Wills and Trusts Flashcards
In order for a will to be validly executed:
Present intent, testamentary capacity, required formalities
Testamentary Capacity
T must have capacity to execute a will and the burden is on the contestant
T has capacity if T knows:
(1) the nature and extent of his property,
(2) the persons who are the natural objects of T’s bounty,
(3) the nature of the instrument T is signing and
(4) the disposition that is being made in the will
Distribute or Withhold Based on Mistaken Fact
If T decides to distribute or withhold property from beneficiary based on mistaken fact a court may invalidate the provision if interested party can show: but-for the mistake, the change or provision would not have occurred
A codicil is valid if:
it meets the same elements as a will
(1) It must be written, executed with testamentary intent, and it must be signed by the T in the presence of two witnesses
Holographic codicils are valid if they are handwritten and signed by T
Incorporation by Reference
A writing that is not valid as a will may be incorporated by reference into a will if the will manifests an intent to corporate the writing, the writing is identified with reasonable certainty, and the writing existed at the time the will was executed
A codicil can validate a previously valid will or codicil if:
it appears that the T is attempting to re-establish her previous will or codicil.
The rule against perpetuities prohibits:
the disposition of property that uncertain to vest or fail within 21 years
Charitable trusts are immune from the rule against perpetuities
A trust of personal property is valid if:
it has a trustee, a beneficiary, and trust property
- Trustee: manages trust property and holds it for benefit of beneficiaries
- Beneficiaries: in private express trust, must be definite and ascertainable
- Trust Property: must be identifiable
Charitable trusts
are created when the settlor intends to create a trust for a charitable purpose, often to benefit the public at large, and has no ascertainable beneficiaries
RAP does not apply!
The Cy pres doctrine:
allows a court to conform a charitable trust to benefit a different purpose, or amend a trust to continue in duration
When a decedent is without a will:
their inheritance passes through intestate succession
*Typically, this would be through their spouse, descendants or parents
Most intestacy statutes assign property as follows: (1) decedent’s linear descendants, (2) decedent’s parents, (3) decedent’s grandparents linear descendant’s or parents linear descendants
What law governs the distribution of individual’s will?
The state where the T was domiciled when T died
*Domicile = presence + intent to remain
A valid holographic will requires:
The will to be written in the T’s handwriting (some states only require material portions) and signed by T
*NO WITS REQUIRED
Omitted Child
AFTER: Most courts allow child born after the will was executed to take in equal share to the other children included in the will
BEFORE: Court should follow the will on its face and omit the child unless it is clear the omission was accidental
When interpreting a will, a court is only permitted to consider extrinsic evidence when:
The terms of a will are ambiguous
Upon a finding of ambiguity, a court may consider both direct and circumstantial evidence in an effort to best determine the intent of the T
When a beneficiary to a will predeceases the T (lapse):
the beneficiary’s devise will lapse into the residuary of the will, or in absence of a residuary, it will pass by intestacy.
***Most states have enacted anti-lapse statutes that apply to devises to FAMILY
A codicil can validate a previously valid will or codicil if:
It appears that the T is attempting to re-establish her previous will codicil.
Termination of Trust by beneficiaries after Settlor Dies
All beneficiaries and the trustee consent to the termination and there is no material purpose yet to be performed
Clafin Doctrine
A trustee can block a premature trust termination, even one to which all beneficiaries have consented, if the trust is shown to have an unfulfilled material purpose
*Consider the settlor’s intent
Class Gifts (CL and UPC)
CL: Unless the governing instrument provides otherwise, the gift is expressly limited to the transferor’s surviving children, so that the surviving issue of a deceased child does not take
UPC: If a class gift is limited in favor of a class of children, only those children at the time of distribution are entitled to possession of property - Child who predeceases time of distribution: issue can take
A class remains open and may admit new members until:
(i) at least one class member is entitled to obtain possession of the gift, (ii) the preceding interest terminates
A trust is a ______ relationship wherein the trustee is called upon to manage, protect, and invest certain property and any income generated therefrom for the benefit of one or more named beneficiaries.
