Wills and Trusts Flashcards
VALIDITY OF WILL
A valid will requires that testator have testamentary capacity (presumed to exist) and intent
Testamentary capacity:
T must be 18+ and of sound mind—no mental disorder or lack of mental capacity
1. 18+, understand nature of testamentary act, nature and extent of property, relations to beneficiaries
Testamentary intent Defenses
- Undue influence (UI) over T
- Fraud in the execution
- Fraud in the inducement
- Mistake in the execution
- Mistake in the inducement
- Sham will
- Conditional will
Undue influence (UI) over T:
Physical or mental coercion that controls T’s dispossession of property. Traditional factors: opportunity to influence T (confidential relationship), susceptibility of T, active participation by influencer, unnatural result (successful influence of dispossession)
a. [CA] Vulnerability of T, apparent authority of influencer, actions of influencer, equity of result
Fraud in the execution:
Misrepresentation of document, deception, switching papers
Fraud in the inducement:
Misrepresentation of law or facts induces T in reliance
Mistake in the execution:
Carelessness, accidentally signing wrong document
Mistake in the inducement:
Innocent misrepresentation, mistaking true facts (extrinsic evidence
Sham will:
C&C evidence showing the document was not intended to be a will invalidates it
Conditional will
If explicit condition precedent to will taking effect does not occur, will is invalid
Formal (attested) will:
Formally witnessed will 1) in writing, 2) signed by T (or another at T’s direction and presence), 3) signing or acknowledgment in joint presence of 2+ witnesses, 4) signed by 2+ witnesses during T’s lifetime (can be separate), 5) witnesses understand instrument being witnessed is T’s will
1. Interested witness (beneficiary): Unless 2+ other disinterested signing witnesses, presume fraud/duress/UI. If presumption not rebutted, gift to interested witness fails, may only take intestate share. If gift acquired through actual fraud/duress/UI, not entitled to any portion of gift
2. After 1/1/2009, a will not meeting witnessing requirements may still be admitted to probate if there is clear and convincing evidence that T intended the document to be his will
Holographic will:
Will 1) signed by T with 2) material provisions in T’s handwriting. No witnesses needed
Codicil
Alteration to existing will – valid if executed with required formalities as attested/holographic will
1. Can have holographic codicil to attested will and vice versa
Incorporation by reference
T may incorporate by reference a separate document into a will when 1) the document is in existence at execution, 2) will shows intent to incorporate, and 3) the writing is described
1. A will can also refer to a document not yet in existence at the time of execution if 1) an unrevoked will refers to the writing, 2) the writing is dated and in T’s handwriting or signed by T, and 3) the writing describes the items and the recipients of the property with reasonable certainty
Facts of independent significance
A will may dispose of property by reference to acts and events that take place after the execution and without formalities that attend to the will itself, i.e., things can happen (variables) after execution that can affect disposition without formalities (e.g., a will to pass a gift in equal shares to T’s employees. This provision is valid even if the employees change after execution)
Pour-over provision:
T may dispose of property by will to an existing inter vivos (established during lifetime) trust. Hence, an inter vivos trust may be a “will substitute,” provided the will is valid
1. This trust must be clearly identified in the will and executed before/concurrently with the will
2. This trust may be amended or revoked after execution of the will
3. This trust may be unfunded during T’s lifetime
Contractual wills
to make/revoke/contest wills are recognized in CA, if the existence of the contractual agreement can be proven because it is stated in the will along with the contractual provisions
Ambiguity in Wills
CA permits extrinsic evidence (EE) if T’s intent or language is ambiguous
REVOCATION & REVIVAL
A will may be revoked in whole or in part by a subsequent will that revokes it expressly or by inconsistency
Subsequent instrument
T makes new will or codicil (Will 2) that expressly or impliedly revokes previous will (Will 1). Attested will can be revoked by holographic will/codicil and vice versa
Physical act
Physical destruction—burn, tear, obliterate, interlineate—with concurrent intent to revoke
1. T may direct another to destroy the will in his presence
2. If only part of will destroyed, EE admissible to show whether T intended part/full revocation
3. If there are copies, destruction with intent of either the original or a copy is a valid revocation
Lost will
CA presumes that a will is known to be in T’s presence. If not found, CA presumes T revoked it
Dependent relative revocation
