Knaplund Spring 2018 I. Transfer of the Decedent’s Estate: A. Probate and Non-Probate Property: 1. Probate Property: o a. Def: Property that is subject to the D’s will or the laws of intestacy. o b. Other vocab: Personal representative – someone who oversees the winding up of the estate; a fiduciary Executor – a personal representative named in the will Administrator – a personal representative named by the court Devise – only for real property Bequeath – for personal property o c. Statute of limitations re probate of will: i. CPC § 8226(c)(i): proponent has 120 days to petition for the probation of a will after receiving notice of a petition to probate. ii. CPC § 8666(c)(ii): proponent has 60 days after obtaining will to file it iii. Proponent of the will may petition for probate of the will within the later of these time periods. 2. Non-Probate Property: o a. def: assets passed outside of probate using an instrument other than a will Wills and the laws of intestacy have no effect on these assets. o b. Joint tenancy property (or CP with RoS): No interest in the property passes at death; the survivor now owns the whole property. e.g., real property, joint checking account o c. Life insurance o d. Contracts with POD/TOD provisions: POD – money TOD – stock or real property e.g., pension plan naming a survivor beneficiary o e. Inter-vivos trusts: 3. CA probate property avoiding probate: o a. CPC § 13100: If probate assets total less than $150K (after paying debts/spouse), can choose to distribute outside of probate. o b. CPC § 13500: Any assets going through spouse may be distributed without probate. (Universal succession) B. Community or Separate Property? a. Community Property: o Def: not separate property CPC § 28 CP heretofore or hereafter acquired during marriage by a married person while domiciled in this state. o All PP, and RP in CA, acquired by married person while domiciled in another CP state CPC 6401(a) o As to community property, the intestate share of the surviving spouse is THE one-half of the community property that belongs to the decedent under Section 100. b. Disposition: o CPC § 100: At the death of a married person, ½ of the CP belongs to the spouse and ½ belongs to the D. c. Spouses can will away their ½ of CP d. Ways to take as CP o H&W as CP No ROS; Probate Assets; Better for taxes; D’s portion can be willed away o H&W as CP w/ ROS Non-probate; JT; D’s portion cannot be willed away e. IV Gifts of CP o While D is alive, S can recover all back into their CP o After D dies, S can only recover their ½ of CP 2. Quasi-community Property: o a. CPC § 66: Definition Knaplund Spring 2018 All personal property, + RP in CA, acquired by a decedent while domiciled in a SP state, that would have been CP if domiciled here when acquired. Property exchanged for prop in (a). o b. Must die in CA o c. Disposition: CPC § 101: At death, ½ of the QCP belongs to the spouse and ½ belongs to the D. Spouses can will away their ½ of the QCP o d. Sequence: Married couple live in a non-CP state and acquire property Move to CA One of them dies 3. Separate Property: o a. CPC § 770: i. owned before present marriage; or ii. property acquired after marriage by gift or inheritance C. Steps for Distribution of Property: 1. Probate/non-probate o a. Probate property via: i. the laws of intestacy ii. the terms of the will o b. Non-probate via its own terms. 2. Is it SP, CP or QCP? o CP or QCP Surviving spouse/DP gets all o SP Surviving spouse/DP gets either all, ½, or 1/3. 3. Did the D execute a valid will? If yes or maybe, o Capacity: Was T able to understand: that he was executing a will; AND what his property was; AND who his beneficiaries are? o Insane delusion? Mental disorder (delusions/hallucinations) Causation regarding disposition of property. 4. Was the will revoked? o By a subsequent will, or o By physical act o 4a. Does DRR apply? 5. If revoked, was it revived? 