Wills and Trusts

Question 1

Independent Administration

Answer 1

Most commonly used form of estate administration in Texas. An independent executor can be named in the decedent’s will.In an independent administration, the executor must file an inventory of estate assets and their values and a listing of creditor claims. After these papers have been filed, she is authorized to act alone, without court supervision, in allowing or disallowing creditor claims and distributing the net estate to the legatees under the decedent’s will or to her heirs under the laws of intestate succession. The independent executor must timely notify beneficiaries of the estate administration, inventory the decedent’s assets and claims to the estate within 90 days of her appointment or file an affidavit in lieu of an inventory; and make an accounting of the estate.

Question 2

Dependent Administration

Answer 2

A dependent, or court-supervised, administration requires that at each step in the probate process (appointment of personal representative, filing of inventory, filing of accounts, disposition of claims, compensation of personal representative, distribution, etc.) (i) a petition be filed with the court, (ii) notice be served on interested parties and creditors, (iii) a first and second hearing be conducted, and (iv) a court order be signed. This form of administration is not the easiest and most advantageous form of administration because it is time-consuming and requires constant court approval and oversight.

Question 3

Muniment of Title

Answer 3

The most advantageous and easiest form of administration. An order admitting a will to probate as muniment of title conclusively establishes the legatees’ rights to the probate property. An affidavit must be filed within 180 days after the will is admitted to probate as muniment of title, certifying which of the testamentary terms have been fulfilled and which have yet to be fulfilled. The court must find that there are no remaining unpaid debts of the decedent (other than any liens on real estate) before it will admit her will to probate as muniment of title. All such debts must be satisfied before the application is filed.

Question 4

When a beneficiary dies before the testator or before the end of a period of time by which he was required to survive the testator under the will…

Answer 4

the gift fails and goes to the residue, unless the will provides for an alternative disposition.

Question 5

To be duly executed and valid, a will must be…

Answer 5

To be duly executed and valid, a will must be in writing, signed by the testator, and signed by two attesting witnesses, over the age of 14, in the testator’s conscious presence.

Question 6

Self-proved wills are recognized in Texas, wherein a…

Answer 6

self-proving affidavit is attached to an attested will, making the will presumptively valid. Once the self-proving affidavit is signed, it is prima facie evidence that the will was executed with all of the formalities.

Question 7

Under Texas’s pretermitted child statute, if a testator has a child after the execution of his will, the will makes no provision for the child, and a provision is not made by non-probate means at the time of the testator’s death, a presumption is created that…

Answer 7

the omission of the pretermitted child was accidental and the child shares in the estate. If the testator had other children at the time the will was executed, the PC’s share is limited to the provisions made for the other children.

Question 8

The pretermitted child state does not apply if…

Answer 8

it appears that the omissions of the child was intentional or if the testator provided for the child outside of the will and intended this to be in lieu of a provision in the will.

Question 9

To establish that there is a pretermitted child, the Uniform Parentage Act requires that paternity be proven. In Texas, a presumption of paternity arises if:

Answer 9

(i) the child was born during or within 300 days of the marriage, (ii) the father held the child out as his own and lived with the child for the first two years of his life, or (iii) if the parents married following the birth of the child and the father voluntarily asserted paternity, promised to support the child in a written record, or agreed to be named on the birth certificate.

Question 10

If there is no presumption of paternity…

Answer 10

then paternity proceedings must be brought against the father. If the court finds by clear and convincing evidence that the purported father is the biological father of the child, then the child is treated as any other child of the decedent for the purposes of inheritance.

Question 11

Anti-lapse

Answer 11

In Texas, a gift made by will to an individual who predeceases a testator is a void gift and lapses. However, under Texas’s anti-lapse statute, if a gift in a will was made to a predeceased descendant of the testator’s parents who left descendants of his own, then such descendants succeed to the gift. Texas’s anti-lapse statute applies to void gifts. Distribution of a lapsed gift is per capita with representation.

Question 12

Texas treats the killer of the testator as if…

Answer 12

he predeceased the testator, allowing the killer’s issue to take under the anti-lapse statute.

