WILLS/TRUSTS Flashcards
Valid Trust
FIVA
- Intent to create - oral, writing, conduct prior or with transfer
- Funding property - identifiable and described with reasonable certainty
- Valid purpose - legal and against PP
- Ascertainable beneficiaries
Types of Trusts
Inter Vivos: grantor still living
Testamentary: created and incorp in a will (will must be valid)
Charitable: benefits society and has a stated purpose (CT analysis)
Revocable Trust
settlor reserves the right to modify/terminate
presumed in CA
Trustee Power to Terminate
No power to terminate unless expressly stated
Removal of a Trustee
The court can remove if purpose is frustrated by a violation of a duty
Trustee can withdraw
Trust will not terminate, court will appoint new trustee
Unfulfilled Material Purpose
Trustee Duties
A trustee can block trust termination by the beneficiaries if the purpose of the trust is unfulfilled
Irrevocable Trust
Modification and termination while the settlor is still alive requires beneficiaries to consent and keep with primary purpose
Trustee Duties
A trustee has a duty to diversify, a duty not to engage in self-dealing, and a duty of care to conduct the business of the trust as a RPP conducting his own business affairs
All trust assets must be earmarked and stored separately from the trustee’s personal assets.
Charitable Trust
A charitable trust is a trust created for the purpose of benefitting society. There must be a stated purpose and indefinite beneficiaries (society at large).
Remainder Beneficiary
Entitled to the principal upon termination of the trust
Income Beneficiary
Recieves income from the trust
Beneficiary Violation of CT
If a charity violates an express condition of the trust, the charity may be liable for the benefit recieved. The attorney general of the state can challenge and has standing to challenge.
Cy Pres
Under the doctrine of cy pres, if the purpose of the charitable trust has terminated or other circumstances have frustrated the settlor’s purpose of the trust, if the court determines that the purpose of the trust was general, rather than a specific cause, the court will imply a new purpose as close as possible to the settlor’s intended purpose.
Specific: NO –> must terminate
General: YES –> substitute similar charity
*Court generally does not want to interfere but will try their best to match intentions
Resulting Trust
A resulting trust is an equitable remedy implied in fact based on the settlor’s intent. If the court decrees a resulting trust, the trustee or beneficiary must transfer the trust property back to the settlor’s estate.
Valid Will
Wills
ATTESTED WILL
Capacity - 18, nature, property, bounty
Testamentary intent
In writing signed by T
2 witnesses - capacity, maturity, present acknowledge
CA substantial compliance
Pour Over Will
When property is brought into a trust for distribution at the death of the testator
Interested Beneficiary/Undue Influence
Interested beneficiaries are parties that benefit from a will but were also involved in creating and executing the will
Presumed by the court to have caused undue influence if opportunity to influence and testator was susceptible to undue influence or coercion
Dependent Relative Revival
If there is a mistake of law or fact, the court can revive a revoked will if it can be shown that the T would not have revoked the original if not for mistake of law or fact
Trustee refuses to serve
Where a trustee refuses to serve as the trustee, the court will appoint a new one. A trust will not fail for lack of a trustee
Trust Termination by…
- Automatically when primary purpose has been accomplished
- Consent of all beneficiaries if S is dead or no remaining interest
- By Court id the purpose becomes illegal, impractical, impossible
Termination of a trust prematurely
If the court finds that termination would not frustrate the settlor’s intent, the court may find that a trust may be terminated
Trustee DOC
A trustee has a duty of care to conduct the business of the trust as a RPP conducting his own business affairs
Duty to Diversify
Trustee Duties
A trustee has a duty to diversify the investments of the assets of the trust, just as a reasonably prudent investor would. 3 rules: majority, minority, statutory
Duty to Diversify - Majority
Trustee Duties
The trustee may only invest funds in a particular list of secure investments and new businesses are not on that list
Duty to Diversify - Minority
Trustee Duties
Under the minority rule, a trustee may invest in a new business
Duty against self-dealing
Trustee Duties
A trustee has a duty to not engage in self-dealing transactions, where they use the trust assets for their own purposes
Avoid violation of trustee duties by
Getting permission from beneficiaries in advance or if the beneficiaries had ratified the trustee’s decision after the fact
Standing to file suit against the trustee
The beneficiaries have standing to file suit if the courts find that the trustee was in violation of his duties.