6. If no will, go to intestacy. E. Choice of law: Real Property: governed by the law of the situs Personal property: wherever located is governed by the decedent’s domicile at death. Quasi-Community Property: II. Intestacy A. Basics: 1. Intestate def: dying without a will 2. Avoiding intestacy: o a. Have no probate property o b. Die with a valid will 3. Heirs and Transfer of an Expectancy: o a. Heirs: i. No living person has “heirs” (only heirs apparent) ii. Heirs are defined by statute after death Knaplund Spring 2018 iii. CPC § 44: Any person, including the surviving spouse, who is entitled to take property of the D via intestate succession per the Code. b. Issue: CPC § 50: all lineal descendants. o c. CPC § 13: Degree of lineal kinship/ consanguinity: Lineal kinship: Count each generation (but not first person) o e.g., grandparent to grandchild = 2 degrees Collateral kinship: Common ancestor but not direct descendent B. Share of Descendants and Others: 1. Share of the Surviving Spouse/ Domestic Partner o a. Definitions: i. Who is a domestic partner? 1. Same sex or over 62. 2. 18 or older. 3. Not married to someone else. 4. Not related by blood. ii. Who is a spouse? 1. You are either married or divorced 2. “Good faith” belief in marriage inherit as spouse 3. No common law marriage in CA BUT OK if valid in the state of domicile. iii. Same sex marriage: 1. Valid for those married during 2008. 2. Not those validly married in another state. o b. CPC § 6401: Intestate share of surviving spouse i. CP: spouse gets all (their ½ + the D’s ½) ii. QCP: spouse gets all (their ½ + the D’s ½) iii. SP: 1. The entire estate if the D left no surviving issue, parent, sibling or issue of sibling 2. ½ of the estate: o a. if the D only left 1 child or the issue of 1 deceased child; o b. the D has no issue, but leaves a parent/parents, siblings, half-siblings, or nieces or nephews. 3. 1/3 of the estate: a. where the D leaves more than 1 child; b. where the D leaves 1 child and the issue of one or more deceased children. c. where the D left issue of 2 or more deceased children. 3. Share of Descendants: a. Modern per stirpes: o i. If any children survive the D, then the property is divided into as many shares as there are living children and deceased children who have living descendants. o ii. If there are no living children, the estate is divided pro rata at the first generation where there are living takers. o iii. Count: 1. Living at that generation; 2. Dead but left issue. b. Negative Inheritance: o i. CA law does not permit disinheritance. o ii. Any disposition to a pet is void. 4. If no descendants: CPC § 6404: Eschat – the state takes it. 6. Transfers to Children: a. Natural Children: o i. Half-bloods – CPC § 6406: relatives of half-bloods inherit as if they were full bloods. o Knaplund Spring 2018 b. C. Advancements: 1. General: o a. Def: prepayment of the beneficiary’s share during the D’s life. o b. Presumption against advancement: o c. Intestacy only i. CPC § 6409: Advancement requires a writing where the D dies intestate, a gift will only be treated as an advancement when: 1. D declared gift was advancement in contemporaneous writing; OR 2. Recipient acknowledged in writing that it was an advancement (at any time). 3. Value calculated as of death/ receipt (the sooner) OR via the written acknowledgment of D or heir. 4. If the heir dies first, property received is not taken into account when computing their intestate estate (unless agreed otherwise). ii. CPC § 6410: Debt owed to D 1. Only chargeable against the debtor/heir (not the intestate share of anyone else) 2. If the debtor fails to survive D, the debt is not taken into account when computing the intestate share of the debtor’s issue. o a. i.e., if a child receives more money from the child that he would receive in intestacy, this debt does not drop down to the kids. 2. Hotchpot: if there is an advancement: o a. Add, divide, subtract (ADS): i. Add the advancement to total value of the estate. ii. Divide by the number of shares. iii. Subtract the advancement to the beneficiary’s share. E. Disclaimer: 1. CPC § 282: Effect of a disclaimer o a. An heir or devisee can decline to take the property; o b. Steps: i. Figure out the share they are disclaiming; ii. Treat them as predeceasing the D. o c. Just say “no, thanks”, not “…and give it to ___” because that is a gift o d. Disclaimer’s creditors generally cannot get to disclaimed property, but special rules from IRS and Medicaid III. WILLS: Questions: 1) Did T execute a valid will? 2) Was it revoked? 