Wills, Trusts, CP Additional

Question 1

mistake in the inducement

Answer 1

innocent misrepresentation, the testator is mistaken as to some extrinsic fact and makes their will based on that erroneous fact.

will is valid, no remedy is available unless the disposition T would have made if not mistaken also appears on the face of the will

Question 2

can you make a holographic codicil to an attested will?

Answer 2

YES

Question 3

incorportation by reference

Answer 3

valid if
1) document exists at the time of execution
2) intent to incorporate
3) writting is described in the will

if the document was not yet in existance at time of execution then valid if
1) will refers to the writting
2) the writing is dated and is in T’s handwriting or signed by T
3) the writting describes the items and recipients with reasonable certainty
4) Property is tangible personal property and not business property
5) total value of items on list may not exceed $25,000, a single item may not exceed $5,000 in value.

Question 4

Pour Over Provision

Answer 4

T may dispose of property by will to an existing inter vivos trust if trust is clearly identified

trust may be revoked or modified after execution

trust may remain unfunded during the testator’s lifetime

Question 5

Contractual Wills

Answer 5

contracts to make, modify, or revoke a will are enforced in CA.

Consideration is required.

CA Statute of Frauds expressly requires that these contracts be in writing.

A contractual will can be revoked by either party if both parties are still alive.

If breaching party dies first → no remedy because P wasn’t harmed (can just change their will)

If breaching party dies second→ the injured beneficiaries may sue the estate to impose a constructive trust on the property they should have received under the contract.
The contract provides a basis for a cause of action against the estate of the promisor,

cannot be used to oppose the probate of a properly executed will that is inconsistent with the terms of the agreement

Question 6

lost will

Answer 6

CA presumes that when a will cannot be found in T’s presence, the will was revoked

Question 7

Ademption by satisfaction

Answer 7

an inter vivos gift will be treated as a satisfaction of a testamentary gify if
1) will specifies deduction for intervivos gifts or
2) T says so in writting contemporaneous with the gift or
3) transferee acknowledges the deduction in writing

Question 8

lapse

Answer 8

if benificiary fails to survive the testator/ intestate their gift fails unless an anti-lapse statute applies

for intestacy the heir must survive by at least 120 hours. no minimum for wills

Question 9

disclaimer

Answer 9

intended benificiary disclaims the gift, irrevokable if
1) in writing
2) identifies T and the interest being disclaimed
3) signed by the benificiary
4) within a reasonable time of T’s death (presumed reasonable if within 9 months in CA)

cannot disclaim after accepting

the disclaiming benificiary is treated as if they predeceased the testator.

Question 10

Bars to benificary getting their gift

Answer 10

• Slayer statute- B feloniously or intentionally kills T
• Elder abuse
• undue influence or fruad
• No contest clause- (in terrorem clause)- will can include a clause that says if a benificary contests the will, they forfeit their right to take under the will if it is deemed valid
  —–in CA, a court will enforce the provision unless the contestant had probable cause to file the contest on grounds of forgery, UI, revocation, fraud, duress, etc…

Question 11

Advancement

Answer 11

inter vivos property given to heirs during the descedent’s lifetime is treated as an advancement of their inheritance (counts agains ttheir intestate share) if
1) descendant says so in a writting contemporaneous with the gift or
2) heir acknowledges this in writting

Question 12

natural parent of child born out of wetlock cannot inherit unless

Answer 12

1) acknowledged the child or
2) contributed to the support or care of the child

Question 13

When can a trustee resign?

Answer 13

once trustee has accepted the trustee cannot resign unless permitted by terms of trust, court, or all benificiaries agree

Question 14

remedies for trustee breaching duty of loyalty to benificiaries

Answer 14

• set aside the transaction
• surcharge- recover trustee’s profits
• may affirm or
• may recover trust property (unless BFP)

Question 15

can a trustee delegate investment?

