Trusts and Estates/Future Interests

Question 1

A trust is…

Answer 1

… 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.

Question 2

What is legal title?

Answer 2

Legal Title. The trustee holds legal title to the property and becomes the owner of record for the property.

Question 3

What is equitable title?

Answer 3

Equitable Title. The beneficiary holds equitable title to the property and is entitled to the financial benefits of the property.

Question 4

Who are the three main parties involved in the creation of a trust?

Answer 4

Settlor
Trustee
Beneficiary

Question 5

Who is the settlor?

Answer 5

Settlor. The settlor is the person who creates the trust (usually the person who places the original assets into the trust).

Question 6

Who is the trustee and what do they do?

Answer 6

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.

Question 7

Who is the beneficiary?

Answer 7

Beneficiary. The beneficiary is the person who is entitled to the assets or profits of the trust.

Question 8

Trusts are classified as either…

Answer 8

express or implied

Question 9

An express trust is created when…

Answer 9

… a person has the intent to create a trust and complies with the requisite formalities to create that trust.

Question 10

An implied trust is created by…

Answer 10

…CONDUCT, regardless of whether there was intent to create a trust (e.g., constructive trusts imposed by courts).

Question 11

How does one create a valid express trust?

Answer 11

A valid express trust is created if the following five elements are met:

1. The settlor has intent to create the trust;
2. There is trust property (i.e., the res);
3. An ascertainable beneficiary exists;
4. The trust has a trustee; AND
5. All parties comply with the requisite formalities.

Question 12

The settlor’s intent may be determined by…

Answer 12

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 (i.e., the settlor need not know what a legal trust is to create one).

Question 13

Does precatory language create a trust? (e.g., “I convey Greenacre to Tom with the hope that Tom uses it for the benefit of Ben.”).

Answer 13

Precatory language merely expresses the settlor’s wishes regarding his property, not his intent, and will NOT CREATE A TRUST.

Question 14

Is capacity required to have the intent to create a trust?

Answer 14

Yes, the settlor must have capacity in order to create a trust (same analysis as capacity under will contests).

Question 15

A trust requires res. What does res mean?

Answer 15

The res refers to the property that makes up the trust as a whole (e.g., money, land, stocks, bonds, jewelry, etc.). Just about anything that can be owned and transferred can make up the res.

Question 16

The res must either be:

Answer 16

Specifically described with certainty; OR

Ascertainable with certainty from the description of it.

Question 17

As to an ascertainable beneficiary, at the time of trust creation, the settlor must either:

Answer 17

At the time of trust creation, the settlor must either:

1. Specifically identify the beneficiary by name; OR
   Sufficiently describe how the beneficiary is to be identified (e.g., “my children” is sufficient –– “my friends” is not sufficient).

Question 18

Must the beneficiary be able to possess the property?
Can an animal be a beneficiary?

Answer 18

Yes, the beneficiary must be able to possess title to property (e.g., an animal cannot be a trust beneficiary).

Question 19

Must the beneficiary be able to manage the property?

Answer 19

No, needs to be able to possess title, but the beneficiary need not have capacity to manage the property.

Question 20

Can settlors and trustees be beneficiaries?

Answer 20

Settlors and trustees can also be beneficiaries; however, a SOLE trustee cannot be the SOLE beneficiary of the trust.

Question 21

Does a trust fail if lacking a trustee?

Answer 21

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.

Question 22

What if a trust involves real property v. physical property (as to the fifth element of a trust, all parties comply with the requisite formalities)?

Answer 22

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.

Question 23

What is a testamentary trust?

Answer 23

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.

Question 24

Does the rule of convenience apply to trusts?

Answer 24

YES.

When a trust remainder is given to a class, the class closes (i.e., no new persons can join the
class) when there is no outstanding income interest, and at least one member of the class is then
entitled to demand possession of his or her share of the remainder

Question 25

Under the common law (majority view), a trust is irrevocable UNLESS…

Answer 25

… the settlor expressly retains the right to revoke or amend the trust.