3) Who gets D’s Probate property B. Revocation/Revival of Wills: 1. Revocation By a Subsequent Will or Physical Act CPC § 6120: o a. Acts constituting revocation: i. burned, torn, canceled, obliterated, destroyed, 1. the act must touch the words of the will. ii. with the intent to revoke; iii. by either: 1. The T, or 2. Another person in T’s presence and at T’s direction. o If they instruct L to destroy but leaves before they do, it is not revoked If pieces are found, probate and sue for malpractice o Over phone or skype does not count as “in presence” o iv. May revoke in part or in whole. Knaplund Spring 2018 o o o v. Writing “void” over a provision will revoke the provision because it touches the words of the will court is more willing now to accept vague language for revocation than in the past b. Duplicates: Revocation of a will also revokes the duplicate (CPC § 6121). Revoking a photocopy by physical act does not count. Photocopy is not a duplicate original because T would not expect it to have the same legal significance as a duplicate original (Laurman) c. Second will revoking the first: i. Where the subsequent will expressly revokes or is inconsistent; ii. In part or in whole; iii. The amendment will be treated as a codicil. iv. The words “canceled, date, signature” in the margin of the will have been interpreted to be a revocation by subsequent holograph. d. Common law presumptions re revocation (I have stated them as the law stands in CA): i. Overturning common law: Destroying an amendment/codicil does revoke the original will but per CPC § 6123(a), the part revoked by a codicil stays revoked even after the codicil is destroyed (unless T makes statements to the contrary). ii. Good CL: Rebuttable presumption that revocation of the original will revokes all the will’s codicils. iii. CPC § 6124: 1. Where the will was in T’s possession prior to death; 2. And T was competent prior to death; 3. And you cannot find the will after T’s death; o a. Nor a duplicate original o b. Duplicate original = T physically signs two separate copies; each of which is witnessed and signed by the witness NOT a photocopy. 4. Presumption is that the will was destroyed with the intent to revoke. iv. If it cannot be proven that the T made the mark with the intent to revoke, 1. If the will was last in T’s possession; 2. And T had capacity until death; 3. And the will is found with marks on it after death; 4. Presumption arises that T made the marks with intent to revoke. 5. NOTE: this assumes that this is an attested will; for holographic will, T may make changes, additions, and deletions without resigning the will. v. NOTE: if T was in possession of the will; had T capacity, and you cannot find it after T’s death, BUT there is an extant duplicate, presumption iii does not take. 2. DRR: a. Elements: o i. Valid revocation, o ii. Involving a mistake of law or fact. o iii. Either: 1. Law: An alternate disposition that failed; or 2. Fact: Mistake recited in the revoking instrument. a. Exception – only extrinsic evidence permitted is where the drafting attorney says there was a mistake of fact. b. Mistake of fact can be a mistake about someone’s death, but for a child’s death, use the statute below. o iv. What are the choices? 1. Let the revocation stand, or 2. Cancel the revocation. 3. (Cannot probate the failed will – e.g., the thing you wrote in thinking this would be a valid amendment) o v. Doctrine of presumed intent – choose the alternative that approximates T’s intent (as expressed in the failed instrument). 