(DRR: “didn’t really revoke”) cancels a revocation based on mistake of law or fact
i. If T revokes on the mistaken belief that another disposition would be effective, and but for this mistake T would not have revoked his will, the revocation is set aside, and the original will remains in force
ii. If revoked by subsequent instrument, EE not admissible to show the mistake
iii. If subsequent instrument is defective in the first place, revocation is also ineffective—DRR inapplicable
Revival
If new Will 2 is revoked, Will 1 remains revoked unless evident from circumstances of Will 2 revocation
i. If Will 2 revoked by Will 3, Will 1 revived to extent of Will 3 showing intent for Will 1 to take effect
ii. If Will 2 revoked by physical act, can admit EE to prove T’s intent to revive Will 1
iii. Revival by republication by codicil: Making a codicil to the voided will (will speaks @ date of codicil)
Abatement
(estate insufficient to pay all debts and claims): Gifts are reduced (abated) pro rata under a will to satisfy the debts and claims of an estate in the following order by default—intestate property, residuary devises, general devises [non-relatives, then relatives], demonstrative devises, specific devises [non-relatives, then relatives]
Ademption by extinction
Specific devise fails (is adeemed) when T no longer owns the gift at death, BUT look to T’s intent. May occur intentionally (sale, gift) or involuntarily (fire, theft). Or T may collect balance of any sale price he intended the property to go to original beneficiary despite it no longer existing
Ademption by satisfaction
An inter vivos gift in advance will be treated as a satisfaction of a testamentary gift if 1) instrument specifies deduction of the lifetime gift from the testamentary gift, or 2) T declares in a contemporaneous writing that transfer is to be deducted from the testamentary gift, or 3) transferee acknowledges so in writing
Lapse
If a beneficiary predeceases T, the gift lapses (into residue of estate)
i. Anti-lapse statute provides a substitute beneficiary: Unless intended by will, the gift passes to the issue of the intended beneficiary who is kindred (including issue) to testator or spouse
Simultaneous death with intended beneficiary
If it cannot be established by C&C evidence that one survived the other (by 120 hours by default), the property is administered as if the intended beneficiary predeceased T
Disclaimer
Intended beneficiary disclaims—irrevocably refuses a gift. Disclaimer must be in writing (identify T, describe interest being disclaimed, and declare the disclaimer) and signed by the beneficiary. Treated as predeceased
No right of exoneration
In CA (cf. common law), a specific devise passes subject to any liens existing at death
FAMILY PROTECTION – RIGHTS OF OMITTED SURVIVING SPOUSE AND CHILDREN
T’s premarital or prebirth will inadvertently fails to provide for surviving spouse or child
CA construes “child” liberally—natural, adopted, halfblood, born out of wedlock, etc.—unless specified
Pretermitted child
receives intestate share, unless 1) the will shows omission was intentional, 2) T provided substitute transfer outside will, or 3) T had other children and left estate to parent of omitted child
i. Substitute transfer means T provided for the omitted child outside the will when T leaves substantially all estate to SS who is child’s parent
Omitted spouse
receives other half of CP and QCP (total 100% CP) + up to ½ share of SP, unless 1) will shows omission was intentional, 2) T provided substitute transfer outside will, or 3) waiver agreement
BARS TO DISTRIBUTION
Slayer statute: A person who feloniously and intentionally kills decedent is not entitled to benefit from his estate
Elder abuse: A person found liable by C&C evidence of elder abuse (physical, neglect, fiduciary) is treated as if he predeceased decedent
No-contest clause (causing a beneficiary to forfeit right to take) will be enforced, unless beneficiary, with probable cause, brings contest on grounds of forgery, revocation, interested witness, improper execution, or fraud/UI/duress
Advancement
Inter vivos property given to heirs during decedent’s lifetime is treated as an advancement against an heir’s share of the intestate estate, only if 1) decedent declares in a contemporaneous writing that the gift is an advancement against the heir’s share, or 2) heir acknowledges it in writing
Passing SP without decedent’s testamentary distribution scheme
The distribution manner may be…
Per stirpes (per capita with right of representation): Each “root” gets equal share; each “root” of each “root” gets equal share
Per capita (equally by headcount): Each living member of a class of beneficiaries (at each surviving generation of issue, unless stated in will) gets equal share
In CA, the presumptive distribution manner is per stirpes (per capita with right of representation) per section 240 of the Probate Code. This presumption may be overridden by specifying in a will or trust.