Question 13

Inter-vivos Gift Examples

Answer 13

A life insurance policy is a will substitute and its proceeds pass outside of the will. The proceeds are not part of the decedent’s estate unless they are payable to the estate as beneficiary. A beneficiary of a life insurance policy takes by virtue of the insurance contract.
Amounts on deposit in a bank account may be transferred at death by means of a joint account designation or any other multiple party account designation. The surviving tenant or tenants have an absolute right to the account proceeds unless extrinsic evidence is introduced that the decedent added the tenant or tenants for convenience purposes only.
Distribution of non-probate assets does not involve a court proceeding but is made in accordance with the terms of a contract, trust, or deed.

Question 14

Community Property Disposition After Death

Answer 14

At death, one half of the CP belongs to the surviving spouse, and one-half belongs to the deceased’s estate. When funds of one marital estate benefit another without receiving a benefit of equal value, that spouse may seek the equitable remedy of reimbursement.

Question 15

Lost Will

Answer 15

The proponent of a lost will must show the will has not been revoked. When the original will cannot be found, its absence creates a rebuttable presumption of revocation.However, the rebuttable presumption of revocation arises only if the will was last seen in the possession or control of the decedent. If a will cannot be found, the burden is on the proponent of the existence of the will to prove its existence by clear and convincing evidence.
To probate a lost will, including a holographic will, the proponent must establish: (i) proof that the will was duly executed; (ii) proof of the cause of the will’s non-production; (iii) proof of the proponent’s inability to produce it by reasonable diligence; and (iv) substantial proof of the contents of the will by a credible witness.

Question 16

To probate a lost will, including a holographic will, the proponent must establish:

Answer 16

(i) proof that the will was duly executed; (ii) proof of the cause of the will’s non-production; (iii) proof of the proponent’s inability to produce it by reasonable diligence; and (iv) substantial proof of the contents of the will by a credible witness. Execution of a will can be proven by testimony of one attesting witness in open court.

Question 17

The Texas Wrongful Death Act provides that…

Answer 17

only the decedent’s spouse, children, and parents may bring an action for wrongful death, and only if the individual injured would have been entitled to bring an action for the injury if the individual had lived. A next friend of a minor child has standing to bring a suit on behalf of a minor child.

Question 18

Joint Will

Answer 18

A joint will is a will properly executed by two or more persons that is intended to serve as the will of each. Parties can enter into a contract to make a will or devise, or a contract to not revoke a will or devise. Such a contract that is executed on or after September 1, 1979 must be established by a written agreement that is binding and enforceable or, alternatively, by a will stating that the contract not to revoke exists and including the material provisions of the contract.

Question 19

Holographic Will

Answer 19

A will that is handwritten and signed by the testator. It must be clear that the document was intended by the testator to be a will.

Question 20

Generally, a testator can expressly revoke a prior will by…

Answer 20

a writing executed with the formalities of a will or by later will or codicil, or by physical act.

Question 21

Simultaneous Death Act

Answer 21

When there is insufficient evidence of the order of death of two individuals, the property of each individual passes as though he had survived the other individual. In addition, if a husband and wife fie less than 120 hours apart, then one-half of their community property is distributed as if the husband had survived and the other one-half is distributed as if the wife had survived.

Question 22

Trust

Answer 22

A trust involves a bifurcated transfer. The creator or settlor transfers property to a second-party trustee to be managed for the benefit of a third-party beneficiary. The trustee holds legal title, and the beneficiary holds equitable title.

Question 23

A trust (will/will not) fail for lack of a trustee.

Answer 23

Will not; Instead the court will appoint a successor trustee. A trustee holds the legal interest or title to the trust property, and accepts the office by taking delivery of trust property or commencing to act in accordance with the terms of the trust instrument.

Question 24

In Texas, a trust will not fail if the trustee…

Answer 24

dies, becomes disabled, resigns, or fails to accept the office within a reasonable amount of time. Instead, the court will appoint a successor trustee unless one is named in the trust instrument or the instrument includes an express intent that the trust was to continue only as long a particular trustee served. The successor trustee has the same powers and discretion as the original unless otherwise provided in the trust instrument or by the court.

Question 25

Trustee Self-dealing

Answer 25

A trustee may not deal with the trust assets for his own benefit. When self-dealing is an issue, an irrebuttable presumption is created that the trustee breached the duty of loyalty, even if the transaction was made in good faith or was of benefit to the trust.

