Wills and Trusts Flashcards
Formalities of a will:
TWIMS
Two witnesses
Writing
Intent
Mature
Signature
Grounds for WILL contest
Grounds for WILL contest: is FIRMED?
Fraud
Incapacity – undue influence
Revocation
Mistake – as to the instrument or mistake on the face of the will
Execution defective
Lost will - If a will is lost or destroyed (and the presumption that the testator revoked it is overcome), it may be admitted to probate if the following can be proven:
(1) valid execution; (2) the cause of nonproduction (that is, proof that the will was not revoked); and (3) the contents of the will.
Improperly revoked
Dependent relative revocation (DRR)-
explain
The doctrine of dependent relative revocation applies when a testator revokes their will under the mistaken belief that another disposition of their property would be effective, and but for this mistaken belief, the testator would not have revoked the will. The more similar the provisions of the two wills, the more likely the court will apply DRR. The more different the wills, the more likely the testator would have preferred intestacy to Will 1, so the court will not apply DRR.
In a will when the court will allow extrinsic evidence:
Under the UPC, a court may reform a will, even if the will is unambig¬uous, to conform to the testator’s intent if it is proven by clear and convincing evidence that the testator’s intent and the terms of the will were affected by a mistake of fact or law.
Traditional - extrinsic evidence not admissible. Plain meaning rule
Stock dividents not included in the will it is going to pass to:
at common law any additional stock dividend is not included in the shares, most states under UPC – included.
What is abatement:
Abatement is the process of reducing testamentary gifts in cases where the estate assets are not sufficient to pay all estate debts. Order: 1. Intestate Property 2. gifts of the residuary estate, 3. General legacies, 4. Specific bequests and devises.
Ademption by extinction-
Ademption refers to the failure of a gift because the property is no longer in the testator’s estate at the time of their death. The gift will be adeemed.
what happens to increases of gifts in a will?
Increases- specific gifts – does not matter. Increases b4 testator’s death – income on property goes into the general estate, but improvements to real property go to specific devisee. Increases after T death- passes to the specific beneficiary.
Anti-lapse
explain
Nearly all states have anti-lapse statutes that operate to save the gift if the predeceasing beneficiary was in a specified degree of relation¬ship to the testator. and left descendants who survived the testator, some require a blood relationship. These descendants take by substitution. The statute applies unless a contrary provision appears in the will.
how to decide when the beneficiary dies before testator, approaches:
- USDA - The USDA provides that when disposition of property (by will, intes¬tacy, joint tenancy, etc.) depends on the order of death and the order cannot be established, the property of each decedent is disposed of as if they had survived the other.
- UPC 120 hours req. - many states and the UPC require that a person survive the decedent by 120 hours to take any distribution of the decedent’s property.
creation of trust (3reqs)
BIT for creation of trust (beneficiary, intent, trustee);
To create a valid trust, there must be a settlor who, intending to create a trust for a valid trust purpose, delivers the trust property to the trustee to hold for the benefit of one or more beneficiaries.
What is a trust
fiduciary arrangement – hold assets on behalf of another.
A pour-over provision is a provision
A pour-over provision is a provision in a will making a gift to an inter vivos trust. Most states have adopted the Uniform Testamentary Additions to Trusts Act, which permits a testator to make a gift to a trustee of an inter vivos trust notwithstanding the fact that the trust may be amended or revoked after execution of the will. The trust may be created before or after the testator executes the will.
Beneficiary remedies in a trust
Remedies for breach of trust: If the trustee commits, or is about to commit, a breach of trust duties, the court may: (1) enforce specific performance of the trustee’s duties, (2) enjoin the trustee from committing a breach of trust, (3) compel the trustee to pay money or restore property, or (4) suspend or remove the trustee.
RAP applies to CORE future interests:
C – CONTINGENT Remainders
O – OPen
R – REMAINDER Interests that either follow a life estate or follow some event
E – EXECUTORY Interests (remainders that follow a conditional fee i.e., fee simple
determinable or fee simple subject to a condition subsequent)
CLAIR Trustee must:
Commingling (no), Loyalty, administer (prudently), Invest (reasonable care), report.
Intestate distribution types:
Classic per stirpes- equal shares at first level regardless of whether living takers
Per capita with representation- equal shares at first level with living takers, if no living takers, combine and split to grandchildren.
Per capita at each generational level- shares of deceased members of level combined and divided equally at next level.
What is a power of appointment?
is an authority created in a donee enabling the donee to designate the limits prescribed by the donor of the power, the persons who shall take and the manner (like personal representative)
What is a No-Contest clause
- A no-contest clause (sometimes called an in terrorem clause) is a clause in a will providing that a beneficiary forfeits their interest in the estate if they contest the will and lose. Exception- valid unless the beneficiary had probable cause for bringing the contest.
