Wills and Trusts Flashcards
What happens when a gift is generally described?
Because of the time-honored rule of construction that a will “speaks” at the time of death, a bequest of generically described property (e.g., my automobile) applies to property that meets the generic description at the testator’s death.
What does an anti-lapse statute do?
The anti-lapse statute provides that, where a beneficiary under a will predeceases the testator, the gift will vest in the issue of that predeceased beneficiary if: (1) the predeceased beneficiary is a specified descendant of the testator (specified by statute); AND (2) the beneficiary leaves issue who survive the testator. Under the Uniform Probate Code, the anti-lapse rule applies to gifts to issue (i.e. children, grandchildren), stepchildren, grandparents, and grandparent’s issue (i.e. siblings).
What is a resulting trust?
If a trust fails for lack of a beneficiary, a Resulting Trust is implied by law, and all trust property returns to the settlor or the settlor’s estate.
Trust modification
Majority View → Trust can only be modified by the settlor who:
a) expressly reserved the power to modify the trust;
OR
b) has the power to revoke or amend the trust.
Minority View → Settlor is free to amend or revoke atrust UNLESS the trust states
otherwise.
Equitable Deviation Doctrine
Equitable Deviation Doctrine – A court may modify the terms of a trust if:
1) continuing the trust is impractical or wasteful;
AND
2) the modification furthers the trust purpose because of unanticipated circumstances.
Common Law → ONLY administrative provisions may be modified.
UTC → dispositive provisions may be modified when circumstances arise that were not anticipated by the settlor.
Duty to Administer the Trust – Trustee MUST continue to administer the trust until it terminates.
Common Law → Trustee owes the beneficiaries the duty to act with care, skill, and prudence.
− UTC → Trustee must administer the trust: (1) in good faith; (2) in accordance with the trust purpose and terms; AND (3) in the interests of the trust beneficiaries.
Trustee MUST exercise all powers in good faith and in accordance with the trust terms and purpose even if trustee is granted a broad range of discretion.
No Further Inquiry Rule
No Further Inquiry Rule → A transaction entered into by trustee for the trustee’s own benefit is automatically presumed to be a conflict of interest.
− It is voidable without further inquiry (fairness or good faith is immaterial).
− For a person who has a close business or
personal relationship with the trustee, the
presumption is rebuttable if the trustee shows the transaction was not affected by any conflict.
Substituted Takers – A substitute gift is created in the deceased beneficiary’s surviving descendants if:
1) The beneficiary of a future interest does not survive the distribution date; AND
2) An anti-lapse statute applies.
Vested Interests: Condition on Survivorship
Common Law → a condition of survivorship on future interests in a trust is NOT implied.
UPC → such condition IS implied.
Powers of Appointment
When a testator/settlor gives another person the power to decide where and to whom the property will go.
− Donor = testator/settlor.
− Donee = person who has power of appointment.
Rule Against Perpetuities (RAP)
Under the common law, a gift must vest within a life in being at the time of the grant plus 21 years.
− Invalidates any gift that will not actually vest or hypothetically vest within that time period.
Vesting of Class Gifts – A class gift vests under RAP when:
1) the class closes; AND
2) all conditions for every member of the class are satisfied.
Modern Modifications to RAP:
− Wait and See Approach (some states) → A gift is valid if it actually vests within 21 years after the death of a life in being at the time the interest was created. The court waits to see if the interest will actually not vest.
− Reduction of Age Contingencies (some
states) → By statute, any age contingency that violates the rule is reduced to 21 years.
UTC Exception to Definite-Beneficiary Rule
Under the UTC, two types of trusts MAY be enforced without ascertainable beneficiaries: (1) trusts for general but noncharitable purposes, and
(2) trusts for a specific noncharitable purpose other than the care of an animal. Such trusts CANNOT be enforced for more than 21 years.
Testamentary Trusts
A Testamentary Trust may be created through the provisions of a settlor’s will, and the trust does not take effect until the
settlor’s death.
* In order to create a Testamentary Trust: (1) the will must state the essential trust terms (beneficiaries, purpose, and trust property); AND (2) intent to create a trust must be found from either (a) the express terms of the will, or (b) incorporation by reference of a document/writing in existence at the time the will was executed.
Charitable purposes include:
(1) the relief of poverty, (2) the advancement of education or religion, (3) the promotion of health, (4) governmental or municipal purposes, and (5) other purposes that benefit the community. (NOT political party)
