Trusts & Estates

Question 1

Intestate Decedent’s Surviving Spouse:

Decedent’s descendants all of SS, and SS w/o other kids

Answer 1

SS takes all

Question 2

Intestate Decedent’s Surviving Spouse:

Decedent w/o kids, but has surviving parent

Answer 2

SS takes 300k, plus 75% of remainder

Question 3

Intestate Decedent’s Surviving Spouse:

SS has other issue

Answer 3

SS takes 225k, plus 50% of remainder

Question 4

Intestate Decedent’s Surviving Spouse:

Decedent has kids unrelated to SS

Answer 4

SS takes 150k, plus 50% of remainder

Question 5

Calculating Shares:

Per Capita w/ Representation

Answer 5

Property split equally between 1st generation with a surviving member,
with the shares of non-living members passing to issue

Question 6

Calculating Shares:

Per Stirpes

Answer 6

Property split equally among Decedent’s children, then passed to issue by representation

Question 7

Calculating Shares:

Per Capita at Each Generation

Answer 7

Property split equally between 1st generation with a surviving member,
then pool unclaimed shares and split at the next generation

Question 8

Adoption

Answer 8

Today, adopted children are entitled to receive the same share, under intestacy laws, as biological children.

In some states, a child may be informally adopted through adoption by estoppel when a person takes a child in and assumes parental responsibilities.

Generally, adoption in fact or by estoppel terminates the adopted child’s right to inherit from her biological parents.

Question 9

Advancements

Answer 9

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.

Question 10

Requirements for a Valid Will

Answer 10

1. In writing;
2. Signed by the testator; AND
3. Signed by at least two witnesses.

Question 11

Interested Witnesses

Answer 11

CL- Interested witnesses don’t count

Mod - Ok, but some forefeit/allow only intestate share

Question 12

Holographic Will

Answer 12

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 precise words are required to make a holographic will valid; however, it must contain operative words legally sufficient to validly devise the property.

Question 13

Integration of Documents into Wills

Answer 13

A document will be integrated into the will if:

1. The testator intended the document to be part of the will; AND
2. The document was physically present at the time of the will’s execution.

Question 14

Incorporation by Reference

Answer 14

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.

Question 15

Methods of Revocation

Answer 15

By Subsequent Instrument
By Cancellation
Partial Revocation

Question 16

Revocation by Subsequent Instrument

Answer 16

A will can be revoked by:

1. A subsequent written instrument that is executed for the sole purpose of revoking the prior will; OR
2. A subsequent will 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).

Question 17

Revocation by Cancellation

Answer 17

A will can be 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 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.

Question 18

Partial Revocation

Answer 18

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.

Question 19

Dependent Relative Revocation

Answer 19

Under DRR, the valid revocation of a will may be ignored if the will was revoked under the testator’s mistaken belief of law or fact that the testator could revive an earlier will, or modify his disposition of property by a new will.

Question 20

Lapsed Legacies

Answer 20

If a beneficiary named in a will predeceases the testator, absent an alternate disposition of the devise specified by the testator, the devise lapses into the estate’s residue unless the jurisdiction’s anti-lapse statute preserves the devise for the beneficiary’s descendants.

Question 21

Anti-Lapse Statutes

Answer 21

Under an anti-lapse statute, devises will vest in the descendants of the predeceased beneficiary if the predeceased beneficiary:

1. Is a blood relative of the testator; AND
2. Has descendant(s) who survive the testator.

Question 22

Ademption

Answer 22

Under the doctrine of ademption, if the subject matter of a specific devise is not in the estate at the time of the testator’s death, the devise to the beneficiary adeems or fails.

However, in most jurisdictions today, a specific devise will adeem only if the testator intended the devise to fail.

If the testator did not intend for a specific devise to fail, the beneficiary is entitled to:

1. Any property in the testator’s estate, which the testator acquired as a replacement for the specific devise; OR
2. A monetary devise equal to the value of the specific devise.

Question 23

Slayer Statute

Answer 23

A person who feloniously and intentionally kills the decedent is barred from claiming a share of the decedent’s estate as either an heir or a beneficiary under the decedent’s will.
Generally, the decedent’s estate is distributed as if the killer had predeceased the decedent.

Question 24

Disclaimers

Answer 24

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.

Question 25

Abatement

Answer 25

Beneficiaries under wills are entitled only to the net value of estate assets.
The net value represents what remains of the decedent’s assets at death after the payments of debts, expenses, and taxes.
If there are more claims against an estate from creditors than there are assets to cover all of the devises made under the will, the devises abate.

Question 26

Stock Splits and Dividends

Answer 26

Under the common law (still followed in some states), a stock dividend constitutes a property interest that is separate from shares of stock received through a specific devise.

Under this rule, the beneficiary of the underlying shares of stock does not receive the additional shares that were obtained through stock dividends.

Under the majority view, beneficiaries are entitled to additional shares owned by the testator that were acquired as a result of stock splits or dividends.

Question 27

Devises to Classes

Answer 27

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.

Question 28

Disinheritance

Answer 28

A child that is intentionally omitted from a will is not entitled to a share of the decedent’s estate.

Question 29

Pretermitted Children

Answer 29

A pretermitted child is a child who is unintentionally omitted from a will.

Pretermitted children are entitled to the share that they would have received had the testator died intestate so long as the testator did not intend to omit the child from his will.

Question 30

Capacity to Devise

Answer 30

A will is invalid if the testator lacked mental capacity when the will was executed.

To prevail in a will contest for lack of capacity, the contestant must prove that the testator did not know or understand:
1. The nature and extent of his property;
2. The persons who are the natural objects of his
bounty; OR
3. The disposition he was making of his property.

Question 31

Undue Influence

Answer 31

A will is invalid if the testator executed the will while under undue influence.

Undue influence occurs when a person exerts such control and influence over the mind of the testator as to overcome the testator’s free will.

To prevail in a will contest for undue influence, the contestant must prove that:

1. The testator was susceptible to undue influence;
2. The wrongdoer had the opportunity to exert undue influence over the testator;
3. The wrongdoer actively participated in drafting the will; AND
4. The will evidences a result that appears to be the effect of undue influence.

Question 32

What is a Trust?

Answer 32

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.

Question 33

Three Parties in a Trust

Answer 33

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.

Question 34

Requirements for a Valid Express Trust

Answer 34

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 35

Revocable vs Irrevocable Trusts

Answer 35

Under the common law (majority view), a trust is irrevocable unless the settlor expressly retains the right to revoke or amend the trust.

Under the Uniform Trust Code (minority view), a trust is revocable unless the trust expressly provides otherwise.

Question 36

Testamentary Trust

Answer 36

Created through provisions of the settlor’s will

Does not come into existence until the settlor dies (must meet the same formalities as the will).

Question 37

Rights of Creditors

Answer 37

Creditors of the beneficiary of a trust have no greater rights in the trust property than the rights of the beneficiary.

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

While creditors cannot go after the principal, they may go after the interest income if there are no spendthrift provisions.

Moreover, 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 38

Deviation from the Trust

Answer 38

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.

Question 39

Cy Pres Doctrine

Answer 39

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 to prevent the trust from failing.

Question 40

Trust Termination

Answer 40

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 41

Fiduciary Duties of the Trustee

Answer 41

As a fiduciary, the trustee must:

1. Manage the trust property exclusively for the benefit of all the trust’s beneficiaries; AND
2. Administer the trust in good faith pursuant to the terms and purposes of the trust.

Question 42

Trustee’s Duty of Care

Answer 42

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.

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 43

Trustee’s Duty of Loyalty

Answer 43

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.

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.