Where a trustee has violated one or more duties, the beneficiaries are entitled to 1) require disgorgment of profits or 2) return the sold item
Will Capacity
Wills
Testator must be at least 18 years old, understand the objects of her bounty, understands the nature and extent of her property, and know she is making a will
Holographic Will
A holographic will is a valid testamentary instrument that is in the testator’s handwriting. It must contain all material terms and be signed. Does NOT need to be dated
Revocation by Subsequent Instrument
A will can be revoked by subsequent instrument either expressly or impliedly by disposing of substantially all of the testator’s property or property stated in the first will
Subsequent instrument must also comply with will formalities
Revocation by Physical Act
A will can be revoked by physical act if there was intent at the same time as the act.
Multiple Copies of a Will
When a testator duplicates a will, it is presumed that when she revokes one copy, the other copy is also revoked
Wills: Mistake in Content - Ambiguity
When a testator disposing of property but it is uncertain who or what is to be given, the court may look to extrinsic evidence to determine property distribution
Cannot be determined = gift fails
Will: Specific Gift
A specific gift is one a distinct asset in the testator’s estate, typically given when stated “my”
Ademption by Extinction
When a testator devises a specific gift but the testator no longer owns the gift at their death, the gift it to adeem and the beneficiary is to take nothing
CA: the courts look to the intent of the testator to determine whether they meant the gift to fail or adeem. Such factors include whether tracing is available or who changed the form and relationship of the parties
Intestate Property
If there is no will or the will is invalid, the assets will pass through intestacy.
CP - split between spouses
SP - parents, siblings, kids take all or split
Issue:
1. Per capita - equal degree of kinship, passes equally to each
2. Per capita with representation - not equal kinship, divided at first generation
Wills Attack Outline
Valid will (formal/holographic, capacity/UI/fraud)
Components (integration, codicil, incorp by reference, ind significance)
Revocation (instrument, physical act, codicil, duplicate, operations of law, presumption if will not found, DRR, revival)
Changes to property (specific gift, gen gift, demonstrative gift, residuary, ademption, satisfaction, abatement)
Reasons to bar (slayer, elder abuse, lapse, anti-lapse, omitted child/spouse)
Distribution (intestate succession, terms of will)
CA Clear and Convincing Evidence Presumption/Harmless Error
In CA, if the testator dies after January 1, 2009, and there is a problem as to
1) only one witness signing the will
2) a witness failed to sign in T’s lifetime or
3) the witness didn’t know that they were signing a will
Clear and convincing evidence that T intending document to be will at time of execution, still the will
Will incorporation by reference - independent significance
When a will makes a gift by reference to something that does not exist at the time the will was executed, the reference is valid if it has independent significance
CL Lapse and Modern CA Anti-Lapse
Wills and Trusts
CL Lapse: When beneficiary dies before settlor, the gift fails
Modern CA Anti-Lapse: When beneficiary dies before settlor and they are blood related, bene’s surviving issue will take the gift
Words of survivorship
When a testator uses words of survivorship, it manifests an intent that the gift should not fo to the taker’s issue and will go to the residuary, and the gift is distributed according to CA intestate succession (link to anti-lapse)
Omitted child/spouse
Spouse: If a will was executed before marriage or domestic partnership or the spouse was not mentioned, they are entitled to an intestate share unless it was intentional, they were provided property outside the will, or there was a valid contract waiver
Child: A child omitted becuase they were born after the will was executed, was thought to have died, or the T did not know they existed and were left out unintentionally can take an intestate share unless provided for outside the will or a significant part of the estate was provided to the child’s parent
Pretermitted Spouse
Not mentioned in will
Considered pretermitted spouse if
- the will shows intent to ommit/disinherit spouse
- spouse did not waive rights to estate
- testator did not provide for spouse
ok to take intestacy share
Pretermitted Child
If child is not included in will, and will was created before child born, then presumed mistake and allowed to take intestacy share
Child will not take if
- evidence of intentionally not being provided for
- decedent provided for child outside the will
Discretionary Trust
Trustee given complete discretion
Mandatory Trust
No trustee discretion, the trust governs
Alienation in Trust
The bene’s interest is freely alienable unless limited by the trust
Support Trust
Income and principal used to support the beneficiary and creditors cannot reach unless necessity
Spendthrift Clause in Trusts
A spendthrift clause expressly restricts the bene’s power to transfer their equitable interest
No creditors can reach unless if child/spousal support, basic necessities, tax lien holders, but if the beneficiary gets a surplus (more than necessary to maintain lifestyle), creditors can reach the extra amount.