Question 26

Standard of care for trustee investing property

Answer 26

The State of Texas requires the trustee to act as a prudent investor would when investing his own property, but puts less emphasis on the level of risk for each investment. The trustee must exercise reasonable care, caution, and skill when investing and managing trust assets unless the trustee has special skills or expertise, in which case he has a duty to utilize such assets. Determinations of compliance under the UPIA are made with reference to the facts and circumstances as they existed at the time the action was made, and do not utilize hindsight.

Question 27

Under the doctrine of merger, because the same individual cannot serve as both the sole trustee and sole beneficiary of a trust, if there is a sole beneficiary and trustee…

Answer 27

the title would merge and the trust would terminate, thus allowing creditors to reach the trust assets.

Question 28

In Texas, a trust is presumed to be (revocable/irrevocable)…

Answer 28

revocable unless otherwise specified in the trust instrument. A revocable trust can be terminated by the settlor at any time. A revocable trust is reachable by the settlor’s creditors.

Question 29

A remainder is vested if…

Answer 29

the holder of the interest is ascertainable and there is no express condition precedent required before the interest becomes possessory.

Question 30

A vested remainder accelerates into possession as soon as…

Answer 30

the preceding estate ends for any reason.

Question 31

A future interest holder holds…

Answer 31

the present right to possess the property in the future.

Question 32

Standing to sue the trustee

Answer 32

Under the Texas Trust Code, any party who has an interest in the trust can have standing to sure the trustee.

Question 33

The following are generally prohibited transactions with trust property by the trustee:

Answer 33

buying or selling trust assets (even at fair market value), borrowing from or making loans to the trust, using trust assets to secure a personal loan, or otherwise acting for personal gain through the trustee position.

Question 34

Spendthrift Trusts

Answer 34

Expressly restricts the beneficiary’s power to voluntarily or involuntarily transfer his equitable interest. The spendthrift restriction applies only as long as the property remains in the trust, and it is inapplicable after the property has been paid out to the beneficiary. Courts will not enforce spendthrift clauses in cases in which the settlor is also the beneficiary, as this would provide an easy way for individuals to avoid their creditors.

Question 35

Texas limits the effects of a spendthrift clause to certain classes of creditors, so as not to include…

Answer 35

children and spouses entitled to support, those providing basic necessities to the beneficiary, and holders of federal or state tax liens.

Question 36

Trustee’s power of termination

Answer 36

The trustee has no power to terminate a trust unless the trust instrument contains express trustee termination provisions. In Texas a trust is amendable and revocable unless the settlor explicitly states otherwise.

Question 37

A court may terminate or modify a trust if…

Answer 37

because of circumstances not known to or anticipated by the settlor, the order will further the purpose of the trust (cy pres doctrine).

Question 38

Priority of Claims/ Creditors against the estate of the deceased

Answer 38

(1) Class 1 - expenses of decedent’s funeral, sickness, and family allowance; (2) administrative expenses; (3) Class 3- secured claims; (4) Child support arrearages that have been reduced to judgment; (5) Class 5 - Taxes, penalties, and interest; (6) Class 6- costs of decedent’s confinement in prison; (7) costs of medical assistance claims by the State; (8) Class 8- all other claims.

Question 39

Private Express Trust Elements

Answer 39

(1) The settlor intends to make a gift in trust; (2) some piece of trust property; (3) a valid trust purpose (valid as long as it is not illegal or contrary to public policy); (4) an ascertained beneficiary (may be unborn children or members of a class).

Question 40

Oral trusts are (valid/invalid) in Texas.

Answer 40

Valid; but only for personal property and the trustee may not be the settlor or the beneficiary.

Question 41

A trust must be in writing when:

Answer 41

(1) It is subject to the SOF - i.e. for the transfer of real estate; (2) if it is created by a will. The trust must either be in existence at the time the will was made or created at the same time the will is created.

Question 42

Charitable Trusts (Public Express Trusts)

Answer 42

Must have a charitable purpose, may last forever, does not require an ascertainable beneficiary, and is only enforceable by the settlor or the attorney general.

Question 43

Express trusts may be created:

Answer 43

Inter-vivos by a declaration of trust or a deed of trust; or in a will (testamentary trust; either pour-over, secret, or semi-secret).

