Wills and Trusts Flashcards
Prudent Investor Rule
Applies to both investment and management of the investments;
The trustee should consider the purposes, terms, distribution requirements, and other
circumstances affecting the trust;
The trustee has a duty to monitor investments prudently made to assure that retention of those
investments remains prudent. If retention is not prudent, the trustee should sell the imprudent
investments and reinvest the proceeds in prudent investments. A trustee, however, is not liable for
declines in value due to a downturn resulting from general economic conditions
Who should an agent for durable POA make decisions in the absence of specific instructions?
In accordance with the agent’s determination of the principal’s best interest considering the principal’s personal values to the extent known to the agent
Who inherits a joint bank account?
Ordinarily, the surviving joint tenant, unless the joint tenancy was created merely for the depositor’s convenience (UPC and some courts will set aside the joint tenancy; other courts will uphold the tenancy by relying on parol evidence)
Constructive Trust Theory
Sometimes utilized to award the joint account to another named beneficiary in a will instead by saying the joint tenant is only holding the account in trust for the beneficiary
This ordinarily requires evidence of misconduct by the tenant
Do lapse statutes apply to class gifts?
Common law: Implies survivorship, so the lapse statute will not apply unless the statute expressly mentions class gifts Modern View/UPC: Most state lapse statutes do include class gifts, but some states (not the UPC) specify that the statute will not apply if the beneficiary passed before the execution of the will
Does a joint will create a contract?
The joint will does not itself create a contract, but a will contract is created when the joint will includes marital provisions of the contract or has language in it that refers to a contract between the testators (“each of us agrees” is most likely sufficient to create the contract)
What happens when a will creates a contract?
The contract becomes irrevocable upon the death of one of the testators
The existence of the contract does not invalidate a later will, it just makes the beneficiaries under the joint will creditors
Does an inter vivos trust require a writing?
No, there just needs to be intent to create the trust
Can a testator leave their acts to a trust that is not created in the will?
Yes, even if they are not the settlor, as long as the will identifies a valid trust and the trust’s terms are incorporated in a writing created before or concurrently with the execution of the will
Can a settlor be a beneficiary?
Yes but they cannot be the sole beneficiary; They also cannot participate in a spendthrift trust
Can a settlor change a trustee’s duties after the trustee accepts the role?
A trustee’s duties cannot be enlarged after acceptance unless the trust instrument contains an additions clause
Residue of a Residue
Most modern courts hold that a partially invalidated will bequest goes to the remaining names legatees (common law held the testator’s heirs take the bequest)
For a testamentary trust, do later amendments apply to the will?
Yes, if the trust is revocable
What relatives does a lapse statute apply to?
Generally only blood relatives, so no spouses
Can a trustee be found liable for abuse of discretion where the settlor gives them absolute and uncontrolled discretion?
Yes if the decision was based exclusively on personal reasons unrelated to the settlor’s goals
What happens if a trust beneficiary dies before the end of the trust term?
Trust interests are devisable and descendible, so the interest will pass through probate
Parentelic Method (UPC and majority view)
The issue of an intestate’s parents take to the exclusion of any issue of the intestate’s grandparents (ex. If the only remaining relatives are an uncle and a niece, the niece takes to the exclusion of the uncle)
Minority Consanguinity Method
Relatives of the same degree take shares
When is a disclaimer of a trust interest valid?
Generally only if it was made in writing and within 9 months of the decedent’s death
Doctrine of Integration
A multi-page will is valid even if only the last page is signed as long as the proponent of the will can establish that all pages were physically present and together when the testator and witnesses signed the last page and that each page was in tended by the testator to be part of the will (presumed if the pages set out an orderly disposition plan when read together)
Is extrinsic evidence allowed to vary the literal meaning of words in a will?
Most jurisdictions say no, but the Restatement (3rd) of Property and some courts will allow upon clear and convincing evidence of a mistake of fact or law, or the donor’s intent
Equitable-Deviation Doctrine: Unanticipated change in the character of the community where trust realty is held
Applicable it is is an administrative provision (permission of the beneficiaries and/or trustee is not required to reform, the court can do it against their consent)
The court is not allowed to alter dispositive provision determining allocation of trust assets and income among income beneficiaries (the court may change the dispositive provision if, because of circumstances not anticipated by the settlor, modification will further the purposes of the trust but the modification must be made in accordance with the settlor’s probable intent)
Incapacity
Must know the nature and extent of their property, the persons who are the natural objects of the testator’s estate and have the highest moral claims to the testator’s property, the disposition the testator is trying to make, and the interrelationship of these items in connection with the testamentary plan formulated in the will
What powers can the trustee not delegate?
The power to select investments or determine how the trust property will be distributed (but they can delegate powers for investments if they periodically review the investments)
Survival Condition: Common law v. UPC
The common law holds a remainder interest to children not expressly condition on survival is not impliedly conditioned as such
UPC: Does impliedly condition survival, so if they do not survive their share will not go through a lapse statute
Line of sight v. conscious presence: signing or revoking a will on behalf of the testator
Another person may sign or revoke for the testator if done at the testator’s direction and in their conscious presence
Line of Sight: In actual sight
Conscious Presence: If done within range of the testator’s senses (adopted by the UPC)
When can a testamentary trust be terminated upon request of all beneficiaries?
If there is no material purpose remaining to be accomplished
Traditional View: If any trust interest is subject to a spendthrift restriction that bars alienation of the interest, a material purpose remains
3rd Restatement: A spendthrift trust does not outright bar termination unless the trust grantor really intended the provision to bar premature termination
Pretermitted Heir Statutes
Most states apply these only if the child was born or adopted after execution of a will
Common Law Doctrine of Exoneration
The specific devisee of encumbered real property was entitled to have the mortgage on the property paid from the estate as a debt of the decedent unless the testator intended otherwise
Many states now (including the MPC) provide a specific devisee passes subject to any mortgage owed at the time of death without the right of exoneration regardless of any directive in the will to pay debts
Interested Witness: UPC v. Common Law
UPC: no interested witness statute
Common Law: A will without 2 disinterested witnesses was invalid, but most states now just bar the interested witness from inheriting
Trust provision to a subsequent divorcee
States are split as to whether a subsequent divorce invalidates a trust provision to the ex-spouse; UPC says divorce revokes the provision
Can a surviving spouse reach assets in the decedent’s trust?
Many states (but not all) recognize the following:
1) Illusory Transfer: a surviving spouse can reach assets transferred during the marriage by the deceased spouse into a revocable trust
2) Fraudulent Transfer: a surviving spouse can reach assets transferred into a revocable trust on the theory that, as to the surviving spouse, the transfer was “fraudulent”
Can a testator dispose of property in a writing made after the execution of the will?
Under common law no, but many states now allow this if the will evidences an intent to dispose of the tangibles in that manner and the later writing is signed, and
describes the gifted items with sufficient particularity so that the gifted items are readily identifiable