Question 26

Under the Uniform Trust Code (minority view), a trust is revocable UNLESS…

Answer 26

… the trust expressly provides otherwise.

Question 27

When settlor retains power to revoke, does this also include a power to amend/modify?

Answer 27

Yes, A retained power to revoke a trust includes the power to modify or amend the trust instrument.

the power to revoke includes the power to amend.

Note that under UTC, even if settlor didn’t express power to revoke, S would automatically have power to revoke and amend unless the trust terms expressed otherwise.

Question 28

What is the illusory-transfer doctrine?

Answer 28

Under the illusory-transfer doctrine, a surviving spouse can reach assets transferred during the
marriage by the deceased spouse into a revocable trust on the theory that the transfer is
economically “illusory” because, by the simple expedient of exercising the power of
revocation—typically with nothing more than a signature on a piece of paper—the deceased
spouse could have recaptured the assets she had placed in the trust.

Question 29

What is the fraudulent-transfer doctrine?

Answer 29

Under the fraudulent-transfer doctrine, a surviving spouse can reach assets transferred into a
revocable trust on the theory that, as to the surviving spouse, the transfer was “fraudulent.” The
assumption behind this doctrine is that a state statute providing surviving spouses with an
elective-share entitlement gives spouses a legitimate expectancy in assets that would have been
included in the decedent spouse’s probate estate but for their transfer into a revocable trust; such
a transfer is treated as defrauding the surviving spouse of his or her expectancy.

Question 30

So if trust assets of $500,000 left to 2 children, and $50,000 of probate assets of $100,000 left to husband, how much can the husband claim?

Answer 30

if this jurisdiction recognizes the fraudulent-transfer or illusory-transfer doctrines or another similar doctrine, Settlor’s
husband will be entitled to receive one-third of the combined probate ($100,000) and trust estate ($500,000) or $200,000 (1/3 of $600,000). However, this $200,000 would be reduced to $150,000 to take account of the fact that he received $50,000 under the will.

Not all jurisdictions recognize such a doctrine, however. In those jurisdictions that do not, the husband would receive nothing beyond the $50,000 he would receive under the will because that amount exceeds the elective share (1/3 of $100,000).

Question 31

What is an elective share?

Answer 31

The elective share is also known as a spousal share, statutory share, election against the will, or forced share. In the United States, statutory elective share law exists to prevent the disinheritance of a spouse. Elective share statutes give to a surviving spouse a fixed fraction, typically out of a probate estate of the deceased spouse. Traditionally that fraction is one-third of the estate regardless of the length of the marriage. The Uniform Probate Code provides a more complicated scheme for determining the elective share. Elective share statutes are enacted in “separate property states.” These are often contrasted with “community property states.”

Question 32

Is a trust provision that an interest in the trust is invalid if a beneficiary gets marriage legit?

Answer 32

No. Provisions of trusts that violate public policy are void. RESTATEMENT (THIRD) OF TRUSTS § 29.
Trust provisions that restrain a first marriage have generally been held to violate public policy.

Question 33

What is a pourover provision?

Answer 33

A pourover provision in a will devises property to a previously existing trust under the terms of that trust. A pourover provision is distinguishable from a testamentary trust, as a pourover provision does NOT create a trust; it transfers property to a trust already in existence. Therefore, a pourover provision CANNOT devise property to a testamentary trust (because a testamentary trust does not come into existence until the settlor dies).

Question 34

What is a charitable trust?

Answer 34

A charitable trust is a trust that has the purpose of accomplishing a substantial amount of social benefit to the public at large or to a reasonably large class.

Question 35

Does the rule against perpetuities apply to charitable trusts?

Answer 35

No, the beneficiary of a charitable trust may be indefinite, named, or contain a class of persons described by the trust. The rule against perpetuities does NOT apply to charitable trusts.

Question 36

Is a charitable trust invalidated for failing to name a beneficiary or purpose?

