Wills & Trusts Flashcards
Requirements for a valid Private Trust?
(1) There is a settlor with a the capacity to make a trust
(2) Intent to create trust
(3) A trustee exists or is ascertainable
(4) Beneficiaries
(5) Property for the trust
(6) Valid and legal trust purpose
Can one person be both the exclusive trustee and exclusive beneficiary?
No.
When is a promise to create a trust in the future valid and actually form a trust?
(1) supported by consideration
OR
(2) re-manifestation of intent for creation
What is a support trust?
The trustee has no discretion and is required to use the trust, both principle and income, as much as is needed, to provide for the support of the trustee.
What is the standard that must be met for a support trust to be terminated?
All beneficiaries must agree, which can be difficult if some of them are not available or unborn.
What is a discretionary trust?
Trustee has discretion on when, how, what trust assets are to be used.
What is the standard that must be met for a discretionary trust to be terminated?
Abuse of power - when the trustee acts in bad faith, to their own benefit (self dealing), or is dishonest.
What is a spendthrift trust?
Spendthrift trusts protect the beneficiary by limiting spending and preventing the squandering of assets.
Beneficiaries cannot voluntarily or involuntarily assign or otherwise transfer their interests.
What is the standard that must be met for a spendthrift trust to be terminated?
(1) all beneficiaries agree
AND
(2) termination does not undermine the intent of the settlor when creating the trust
Appropriate grounds for removing a trustee?
(1) a substantial change in circumstances
(2) dishonesty
(3) inability to work with trustee
(4) trustee fails to act in accordance with duties
Beneficiaries must be definite. What does this mean?
Beneficiaries don’t need to be specifically identified when the trust is created as long as they are ascertainable when their interests vest.
Can beneficiaries be a class instead of individual people?
Yes, as long as sufficiently definite.
Who takes the benefit of the trust when it fails for lack of definite beneficiaries?
Reverts back to the settlor or their successors
Under what circumstances can creditors of beneficiaries receive payment from a trust?
When . . . .
(1) the beneficiaries are otherwise unable to pay
(2) it is not s spendthrift trust
(3) there is no statutory prohibition to the contrary
(4) the payments do not exceed what is due to the beneficiary (i.e., the interest of the beneficiary is the only thing that can be taken, not the trust res).
When is the Cy Pres Doctrine at issue?
When . . .
(1) the trust has a specific charitable intent, which is no longer possible to satisfy
(2) the settlor had generalized charitable intent when creating the trust
(3) in such cases funds may be allocated to charities that have a similar purpose to the originally indicated charity.
Brief Summary of a support trust?
Trustee must use trust income and principle, to the extent needed, to support the beneficiary.
Brief summary of a discretionary trust?
Trustee has discretion to use or withhold trust assets.
General rule for the termination of a trust?
(1) all beneficiaries must agree
And
(2) termination does not destroy the fundamental intent of the settlor in creating the trust.
What is a trustee?
A trustee receives legal title to property and has a fiduciary obligation to use the trust for the benefit of the beneficiaries.
What is trust merger?
A trust merges and no long exists when the only trustee in some manner becomes the only beneficiary.
What is the common law rule of irrevocability?
Irrevocability of a trust is presumed unless the trust document states otherwise.
What is a revocable trust?
The settlor has the right to amend, cancel, alter the trust.
What is the power of appointment?
The receiver of trust funds has the right to assign benefits / payments to OTHERS as they see fit.
What is the general power of appointment?
The receiver of trust funds has the right to assign benefits / payments to OTHERS OR THEMSELVES (including their estate, creditors, etc.) as they see fit.
What is the special power of appointment?
Receiver of trust funds can only distribute to specific classes of persons which do not include the receiver.
Again, what is an irrevocable trust?
The trustee, settlor, and beneficiaries cannot amend or revoke the trust once settled. The settlor is not allowed to take back the property from the trust.
Who has legal title and equitable title to a trust?