Holographic wills
A holographic will is one that is entirely in the testator’s handwriting and has no attesting witnesses. States vary with regard to how much material may be typewritten before the will no longer qualifies as holographic, but the UPC and most states that recognize holographic wills accept a will that contains some typewritten text as long as the portion not in the testator’s handwriting is not material. Must contain signature, does not need to be at the end.
Which doctrine, the will and codicil, are treated as one instrument speaking from the date of the last codicil’s execution.
Under the doctrine of republication by codicil
Change to a typewritten will – if the testator crosses words…
it will be revoked even if giving more gifts. It won’t be given effect unless re-executed. If he believed it would be effective and die, then use DRR (intent of test).
Incorporation by reference - 3 reqs.
A document may be incorporated if: The will manifests an intent to incorporate the document, The document is in existence at the time the will is executed; and The document is sufficiently described in the will.
Revocation by subsequent instrument. 3 revocations
A person with testamentary capacity may revoke their will at any time prior to death. A will may be revoked by operation of law, by subse¬quent instrument, or by physical act.
“omitted spouse.”
Under UPC, the new spouse takes an intestate share as “omitted spouse.” If there is a provision, it was intentional, common law still gives to her, the statute under protection of the family. The amount varies from state to state, but the typical amount is one-third of the net probate estate if the decedent is survived by issue and one-half if the decedent is not survived by issue.
Codicil valid?
All or part of a will may be revoked or altered by a subsequent instru¬ment that is executed with the same formalities as a will.
revival under UPC if 2nd will is revoked.
if a will that wholly revoked a previous will is thereafter revoked, the previous will remains revoked unless it is evident from the circumstances or the testator’s state¬ments that the testator intended to revive (that is, restore to effective¬ness) the previous will.
(2) Automatic Revival Approach - other states
In other states, revival is automatic under the theory that the revoking will did not take effect because it was revoked prior to the testator’s death.
if the decedent gave the gift to the person already
Ademption by satisfaction
Intestacy - Order
intestacy, the property passes in this order: spouse, children, descendants’ parents and/or siblings (and children of deceased siblings), but first, administrative expenses, funeral expenses, family allowance, federal claims, secured claims, and unsecured claims, then family.
Stock increase- specific bequest
a specific bequest of stock includes any additional shares produced by a stock split but does not include shares produced by a stock dividend. UPC now includes dividends.
Gift Lapse
A gift lapses if the beneficiary predeceases the testator or if the beneficiary is treated as not surviving the testator. Lapsed gift is controlled by: the express terms of the will, rule of law, residuary clause or intestacy.
Non-marital child - after death
the child will inherit from their father if: (1) the father married the mother after the child’s birth; (2) the man was adjudicated to be the father in a paternity suit; or (3) after his death and during probate proceedings, the man is proved by clear and convincing evidence to be the father.
What is the methods of computing shares in a intestate succession
- classic per stirpes (minority)
-per capita with representation (majority)
-per capita at each generational level (UPC)
Advancement applicable?
UPC states, as well as many non-UPC states, go further, finding an advancement only if it is: (1) declared as such in a contemporaneous writing by the donor, or (2) acknowledged as such in a writing by the heir (which need not be contemporaneous).
Cy Pres doctrine
When a charitable purpose selected by the settlor is impracticable, unlawful, impossible to achieve, or wasteful, the court may select an alternative under the doctrine of cy pres, which means “as near as possible,” by ascertaining the settlor’s primary purpose
trusts or wills
spendthrift trust
A spendthrift trust precludes the beneficiary from transferring their interest in the trust, and the beneficia¬ry’s creditors are precluded from reaching it to satisfy their claims. The purpose is to protect the beneficiary from their own improvi¬dence. Although a spendthrift trust is a restraint on alienation, most courts uphold spendthrift restrictions.
Spendthrift not enforceble in:
SENATE is not bound by the spendthrift rules:
S – SELF-SETTLED trusts, where the settlor and beneficiary are the same person, trust can be attached by creditors for up to 100% of the settlor’s interest. If settlor retained only a life estate, his creditors can only seize 100% of the life estate, not the remainder interest.
E – The trust is not EXPRESSLY made spendthrift
N – If NECESSARIES are furnished to a beneficiary, the creditor is allowed to recover their fair value from the beneficiary’s trust income
A – ALIMONY & child support arrears
T – Federal income TAXES owed by the beneficiary
E – “Services EXCEPTION” to pay for legal and other services needed to protect the beneficiary’s interest in the spendthrift trust.