Question 44

Declaration of Trust

Answer 44

The settlor declares himself the holder of the property in trust for beneficiaries. The settlor serves as the trustee.

Question 45

Deed of Trust

Answer 45

The settlor executes a deed of trust, conveying legal title to a trustee for the benefit of a designated beneficiary. The settlor is not the trustee.

Question 46

Pour-over Trust

Answer 46

A pour-over trust is a trust created in a will in which the testator may direct his assets into a trust in order to avoid the probate process. Upon the testator’s death the assets “pour-over” into the trust, passing outside of the reach of the testator’s creditors. The trust must be either in existence at the time the will was made, or created at the same time the will is created.

Question 47

Secret Trust

Answer 47

A secret trust exists when a testamentary trust in a will does not meet the requirements but looks like a testamentary gift and is created in reliance on the beneficiary’s promise to hold property for another. The intended beneficiary can testify to the promise to prove its existence.

Question 48

Semi-Secret Trust

Answer 48

A semi-secret trust is a testamentary trust that fails to name a beneficiary. This trust fails and the trustee holds title of the property, to be delivered back to the testator’s estate.

Question 49

Resulting Trust

Answer 49

When a trust fails, a resulting trust is created in which the trustee holds the property for the sole purpose of returning it to the settlor or the settlor’s estate. The goal of a resulting trust is to avoid unjust enrichment. A resulting trust may be avoided by including a “gift-over” clause, which distributes the property to an identified person in the event the trust fails.

Question 50

Constructive Trust

Answer 50

A remedy used to prevent unjust enrichment in the event a third party takes advantage of the settlor; if there is fraud, duress, undue influence, brach of a duty, detrimental reliance by a third party, or other wrongful conduct, the trust property is put into a constructive trust and the trustee’s job is to return the property to the settlor/settlor’s estate.

Question 51

Mandatory Distributions

Answer 51

The trustee has no discretion as to whether he will make a distribution. Look for language such as “trustee to pay all income” or “trustee to distribute…”

Question 52

Discretionary Distributions

Answer 52

The trustee has complete discretion as to whether he will pay the beneficiary. Trust language may include “trustee to make payments for the health and care of beneficiary” or “trustee to make payments, in her discretion, for the education of the beneficiary.”

Question 53

Support distributions

Answer 53

The trustee makes distributions to support the beneficiary. Trust language may include “trustee to make distributions for the support of the beneficiary.” Support is generally discretionary in nature.

Question 54

A beneficiary’s equitable interest in trust property is freely alienable unless…

Answer 54

the trust instrument or a statute limits this right.

Question 55

If the beneficiary has the power to freely alienate, then the beneficiary’s creditors (can/cannot) reach the beneficiary’s equitable interest in the trust property.

Answer 55

If the beneficiary has the power to freely alienate, then the beneficiary’s creditors can reach the beneficiary’s equitable interest in the trust property when such amounts become payable to the beneficiary or are subject to her demand.

Question 56

A creditor cannot reach trust principal or income until such amounts…

Answer 56

become payable to the beneficiary or are subject to the beneficiary’s demand.

Question 57

The settlor can create a variety of asset protection trusts, which shield beneficiaries from the claims of creditors. These include:

Answer 57

(1) Pour over trusts (cannot reach the testator’s assets); (2) Support trusts (cannot reach the trust property until T makes payment cuz the B is unable to demand payment); (3) Discretionary trusts (see 2); (4) Spendthrift trusts (interest is inalienable so creditors cannot reach until a payment is made).

Question 58

Claflin Doctrine

Answer 58

Followed by Texas; a trustee can block a premature termination if the trust is still serving some material purpose. No premature termination of discretionary trusts, support trusts, age-dependent/delayed enjoyment trusts, and spendthrift trusts.

Question 59

Trust Modification by beneficiaries

Answer 59

If the settlor is dead and all beneficiaries agree to modify, a court can modify a trust if an unforeseen event frustrates the purpose of the trust.

Question 60

The removal of a trustee may be granted when:

Answer 60

the trustee became incapable of performing her duties, the trustee materially breached her duties, a conflict of interest arose, a serious conflict between the trustee and one of the beneficiaries arose, or the trust persistently performed poorly as a result of the trustee’s actions or inaction.

Question 61

A trustee may resign by:

Answer 61

the trust instrument outlines the procedure or the trustee petitions the court to authorize the resignation.

