Wills and Trusts

Question 1

What does intestate succession explains?

Answer 1

It explains how property is divided if a person dies without a will or if the will is invalidated in part or in whole or does not make a total disposition.

Question 2

What are the two schemes to divide property among a decedent’s children if there is no surviving spouse or parents?

Answer 2

• Per capita at each generation
• Per capita with representation (modern per stirpes)

Question 3

Define ‘per capita at each generation’.

Answer 3

All cousins are treated alike.

To decide who gets the shares of the estate, find the first generation where there are issue living. Give one share for each living issue and one share for each person in that generation who predeceased the decedent but left issue surviving. Combine the shares belonging to the deceased persons and distribute them equally at the next generational level.

Question 4

Define ‘per capita with representation’ (modern per stirpes).

Answer 4

Cousins are not treated alike.

This is the same as Per capita except instead of combining all shares and dividing them equally, simply pass each deceased person’s share on to her issue.

Question 5

What methods determine heirship when there is no spouse and no children?

Answer 5

• Civil law consanguinity method
• Parentelic method adopted by the UPC

Question 6

What is the civil law consanguinity method?

Answer 6

Heirship is determined by degree of relationship: all persons of the same degree take equal shares.

So an uncle and a niece are in the third degree of consaguinity and would be heirs entitled to equal shares.

Question 7

What is the parentelic method?

Answer 7

Descendants of the decedent’s parents take to the exclusion of descendants of the decedent’s grandparents.

So, a niece would be an heir but an uncle would not.

Question 8

What constitutes a child for purposes of intestate succession?

Answer 8

• Adopted children
• Children born in wedlock
• Children born out of wedlock
• Half-bloods

Not stepchildren.

Question 9

What is the issue of advancements in intestate succession?

Answer 9

This is an issue when the decedent dies without a will but gave a child a gift during his lifetime. The question is: Should the gift be deducted from what the child would inherit?

Question 10

What is the common law treatment of lifetime transfers to heirs?

Answer 10

A lifetime transfer to an heir was presumptively treated as a down payment on the heir’s intestate share and thus is taken into account when computing the heir’s intestate share.

At common law, this only applied to a gift to a child, but most states have broadened it to include any heir.

Question 11

What is the majority law regarding lifetime transfers?

Answer 11

Most states today say that a lifetime transfer is presumed to be gift and is ignored in computing the heir’s intestate share unless there is evidence to show that the decedent intended the gift to be an advancement.

Question 12

What is ademption by satisfaction?

Answer 12

This doctrine applies when there is a will (unlike the
advancements doctrine). The Uniform Probate Code (UPC) states that a lifetime gift is not a
prepayment unless:
(1) the will says so,
(2) the testator 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.

Question 13

What is the general rule to execute a valid will under majority law?

Answer 13

Many state laws require that the will is in writing, signed by the testator, and witnessed by two witnesses. They also require that the testator is 18 or older and intend that the document is his will.

Note: generally, any mark that is made with intent to adopt the will counts as a signature.

Question 14

What are holographic wills?

Answer 14

Holographic wills are unwitnessed wills. Holographic wills are valid if signed and (according to the UPC and some states) if the material portions are in the testator’s handwriting. Holographic wills are recognized by about half the states.

Mention this doctrine if you see an unwitnessed will on the MEE.

Question 15

What is the dispensing power under the UPC?

Answer 15

A court can validate a will so long as there is clear and convincing evidence that the decedent intended the document to be her will

Question 16

What is incorporation by reference?

Answer 16

A writing that is not valid as a will may be incorporated by reference into a will if the will manifests an intent to incorporate the writing and the writing is identified with reasonable certainty. This writing must exist at the time the will is executed.

The UPC and some states recognize the right of a testator to dispose of tangible personal property by a signed memorandum, whether it is prepared before or after the execution of the will, even if it does not comply with the formalities of a will.

Question 17

What is required to revoke a will by physical act?

Answer 17

Revocation by physical act (e.g., by execution of a new will or by some other physical act, such as cancellation or other writings on the will): This must be done with the intent to revoke the will. The testator or someone acting at the testator’s direction and in his “conscious presence” may revoke the will.

Question 18

What is dependent relative revocation?