Answer 36

NO. A charitable trust will NOT be invalidated for failure to state a specific charitable purpose or beneficiary. Generally, courts will select a purpose or beneficiary that is consistent with the settlor’s intent if the settlor had a general charitable intent. The Cy Pres doctrine may be applied to continue the charitable trust in a manner consistent with the settlor’s general charitable intent.

Question 37

If a trust names a specific charity, what if that charity terminates?

Answer 37

Then the trust terminates. If the settlor names a specific charitable beneficiary, the trust will terminate upon that charity’s termination.

Question 38

What are the responsibilities of a trustee of discretionary trusts?

Answer 38

A discretionary trust grants the trustee absolute power and discretion to make good faith determinations regarding when and how much of the trust property should be distributed to the beneficiaries of the trust.

Question 39

When may courts intervene over decisions of a turstee of discretionary trust?

Answer 39

Courts may interfere if the trustee is making such determinations in bad faith.

Question 40

What is a support trust?

Answer 40

A support trust is a trust that contains a provision directing the trustee to pay to the beneficiary as much of the income or principal as is necessary for the beneficiary’s education and support. Support trusts can be pure or discretionary (see above rule).

Question 41

What is a pure support trust?

Answer 41

Pure support trusts limit the trustee’s discretion. The trustee is obligated to spend only so much of the available trust property as is necessary for the education and maintenance of the beneficiary.

Question 42

What are spendthrift trusts?

Answer 42

Spendthrift trusts contain provisions designed to protect beneficiaries from their own carelessness. Generally, spendthrift provisions serve two main functions:

1. The beneficiary is NOT permitted to sell or assign his beneficial interest; AND
2. The beneficiary’s creditors CANNOT reach the beneficiary’s beneficial interest.

Question 43

What are the exceptions to the general rule that beneficiary’s credits cannot reach the beneficial interest of a beneficiary’s spendthrift trust?

Answer 43

Creditors are generally able to reach the beneficiary’s beneficial interest if:

1. The settlor is the beneficiary of the spendthrift trust (i.e., self-settled trust);
2. The creditor is seeking reimbursement for providing necessaries;

OR

3. The creditor has an order for child support or spousal support.

Question 44

What rights to creditors of a beneficiary have over the property in a trust?

Answer 44

The creditors of the beneficiary of a trust have NO greater rights in the trust property than the rights of the beneficiary.

ie, If the trust prevents a beneficiary from receiving the trust principal, then his creditors have no right to reach the trust principal either.

Question 45

When can creditors go after a beneficiary’s interest in a trust?

Answer 45

Whether or not the trust contains a spendthrift provision, creditors can reach the beneficiary’s interest once it is distributed to the beneficiary. Once trust income is paid to the beneficiary, a creditor may initiate appropriate proceedings to reach that income in order to satisfy a claim.

Question 46

Can creditors go after the interest income of a trust?

Answer 46

Absent a spendthrift provision, the beneficiary’s creditors are able to reach the beneficiary’s interest by attachment of the interest income to the beneficiary (i.e., generally, creditors cannot go after the principal, but they may go after the interest income if there are no spendthrift provisions).

Question 47

Are trusts interests alienable?

Answer 47

Trust interests are alienable, devisable, and descendible unless the terms of the trust provide otherwise (e.g., a spendthrift clause that prevents transfer).

Question 48

Generally (but there are exceptions), an income beneficiary is only entitled to trust income UNLESS…

Answer 48

… the trust authorizes the trustee to invade the trust principal.

For Example: Sam (the settlor) creates a trust and places $100 million dollars in the trust as the principal. Tom (the trustee) manages the $100 million principal, and successfully invests it generating around $5 million in income annually. Ben and Bob (the beneficiaries) are only entitled to the $5 million dollars in annual income unless the trust authorizes Tom to invade the $100 million principal. This arrangement protects the principal, so the trust fund can last perpetually.