3. Revocation by Operation of Law: o 1. CPC § 6122/6122.1 (adds DP): a. Sequence: Knaplund Spring 2018 i. Execute will or revocable trust providing for spouse/DP o (this may be done before marriage) ii. Divorce iii. Death without changing will/trust b. Result: i. Revoke the bequest to ex-spouse or DP by operation of law (i.e., treat the spouse as predeceasing T) ii. Estate of Jones: this also may revoke bequest to step-daughters (as a contingent beneficiary) depending on the nature of the relationship as revealed by extrinsic evidence (even though the statute does not say this). o Looking a the intention of the will, not the construction of the statute Knaplund Spring 2018 4. Revival of a Revoked Will: o a. CPC § 6123: i. CPC § 6123(a) - Does revocation by physical act revive earlier will? 1. Where will 2 (if effective) would have revoked will 1 in whole or in part; 2. And will 2 was revoked by physical act; 3. Will 1 is still revoked, unless: a. It is evident from the circumstances of the revocation of will 2 or from T’s statements (at the time or later) that T intended will 1 to take effect. b. Extrinsic evidence OK re the revival of will 1. ii. CPC § 6123(b) – Does revocation by subsequent will revive earlier will? 1. Where will 2 (if effective) would have revoked will 1 in whole or in part, is revoked by will 3, the will 1 is revoked, except to the extent will 3 says it should take effect. a. No extrinsic evidence permitted. C. Components of a Will: CPC § 88: A will includes codicils and any testamentary instrument that appoints an executor or revokes or revises a will. 1. Integration of Wills: o a. Your will consists of: 1. All papers physically present at the time of execution; 2. That you intend to be your will. 3. Does NOT need to be physically attached. (Might need evidence that the paper not signed was physically present at the time of execution) Usually used as a negative thing rather than a positive thing 2. Republication by Codicil: o a. Def: 1. Republication: the entire will is re-dated as of the date of the codicil. 2. Codicil (refresher): a testamentary instrument that does not make a complete dispensation of the T’s property. o b. Effect: Conclusive presumption that anything not changed is republished. 1. E.g., appointing an executor republishes the entire contents of the original will. 3. Incorporation by Reference: o a. CPC § 6130: i. A writing ii. in existence when the will is made, is incorporated by reference if iii. the language of the will: 1. Manifests this intent; and 2. Describes the writing sufficiently to permit its identification. (These last 2 elements are loose) iv. NOTE: combination of this and republication by codicil (the writing will be incorporated if written before codicil). o b. CPC § 6132: Tchotchke Statute: i. Where an unrevoked will refers to a writing; ii. Made before or after will executed; iii. The writing refers to things (less than $5K in value each, less that $25K total); iv. Dated and in T’s handwriting or signed by T; 1. Or the intent of the T can be divined. v. The writing describes the items and recipients with reasonable certainty. vii. Definitions: 1. Tangible personal property: articles of personal or household use or ornament. 2. Legal tender is not permitted; but OK if the coinage is kept for historic or artistic value. 4. Acts of Independent Significance: o a. CPC § 6131: i. Will may dispose of property referring to ii. Acts that have significance apart from their effect upon a will, Knaplund Spring 2018 1. Including another person’s execution/revocation of a will. 2. E.g., employees of firm at death. iii. Acts may occur at any time We allow extrinsic evidence to ID who gets the property or what they get if they are identified by reference to acts or events that have a lifetime motive or significance apart from their effect on the will. E. Construction of Wills: 1. Four Corners Rule: CPC § 21102: o a. Cannot admit extrinsic evidence to contradict the will, but may introduce extrinsic evidence to explain ambiguous language. i. In order to introduce extrinsic evidence to explain something in the will, must show that the words of the will are ambiguous. ii. Where the words of the will are clear, we will not “reform” the will. o c. Def: reformation: equitable rule that correct a mistaken term to reflect the T’s intent. o d. Patent v. latent mistakes: i. Patent: on the face of the will. ii. Latent: hidden mistakes. iii. CA does not discriminate between patent and latent ambiguities/mistakes. 