Answer 18

Under this doctrine, a first will isn’t revoked if a later will is found invalid.

Essentially, if a testator revokes a will or bequest based on a mistaken assumption of law or fact, the revocation of the will is ineffective if it appears that the testator wouldn’t have revoked the bequest had the testator had accurate information.

Question 19

What happens to gifts in favor of a spouse after divorce?

Answer 19

Divorce revokes gifts in favor of a spouse.

Note: there actually needs to be a divorce (or annulment)—not just a filing of divorce.

Question 20

What is the general rule if a beneficiary predeceases the testator?

Answer 20

The general rule is that if a beneficiary does not survive the testator, the gift will lapse or fail and fall into the residuary.

Question 21

What is antilapse statute?

Answer 21

All states have antilapse statutes (which keep gifts in the family). Under a typical antilapse statute, if a beneficiary dies before the testator and was both related by blood to the testator within a certain degree of relationship and had issue who survived, the gift to the deceased beneficiary is saved and the beneficiary’s issue will take in lieu of the beneficiary.

Question 22

What does the slayer statute entail?

Answer 22

An individual who feloniously and intentionally kills the decedent, or who is convicted of committing abuse, neglect, or exploitation with respect to the decedent, forfeits all benefits with respect to the decedent’s estate (including an intestate share, an elective share, an omitted spouse’s or child’s share, etc.). Voluntary manslaughter is a form of a felonious and intentional killing.

Question 23

True or False: A beneficiary who accidentally kills the decedent forfeits their gift under the slayer statute.

Answer 23

False. If a beneficiary accidentally kills the decedent (even if it rises to involuntary manslaughter), the slayer rule does not bar a gift. Nor does it apply if the slayer murdered someone other than the decedent.

Note: when this is tested on the MEE, generally this doctrine does not bar a gift to the slayer (usually because the killing is not felonious and intentional!).

Question 24

What happens when a gift fails due to ademption?

Answer 24

If specifically devised property (i.e., property that is specifically described in the will) is not in the testator’s estate when the testator dies, the bequest adeems—i.e., the gift fails.

Question 25

Under what conditions can a beneficiary receive insurance proceeds instead of specifically devised property?

Answer 25

Under many statutes, if the testator replaced the property, or if there were insurance proceeds unpaid at death, then the beneficiary would receive that in place of the property.

Question 26

What is a **disclaimer** in the context of estate property?

Answer 26

Disclaimed property (property that a beneficiary does not want) will pass as if the person disclaiming had failed to survive the testator. ## Footnote An antilapse statute may apply; otherwise, the gift will fall into the residuary.

Question 27

What is **abatement** in estate planning?

Answer 27

When the assets of an estate are insufficient to satisfy all the gifts made by someone’s will, then the gifts to the beneficiaries will be reduced (abated).

Question 28

In what order are gifts abated?

Answer 28

* Intestate property * Residuary gifts * General gifts * Specific gifts

Question 29

What is the key principle regarding mental capacity in executing a will?

Answer 29

A testator meets this requirement if the testator knows (1) the ***nature and extent*** of his property, (2) the ***persons*** who are the natural objects of the testator’s bounty (i.e., family members), (3) the ***nature of the instrument*** that the testator is signing, and (4) the ***disposition*** that is being made in the will.

Question 30

Who has the burden of proving lack of mental capacity?

Answer 30

The burden of proving that the testator lacks mental capacity rests on the contestant.

Question 31

Define **undue influence** in the context of a will.

Answer 31

This is present when the wrongdoer exerts such influence over the testator that it ***overcomes the testator’s free will*** and causes the testator to ***make a gift*** he would otherwise not have made.

Question 32

What must the contestant show to prove **undue influence**?

Answer 32

**SODA** (1) the testator was **Susceptible** to undue influence, (2) the alleged influencer had the **Opportunity** to exert undue influence, (3) the alleged influencer had a **Disposition** to exert undue influence, and (4) the will **Appears to be a product** of undue influence. ## Footnote Most courts only invalidate portions that are infected by undue influence.

Question 33

What are the requirements for the validity of a trust?

Answer 33

A trust of personal property is valid if it has a trustee, a beneficiary, and trust property (trust res): trust property must be identifiable. .

Question 34

What is the role of the **trustee**?

