Wills & Trusts Flashcards
What are the requirements for validly executing a will?
In Florida, the following formalities must be observed:
- (1) the will must be in writing;
- (2) the will must be signed by the testator or another person at the direction of and in the presence of the testator;
- (3) the will must be signed at the end (signing on page 5 instead of 6, for example, is valid);
- (4) in the presence of at least two attesting witnesses; and
- (5) the witnesses must sign in the presence of:
- (a) the testator; and
- (b) each other.
No particular signing order is required, but the signature must be done as part of a single contemporaneous transaction.
Fraud in the factum v. fraud in the inducement
A will, or a portion thereof, may be challenged on the basis of fraud.
- (a) Fraud in the factum occurs when a person fraudulently causes a testator to execute a will without knowing the nature of the document. It will be deemed invalid and unenforceable.
- (b) A will procured by fraud in the inducement is still valid and enforceable.
What is a holographic will? Is it enforceable in Florida?
A will that is entirely in the handwriting of the testator and signed by the testator, but lacking witnesses.
A holographic will may not be admitted into probate in Florida even if it was validly executed in another state. However, a handwritten will that follows all of the will formalities will be deemed valid.
What scheme of intestate distribution does Florida use?
Florida follows a strict per stirpes scheme of distribution:
- (1) The estate is divided into shares at the “root” generation, which is the first generation after the decedent.
- (2) Each member receives a share, whether the member is living or dead at the time of the decedent’s death.
- (3) If a member of the root generation predeceased the decedent, the deceased member’s share descends strict per stirpes to the lineal descendants of the deceased member.
Ademption by extinction
Property that is to be disposed of in a will is adeemed by extinction if it is no longer in the testator’s estate at the time of his death. Florida follows the modern approach, which considers the intent of the testator in determining whether property has adeemed.
Lapse and anti-lapse
When a beneficiary under a will dies before the testator, the gift lapses, and falls to the residuary estate unless it is saved by the Anti-Lapse Statute. In Florida, if there is a lapse in a gift given, the gift will pass to the intended beneficiary’s surviving family members, provided that those surviving family members are descendants of the testator’s grandparents.
Requirements for proving the contents of a lost will
The contents of a lost will may be proved by:
- (a) the testimony of two disinterested witnesses who knew the terms of the will; or
- (b) presentation of a correct copy of the will and the testimony of one disinterested witness.
What is a negative will?
A negative will is a will that expressly disinherits an heir. Florida does not permit negative wills.
What is a pretermitted child? Can they claim any share of the estate?
A pretermitted child is a child born after a testator has executed his will. If the testator fails to provide for a child born or adopted after execution of the testator’s will, the child may claim an intestate share as a pretermitted child, unless:
- (a) they received an advancement equal to their intestate share;
- (b) the omission was intentional, or
- (c) the testator had other children and left most of his estate to the parent of the omitted child.
In cases where paternity must be established, it is the date of birth that controls, not the date of legitimization.
How may a will be revoked?
A testator may revoke his will by making a subsequent writing that declares intent to revoke his will, and is executed with the requisite formalities for execution of a will.
Florida permits a testator to revoke a will by a physical act such as burning, tearing, canceling, defacing, obliterating, or destroying the document. Florida does not permit partial revocation by physical act, such as crossing out one clause in a will. If one portion of the will is crossed out, the crossed out portion will remain in effect.
For physical revocation of a copy to be valid, it must be an executed copy.
Florida intestate distribution order
If a decedent dies intestate, the entire portion of the estate will go to the surviving spouse if there are no descendants. If there are descendants of the decedent and not of the surviving spouse, the surviving spouse takes half and the other half is divided among all descendants.
If there is no surviving spouse, the order is:
- All to descendants, per stirpes;
- If no descendants, to parents or the surviving parent;
- If no descendants or parents, to brothers and sisters and their descendants, per stirpes;
- If no descendants, parents, siblings or descendants of siblings, one-half to paternal grandparents and their descendants and one-half to maternal grandparents and their descendants;
- Kindred of the last deceased spouse, as if she had survived the decedent and then died.
Failing all of the above, the estate escheats to the state.
What are advancements and how do they affect the estate?
An advancement is a transfer to a potential beneficiary that occurs before the intestate death of the decedent. No gift is considered an advancement unless such an intention is declared in a contemporaneous writing by the testator, or acknowledged in writing as such by the beneficiary. Advancements are not binding on a predeceased’s heir’s successors unless the instrument provides otherwise.
If a beneficiary received a cash advancement, the value of the advancement will be set at the sum received. If the beneficiary received an advancement in the form of property, the value of the advancement will be determined by the value of the property at the time the advancement was made, not at the time of the decedent’s death.
Under the “hotchpot” method, the advances are added back into the estate, the total is divided by the number of recipients, and the advances are then subtracted from the individual shares.