Question 49

When can a trustee invade the trust principal

Answer 49

However, a trustee may be allowed to invade the trust principal if:

1. Only one beneficiary exists;
2. The beneficiary will ultimately receive the trust principal (usually not permitted if the invasion would be inconsistent with the settlor’s express directions in creating the trust);
3. There is a significant change in circumstances (e.g., the beneficiary suffers a traumatic injury and the trust income can no longer support the beneficiary’s health); OR
4. The trust grants the trustee discretion to invade the principal (can be express or
   implied through the settlor’s words or conduct).

Question 50

When and how may a court modify a trust?

Answer 50

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.

Question 51

Who may request a deviation?

When will the court permit a deviation from the administrative provisions in a trust instrument?

Answer 51

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:
Have been satisfied;
Have become unlawful; OR
Are impossible to carry out.

Question 52

What is the Cy Pres doctrine?

Answer 52

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.

Question 53

The Cy Pres doctrine is applicable only if…

Answer 53

Cy Pres 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).

Note: 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.

Question 54

When can parties modify a trust?

Answer 54

Generally, a trust is irrevocable and CANNOT be modified unless the settlor retained the right to do so in the terms of the trust instrument.

However, in a minority of jurisdictions, the settlor is free to modify or revoke the trust instrument WITHOUT express authorization to do so.

Question 55

What are the ways a trust may be terminated?

Answer 55

1. The trust is revoked or expires pursuant to its terms;
2. The material purpose of the trust has been satisfied or becomes unlawful, contrary to public policy, or impossible to carry out;
3. The settlor and all of the beneficiaries unanimously agree to terminate;
4. All of the beneficiaries agree AND no material purposes for the trust remain;
5. Termination will further the purpose of the trust due to circumstances that were not foreseen by the settlor;

OR

6. The court or trustee determines that the value of the trust property is too low to justify the cost of administration.

Question 56

If a trust validly terminates, who gets the remaining trust property?

Answer 56

If a trust is validly terminated, the trust property generally vests in the beneficiaries who may distribute the property in any manner they choose.

Note, however, that the trustee may retain a reasonable amount of the trust property to cover debts, expenses, and taxes.

Question 57

A trustee is a fiduciary holding legal title to the trust property. As a fiduciary, the trustee MUST

Answer 57

1. Manage the trust property exclusively for the benefit of ALL trust beneficiaries;

AND

2. administer the truth in GOOD FAITH pursuant to the intents and purposes of the trust

Question 58

What duty of care does a trustee owe?

Answer 58

The trustee possesses a duty to exercise the degree of care and skill as a person of ordinary prudence would exercise in dealing with his own property.

In making this determination, the focus is on the trustee’s conduct, not the results of such conduct.

Question 59

What is an exculpatory clause?

Answer 59

Exculpatory Clauses may limit trustee liability.

Under the majority view, the settlor may limit the potential liability of a trustee by including an exculpatory clause in the trust instrument.

However, exculpatory clauses do not excuse the trustee for acts done in bad faith.

Question 60

What is the Uniform Prudent Investor Act (UPIA) standard of care owed by a trustee?

Answer 60

The UPIA requires the trustee to exercise the degree of care and skill as an investor of ordinary prudence would exercise in investing his own property (e.g., diversifying investments, avoiding risky investments and speculation, etc.).

Question 61

One of the hallmarks of prudent investing is…

Answer 61

…diversification.
A balanced portfolio reduces aggregate risk by investing in different investment
categories. Diversification thus is strong evidence of prudent investing.

Question 62

Does the prudent investor rule include duty to monitor?

Answer 62

Yes, The prudent investor rule applies to both investment and management decisions. Management
includes monitoring; thus, the trustee has a duty to monitor investments prudently made to assure
that retention of those investments remains prudent. If retention is not prudent, the trustee should
sell the imprudent investments and reinvest the proceeds in prudent investments. A trustee,
however, is not liable for declines in value due to a downturn resulting from general economic
conditions.

Question 63

What is the trustee’s duty loyalty?

Answer 63

The trustee owes a duty of loyalty to the beneficiaries where the trustee may NOT
obtain any personal gain from administering the trust, except for fees.

Question 64

What is self-dealing and what does it constitute?