Question 62

Uniform Principal and Income Act

Answer 62

Generally, life beneficiaries were entitled to the income of the trust and the holder of the remainder interest would be entitled to the trust principal. The UPAIA says that trustees should focus on the total return of the trust portfolio. The allocations must be reasonable based on: (1) the intent of the settlor and the language of the trust instrument; (2) the nature, duration, and purpose of the trust; (3) the identities and circumstances of the Bs; (4) the anticipated effect of economic conditions; and (5) the anticipated tax consequences.

Question 63

Powers of Trustee

Answer 63

In Texas, a trustee’s powers include all powers that an individual would have over his own property, all powers reasonably necessary to administer the trust, and other powers granted by the Texas Trust Code (“TTC”), including the power to hold and invest assets; operate a business; buy, sell, lease, or encumber assets; insure assets; and prosecute and defend actions. The courts follow the modern trend to allow a trustee all of those powers necessary to act as a reasonably prudent person in managing the trust assets.

Question 64

Duties of Trustee

Answer 64

A trustee is bound by a broad range of fiduciary duties designed to ensure that she acts solely in the best interests of the beneficiaries when investing property and otherwise managing the trust according to its terms and the TTC. A trustee has a duty of loyalty and good faith to the beneficiary of the trust. Any expenses incurred by a trustee must be reasonable and proper. The court will determine whether the trustee acted reasonably and in good faith.

Duty of loyalty and good faith: no self-dealing (per se breach of loyalty); Plus, if a T enters into a non-self-dealing conflict of interest, the conflict is assessed under the reasonable and good faith test.
Duty of care/prudence: that which a person of ordinary prudence would practice in the care of his own estate.
Duty of impartiality: all assets received by a T must be allocated to either income or principal. This duty demands that the allocation be balanced so as to treat life-tenants and remaindermen fairly.
Duty to inform B about the nature of the trust property and the duty to account for actions taken on behalf of the trust.

Question 65

Share of community property if decedent is survived by spouse and no descendants:

Answer 65

spouse takes the entire community estate of the decedent

Question 66

Share of community estate if decedent is survived by spouse and a descendant unrelated to the spouse:

Answer 66

the surviving spouse takes no part of the community estate of the decedent

Question 67

Share of the community estate if the decedent is survived by spouse and descendants of the surviving spouse

Answer 67

the spouse takes the entire share of the decedent’s community estate

Question 68

Share of separate estate if decedent is survived by a spouse and no descendants

Answer 68

Surviving spouse takes all of the decedent’s separate personal estate and 1/2 share of the decedent’s separate real property. The remaining assets go to the decedent’s ancestors or collaterals.

Question 69

Share of separate estate if decedent is survived by a spouse and descendants

Answer 69

The surviving spouse takes 1/3 of the decedent’s personal property and a life-estate in 1/3 of the decedent’s separate real property. The remaining assets go to the decedent’s descendants.

Question 70

Share of separate estate if there is no surviving spouse:

Answer 70

the entire separate estate goes to the descendants, and if no descendants, goes to the ancestors and collaterals.

Question 71

Per Capita with Representation

Answer 71

(1) Divide the property equally at the first generation where a member survives the decedent; (2) if there are deceased members at that first generation, their shares drop down to their surviving issue at the next generation; (3) if a deceased member of a generation is not survived by living issue, then that member does not take a share.

Question 72

In Texas, if a formality of the will is missing, the will is…

Answer 72

invalid. (strict compliance)

Question 73

Wills may be revoked by:

Answer 73

(1) Subsequent instrument; (2) Physical Act; (3) Operation of law

Question 74

Lost Will

Answer 74

If a will once known to exist cannot be found at the testator’s death, there is a rebuttable presumption that the testator revoked the will be physical act. The burden is on the proponent to show the will’s existence by clear and convincing evidence. Duplicate originals may be admitted; copies may not.

Question 75

Revival

Answer 75

In Texas, there is no automatic revival of a revoked will. In order to revive, the original must be re-executed.

Question 76

If the estate does not have sufficient funds to pay debts or make gifts, the gifts will be abated in the following order:

Answer 76

(1) Intestate property (least protected - first to be reduced); (2) property in a residuary gift; (3) general bequests; (4) specific bequests to others; (5) specific bequests to relatives (most protected, last thing to be reduced).