Uniform Simultaneous Death Act
If it is not possible to determine which of two persons died first, the property of each person will pass as if that person survived the other person. In other words, the beneficiary dying at the same time as the testator will be treated as predeceased.
However, this presumption does not apply if there is a contrary intention expressed in the governing instrument.
Slayer statute
A person who feloniously and intentionally kills another person or procures the death of another person forfeits all death-related benefits that the slayer would have derived from the decedent.
A criminal conviction for murder is conclusive proof that the killing was felonious and intentional.
However, lineal descendants of the slayer will receive the slayer’s benefit as if they had died.
Elements of a valid private trust
To determine whether a valid private trust has been created, look for the following characteristics:
- (1) Settlor with capacity
- (2) Present intent to create a trust (manifested by settlor’s words, writing, or conduct; no precatory expressions)
- (3) Trustee with capacity and duties (inter vivos trusts only; a testamentary trust will not fail for lack of a trustee)
- (4) Definite beneficiary or beneficiaries (Note: Same person cannot be sole trustee and sole beneficiary)
- (5) Trust property (res)
- (6) Valid trust purpose (one that is not illegal, against public policy, or impossible to achieve)
What are precatory expressions and how do they affect the creation of a trust?
A settlor’s expression of a hope, wish, or mere suggestion that the property be used in a certain way is called precatory language. The usual inference is that precatory expressions don’t create a trust. This inference can be overcome when:
- The directions are definite and precise, not vague;
- The directions are addressed by a decedent to their executor or administrator, or to one who otherwise occupies the position of a fiduciary under the will;
- Failure to impose a trust results in an “unnatural” disposition by a testator (such as when a close relative takes no interest under the will); or
- Extrinsic evidence shows that the transferor had been supporting the alleged beneficiary prior to executing the instrument, and the beneficiary wouldn’t have sufficient means of support absent a finding that a trust was created.
When will a trust’s purpose violate public policy? What is the effect?
Public policy is violated if the purpose of a trust is to: induce others to engage in criminal or tortious acts; encourage immorality; or induce a person to neglect parental, familial, or civic duties. Invalid conditions commonly seen on the exam include those that encourage divorce or the commission of crimes and provisions restraining the right to procreate or the free practice of religion. If a condition attached to an interest is against public policy:
- The settlor’s alternative desire controls if expressed
- If the invalid condition is a condition subsequent, the condition is invalidated but the trust is valid
- If the illegal condition is a condition precedent, the preferred view is to hold the interest valid unless there is evidence that the settlor’s wish would be to void the beneficiary’s interest altogether if the condition is unenforceable
Can a trust be created if there is a promise to create a trust that is unsupported by consideration? How does it differ from a promise that is supported by consideration?
An unenforceable gratuitous promise cannot be the subject of a trust.
Where a promise to create a trust isn’t supported by consideration (gratuitous), a trust arises when all elements of a valid trust have been met if, but only if, at that subsequent time the settlor manifests an intention then to create the trust. Indicia of a trust might include actions such as distributing income to the beneficiary or keeping records like a trustee would.
When a promise to hold property to be received in the future in trust is supported by consideration, under contract law the trust automatically attaches when the property is received.
What is the effect of a valid trust with no named trustee?
No trust fails for want of a trustee. If the intention to create a trust is clearly manifested but no trustee is named, or the named trustee dies or resigns with no provision for a successor trustee, the court will appoint a suitable trustee to execute the trust.
What are the rules that require ascertainable beneficiaries for a trust? Are unborn beneficiaries allowed?
A private trust must have ascertainable beneficiaries. Beneficiaries need not be identified at the time a trust is created, but they must be susceptible of identification by the time their interests are to come into enjoyment. If a trust fails for lack of a beneficiary, a resulting trust in favor of the settlor or his successors is presumed.
An unborn beneficiary may be described in the instrument, and the trust will be valid even as to his interest. Thus, if A conveys “to T in trust for B for life, remainder to B’s children,” the beneficiaries are “definite” even though B had no children at the time of the trust conveyance. It is sufficient that B’s children would be susceptible of identification at the time their interests were to come into enjoyment (on B’s death).
Are beneficiaries required for honorable or charitable trusts?
The rule requiring a private trust to have definite beneficiaries does not apply to charitable trusts; beneficiaries of a charitable trust must be indefinite. Charitable purposes may be expressed in general terms. A charitable trust must have a purpose considered to benefit the public.
An honorary trust is one without beneficiaries who can enforce the trust, such as a trust for the care of pets; a trustee was traditionally on their honor to carry out the trust.
Are voluntary assignments of a beneficiary’s interest in a trust permitted?
Absent restrictions by statute or by the trust instrument, a beneficiary may freely transfer their interest in the trust. The assigned interest remains subject to all previous conditions and limitations.
What are the rights of a beneficiary’s creditors in a trust instrument where there are no restrictions on the beneficiary’s rights? What about a settlor’s creditors?