In CA, registered domestic partners are recognized as spouses
Surviving spouse gets
½ CP and QCP (total 100% CP) + at least 1/3 SP depending on surviving kindred or issue
i. Decedent survived by SS only → all SP to SS
ii. Decedent survived by parents or issue of parents → ½ SP to SS, remainder to parents
iii. Decedent survived by 1 child or issue of child → ½ SP to SS, remainder to issue
iv. Decedent survived by 1+ child and/or issue of child → 1/3 to SS, remainder to issue
No surviving spouse
If spouse does not survive decedent, SP passes to issue, then to parents, then to parents’ issue, then to grandparents’ or their issue, then to predeceased spouse’s issue
Adopted person dies intestate
Property is distributed among those who would have been kindred
Child born out of wedlock
A natural parent may not inherit from the child, unless the parent 1) acknowledged the child and 2) contributed to support or care of the child
Valid trust
(private express trust) requires 1) intent (settlor manifests present intent to create a trust by words or conduct), 2) settlor capacity (presumed unless contrary evidence such as UI, fraud, mistake), 3) identifiable trust property (res) in existence, 4) ascertainable and definite beneficiary, and 5) valid trust purpose
i. Court will not allow a trust to fail solely because there is no trustee (court can appoint competent trustee)
ii. The same person cannot be the sole trustee and the sole beneficiary; the trust terminates in this case
Express trusts
private express trust, charitable trust (made for charitable purpose, lasts forever)
Trusts implied by law
resulting trust (when intent to create trust recognized by law), constructive trust (equitable remedy for unjust enrichment, transfers ownership from wrongful party to rightful party)
TRUSTEE POWERS & DUTIES
TRUSTEE POWERS & DUTIES
a. Express powers
b. Implied powers
c. Resignation
d. Compensation:
e. Duty of good faith
f. Duty of loyalty to beneficiaries
g. Duty of care
h. Duty to perform personally
i. Duty to earmark assets
j. May be personally liable to 3P on K (can be reimbursed by trust if K was for trust, done w/ reasonable prudence) & for torts (can be reimbursed if not personally at fault and incidental to trust activity) in course of trust administration
Express powers of Trustee
A trustee has powers expressly conferred by the trust instrument, state law, and court decree
Implied powers
A trustee has broad powers as necessary to carry out trust terms and promote beneficiary interests
Resignation
Once trustee position is accepted, can resign only where permitted by trust, court, or all beneficiaries
Duty of good faith
A trustee must administer the trust in good faith in accordance with the trust purpose and terms, in the interests of the trust beneficiaries. If a trustee acts in bad faith or dishonestly, court may interfere with actions
Compensation
Entitled to reasonable compensation for his duties
Duty of loyalty
in all matters relating to the trust. Trustee must put interest of the beneficiaries first
i. Must avoid self-dealing (trustee may not use trust to advance own interests) and conflict of interest
1. Examples of prohibited transactions: buying trust assets, selling to another trust managed by trustee, borrowing from or loaning to trust, personal gain (other than fees), securing personal loan
2. Trustee’s good faith is irrelevant (e.g., trying to save trust from paying fees by buying trust assets)
3. Applies to indirect self-dealing with relatives, business associates, corporations if s/h or on board
ii. Remedies for breach: Beneficiary may set aside the transaction, surcharge (recover any profit by trustee), affirm (waive breach if positive outcome), or recover property (unless buyer was a bona-fide purchaser)
Duty of care
to exercise care, skill, and caution that would be exercised by a reasonably prudent person, in managing the trust. Mistakes in judgment do not expose trustee to liability as long as reasonable care was exercised
i. Prudent investor rule: Trustee must act prudently and reasonably in managing the interests of the trust, as a prudent investor, as if it were his own. Includes a duty to diversify trust assets and protect from devaluation
ii. Remedies for breach: Trustee is liable for any resulting loss if he has breached his duty of care
Duty to perform personally
not to delegate duties) except acts that would be unreasonable to do personally
i. Modernly, per Uniform Prudent Investor Act (UPIA), may delegate investment and management. Must use reasonable care, skill, and caution to select agent, establish scope, and periodically monitor agent actions
Duty to earmark assets