fiduciary
A trustee has a duty to:
administer the trust in good faith, in accordance with its terms and purposes, and in the interests of the beneficiaries
A private express trust:
Clearly states the intention of the settlor to transfer property to a trustee for the benefit of one or more ascertainable beneficiaries
Revocability
Under the UTC, an inter vivos trust is revocable unless the instrument expressly states otherwise
- Settlor may terminate if all beneficiaries are in existence and all agree on termination
If a trust is revocable:
The settlor’s power to revoke naturally includes the power to amend or modify the trust
*May do so by substantial compliance with a method provided in the terms of the trust
A power of appointment:
enables the holder to direct a trustee to distribute some or all of the trust property without regard to the provisions of the trust
A special power of appointment:
Allows the donor to specify certain individuals as the objects of the power, to the exclusion of others
When an appointment exceeds the grant of power:
The property or interest that was invalidly appointed passes to the taker in default (the party who would have received had there been no appointment)
Elective share
An elective share gives the surviving spouse a fraction of the decedent’s estate if the surviving spouse decides to elect that share, rather than a gift in the will.
The probate estate includes:
All assets that pass by will or intestacy upon a decedent’s death.
*A trust is generally considered a will substitute because the distribution of property placed in trust during a decedent’s lifetime pass outside of probate according to the terms of the trust
In some jurisdictions, the surviving spouse can set aside inter vivos transfers made by decedent during marriage, without spousal consent if:
the decedent initiated the transfer within one year of her death, retained an interest in the property, or received less than adequate consideration
Specific Gift
A specific legacy, devise, or bequest is a gift of property that can be distinguished with reasonable accuracy from other property that is apart of the T’s estate
General Gift
Gift of personal property that T intends to be satisfied from the general assets of his estate
*“my automobile,” or “$10,000”
Bequest of Stock (CL)
Bequest of stock owned by T when the T’s will was signed excluded subsequently acquired shares of the same stock.
*A stock dividend is a property interest distinct from stock given by the specific bequest
Bequest of Stock (UPC)
A stock dividend is treated like a stock split instead of cash dividend
Ademption (CL)
If the subject matter of a specific bequest is missing or destroyed, the beneficiary takes nothing, not even the equivalent in cash
*Ademption only applies to specific bequests
Ademption (UPC)
Permits a beneficiary of a specific extinct gift to inherit the property acquired by T as replacement property or the outstanding balance
*Ademption only applies to specific bequests
Rule of Construction - Generically Described Property
Bequest of generically described property applies to property that meets the generic description at T’s death
Disclaimer
A disclaiming party is treated as if she predeceased the decedent and the bequest passes either to disclaimant’s issue or residuary
Typical Anti-lapse statute:
Provides for alternate disposition of lapsed bequests
*If the gift was made to a relative of T within certain statutory degree, and the relation predeceased the T but left issue, the issue succeed to the gift, unless the will expressly states to the contrary
If decedent’s spouse and parents do not survive, what are the schemes available to divide property?
Per capita with representation, per stirpes, and per capita at each generation
Per capita with representation
Property is divided equally among the first generation with at least one living member
Per stirpes
First divided into the total number of children of the ancestor who survive or leave issue
Issue equally share the portion that the deceased ancestor would have taken if living
Per capita at each generation
Property is divided into as many equal shares as there are living members of the nearest generation of issue and deceased members of that generation with living issue
If there is no spouse and no children, what are the two methods of determining heirship?
