desires of the influencer rather than the testator; AND
3- but for the influence, the will would have been different
When does a presumption of undue influence arise
1- when there was a confidential relationship between the testator and bene AND
2- that bene was active in procuring, drating, or executing the will
some states require 3) that the provisions of the will appear unnnatural and favor the person who exercised the undue influence
Elements require to prove fraud for wills
- False representation made to the testator
- Knowledge of falsity by person making the statement
- The testator reasonably believed the statement
- The statement caused the testator to execute a will or makea particular disposition the testator would not have made but for the misrepresentation
fraud in the execution
bc of a misrep as to the identity or contents of the instrument, the testator did not know the document was a will or what it contained -> testator did not have testamentary intent
mistake in the execution
bc of a mistake, the testator did not know that the instrument they were signing was a will
Court will grant relief where the nature of the mistake is obvious
mistake in inducement
testator is mistaken as to some extrinsic fact and makes their will based on that erroneous fact
court doesn’t normally provide relief for this
what type of interest does the trustee hold
legal interest
what kind of interest does the beneficiary of a trust hold
equitable interest
how does a settlor creates a trust
- transfers legal title to the trustee
- transfers equitable title to a bene
five main elements of a valid trust
- Settlor
- Intent to create a trust
- Valid trust purpose
- Trust property
- Trustee
- vBeneficiaries
*
intent required to create a trust
settlor must have the intent to split legal and equitable title
seven requirements for an express trust
1- settlor with a capacity to convey
2- a present intent to create a trust relationship
3- a competent trustee with duties
4- a definite bene
5- the same person is not the sole trustee and sole bene
6- valid purpose for the trust
7- present disposition in trust of specific property
Capacity required for an inter vivos trust
Ability to understand what you are giving away, to whom, and the consequences of doing so
capacity required for a testamentary trust
Ability to understand what a will is, what property you own, who your benes are, and what it means to distribute your property after your death
definition of intent to create trust
Settlor must intend to split the legal and equitable title and enforce duties on trustee
intent must be that the trust take effect immediately, not at some future time; A promise to create a trust in the future is not enforceable unless the promise is supported by consideration (is a binding contract)
precatory expressions
A settlor’s expression of hope, wish, or suggestion that property be used in a certain way. Precatory language does not create a trust bc it does not impose a legal obligation on the transferee
when must the trust assets be put into the trust
at the time of formation
- If there are no trust assets when the instrument is executed, the trust fails UNLESS there was a valid contract to create the trust in the future with consideration
- a trust will only form when the assets are put into the trust
what is the main restriction on split of title?
The sole trustee is not the sole bene -> legal and equitable titles merge and the trust terminates
identifiable corpus
property that is ascertainable with certainty
the trust property must be an existing interest in an existing property
capacity required to be a bene
A person or entity must be legally able to own property
Person: any age, including minors
Entities: corps, partnerships, other orgs as long as they have legal capacity to own property
how to disclaim your interest in a trust
File a written instrument with the trustee or with the probate court (if trust created by will)
effect of disclaimer of trust interest
trust is read as if the disclaimant was deceased as of the relevant date
when is a bene estopped from disclaiming their interest?
If the bene has exercised any dominion or control over the interest or accepted any benefits under the trust
do anti-lapse statutes apply to trusts?
Yes- If the state allows it or the state follows the UPC.
The UPC applies the anti-lapse statute to future interests created in trust
effect of divorce or annulment on a trust
general
A final decree of divorce or annulment revokes all beneficial gifts and fid appointments that favored the former spouse
effect of divorce or annulment on a trust
UPC
divorce revokes benefiicary designations of individuals who are related to the former spouse but not the settlor
Governing instrument is read as though the former spouse and their relatives are deceased
when must benes be ascertainable?
By the time they are to benefit
applies to class gifts too (“children” as the class of benes) as long as thery are ascertainable when they are to benefit
Trustee must be able to determine who belongs to the class
common law standard for a class of benes
The class must be reasonably definite.
If reasonably definite, the trust can allow the trustee to exercise their discretion in choosing members to benefit
UTC standard for a class of benes
A settlor may empower the trustee to select the benes from an indefinite class
1.
If a trust doesn’t have benes (under the applicable standard), what happens to the trust?
the trust fails for lack of a bene and a resulting trust in favor of the settlor or their successors is presumed
capacity required for a trustee
the capacity to acquire and hold property for their own benefit and can administer that property (minors and insane persons do not have capacity to be a trustee)
Capacity to dminister the property def
legal and practicability to manage, invest, and distribute the trust assets according to the terms of the trust and in the best interests of the benes
Who can request to remove a trustee?
Court, on its own, or upon request by the settlor, bene, or co-trustee
Grounds for removal of a trustee
- serious breach of trust
- serious lack of cooperation among co-trustees
- unfitness, unwillingness, or persisten failure to administer, OR
- substantial change in circumstances
main factor: whether continuation in office would hurt the trust
two methods to create an intervivos trust
By the settlor declaring themself trustee of specific property for a bene (present declaration of trust) or by transferring legal title of property to a trustee
who must be alive at the the trust was formed for the trust to be an inter vivos trust
the settlor
Present declaration of trust
- what kind of trust does this create
- how do you do it
- what type of title does the settlor keep
- inter vivos trust
- person declares themselves trustee of a specific property for a bene
- settlor keeps legal title
Transfer or Conveyance in trust
- what kind of trust does this create
- how do you do it
- what type of title does the settlor convey and what does it keep
- inter vivos trust
- settlor creates the trust by transferring legal title of property to a trustee
- settler conveys legal title and can keep or transfer equitable title
pour-over property can be the initial trust funding and the trust may remain unfunded during the settlor’s lifetime if:
the trust is identified in the will and the trust is executed before the testator’s death
Pour-over gifts are valid even if the trust is unfunded during the testator’s lifetime
how are testamentary trusts created
in the settlor’s valid will
Traditional view:
- to create a valid pour-over gift from a will to a revocable trust, BLANK or BLANK at the time of the will’s execution
- The trust must be in existence
OR - the trust must be executed
at the time of the will’s execution
the trust must bein existence or must be executed at the time of the will’s execution to create a valid pour-over gift from the will to the trust
Majority view for when a pour-over gift from a will is valid
A will may devise property to a trustee of a trust established or to be establsihed during the testator’s lifetime
the trust may be established after the will was executed but before the testator’s death
A spendthrift clause cannot be used to shield trust assets in these situations:
who does spendthrift clause not work against-> the bene has to pay
- A settlor cannot use a spendthrift trust to protect their own property from their own creditors
- against claims by the government
- judgments or court orders for support or maintenance of the bene’s child, spouse, or former spouse
spendthrift trust
a trust in whcih the bene is unable voluntarily or involuntarily to transfer his interest in the trust
protects the trust from creditors
what is a trustee required to pay out of the trust for the bene in a support trust?
as much of the trust as is necessary for the bene’s support
The trustee MUST pay this- no discretion on whether to pay bills here
what is the trustee required to pay out of the trust for the bene in a discretionary trust
the trustee has discretion whether to apply or withhold payment of trust property to the bene
Bene cannot interfere with the trustee’s discretion unless the trustee has acted in bad faith or abuses her power
