Trusts and Estates Flashcards
Intestate Succession (14%)
a) Any property that does NOT pass by will upon the decedent’s death will be distributed according to the state’s applicable intestacy statutes.
b) In most states, if the decedent is survived by ONLY a spouse (no descendants), the surviving spouse will inherit the entire estate. However, some states provide that a certain portion of the estate will be given to the decedent’s parents and the parents’ issues.
c) In most states, if the decedent is survived by a spouse AND descendants, the surviving spouse will inherit one-half or one-third of the decedent’s estate with the surviving descendants inheriting the rest. Under the Uniform Probate Code (UPC), the surviving spouse will inherit the entire estate IF ALL of the descendants are descendants of the surviving spouse.
d) In most states, if the decedent is NOT survived by a spouse, the decedent’s surviving descendants will inherit the entire estate equally.
e) In most states, if the decedent is NOT survived by a spouse OR descendants, the decedent’s surviving parents will inherit the entire estate equally. If there are NO surviving parents, the descendants of the decedent’s parents will inherit the estate (i.e., the decedent’s brothers/sisters, nieces/nephews, and their descendants down the line).
Inheritance Rights of Children (10%)
Adopted Children. At common law, ONLY blood relatives inherited from an intestate decedent. Today, adopted children are entitled to receive the same share, under intestacy laws, as biological children.
(1) Equitable Adoption. In some states, a child may be informally adopted through adoption by estoppel when a person takes a child in and assumes parental responsibilities. If such a surviving child can establish an adoption by estoppel, equity holds that she can inherit from the decedent as if she were a legally adopted child. Courts consider several factors when determining whether a relationship constitutes an adoption by estoppel:
(a) The parent’s bestowal of love and affection on the child;
(b) The parent’s performance of parental duties toward the child;
(c) The child’s obedience and companionship toward the parent;
(d) The child’s reliance on the relationship; AND
(e) The parent’s holding out the child as their own.
(2) Generally, adoption in fact or by estoppel terminates the adopted child’s right to inherit from her biological parents. However, a child adopted by her stepparent may usually inherit from her biological parents as well.
b) Children Born Out-Of-Wedlock. At common law, a child born out-of-wedlock was prohibited from inheriting from an intestate decedent. Today, non-marital children may inherit from either parent so long as the facts establish a legal parent-child relationship (non-marital children inheriting from a father must first establish paternity).
c) Half-Blood Children. At common law, ONLY full-blood children were entitled to inherit from an intestate decedent. Today, in almost every state, half-blood children (i.e., two people who share one parent, but not the other) are treated equally as whole-blood children. In a minority of jurisdictions, they are treated less favorably and sometimes excluded if whole-blood kin exist.
Advancements (10%)
a) At common law, gifts to heirs during a testator’s lifetime were considered advancements on the heir’s intestate share of the estate, and were automatically deducted from the heir’s share of the estate.
b) Today, gifts to heirs during a testator’s lifetime are NOT considered advancements on the heir’s intestate share of the estate UNLESS:
(1) The decedent declared his intent to make the gift an advancement in a contemporaneous writing; OR
(2) The heir acknowledged the gift to be an advancement in writing.
Will Execution Requirements (12%)
A will is valid if the specific formalities provided by state law are met. Generally, these formalities require a valid will to be:
(1) In writing;
(2) Signed by the testator; AND
(a) If the testator is incapable of signing his will, then he must have another sign his name in his presence and by his direction. Any mark intended to validate the will constitutes a valid signature.
(3) Signed by at least two witnesses.
(a) The witnesses must sign the will in the testator’s presence within a reasonable amount of time after witnessing the signing of the will. Under the UPC, a valid notary can satisfy the dual-witness requirement.
(b) Under the majority view, a witness signs the will in the testator’s presence if she signs the will within the testator’s line of sight (e.g., cannot be in another room down the hall from the testator). Under the minority view, a witness signs the will in the testator’s presence if she signs the will within the testator’s range of senses (e.g., may be in another room down the hall if the testator can still hear the witness).