Answer 15

under the modern rule yes

the trustee must use reasonable care in selecting and monitoring the agent

Question 16

“prefered creditor” exceptions which allow creditors to reach spendthrift trust

Answer 16

• tort judgment creditors
• victem of a felony committed by benificiary
• alimony or child support
• creditor who supplied necessities to benificiary
• government
• settlor is the benificiary

Question 17

Support trusts

Answer 17

directs trustee to pay only as necessary for the benificiary’s support (health, education, maintenance and support)
* Can be mandatory of discretionary
* If the instrument is silent, the standard of support is the beneficiary’s accustomed standard of living.

NOT assignable and CANNOT be reached by creditors even without a spendthrift provision

Question 18

Trust

Answer 18

a fiduciary relationship in which a trustee holds legal title to specific property under a fiduciary duty to manage, invest, safeguard, and administer the trust assets and income for the benefit of designated beneficiaries, who hold equitable title.

Question 19

rights of creditors in trusts

Answer 19

can attach the benificiary’s interest unless
* subject to a valid Spendthrift provision (and not an exception)
* support trust
* discretionary trust - the beneficiary has nothing to transfer and no interest for creditors to reach—the beneficiary merely has an expectancy to be a beneficiary

Question 20

Illusory transfer doctrine

Answer 20

if a spouse makes a unilateral inter vivos transfer of QCP then the other spouse can compel a the holder to restore ½ of the property to the decedent’s estate if….
(1) conveyed for less than FMV of consideration
(2) if the decedent reserved any rights in the property (ex: right to revoke, right of survivorship, right to income)

Question 21

trustee’s duties

Answer 21

• duty of care
• duty to make trust assets productive –> reaosnably prudent investor rule
• Duty to diversity unless they reasonably determine that the purposes of the trust are better served without diversification.
• Duty of loyalty
• duty of impartiality toward all beneficiaries
• Duty to Account
• Duty to Review Trust Property when they take office
• Duty to Separate and Earmark Trust Property—No Commingling
• Duty to Perform Personally (except investments)

Question 22

to whom does a trustee owe duties while settlor is alive?

Answer 22

if the trust is revocable –> only the settlor

if the trust is irrevocable –> only the benificiaries

Question 23

What instruments ommited child/ pretermitted child/ and ommited spouse doctrines apply to?

Answer 23

• wills
• revocable intervivos trusts

Question 24

if there is an ommited child/ spouse issue AT ALL what other topic must you analyze

Answer 24

ABATEMENT- the ommited persons share is taken pro rata from all the benificiaries under the will or revocable trust

Question 25

What to do if a will provision is ambiguous?

Answer 25

If the provision in a will is ambiguous the court should attempt to find the testators intent within the 4 corners of the will
* If the court cannot then the court should admit extrinsic evidence that is probative of the issue of intent

Question 26

republication by codicil

Answer 26

the codicil and the will are read together as if they are a single instument
* any portions of the will which are directly inconsisten with the codicil are revoked, but all other provisions of the will remain in place

Question 27

class gift in a will

Answer 27

a testator may make a class gift to benificiaries who are not identifiable at the time of execution, so long as the class is closed and the benificiaries are identifiable at the time of the testator’s death

Question 28

Acts or facts of Independent Significance

Answer 28

gift is still valid even though the meaning of acts or facts of independent significance can change after execution without following will formalities→ the key factor is whether the act had significance beyond just the will (ex employees of a business)
* Specific Gifts of a General Nature- I leave my car to Bob
* Class Gift Designations– I leave 1000 to each employee of SMART

Question 29

Quasi CP

Answer 29

Quasi Community Property (QCP) is property acquired by a married couple while they were domiciled in a non-CP state that would have been classified as CP had it been acquired under the same circumstances in California.

DURING THE MARRIAGE → With the exception of debt collection, all QCP acquired during the marriage is treated as separate property during the marriage, meaning that one spouse may manage, control, and transfer it without the other.

At DIVORCE → QCP is treated as CP, each spouse is entitled to a ½ interest

At DEATH → treated the same as CP EXCEPT, that the decedent does not have any interest in the surviving spouse’s QCP
* The quasi-CP system gives protection only if the non-acquiring spouse survives the acquiring spouse.

