Trusts/Estates Flashcards
Intestate succession occurs when
- Decedent dies without will
- Decedent’s will does not dispose of all of their property
- Decedent’s will is denied probate
Intestate where survived by spouse and descendants
Surviving spouse inherits one-half or one-third of decedent’s estate with remainder to surviving descendants
UPC: if decendent’s descendants are also surviving spouse’s descendants, entire estate goes to surviving spouse
Not survived by spouse or descendants
Decedent’s surviving parents inherit entire estate and if no parents, descendants of decedent’s parents inherit
Intestate distributions
When decedent’s estate does not pass to surviving spouse, but instead to descendants then statutes control how distributions are made
Either (1) per capita with representation—modern per stirpes, or (2) per capita at each generation
Per capita with representation (modern per stirpes)
Estate divided into equal shares at first generation at which there are living takers; each living person takes share and each share of deceased person at that level passes to descendants
Per capita at each generation
UPC and growing number of states: divided at first generation with living takers, but shares of deceased are combined and divided equally among takers at next level
Avoids situations where takers are penalized for having bigger family
Adopted children’s inheritance rights
Treated the same as natural child for purposes of intestate succession but cuts off rights from adoptee’s inheritance rights from natural parents unless adoption by spouse of natural parent
Stepchildren and foster children inheritance rights
Generally have no inheritance rights unless adoption by estoppel or equitable adoption
Non-marital children
All states permit inheritance from mother and from father is allowed if paternity established
Posthumous children inheritance rights
Child in gestation at time of decedent’s death inherits as if born during lifetime
Simultaneous death
One cannot take as an heir or beneficiary unless she survives decedent
Two approaches (1) Uniform Simultaneous Death Act, (2) 120-hour rule
Uniform simultaneous death act
Property passes as though beneficiary or heir died before decedent unless sufficient evidence decedent died first
120-hour rule
Beneficiary/heir is only treated as having survived decedent if clear evidence that she survived by 120 hours or more
Slayer Rule
Decedent death’s caused by beneficiary; they then forfeit interest in decedent’s estate
Disclaimers
One may disclaim interest that otherwise would pass to them from decedent or decedent’s estate which has effect of interest passing as if disclaiming party predeceased decedent
Disclaimer requirements
For federal tax purposes, disclaimer must be in writing, irrevocable, and filed within 9 months of decedent’s death
Advancement
Gifts made during testator or decedent’s life with intent that gift be applied against any share the heir or beneficiary inherits from decedent/testator’s estate
Common law: gifts automatically deducted from interest
Modern requirement of advancements
Recognized as advancement only if
(1) decedent declared intent to make gift an advancement in contemporaneous writing, or
(2) beneficiary/heir acknowledged gift to be advancement in writing
Testamentary capacity and intent
For valid will, testator must have capacity and requisite intent
Testamentary capacity
For valid will, person executing must be 18 or older and have mental capacity which means they understand act, extent or property, people who are natural objects of bounty, and nature of disposition
Rebuttable presumption
Testamentary intent
Must intended that instrument operates as will and this must be present intent
Extrinsic evidence allowed to prove requisite intent or lack thereof
Wills
Instrument directing disposition of person’s property when they die
Has no legal effect before death and may be revoked or amended until death
Reqs of a will
- In writing
- Signed by testator, any mark intended is sufficient
- Signed by at least two witnesses
Attestation clause
Included immediately between testator and witness signatures setting forth above required elements and that they were met
Witness reqs
Must be competent (sufficient maturity and mental capacity to understand and appreciate nature of what they witnessed)
Interested witnesses common law
Entire will could not be probated, abolished in every state
Interested witnesses majority rule
Will is valid but gift to witness beneficiary is void unless (1) two other disinterested witnesses, or (2) interested witness would take if no will
Interested witness UPC
Presence does not invalidate anything
Codicil
Amendment, modification, or alteration to previously executed will
Same formalities are required and, when met, original is republished and executed on date of codicil
Holographic will
Handwritten, unwitnessed will
Not recognized everywhere