Parentelic, degree of relationship approach, combined approach, UPC approach
Parentelic
Descendants of the decedent’s parents take to the exclusion of descendants of the decedent’s grandparents (niece would be an heir but not an uncle)
Degree of Relationship
Calculated by counting the number of relatives between the living taker and D using the closest common ancestor
UPC
(1) D’s parents equally if both survive or all to surviving parent if only one survives, (2) then to descendants of D’s parents, (3) then to D’s living maternal/paternal grandparents, (4) then to descendants of D’s deceased grandparents, (5) then to D’s nearest maternal/paternal relative, (6) then escheats
Child (for purposes of intestate succession)
Includes adopted children, children born out of wedlock, and half bloods (but not step children)
Advancements
Issue: should the gift be deducted from what the child would inherit under the laws of intestate succession?
CL: Lifetime transfer was presumptively treated as down payment on heir’s intestate share and taken into account when computing heir’s intestate share
Majority: Presumed to be gift and is ignored in computing intestate share
Ademption by Satisfaction (UPC)
A lifetime gift is not prepayment unless: (1) the will says so, (2) T declares in a contemporaneous writing that the gift is to be deducted from the will, or (3) the devisee acknowledges in writing that the gift is in satisfaction of the bequest
Will Requirements
In writing, signed by T (who intends doc to be will), and witnessed by two witnesses
Revoking a Will by Physical Act
Must be done with the intent to revoke the will
Dependent Relative Revocation
A first will is not revoked if a later will is found invalid, if it appears that the T would not have revoked the first had the T had accurate information
Divorce (revocation)
Actual divorce revokes gifts in favor of a spouse
Slayer Statute
An individual who feloniously and intentionally kills the decedent cannot take under decedent’s will
*On test, this doctrine usually does not preclude taking because the killing was not felonious or intentional
Abatement
When assets of an estate are insufficient to satisfy all gifts made by someone’s will, gifts to the beneficiaries will be reduced in the following order: intestate property, residuary gifts, general gifts, specific gifts
Undue Influence
Wrongdoer exerts such influence over T that it overcomes T’s free will and causes T to make a gift he would not otherwise have made
(1) T was susceptible to undue influence,
(2) influencer had opportunity to exert undue influence,
(3) influencer had a disposition to exert undue influence, and
(4) will appears to be an object of undue influence
Pourover Will
Will that makes a gift to a trust is valid so long as the trust is identified in the will and the terms are incorporated in a writing executed before or concurrently with the execution of the will
Discretionary Trust
Trustee has discretion to decide when to make a distribution to a beneficiary
Support Trust
Trustee must pay what is necessary for the beneficiary’s support
Spendthrift Trust
Restrains both the voluntary and involuntary transfer of a beneficiaries rights
- Creditor may not reach prior to beneficiary reaching it unless creditor is:
(1) child or spousal support creditor,
(2) judgment creditor,
(3) State or United States,or
(4) creditor with claim for necessities
Modifying Charitable Trust
May terminate if charitable purpose becomes unlawful, impracticable, or impossible
*Cy pres may save the trust
Honorary Trust
Does not have a charitable purpose or a definite beneficiary
*Often a trust to take care of a thing
Duty of Loyalty
A trustee has a duty of loyalty to act in the best interests of the beneficiaries
Duty of Care - Prudent Administrator
UPIA: trustee must administer the trust as a prudent person would, using reasonable care, skill, and caution
- Investment and management strategies should be evaluated in context of portfolio as a whole
- Duty to Diversify: Liable for failure to diversify absent directions to the contrary
Breach of Trust Remedies
Suspending or removing trustee, decreasing compensation, compelling a trustee to perform trust duties, compelling payment of damages
- Self dealing: beneficiaries may rescind the transaction and ask for the self-dealing purchase to be set aside OR recover any profits the trustee made
Class Gifts - Rule of Convenience
When a gift is made to a group, such as “my children,” the class closes when at least one member is entitled to distribution
Class Gifts - UPC Approach
Each beneficiary will take their share and the deceased beneficiary’s share will pass to their surviving descendants
Class Gifts - CL Approach
If gift or remainder to a deceased beneficiary has already vested and there is no applicable statute, then it will go to whomever the instrument says it should go to or whomever the deceased person has specified in their will or through intestacy