Forigen Real property (RP located in another state)
* divorce–> treated as CP
* at death –> treated under law of the state where it is located

Illusory transfer doctrine applies

Question 30

source rule

Answer 30

Source Rule: to determine the character of any asset, courts will trace back the source of funding used to acquire the property.

Question 31

deviations from 50/50 division of CP

Answer 31

each community property asset MUST be divided 50/50, pro rata division is not allowed unless economic circumstances require it

other diviations are allowed for
* misappropriation of CP by one spouse
* Educational Debts
* Tort Liability from activity NOT for community’s benefit
* Personal Injury Award - A personal injury award is CP but on divorce is awarded to the injured spouse unless interests of justice require otherwise
* Negative Community - When community debts exceed community assets, the relative ability of spouses to pay debt is considered.

Question 32

Unilateral Transfer of CP Property

Answer 32

One Spouse CANNOT make an inter vivos gift of CP without consent of the other spouse → Nonconsenting spouse can void the gift while the other spouse is alive
BUT If gift has not been voided when the donor spouse dies, the gift is treated as a valid testamentary transfer of the donor’s one-half interest in CP.

Question 33

illusory transfer doctrine

Answer 33

if a spouse makes a unilateral inter vivos transfer of QCP then the other spouse can compel the holder to restore ½ of the property to the decedent’s estate if….
* (1) made for less than FMV consideration AND
* (2) the decedent reserved any rights in the property

Question 34

Testamentary Gifts of CP + widows election rule

Answer 34

A married person may transfer their one-half of the CP and all of their SP by will. The surviving spouse owns the other half of each item of CP.

Widow’s election rule - widow has to take the will in whole, If the decedent’s will attempts to wrongfully pass the widow’s one-half interest in CP to a third party, then the surviving spouse must elect between the will and their CP rights.

Question 35

Goods purchased on credit during the marriage

Answer 35

are presumptively community

BUT borrowed funds (and credit purchases) are ultimately classified according to the primary intent of the lender
* To demonstrate that loan proceeds or credit purchases are SP, the borrowing spouse must demonstrate that the lender primarily relied on the borrower’s SP in granting the loan or extending the credit.

Relying on a one spouses credit score doesn’t make it SP because reputation is CP

Question 36

when does the marital econ community end?

Answer 36

Marital Economic Community ends at one spouse’s death or on the date of separation

Date of separation is shown by:
* 1) Intent not to resume the marital relation (only need intent by one party) and
* 2) Conduct consistent with that intent.

Question 37

to change the character of an asset…

Answer 37

transmutation = Must be in writing which expressly declares that change in ownership of the property is being made, and need consent of the spouse whose interest is adversely affected
* Exception: personal gifts of relatively insubstantial value

Question 38

what happens when property is bought during the marrige but taken in 1 spouse’s name?

Answer 38

source rule applies
or
When property is acquired with both CP and SP AND there is no title presumption (did not take joint title) courts will apply the Moore principle.
* Under Moore, ownership share of CP and SP are apportioned based on their respective contributions.
* If tracing is not possible, the entire asset will be treated as CP.

Same outcome if the property had no title at all (ex a painting)–> trace respective contributions

Question 39

How do SP contributions to Jointly-titled CP affect ownership and reimbursement?

Answer 39

spouse dies→ Marriage of Lucas- if one spouse contributes SP to jointly held CP, they are presumed to have been making a gift to the CP
* Ownership → presumed 100% CP absent agreement (no tracing)
* Reimbursement→ NO

At divorce → CA passed anti-lucas statutes
* Ownership → The jointly titled property is still presumed to be 100% CP. Still no tracing of SP used to acquire Jointly titled property BUT…
* Reimbursement→ YES— reimbursement without interest for contributions to down payments, improvements, or payments going to the principal on the mortgage (“DIP”).

Question 40

When a Property’s pre-marriage debt (installment purchase or mortgage) is paid down during the marriage (and title is NOT jointly held)…

Answer 40

pro rata rule - community is entitled to a pro rata ownership of portion of the property
* community’s share is measured by the amount the principal is reduced using community funds. Mortgage interest, property taxes, and insurance are not considered.