Incorporation by Reference (16%)
Incorporation by reference deals with the incorporation of extrinsic documents into the will (rather than pages or portions of the original will). In most states, a document or writing may be incorporated into a will by reference if:
(1) The testator intended to incorporate the document into the will; (2) The document was in existence at the time the will was executed; AND (3) The document is sufficiently described in the will.
Revocation by Physical Act (12%)
Three physical acts can revoke a will:
(1) Subsequent Written Instrument. A will can be revoked by either:
(a) A subsequent written instrument that is executed for the sole purpose of revoking the prior will; OR
(b) A subsequent will/codicil containing a revocation clause or provisions that are inconsistent with those of the prior will (only revokes to the extent it conflicts with the prior will).
(2) Cancellation. A will is revoked if the testator, or another person in his presence and at his direction burns, tears, obliterates, or destroys the will WITH the intent to revoke the will. Under the common law, words of cancellation are valid ONLY IF they come in physical contact with the words of the will (e.g., words of cancellation are written over the original terms of the will). Under the UPC, words of cancellation need NOT touch any of the words of the will, but they must be somewhere on the will to validly revoke.
(3) Partial Revocation. In most states, when marks of cancellation (e.g., putting a line through terms in the will) are found on a will known to last have been in the testator’s possession, a presumption arises that such marks were made by the testator with the intent to revoke. The burden to overcome this presumption is on the party claiming that the devise has not been revoked.
(a) If a devise is revoked, it passes as part of the residuary estate. However, some states do NOT permit partial revocations.
Holographic Will (8%)
A holographic will is a handwritten will that is NOT witnessed. Most states do NOT recognize holographic wills. However in states that do recognize holographic wills, the holographic will is only valid if the testator signs it personally (no proxy signatures are permitted). No precise words are required to make a holographic will valid; however, the will must contain operative words legally sufficient to validly devise the property.
Codicil (6%)
a) A codicil is a supplement or addition to a will that is made after a will is executed. A codicil can explain, modify, amend, or revoke provisions of an existing will. A codicil MUST satisfy the same formalities as a will in order to be valid.
b) At the time a person executes a codicil, the original will is treated as republished and is deemed to have been executed on the date the codicil is executed. Republication can cure defects in a will that might affect the validity of specific devises (e.g., in a jurisdiction that prohibits devises to interested witnesses, republication by a codicil that is properly witnessed could save the devise). However, most courts hold that a codicil CANNOT republish an invalid will as a whole.
Construction Problem: Disclaimers (12%)
a) A beneficiary under a will can disclaim or renounce his interest under a testator’s will causing the disclaimed property to pass as if the disclaiming party predeceased the testator. A valid disclaimer must:
(1) Be in writing and signed by the person making the disclaimer;
(2) Describe the interest being disclaimed sufficiently; AND
(3) Be delivered or filed.
b) Timing. Under the common law, a disclaimer must be made within a reasonable amount of time. Some states require a disclaimer to be made within 9 months after the testator’s death. Under the UPC, a disclaimer may be made at any time.
Construction Problem: Devises to Classes (14%)
a) A testator may devise property to a class of individuals (e.g., “I leave $20,000 to be divided equally among all my children.”). A class may increase or decrease in number until the testator’s death. If a member of the class predeceases the testator, her share is split evenly among the remaining members of the class (i.e., it does NOT lapse into the residue).
b) NOTE. If there is a devise to a group of individuals, and at least one of those individuals predeceases the testator, then you must determine whether the group constitutes a class. If the group constitutes a class, the predeceased member’s share is split evenly among the remaining members of the class. If the group does NOT constitute a class, the predeceased member’s share lapses into the residue.
(1) For Example: Tom (the testator) leaves “$20,000 to be divided evenly among Ann, Beth, Chris, and Doug” under his will. Ann, Beth, Chris, and Doug are all Tom’s children. This provision can be interpreted as either:
(a) A devise to a class (Tom’s children); OR
(b) Four separate individual devises of $5,000.
(2) BOTH interpretations have merit and should be discussed on an exam if any of the children predecease Tom. This finding will determine whether the predeceased beneficiary’s share is split among the remaining class members or lapses into the residue.