Trustee Powers
A trustee has powers that are expressly granted in the trust, necessary power to act as a reasonably prutent person handling their own affairs, and the implied powers to k, lease, sign, rent, invest, etc.
If there are co-trustees, votes must be unanimous unless stated otherwise
Trustee Duties of Care
FIDM-P
Follow instructions in trust
Impartial - best interest of all present and future beneficiaries
Diversify - adequately diversify investment as to spread risk of loss
Make property productive - pursue all claims for the max amount of income
Prudent Investor Rule - like acting with own property (startups vs. large companies)
Trustee Duties of Loyalty
Good faith (subj) and reasonable (obj) in B’s best interest
Self-Dealing = per se breach, irrebuttable presumption
Trustee Duty to Disclose
Complete and accurate information to the beneficiaries
Trustee Duty to Account
So that trustee’s performance can be evaluated and assessed
Remedies for Trustee Violations
- losses resulting from breach
- beneficiaries can sue and seek damages
- court or beneficiaries can discharge the trustee (will not end trust)
Undue Influence in Trust and Wills
If a beneficiary is part of a will or trust but was part of the making of the will or trust, the court may find that there was undue influence.
Traditionally, the court will look at susceptibility, motive, opportunity, and causation
CA will look at the tactics used, the influencer’s authority, the victim’s vulnerability, and the equity of the result
Confidential Relationship Presumption
1. beneficiary and settlor/testator had a confidential relationship
2. beneficiary participated in executing the will
3. gift to the the beneficiary was unnatural
4. Does not take or takes under intestate succession
Fraud in Wills and Trusts
Fraud is the intentional misrepresentation by the beneficiary, with the intent to deceive, with the purpose of being included in the trust or will.
Inducement: If testator/settlor made the will he wouldn’t have made but for the fraud
Execution: If testator/settlor didn’t know that beneficiary was creating a will or of its contents
Wills - interested witnesses
Rebuttable presumption of undue influence
Codicil
A codicil is a testamentary instrument modifying an earlier will. If valid, it republishes the will date.
- How is it changing og will?
- Is it valid? Holographic/attested
Will Substitute - Deed
Must be valid attested or holographic and merges
Will Choice of Law - CA
If created and valid in another state, valid in CA
Will Revocation by Operation of Law
A will can be revoked at divorce or dissolution of domestic partnership unless there is intent that the will is to survive divorce or dissolution
Will Revival by Republication
Shown by extrinsic evidence
Will Integration
Court will allow integrations if present at the execution of the will and there was intent by physical or nature of language
Will Incorporation by Reference
References existed at the time of execution, with the intent to be incorporated, described in the will
Can make invalid will valid
Classification
Specific - identified easily
General - not specific ($)
Demonstrative - gifts from particular source
Residual - remaining
Abatement
If assets in the estate are insufficient to satisfy outside creditors, the court will reduct the gifts in the following order:
- intestate
- residuary
- general
- specific
Take from non-relatives first, then relatives
Ademption by Extinction
Traditionally, if a specific gift is no longer in existence at the time of death, beneficiary gets nothing. Modernly, the court will try to find ways to give the gift.
Distribution CP/QCP
Surviving spouse owns 1/2 CP at death, dead spouse can dispose through will