Answer 64

Self-dealing is a per se breach of the duty of loyalty. Self-dealing includes any transaction involving the trust property that the trustee enters into for his own gain.

Question 65

What is the “no further inquiry” rule?

Answer 65

Under the “no further inquiry” rule, there
is no need to inquire into the motivation for the self-dealing transaction or even its fairness.

Question 66

What remedies do beneficiaries have for a trustee’s self-dealing?

Answer 66

May cause the self-dealing transaction to be set aside (and property returned to the trust), or seek damages based on the difference in the fair market value of the trust assets at the time of the self-dealing and the amount paid by the trustee.

Question 67

May a settlor waive the trustee’s duty of loyalty?

Answer 67

Yes, the settlor may expressly waive the trustee’s duty of loyalty in the trust
instrument.

However, a waiver will not excuse the trustee for acts done in bad faith.

Question 68

What is the duty of impartiality?

Answer 68

Duty of impartiality = CANNOT FAVOR ONE BENEFICIARY OVER ANOTHER

The trustee possesses a duty to be impartial with respect to ALL the beneficiaries of the trust when investing, managing, and distributing the trust property

Question 69

What newly acquired assets are added to the trust income?

Answer 69

The following newly acquired assets generally must be allocated to the trust income:

1. Receipt of rental payments from trust property;

AND

2. Corporate distributions (e.g., cash dividends, return on investments, etc.).

Question 70

What newly acquired assets are added to the trust principal?

Answer 70

The following newly acquired assets generally must be allocated to the trust principal:

1. Funds received from the sale of trust property (not just the profit, the enter amount (eg, i buy office building for 500k, sell for 700k, the entire 700 k goes into trust principal);

AND

2. Repayment of loan principal.

AND

3. dividends paid in the form of stock

Question 71

In present estates, what is the default type?

Answer 71

Fee simple.

Question 72

A fee simple is created when…

Answer 72

A fee simple is created when the grantor uses the following language:

“O to A”
“O to A and his/her heirs”
“O to A forever”

Question 73

A defeasible fee is…

Answer 73

A defeasible fee is a conveyance in fee simple in which the grantor places express conditions on the conveyance

e.g., “O to A on the condition that . . .”

Question 74

Does a defeasible fee last forever?

Answer 74

A defeasible fee is capable of lasting forever, but may be terminated by the occurrence of an event.

Question 75

Who has the present possessory interest in a defeasible fee?

Answer 75

A defeasible fee gives the grantee a present possessory interest in the property.

Question 76

Who holds a future interest in a defeasible fee?

Answer 76

Depends on the language in the instrument. If spanish, then goes to a spanish person. JUUuuuuuust kiddding c’mon let’s have some fun here. Okay no but really what’s the rule?

A defeasible fee reserves a future interest in the property in the favor of the grantor or a third party.

Question 77

What are three main types of defeasible fees?

Answer 77

1. Fee simple determinable.
2. Fee Simple subject to condition subsequent
3. Fee simple subject to executory interest

Question 78

What is a fee simple determinable

Answer 78

A fee simple determinable is a conditional conveyance in which the grantor retains a possibility of reverter.

The possibility of reverter vests automatically when the condition is not met (i.e., the grantor does not have to reclaim the property, the interest automatically vests back to him).

A fee simple determinable is created when the grantor uses durational language, such as:
“While the property is used for farming”
“During the property’s use as a farm”
“Until the property is no longer used as a farm”

Question 79

Test Tip: what is the key for fee simple determinables?

Answer 79

DURATIONAL LANGUAGE:

“While the property is used for farming”
“During the property’s use as a farm”
“Until the property is no longer used as a farm”

Question 80

MBE Tip: grantee executes deed that says, “to grantee to have and to hold the described tract of land in fee simple, subject to the understanding that within one year from the date of the instrument said grantee shall construct thereafter maintain and operate on said premises a public health center.”

What did grantor convey?

Answer 80

THIS IS FUCKED UP, so don’t get down on this. Just remember it and move on.