NOTE. A devise to a class member who qualifies under an anti-lapse statute would pass to her descendants.
Trust: Definition
a) A trust is a fiduciary relationship between the trustee(s) and the trust beneficiaries. When a trust is created, title to property is divided between legal and equitable title:
(1) Legal Title. The trustee holds legal title to the property and becomes the owner of record for the property.
(2) Equitable Title. The beneficiary holds equitable title to the property and is entitled to the financial benefits of the property.
b) There are three main parties involved in the creation of a trust:
(1) Settlor. The settlor is the person who creates the trust (usually the person who places the original assets into the trust).
(2) Trustee. The trustee is the person who holds the assets of the trust for the benefit of the beneficiaries. The trustee manages the trust and its assets under the terms of the trust.
(3) Beneficiary. The beneficiary is the person who is entitled to the assets or profits of the trust.
Elements of a Valid Express Trust (14%)
A valid express trust is created if the following five elements are met:
(1) The settlor has intent to create the trust;
(a) The settlor’s intent may be determined by written and spoken words or conduct. There are NO specific words required to create a trust. The settlor need only intend to create the legal relationship and duties of a trust.
(2) There is trust property;
(a) The res refers to the property that makes up the trust as a whole. Just about anything that can be owned and transferred can make up the res.
(b) The res must either be:
(i) Specifically described with certainty; OR
(ii) Ascertainable with certainty from the description of it.
(3) An ascertainable beneficiary exists;
(a) At the time of trust creation, the settlor must either:
(i) Specifically identify the beneficiary by name; OR
(ii) Sufficiently describe how the beneficiary is to be identified (e.g., “my children” is sufficient –– “my friends” is not sufficient).
(b) The beneficiary must be able to possess title to property (e.g., an animal cannot be a trust beneficiary). However, the beneficiary need not have capacity to manage the property.
(c) Settlors and trustees can also be beneficiaries; however, a sole trustee cannot be the sole beneficiary of the trust.
(4) The trust has a trustee; AND
(a) Although, a trust must have a named trustee, the trust will not fail solely for lack of one – a court may appoint a trustee if the settlor did not name a trustee or if the trustee dies, resigns, or is removed.
(5) All parties comply with the requisite formalities.
(a) The creation of a trust involving real property must comply with the Statute of Frauds, while the creation of a trust involving personal property (without real property) need not comply with the Statute of Frauds.
Revocable and Irrevocable Trusts (10%)
a) Under the common law (majority view), a trust is irrevocable UNLESS the settlor expressly retains the right to revoke or amend the trust.
b) Under the Uniform Trust Code (minority view), a trust is revocable UNLESS the trust expressly provides otherwise.
Testamentary Trusts (12%)
A testamentary trust is a trust that enters into existence upon the death of a person and disposes of their property. Such trusts must be executed with the same formalities of a will.
Judicial Modification of Trusts (12%)
a) In some instances, a court may need to modify a trust instrument in order to conform the trust to the settlor’s wishes or intent. This may be accomplished through deviation or the Cy Pres Doctrine.
b) Deviation. Trustees and beneficiaries can request that the court permit a deviation from administrative provisions in the trust instrument. Generally, a court will permit a deviation if the purposes of the trust:
(1) Have been satisfied;
(2) Have become unlawful; OR
(3) Are impossible to carry out.
c) Cy Pres Doctrine. If it becomes unlawful, impossible, or impracticable to carry out the purpose of a charitable trust, the Cy Pres doctrine allows the court to modify the terms of the charitable trust “as near as possible” to the original intention of the settlor in order to prevent the trust from failing. The Cy Pres doctrine is applicable only if:
(1) Property is placed in a trust for a charitable purpose that has become unlawful, impossible, or impracticable to carry out; AND
(2) The settlor manifested a general charitable intent to devote the property to charitable purposes (the majority of courts presume general charitable intent).
(a) The absence of a reverter clause is evidence of the settlor’s general charitable intent. However, if there is a reverter clause, the court will likely revert the trust property to the parties specified in the reverter clause when it becomes unlawful, impossible, or impracticable to carry out the purpose of the trust.