Absent restrictions by statute or by the trust instrument, an insolvent trust beneficiary’s creditors may levy on his beneficial interest. The interest is subject to judicial sale. To avoid this, a court may order the trustee to pay the beneficiary’s income to the creditors until the debt is satisfied.
A settlor’s creditors may levy on the property of a revocable trust to the extent such property, if owned directly by the settlor, would not be exempt from creditors’ claims. If the trust is irrevocable, a creditor may reach distributions made for the settlor’s benefit.
What is a spendthrift trust and what are the rights of creditors? Are assignments of spendthrift trusts enforceable?
A spendthrift trust is one in which the beneficiary is unable voluntarily or involuntarily to transfer their interest in the trust, which means their creditors are precluded from reaching it to satisfy their claims. Although a spendthrift trust is a restraint on alienation, most courts uphold spendthrift restrictions.
A beneficiary’s creditors cannot reach the trust interest until income has been paid to the beneficiary.
A restriction permitting the beneficiary to voluntarily alienate his interest, but purporting to deny creditors the right to reach the beneficiary’s interest, is probably invalid.
A beneficiary’s assignees can’t force the trustee to pay them directly. However, the trustee may choose to honor a purported assignment by the beneficiary, but the trustee may recommence payments to the beneficiary at any time, and the beneficiary may withdraw their direction to pay the assignee.
What are the exceptions to spendthrift trusts?
A spendthrift clause can’t be used to shield the beneficiary from:
- (a) the creditors of the settlor/beneficiary of a spendthrift trust;
- (b) claims for support, alimony, and services provided to protect the beneficiary’s interest; or
- (c) claims by the government.
Moreover, a creditor can reach a mandatory distribution of income or principal if the trustee didn’t make it within a reasonable time.
What are creditors’ rights in discretionary trusts?
If the trustee has discretion to pay all or so much of the income and/or principal to or for the benefit of the beneficiary, the beneficiary doesn’t have any “right” to the income until the trustee exercises his power. Thus, the beneficiary’s creditor can’t compel payment from the trustee or otherwise reach the beneficiary’s interest, even in the absence of a spendthrift clause.
But if the trustee is served with process, he must first satisfy the creditor’s claim before exercising his power in favor of the beneficiary.
If a trust instrument names more than one trustee, must decisions be unanimous?
Co-trustees who are unable to reach a unanimous decision may act by majority decision. If a co-trustee cannot perform because of, for example, absence or illness, the remaining co-trustees may act for the trust (unless otherwise specified for the trust instrument).
What are the beneficiaries’ remedies against a trustee for breach of trust?
Whenever a trustee breaches fiduciary duty (self-dealing, improper investment, etc.) the beneficiary has a choice of options:
- (a) Ratify the transaction and waive the breach.
- (b) Sue for the resulting loss in a surcharge action. The measure of damages would be the difference between what the trustee paid for the investment and its worth at the time of suit.
In self-dealing cases, the beneficiary can:
- (a) Trace profits from the trustee if the trustee profited,
- (b) Affirm the transaction if the trust profited, or
- (c) Set aside the transaction if the trust lost money.
A breaching trustee is liable for the greater of the amount necessary to restore the trust property and the trustee’s profit from the breach.
Can a third party sue a trustee for torts committed as trustee? What about in contract?
A third party may sue the trustee in their representative capacity for torts committed by the trustee or their agent. However, the trustee may be sued personally in tort only if personally at fault, not by reason of respondeat superior. If the tort claimant sues the trust estate instead of the trustee personally, the estate may seek indemnification from the trustee individually.
A trustee may be sued on the contract or in tort in the trustee’s representative capacity. But the trustee may be sued personally on the contract only if, in entering into the contract, they failed to reveal their representative capacity and identify the trust.
When may a court reform a trust? Can a settlor prevent reformation? Do spendthrift provisions prevent reformation?
A trust may be modified or terminated by the court upon petition of a qualified beneficiary under certain circumstances:
- (a) it is not inconsistent with the settlor’s purpose;
- (b) it is in the best interests of the beneficiaries;
- (c) continuance of the trust would be uneconomical;
- (d) modification would achieve the settlor’s tax objectives; or
- (e) reformation is necessary to correct a mistake.
Nonjudicial modification or termination is permitted if, after the settlor’s death, the trustee and all beneficiaries agree.
A settlor may expressly prohibit judicial reformation in the terms of the trust.
The court must consider spendthrift provisions when making modifications, but such provisions do not preclude the court from modifying the trust.
Are oral trusts permitted? What about trusts of land?
Irrevocable oral trusts of personal property are enforceable. Oral trusts may be established only by clear and convincing evidence.
For a trust of land, however, a written instrument signed by the person entitled to impress the trust upon the property is required under the Statute of Frauds. Note that an otherwise invalid oral trust of land may be enforced by imposing a constructive trust.
Recall that contracts to devise land or personal property in a will require a signed writing and 2 witnesses.