While this sounds an awwwwwwful lot like a FSD, courts dislike restraints on alienation, so if there is any question as to the interpretation of a conveyance, courts will favor a fee simple absolute over a defeasible fee. As a result, the grantee would be left with a fee simple absolute and a personal, contractual liability to use the property as instructed by the deed.

See Immauel MBE Q 51

Question 81

What is the after-acquired title doctrine?

Answer 81

aka estoppel by deed

The grantor purports to convey an estate larger than the one he has; the grantor subsequently acquires the title he’s already purportedly conveyed; title automatically passes to grantee, by estoppel.

Question 82

Do courts dislike restraints on alienation

Answer 82

Yes, yes they do. So if at all vague as to whether an FSD or FSSCS, then they’ll construe as fee simple apparently. See Immauel MBE Q 51

Question 83

For fee simple determinable, does possibility of reverter vest automatically?

Answer 83

Yes, the possibility of reverter vests automatically when the condition is not met (i.e., the grantor does not have to reclaim the property, the interest automatically vests back to him).

Question 84

What is a fee simple subject to a condition subsequent?

Answer 84

A fee simple subject to condition subsequent is a conditional conveyance in which the grantor retains a right of entry. The right of entry does NOT vest automatically when the condition is not met (i.e., the grantor must reclaim the property). A fee simple subject to condition subsequent is created when the grantor uses conditional language, such as:
“Provided that the property is used for farming”
“On the condition that the property is used as a farm”

Question 85

For a FSSCS, does the right of reentry vest automatically?

Answer 85

No. The right of entry does NOT vest automatically when the condition is not met (i.e., the grantor must reclaim the property).

Question 86

Test Tip: what is the key to spotting FSSCS questions?

Answer 86

CONDITIONAL LANGUAGE, such as:

“Provided that the property is used for farming”
“On the condition that the property is used as a farm”

Question 87

What is a fee simple subject to an executory interest?

Answer 87

A fee simple subject to executory interest is a conditional conveyance in which a third party (not the grantor) is granted an executory interest in the property. An executory interest is a future interest that divests (i.e., terminates) an earlier interest.
For example:

“O conveys Greenacre to A and his heirs, but if Greenacre is no longer used as a farm, then to B and her heirs.” A has a fee simple subject to an executory interest. B has an executory interest, because B is a third party (not the grantor) and her interest divests A’s interest.

Question 88

MEE Tip: how do you spot a fee simple subject to an executory interest?

Answer 88

Look for a fee simple subject to a condition, but if the condition stops being met, there is a THIRD PARTY (not the grantor) who gets interest in the property.

eg, “O conveys Greenacre to A and his heirs, but if Greenacre is no longer used as a farm, then to B and her heirs.”
A has a fee simple subject to an executory interest. B has an executory interest, because B is a third party (not the grantor) and her interest divests A’s interest.

Question 89

Think quick, what kind of instrument is this: “A to B”

Answer 89

Fee simple

Question 90

Think quick, what kind of instrument is this: “A to B until B stops using land as farm”

Answer 90

Fee simple determinable

Question 91

Think quick, what kind of instrument is this: “A to B provided that B uses the land as a farm”

Answer 91

FSSCS

Question 92

Think quick, what kind of instrument is this: “A to B provided that B uses the land as a farm, and if not used as farm, then to C”

Answer 92

Fee simple subject to an executory interest

Question 93

Think quick, what kind of instrument is this: “A to B, until B stops using land as a farm, then to C”

Answer 93

Fee simple subject to an executory interest

Note: if they add the third party, then doesn’t matter if durational or conditional language, it’s a fee simple subject to an executory interest because doesn’t go back to grantor. BOOM.

Question 94

Springing vs. Shifting Executory Interest.

Answer 94

A springing executory interest divests the grantor, while a shifting executory interest divests a prior grantee.
“O conveys Greenacre to A and his heirs, but if Greenacre is no longer used as a farm, then to B and her heirs.” B has a shifting executory interest, because B’s interest divests A’s interest (prior grantee).