Holographic will reqs
- Testator’s writing, at least material portions
- Signature
- Reflect intent to make will
Revokes any prior valid will
Separation of will documents (integration)
Issue can arise where part of will becomes separated
Test: integrated into will if (1) document was physically present at time of execution, and (2) testator intended to include
Reqs presumed if physical connection of pages
Acts of independent significance
Will can dispose of property by reference to acts or events occurring after testator executes will IF act or event has some independent significance during testator’s lifetime other than providing gift in will
Identifying beneficiaries and property
Future act or event can involve identifying beneficiaries like each person employed as gardener or all cars
Incorporation by reference
Docs intrinsic to will may be incorporated by reference into will
Incorporation by reference reqs
- Intent to incorporate
- Authenticated document: sufficiently described to be authenticated
- In existence upon will execution unless it relates to tangible property if signed and items described to whom they are devised with reasonable certainty
Revocation by testator
If testamentary capacity to make valid will then can revoke at any time before their death
Revocation by written instrument
Will or any part of it can be revoked or changed if intent to revoke and formalities
Revocation by physical act
Will may be revoked in most states by burning, tearing, or otherwise destroying the will
- Present intent required
- Act by another (revocation by proxy) is fine if done at testator’s direction and in their presence
Partial revocation
May be accomplished by making marks of cancellation on will in most states
Revocation by operation of law
Upon happening of certain events, usually involving marital status or children
Marriage following execution of will
No effect on existing will in most states
UPC: omitted spouse takes share of decedent’s estate equivalent to what their intestate share would be unless it was clear intent to omit
Divorce following execution of will
Revokes all bequests made in favor of former spouse, unless will expressly provides otherwise and treats former spouse as predeceased
Pretermitted children
Will does not provide for children born or adopted after will
Most states give equal to what they would have received through intestate succession
Revival of will
Where will revoked, and revoking instrument is revoked then original presumptively valid unless clear intent not to do so
Dependent relative doctrine
Court disregards revocation done to create alternative disposition but based on mistake of fact or law if (a) premised on some mistake of fact or law, (b) revocation would not have happened absent this mistake, and (c) originally revoked is closer to what testator wanted
Lapsed
Gift provided in will lapses where beneficiary predeceases testator and, absent anti-lapse, gift goes back into estate
Anti-lapse statutes
Gift that would otherwise lapse vests in predeceased beneficiary’s descendants who become substitutes if predeceased was relative of testator and had descendants
When anti-lapse elements not fulfilled
Common law: lapsed gift passes to testator’s heirs
Modern: residuary beneficiaries who survive testator and deceased beneficiary take
Class gifts where there is predecease
If will makes gift to class and class member predeceases, surviving class members take absent an alternative provision in will unless anti-lapse applies
Ademption
Gift fails if no longer in estate at time of death, applying to specific devises only
Intent theory states exception to ademption
Adeemed bequest saved if evidence suggests ademption would be inconsistent with intent
Abatement
Where estate’s value is insufficient to pay its obligations and provide for disposition of property, it must reduce gifts to pay obligations and satisfy
Order of abatement
Property not disposed of by will
Residuary estate
General devises
Specific devises
K involving will
Valid Ks to make, not make, or revoke wills generally enforceable, governed by K law so K requirements must be satisfied and generally needs to be in writing
Common grounds for contesting will
Lack of capacity or testamentary intent, defective execution, undue influence, fraud, mistake, or revocation
Standing to contest will
Only those who have pecuniary interest have standing
No-contest clauses
Clause providing that beneficiary loses interest under will if they contest it but does not apply to suits challenging executor appointment, jurisdiction, or asking court to interpret
Majority: no forfeiture of interest if good faith and probable cause
Minority: given full effect
Undue influence
Invalid if executed while testator subject to undue influence effectively overriding testator’s free will
Requirements: (a) influence exerted, (b) mind and free will overpowered, and (c) will would not have been executed absent influence