Identify, separate, and account for assets. Trustee must not commingle trust assets with own
May be personally liable to 3P on K
(can be reimbursed by trust if K was for trust, done w/ reasonable prudence) & for torts (can be reimbursed if not personally at fault and incidental to trust activity) in course of trust administration
TRANSFER OF INTEREST (beneficiary vs. creditor)
Interest may be freely transferrable by the beneficiary (voluntary alienation) and/or may be subject to claims of the beneficiary’s creditors (involuntary alienation), subject to limiting trust provisions
Spendthrift trust
restrains alienation, preventing beneficiary from transferring interest and creditors from accessing
i. Creditors cannot reach trust funds until the beneficiary receives payment. Creditor may attempt to collect directly from the beneficiary after a payment is made
ii. To be valid, it must apply to both voluntary and involuntary transfers of interest
EXCEPTIONS – “preferred creditors” who can break through a spendthrift clause
- Tort judgment creditors (spendthrift is to prevent bad spending, not from tortious conduct)
- Someone a beneficiary is required to support (via, e.g., alimony support or child support)
- Creditor who supplies necessities of life (e.g., food, clothing, shelter) to beneficiary or his family
- Government (e.g., claim for back taxes, tax liens)
- Victim of felony committed by beneficiary to the extent it is equitable and reasonable
- If the settlor is the beneficiary, spendthrift provision is invalid (can’t protect self from creditors)
Discretionary trust
grants absolute discretion to trustee to make distributions as he sees fit. The beneficiary, his assignee, nor his creditors can compel payment (unless settlor is the beneficiary of the discretionary trust)
Support trust
directs the trustee to pay only as is necessary for the beneficiary’s support. Voluntary and involuntary alienation are both prohibited (unless the creditor is a “preferred creditor”)
Rights and limitations of creditors
Court may authorize a creditor to reach a beneficiary’s interest by attaching present or future distributions to the beneficiary, as long as the interest is not subject to a spendthrift provision (see also § III-b-i)
A creditor cannot compel distribution to a beneficiary if subject to the trustee’s discretion (see also § III-c)
MODIFICATION OF TRUST
Majority rule (Uniform Trust Code): A trust is presumed revocable by default. The settlor may revoke or amend the trust unless the terms of the trust expressly provide that the trust is irrevocable
i. Note: The majority rule used to be that a trust was presumed irrevocable. This is now the minority rule
ii. Testamentary trust (created by a will) is revocable during T’s lifetime but becomes irrevocable when T dies
Termination & modification (by settlor, all beneficiaries, settlor + beneficiaries, changed circumstances)
A trust terminates automatically if its stated term expires or its purpose is accomplished
Beneficiaries Modification
Beneficiaries may compel modification or termination a trust (even if irrevocable) if all beneficiaries consent + modification or termination will not frustrate material trust purpose
1. If any beneficiary does not consent, court may still modify part of the trust as long as the interests of non-consenting beneficiaries are not substantially impaired
2. A trustee generally may not unilaterally terminate without consent of all beneficiaries (trustee may terminate if he happens to be the only beneficiary, or trust provisions allow it)
Settlor Modification
who is alive can modify/terminate the trust during his lifetime; this right is presumed under majority rule (see § IV-a)
1. May be modified/terminated by consent of settlor & beneficiaries (even if inconsistent w/ purpose)
Changed circumstances
Court may modify/terminate by petition by trustee or beneficiary if continuation of trust would defeat the purpose of the trust, or if modification will further the purposes of the trust
Claflin doctrine
Trust cannot be modified/terminated, even if all beneficiaries agree, if doing so would be contrary to a material purpose of the settlor
1. Material purpose includes spendthrift, support, discretionary trusts
Cy pres (charitable trusts only)
If the original charitable purpose is frustrated or can no longer be pursued, trustee and court can modify the trust to one “as near as possible” to the settlor’s original purpose
i. Only applicable if settlor had general charitable intent, not a specific charitable intent (e.g., named charity)
1. Court may admit EE to ascertain settlor’s intent
ii. Trust instrument may prohibit cy pres (e.g., by indicating the property should revert to settlor or estate)