Answer 34

A trustee manages the trust property and holds it for the benefit of the beneficiaries. ## Footnote Note that a trust will not fail for lack of a specifically appointed trustee. (The court will appoint one.)

Question 35

What are the characteristics of the **beneficiary**?

Answer 35

In a private express trust, beneficiaries must be definite and ascertainable. Further, the same person cannot be the sole trustee and sole beneficiary or the trust collapses.

Question 36

What is the default rule under the Uniform Trust Code regarding trusts?

Answer 36

**Presumption of revocability**: under the UTC, an inter vivos trust is revocable unless the instrument expressly states otherwise.

Question 37

What must happen for a settlor to terminate a trust?

Answer 37

A settlor may terminate the trust if all beneficiaries are in existence and all agree to the termination.

Question 38

What are the requirements for **termination by beneficiaries after settlor dies**?

Answer 38

Generally, even an irrevocable trust can be terminated if both the income beneficiaries and the remaindermen ***unanimously consent*** and if there is ***no material purpose of the trust yet to be performed***. ## Footnote *Claflin v. Claflin.*

Question 39

What is a **pourover will**?

Answer 39

A 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. Under the modern approach, later made amendments to the trust are valid. Under common law, amendments made after execution of the will are not valid. ## Footnote You are expected to articulate the differences between these two approaches on the MEE.

Question 40

What is a **discretionary trust**?

Answer 40

The trustee has discretion to decide when to make a distribution to a beneficiary. The beneficiary cannot demand any part of the income or principle. Nor can a creditor, unless it shows the trustee acted dishonestly or in a state of mind “not contemplated” by the settlor. ## Footnote There is an exception under the UTC for child support or alimony.

Question 41

What is a **support trust**?

Answer 41

A trust where the trustee must pay what is necessary for the beneficiary’s support.

Question 42

What characterizes a **spendthrift trust**?

Answer 42

It restrains "both the voluntary and involuntary transfer of a beneficiary’s interest".

Question 43

Who may reach a beneficiary's distribution in a trust? | **Right of a creditor**

Answer 43

Generally, a creditor may not reach (i.e., by garnishment or attachment) part of a beneficiary’s distribution prior to the beneficiary reaching it.

Question 44

Which favored creditors are the exception? | **Spendthrift trust**

Answer 44

(1) a ***child or spousal support creditor*** (for maintenance and support), (2) a ***judgment creditor*** who has provided services for the protection of a beneficiary’s interest in the trust (e.g., a lawyer), (3) a claim of the ***state or United States*** (usually for taxes), and (4) creditors with claims for ***necessaries*** in some states (this fourth category is not recognized in states that follow the UTC).

Question 45

What is a **charitable trust**?

Answer 45

A charitable trust may be created for a charitable purpose (including for the relief of poverty, the advancement of education, the advancement of religion, the promotion of health, governmental or municipal purposes, or other purposes that are beneficial to the community). It must have a large number of not readily identifiable individuals (rather than a few identifiable individuals). ## Footnote Note that a charitable trust is not subject to the common law rule against perpetuities.

Question 46

For what reasons a charitable trust may be terminated?

Answer 46

A charitable trust may terminate if the charitable purpose becomes unlawful, impracticable, or impossible.

Question 47

What is the *cy pres* doctrine? | Regarding charitable trusts

Answer 47

*Cy pres* is a common law doctrine that is also a part of the UTC. It states: if a particular charitable ***purpose has become unlawful, impracticable, or impossible*** to achieve; ***no alternative charity is named*** in the trust; and the court finds that the settlor had ***general, rather than specific, charitable intent***, then the court may apply cy pres to modify or terminate the trust by directing that the trust property be distributed in a manner consistent with the settlor’s general charitable intent.

Question 48

Define an **honorary trust**.

Answer 48

This is a trust that does not have a charitable purpose or a definite beneficiary. It is often a trust to take care of a thing (e.g. cemetery plot) for a noncharitable purpose. Under the UTC, this is valid but may not be enforced for more than 21 years. Under common law, such a trust would not be valid if it violates the rule against perpetuities, but a court may characterize the trust as a “power” and allow the trustee to exercise that power in accordance with the trust terms for 21 years.

Question 49

What is the **duty of loyalty** in trust management?