Presumed if special relationship like attorney-client, or significant participation in execution
Mistake
Nature of instrument: what it is person is signing, extrinsic evidence allowed
In inducement: relates to reason made will or gift, no relief
Omission: no relief or extrinsic
Reformation for Mistake
UPC allows court to reform terms of will to conform to testator’s intent
Must show by clear and convincing evidence that mistake of law/fact affected will and testator’s intent
Inter vivos gift
Non-probate; gift given by living person to another living person
Requirements include intent, delivery, and acceptance
Totten trust or POD account
Deposit in one’s own bank account held in trust for another, creates valid revocable trust either by withdrawing all funds of revoking trust by will
Life insurance
K between insurance and policyholder
Unless K provides otherwise, policyholder cannot change beneficiary through will provision
Power of appointment
Authority granted to person enabling them to designate new owner of property and how they take
General: donee can exercise in favor of anyone
Special: power exercisable in favor of limited class of appointees
Executor
Named in will as personal representative to carry out administration of decedent’s estate and, if no one, court appoints
Living will
Specifies life-sustaining and pain-alleviating measures
Created, generally, in writing, signed by testator, and witnessed by two adults
Revocable
Durable healthcare power of attorney
Document that appoints individual as an agent to make decisions on behalf of principal if become incapacitated
Trust
Fiduciary relationship where trustee holds legal title to property for benefit of designated beneficiaries
Created by settlor; generally, revocable
Express trust
Created with express intent either private, for benefit of certain defined or ascertain able persons, or charity, for benefit of indefinite class or public generally
Resulting trust
Implied or imposed by law when express trust fails for some reason; settlor becomes beneficiary and if dead, then to settlor’s estate
Constructive trust
Not trust; equitable remedy used in cases to rectify unjust enrichment or wrongful conduct
Valid express trust requires
- Settlor has capacity to convey
- Settlor has clear present intent to create trust
- Competent trustee with duties
- Definite beneficiary (specifically identify, or how beneficiaries will be ascertained)
- Present and clear disposition of settlor’s specific property in trust
- Valid trust purpose
Inter vivos trust
Creation requires transfer of property or declaration of trust and then property must be delivered
If land is property, then must be in writing for SoF
Testamentary trusts reqs
Created by will and must include intent, essential terms, and identification of beneficiaries by either
- Terms of will itself
- Incorporation by reference
- Power of appointment
Pour-over provisions
Provision that devises property to previously existing trust
Powers of trustee
Exercise powers expressly or impliedly conferred; has powers necessary and appropriate to properly invest, manage, and distribute trust property
Duties of trustee
- Duty to administer trust in good faith and prudent manner
- Duty of loyalty, no self-dealing
- Duty to report to beneficiaries
- Duty to separate trust property and keep records
- Duty to enforce claims and defend trust
- Duty to preserve property and make it productive
Discretionary trust
Trustee has absolute power and discretion to make decisions regarding distribution
Beneficiaries have no right to income until trustee exercises discretion to distribute; creditors of beneficiary cannot reach unless served with process
Support trust
Directs trustee to pay beneficiaries from trust as much as is necessary for beneficiary’s support
Creditors of beneficiary cannot touch
Spendthrift trust
Prohibits beneficiaries from transferring their interests in the trust
Beneficiary’s creditors cannot reach but once distributed, they can
Charitable trust
- Indefinite beneficiaries required: reasonably large class, unnamed and changing over time
- Charitable purpose: benefit public, effect of gift not motive controls
- Can be perpetual: RAP does not apply
Modification: trust property can be applied to different charitable purposes
Termination of trusts (automatic)
At expiration of specified term, or when purposes have become accomplished, unlawful, impossible, or contrary to public policy
Revocation and/or modification of private trusts
By settlor: modify or revoke unless terms expressly prohibit
By beneficiaries: modify or revoke upon consent of settlor and all beneficiaries, or without settlor consent if would not frustrate material purpose of trust
Remember, all beneficiaries include unascertainable ones
Cy Pres
For charitable trusts, allows court to modify terms to as near as possible as settlor’s original intent