Appreciation is allocated in proportion to each estate’s ownership interest.

Question 41

2 ways to trace the character of an asset from a co-mingled bank account

Answer 41

Exhaustion - This requires showing that when the asset was purchased, all community funds in the account had already been exhausted by the payment of family expenses, and therefore the asset must have been purchased with separate funds.

Direct tracing - quick in quick out - they deposited separate funds into the account shortly before making a specific payment (especially if the payment is the exact amount of the deposit)

CANNOT use recapitulative accounting (showing that total family expenses exceeded total community income

Question 42

Business (or Stock Portfolio) owned before the marriage

2 Permissible apportionment methods

Answer 42

(always discuss BOTH)

Pereira Accounting- Pay back SP + interest, and the rest is CP.
* If the spouse’s management ( personal skills and efforts) was the primary cause of business growth during the time period of the marriage then the pre-marrige SP is paid back (with fair interest, 10%) and the rest of the business value is CP
* More likely to apply Pereira if the spouse was making below market salary to grow the business

Van Camp Accounting- - If the character of the company (or good fortune and timing) drove growth of the business and not the spouse’s personal skill then apply Van Camp
* The services of the spouse who is working for the business are valued using the going market salary. Family expenses that were paid from business earnings are then subtracted from that amount.
* (mkt rate of spouse’s job x # of years married) - (family expenses paid x number of years) = CP, the remaining value of the business is SP
* Van camp is more likely if spouse was overcompensated, got bonuses, etc

Question 43

are retirement benifits CP or SP?

Answer 43

Both vested and unvested retirement pensions are CP to the extent that the right to benefits was earned during marriage.
* It is immaterial that benefits are in fact received after divorce, think of it as deferred compensation earned during the marriage

If the covered spouse is not yet eligible for retirement, a decree awarding benefits to the other spouse can take either of two forms:
* “If and when received decree”: If and when the covered spouse receives the benefits, the other spouse gets their share
“Cash out”: This option compensates the second spouse by awarding other assets of equal value

Question 44

is disability pay CP?

Answer 44

Disability pay and workers’ compensation are treated as wage replacement. Thus, the benefits are classified according to when they are received (not when earned).

Question 45

Are employee stock options CP or SP?

Answer 45

If stock option vests (becomes exercisable) during the marriage→ option is CP

If stock option is awarded during the marriage but does not vest until after → then the portion considered CP is determined using a proration rule based on the primary intent of the employer in granting the option
* If primary intent of employer was to reward employee for past services –> deferred compensation → Marriage of Hug Formula
* If primary intent of the employer was to encourage the employee to remain → Marriage of Nelson formula

Question 46

Is Goodwill of a Professional Practice CP or SP?

Answer 46

RULE: To the extent that goodwill is earned during marriage, California treats it as CP.

Goodwill is defined as the qualities that generate income beyond that generated from the professionals’ labor and a reasonable return on capital and physical assets.

Question 47

characterization of education expenses

Answer 47

Education and training acquired during marriage are NOT treated as divisible property.
BUT community gets reimbursement if
* 1) Community funds are used either to pay for education or training or to repay a loan related thereto, and
* 2) The education or training substantially enhances the earning capacity of the party.

equitable defenses to reimbursement:
* Community has already substantially benefited from the education or training (presumed if more than 10 years since degree)
* Other spouse also received a community-funded education or
* The need for spousal support is reduced as a result of education or training

Loans still outstanding at divorce are assigned solely to the educated spouse.

Question 48

creditors rights to CP and SP

Answer 48

The general rule is that a creditor may reach any property over which the debtor has the legal right of management and control
–> creditors of one spouse can reach CP
Generally, CP can be reached for a debt incurred before marriage.
* However, the earnings of a nondebtor spouse cannot be reached for premarital debts if held in a separate account (in which the other spouse has no right of withdrawal) and not commingled with other CP funds.

One spouse’s SP cannot be reached to satisfy the other spouse’s separate debt (except necessities)

After divorce, a creditor cannot reach the ½ in CP that a spouse got who did not incur the debt and was not assigned the debt (so is not personally liable for the debt)