Wills and Trusts

Question 1

Prudent Investor Rule

Answer 1

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

Question 2

Who should an agent for durable POA make decisions in the absence of specific instructions?

Answer 2

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

Question 3

Who inherits a joint bank account?

Answer 3

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)

Question 4

Constructive Trust Theory

Answer 4

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

Question 5

Do lapse statutes apply to class gifts?

Answer 5

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

Question 6

Does a joint will create a contract?

Answer 6

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)

Question 7

What happens when a will creates a contract?

Answer 7

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

Question 8

Does an inter vivos trust require a writing?

Answer 8

No, there just needs to be intent to create the trust

Question 9

Can a testator leave their acts to a trust that is not created in the will?

Answer 9

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

Question 10

Can a settlor be a beneficiary?

Answer 10

Yes but they cannot be the sole beneficiary; They also cannot participate in a spendthrift trust

Question 11

Can a settlor change a trustee’s duties after the trustee accepts the role?

Answer 11

A trustee’s duties cannot be enlarged after acceptance unless the trust instrument contains an additions clause

Question 12

Residue of a Residue

Answer 12

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)

Question 13

For a testamentary trust, do later amendments apply to the will?

Answer 13

Yes, if the trust is revocable

Question 14

What relatives does a lapse statute apply to?

Answer 14

Generally only blood relatives, so no spouses

Question 15

Can a trustee be found liable for abuse of discretion where the settlor gives them absolute and uncontrolled discretion?

Answer 15

Yes if the decision was based exclusively on personal reasons unrelated to the settlor’s goals

Question 16

What happens if a trust beneficiary dies before the end of the trust term?

Answer 16

Trust interests are devisable and descendible, so the interest will pass through probate

Question 17

Parentelic Method (UPC and majority view)

Answer 17

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)

Question 18

Minority Consanguinity Method

Answer 18

Relatives of the same degree take shares

Question 19

When is a disclaimer of a trust interest valid?

Answer 19

Generally only if it was made in writing and within 9 months of the decedent’s death

Question 20

Doctrine of Integration

Answer 20

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)

Question 21

Is extrinsic evidence allowed to vary the literal meaning of words in a will?

Answer 21

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

Question 22

Equitable-Deviation Doctrine: Unanticipated change in the character of the community where trust realty is held

Answer 22

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)

Question 23

Incapacity

Answer 23

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

Question 24

What powers can the trustee not delegate?

Answer 24

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)

Question 25

Survival Condition: Common law v. UPC

Answer 25

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

Question 26

Line of sight v. conscious presence: signing or revoking a will on behalf of the testator

Answer 26

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)

Question 27

When can a testamentary trust be terminated upon request of all beneficiaries?

Answer 27

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

Question 28

Pretermitted Heir Statutes

Answer 28

Most states apply these only if the child was born or adopted after execution of a will

Question 29

Common Law Doctrine of Exoneration

Answer 29

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

Question 30

Interested Witness: UPC v. Common Law

Answer 30

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

Question 31

Trust provision to a subsequent divorcee

Answer 31

States are split as to whether a subsequent divorce invalidates a trust provision to the ex-spouse; UPC says divorce revokes the provision

Question 32

Can a surviving spouse reach assets in the decedent’s trust?

Answer 32

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”

Question 33

Can a testator dispose of property in a writing made after the execution of the will?

Answer 33

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