Answer 49

A trustee has a duty to act in the best interest of the beneficiaries.

Question 50

What is the **duty of care** in trust management?

Answer 50

A trustee must act with the care that a reasonably prudent person would exercise.

Question 51

What does the **Uniform Prudent Investor Act (UPIA)** require of trustees?

Answer 51

Almost all states have adopted a form of the UPIA. The UPIA states that a trustee must “administer the trust as a prudent person would . . . using reasonable care, skill, and caution.”

Question 52

How should a trustee's investment decisions be evaluated?

Answer 52

A trustee’s investment and management decisions with respect to individual assets should be evaluated in the context of the portfolio as a whole and as a part of an overall investment strategy rather than in isolation.

Question 53

What is the **duty to diversify** in trust management?

Answer 53

This is one of the hallmarks of prudent investing. The trustee is not liable for declines in value due to a downturn resulting from general economic conditions—but is liable for failure to diversify absent directions to the contrary.

Question 54

What **remedies** are available for a **breach of trust**?

Answer 54

Suspending or removing a trustee, decreasing compensation, compelling a trustee to perform trust duties, compelling payment of damages, etc. (There are several other remedies, including asking the court to “order any other appropriate relief.”)

Question 55

In a ***self-dealing case***, what can trust beneficiaries do?

Answer 55

In a ***self-dealing case***, the trust beneficiaries may ***rescind the transaction*** and ask for the self-dealing purchase to be ***set aside*** (the trust property is returned to the trust and the amount paid is refunded by the trust) or ***recover any profits the trustee*** made by reason of the breach.

Question 56

What is the **purpose** of powers of appointment?

Answer 56

A person writing a will or trust can give her beneficiaries a power of appointment, which enables the beneficiary to designate who will receive specific property.

Question 57

What is the difference between **general and special powers of appointment**?

Answer 57

General powers allow unlimited class of people; special powers are limited to specific individuals. ## Footnote Understanding this distinction is crucial in estate planning.

Question 58

What is a **general power of appointment**?

Answer 58

The class of people that the beneficiary can exercise the power of appointment in favor of is unlimited (she can use it for herself, her creditors, or someone else).

Question 59

How does the **majority view** interpret the general power of appointment?

Answer 59

A general residuary clause in a will (“I give all of my estate . . .”) does not exercise a power of appointment. However, if the general residuary clause is coupled with a blanket exercise clause (e.g., “including all property over which I have a power of appointment”), any power of appointment held by the donee is exercised, unless the donor of the power specifically requires reference to it.

Question 60

How does the **minority view** interpret the general power of appointment?

Answer 60

A general testamentary power of appointment can be exercised by general language in the beneficiary’s will (such as the residuary clause) even if it makes no reference to the power in the instrument (e.g., “Everything to my husband”—the husband will get it), unless the creating instrument of the power made an express gift in default or the instrument stated that the power needed to be specifically mentioned.

Question 61

What is a **special (or limited) power of appointment**?

Answer 61

The class of people that the beneficiary can exercise the power in favor of is limited. A special testamentary power needs to be specifically exercised. The Uniform Probate Code (UPC) adopts a *substantial compliance* rule which says that if it could be shown that the powerholder intended to exercise a power, a blanket exercise clause may be sufficient

Question 62

What is the **rule of convenience**?

Answer 62

When a gift is made to a group, such as “my children,” the class closes when at least one member is entitled to distribution.

Question 63

What does the Uniform Probate Code (UPC) say about class gifts?

Answer 63

The UPC states that when a class gift is made, each living beneficiary will take their share and the deceased beneficiary’s share will pass to their surviving descendants. (If there are no surviving descendants then the gift will fail.) ## Footnote Note: this applies even if the beneficiary is not related to the settlor (and thus differs from most antilapse statutes).

Question 64

What is the **common law approach** to gifts to deceased beneficiaries?

Answer 64

Under the common law, if the 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. ## Footnote This also applies to gifts that are not made to classes.

Question 65

In a **Decedents’ Estates question**, what happens if a testator gives a gift to a group and one member predeceases them?

Answer 65

If a testator gives a gift to a group of unrelated individuals and one predeceased him, the deceased would not take, and neither would his descendants, unless the antilapse statute saved the gift.