Types of trusts
charitable, spendthrift, discretionary, support
Discretionary trust
explain
the trustee is given discretion whether to apply or withhold payments of income or principal (or both) to a beneficiary. This discretion actually limits the rights of the beneficiary, the beneficiary cannot interfere with the trustee’s discretion unless the trustee abuses its powers. A court will not interfere unless the trustee acted in bad faith or dishonestly.
Creditors are usually allowed to attach the beneficiary’s interest but may not compel the trustee to make a distribution
Support Trust
A support trust directs the trustee to pay only so much of the income or principal (or both) as is necessary for the beneficiary’s support. A support trust may be mandatory or discretionary.
creditors cannot get it
Constructive Trust (matter of law)
Equity turns the holder of legal title into a trustee when they may not in good conscience retain the beneficial interest in the property. The constructive trustee’s only duty is to convey the property to the person who would have owned it but for the wrongful conduct. A constructive trust must be requested as a remedy in a court action.
example when there is fraud, theft, conversion etc.
Modification of Trust by settlor
Under the UTC, a settlor can revoke or amend a trust unless the terms expressly state that it is irrevocable. However, some states, even some that have adopted the UTC, follow the traditional rule, which provides that a trust is irrevocable unless the settlor expressly reserves the power to revoke or modify the trust. Note: Under the law of some states, the settlor may revoke an irrevocable trust upon written consent of all living persons with vested or contingent interests.
Modification of trust by beneficiaries
By the beneficiaries- (a) with settlor’s consent or (b) without settlor’s consent- A trust also may be terminated or modified on the consent of only all beneficiaries (that is, without consent of the settlor), but only if no material purpose of the trust would thereby be frustrated (“Claflin Rule”).
Attention: Watch for remote and contingent beneficiaries , incl. unborn
Modification or termination of trust by the court
a court may terminate or modify the trust if: (1) the trust could have been modified if all beneficiaries had consented, and (2) the interests of any nonconsenting beneficiaries will be adequately protected.
termination of trust by trustee
a) uneconomic reason: In some states, a trustee can terminate a trust if the trust property is less than $50,000 and the amount is insufficient to justify the cost of administration, with notice to beneficiaries. (b) combination and division of trusts- the trustee can combine several trusts into one trust or divide one trust into several trusts, provided doing so does not frustrate purpose.
Prudent investor rule
The UPIA permits a trustee to invest in any kind of property or any type of investment provided the trustee acts prudently; no particular type of investment is inherently imprudent.
Standard of care: A trustee must exercise reasonable care, skill, and caution when investing and managing trust assets. A trustee must diversify the investments of the trust unless they reasonably determine that the purposes of the trust are better served without diversification.
Trustee delegation of duties
A trustee may delegate investment and management functions but only if a prudent trustee of comparable skills could properly delegate under the circumstances. The trustee must act prudently in: (i)selecting an agent (ii)establishing the sope and terms of the delegation; and (iii)periodically reviewing the agent’s actions. Includes duty to report to beneficiaries.
Discretion power cannot be delegated when making the investments
Trustee liability for breach of duties: you PRESS!
Request court to make him liable and PRESS:
1. Pay money
2. Restore property
3. enjoin from breach
4. specific performance
5. suspend or remove him
Disclaimer of gift?
explain
Under the law of most states, a beneficiary may disclaim an interest by filing a written instrument with the trustee (or, if a trust created by will is involved, with the probate court). If a valid disclaimer is made, the trust is read as though the disclaimant was deceased as of the relevant date. Time: Many state disclaimer statutes require that a disclaimer be made within 9 months of the interest’s creation, and that is the relevant period for federal gift tax purposes.
Resulting Trust (matter of law)
A resulting trust is an equitable reversion that arises by operation of law whenever a person has created an express intentional trust, but the express trust fails or does not completely dispose of the trust property. When the trust fails or does not completely dispose of the trust property, the undisposed property goes back to the settlor in a resulting trust.
Disinheritance clause
Majority. and UPC rule
Majority - clause innefective if testator dies partially intestate, partial intestacy distribution
UPC- clause give full effect, same as disclaimed
Pretermitted child
the child will not receive anything if the omission of her was intentional or the will was made after her birth.
Rule against Perpetuities:
Under the common law Rule Against Perpetuities, a nonvested property interest is invalid unless it is certain to vest or fail no later than 21 years after the death of a person who is alive when it is created. However, many states have adopted a wait-and-see approach or an alternative 90-year vesting period that would save the interest. A growing number of states have abolished the Rule Against Perpetuities as it applies to trusts, permitting the creation of “dynasty” trusts.