Question 77

Specific Gift

Answer 77

gift of a particular piece of property

Question 78

General Gift

Answer 78

property satisfied by the general assets of the estate (usually money)

Question 79

Demonstrative gift

Answer 79

general gift from a particular source (i.e. 5,000 from my Bank One account).

Question 80

Ademption by Extinction

Answer 80

applies in the situation where a will makes a specific devise of property, but the specific property is no longer in the estate. The specific devise is extinct and the devisee takes nothing.

Question 81

Ambiguities in the will

Answer 81

Texas does not distinguish between patent and latent ambiguities and allow extrinsic evidence to resolve the ambiguity.

Question 82

Unintentional Disinheritance of a Child

Answer 82

If a T has no other children when the will was executed, then omitted child takes an intestate share; if testator had at least one child at the execution of the will and the will devised property to at least one of those children, then the omitted child takes an equal share from that portion of the property already devised to the other child(ren).

Question 83

A will contest must be made within ______ by _______.

Answer 83

2 years of opening probate; an interested party.

Question 84

An interest party may contest the validity of the will by claiming:

Answer 84

lack of testamentary capacity, insane delusion, undue influence, fraud, and duress. A constructive trust is the most common remedy for fraud.

Question 85

If a will cannot be found…

Answer 85

If a will cannot be found, the proponent of its existence must prove its existence by clear and convincing evidence. To probate a lost will, including a holographic will, the proponent must establish: (1) proof that the will was duly executed. This can be shown by the testimony of an attesting witness in open court; (2) Proof of the cause of the will’s non-production. The proponent of a lost will must show that the will has not been revoked. When the original will cannot be found, its absence creates a presumption of revocation. However, the presumption of revocation applies only if the will was last seen in the possession or control of the decedent. Testimony that, to a witnesses knowledge, a testator did not revoke a will is sufficient evidence of non-revocation; (3) Proof of the proponent’s inability to produce it by reasonable diligence; and (4) Substantial proof of the contents of the will by a credible witness who has read it or heard it read. The wills material contents must be sufficiently proven to allow the court to determine how to pass title to the property devised.

Question 86

Adopted Children

Answer 86

For the purposes of probate, an adopted child is considered just as a natural child of the parent and inherits as such from the adoptive parents.

Question 87

Trust purpose

Answer 87

A trust can be created for any purpose, as long as it is not illegal, restricted by rule of law or statute, or contrary to public policy. In situations when one of several trust terms violates law or public policy, any alternative terms provided by the settlor will be honored, and if none, then the term will be stricken from the trust, but the trust will not fail altogether, unless the removal of the term proves fatal.

Question 88

Conflict of interest/Self Dealing of Trustee

Answer 88

A conflict of interest arises between the trustee’s duties to the beneficiaries and his own personal interest when a trustee personally engages in a transaction involving the trust property. It is generally prohibited for the trustee to buy for himself and sell to himself trust assets, even at fair market value; engage in prohibited transactions with friends, relatives, or business associates; sell one trust’s property to another trust that the trustee manages; otherwise act for personal gain through the trustee’s position; or use trust assets to secure a personal loan. An irrebuttable presumption is created that the trustee breached the duty of loyalty when self-dealing is an issue. This is the case even when the transaction was made in good faith or was of benefit to the trust.

Question 89

Remedies for Breach of a Trustee’s Duties

Answer 89

If a breach of the duty of loyalty and good faith occurs, a beneficiary can choose either to set aside the transaction or to ratify the transaction and recover any profits from it. In an action for breach, the court may also compel the trustee to perform his duties, to cease commission of the breach, to redress the breach, to step down from his office either temporarily or permanently, or to forego compensation. The court may even go as far as to impose a constructive trust. Damages for breach include lost profits, decreasing value of the trust assets, or increase in the value of the trustee’s personal assets.

Question 90

(Wills) Interested Witnesses

Answer 90

At common law, a witness with a direct pecuniary interest under a will was not competent to witness the will. In Texas, an interested witness is competent and the will is valid, except the bequest is void without the corroborating testimony of a disinterested witness. A drafting attorney, fiduciary, or creditor of the testator is not an interested witness unless he is also a legatee under the will.