Legal title => trustee
Equitable title => beneficiaries
Requirements of a valid will?
(1) Signed
(2) writing
(3) that is presently intended to create a will
(4) the testator is of the statutory age and has the capacity to create a will (age / able to understand)
When may a document be incorporated by reference into a will?
(1) the document exists before the will
(2) the will sufficiently identifies the document to be incorporated
(3) the will shows intent to incorporate the document that is identified
When can a destroyed will be probated?
When the proponent can show in court . . .
(1) The will was valid
(2) the reason the will cannot be produced to show that destruction was not intended to revoke
(3) the contents of the will
When is there undue influence in the creation of a will?
(1) a party exerted influence of the testator
(2) the influence was sufficient to overpower the mind, intentions, free will of the testator
(3) the will would not exist in its current form BUT FOR the influence
Is it permissible to influence someone when making a will?
Yes. Even repeated nagging is acceptable as long as the influence is not “undue”
What is testamentary capacity?
Simply the ability to understand (1) that they are creating a will, (2) to understand the property at issue, and (3) to understand the nature and relationship of the people that will receive the property.
This standard is lower than the capacity needed to create contracts.
How is property disposed of if 2 people die, how property is to be disposed depends on the order in which they died, and it cannot be determined in what order they died?
Property will be disposed as though each person survived the other.
What is the 120 hour rule?
State specific rule.
A person must survive the decedent by 120 hours or more, otherwise they will not take any property.
Ademption
When a property is devised, but later sold or does not exist before the time of distribution.
What is the UPC replacement rule?
If property is devised to a devisee in a will, but the same property was sold, devisees have the right to any property that was acquired as a replacement.
Explain what Slayer Statutes are?
If someone intentionally and illegally causes the death of a decedent, any right to the decedent’s property is forfeited.
If a slayer statute applies and the person forfeits their rights, how is the property distributed?
The property is distributed as though the “slayer” predeceased the murdered decedent.
Under the common law, does a bequest of stock include shares created by a stock split? Does it include shares created by a dividend?
Split: Yes
Dividend: No.
Under the UPC, does a bequest of stock include dividends?
Yes.
What are the three distribution schemes and how do they work?
(1) Per Capita with right of representation (the majority view)
Property is divided equally at first generation with living representatives.
(2) Per Capita at each generation (growing minority)
Equal shares are divided at firs generation with living heirs AND if a member of the first generation is deceased, their shares will be combined and divided equally to the next generation with representatives.
(3) Strict Per Stirpes
Equal shares are created for living children and for the offspring of deceased children who have living offspring.
What happens when a will is the result of undue influence?
The will is void.
Undue influence over a will occurs when . . .
(1) influence is exerted
(2) that is sufficient to overcome the mind / intention / free will of the testator
(3) the will would not exist BUT FOR the undue influence
Who has the burden to show undue influence?
The person that wants the will to be voided (the contestant)
When is there a presumption of undue influence?
When . . .
(1) there is a confidential relationship between testator and influencer
(2) the influencer / beneficiary was involved with the creation of the will
(3) the terms of the will benefit the beneficiary / influencer to a surprising and unnatural extent.
How is property distributed if a decedent’s will is denied probate, and has no surviving spouse?
If denied probate, property in the will passes through intestacy. I.e., the property goes the decedent’s children and their heirs.
What happens if an estate cannot cover all the claims and satisfy bequests, gifts etc.?
Abatement happens.
What happens to a bequest if the recipient dies before the testator?
The gift fails.
What is an anti-lapse statute? What does it do?
(1) prevents any lapse when a specified beneficiary dies
(2) deceased beneficiary’s heirs will take the property
(3) anti-lapse statutes are used in all states.
What happens if there is no anti-lapse statute?
The property passes intestate.
May a will change a life insurance policy beneficiary?
No. A life insurance policy is a contractual obligation outside the estate.
Holographic will
(1) unattested (proven)
AND
(2) 100% hand-written