2. Mistakes or Ambiguous Language in Wills: o a. Basic rule: Wills law does not fix mistakes. o b. Def: ambiguous: reasonably susceptible to two or more meanings. i. NOT a term defined in statute. o c. Examples of latent ambiguities for which the court will typically admit extrinsic evidence: i. Equivocation: 2 or more people match the same description in a will; ii. Personal usage: an idiosyncratic naming practice; iii. False description: where no one meets the entire description. o d. Steps: i. Is the language ambiguous (reasonably susceptible to two or more meanings)? 1. If latent, is there equivocation, personal usage, or a false description? ii. If no, no extrinsic evidence. iii. If yes, extrinsic evidence permitted. Is this right? F. Post-execution events: 1. Death of a Benefactor: o a. Lapse: CPC § 21109: i. Def: Where a bequeath goes to someone who does not survive the T, the bequeath lapses. Either: 1. Beneficiary dies before transferor, or 2. Transferee is dead when instrument executed, or 3. Individual is treated as failing to survive the transferor (e.g., murderers, disclaimers), or 4. Transferee fails to survive to the date stipulated by the instrument (by C&C evidence), or 5. The transferee is a pet. o b. CA Anti-lapse: i. CPC § 21104: Applies to revocable at-death transfers: 1. Will; 2. Revocable IV trust 3. Life insurance (if revocable) 4. PoD/ToD account 5. NOT: Irrevocable IV trust. ii. Ant-lapse def: for certain types of people, if the taker fails to survive and leaves issue, the issue take unless: 1. the instrument expresses a contrary intent, or a. E.g., “If A survives . . .” o “To all my living . .” o “If A outlives me by 5 years” 2. alternative disposition. iii. CPC § 21110: 1. Specific or general bequest: Knaplund Spring 2018 a. Def: o 1. Specific bequest: “I leave my boat to A” o 2. General bequest: “I leave $100,000 to B” o 3. Demonstrative: “I leave $20,000 from the sale of my house” b. CL: devise lapses and goes to residue. c. CA: anti-lapse if transferee is T’s kin or T’s spouse’s kin (not T’s spouse), d. and they leave issue, the property goes to: i. Issue, otherwise ii. Residue. 2. Residue: a. Def: the remaining estate. o E.g., All my estate o The rest to A and B b. CL: devise lapses and goes to intestacy. c. CA: antilapse if transferee is T’s kin or T’s spouse’s kin (not T’s spouse), d. And they leave issue, the property goes to: o i. Issue, otherwise, o ii. Other residuary beneficiary, if none, o iii. Intestacy. 3. Class gift: a. Def: have a class label such that you don’t know how many shares there are until T dies. o i. Class buster = named and numbered b. CL: devise does not lapse (it goes to those still alive in the class). c. CA antilapse nevertheless applies where transferee is T’s kin or T’s spouse’s kin, o i. Except if class member dead at the time of execution, and o ii. This was known to T (dinner party rule). d. and they leave issue, then goes to: o i. issue, otherwise, o ii. to remaining class members (in proportion to their shares), if none, o iii. specific/general residue o iv. residue intestacy 4. NOTES: a. if anti-lapse fails (e.g., T is not kin/has no issue) the CL rules apply. b. The issue take per modern per stirpes. c. The party whose claim is dependent on survivorship has the burden of proof by C&C evidence (CPC § 21109(b)). 2. Changes in Property Following Execution: o a. CPC § 21105: the will passes all property on death, including that acquired after the execution of the will. o a. Ademption by extinction: i. Def: where the will devises something, but it is not in the estate at death. ii. Ademption only applies to specific bequests. o b. General, demonstrative, or residual devises do not adeem: CPC § 21117: i. Def: specific: transfer of identifiable property. 1. Usually has the word “my” 2. E.g., My car, all the money in my Wells Fargo account, my IBM stocks. ii. Def: general: transfer of general assets. 1. Are not specific items in T’s estate, and 2. Are available on the open market. 3. E.g., 100 shares of IBM stock, $1000. iii. Def: residual: 1. Transfer of the property that remains in the estate after all the specific and general gifts have been satisfied. 2. E.g., “all my property,” “The rest of my property,” “3/4 of my property to A, ¼ to B.” iv: Def: demonstrative: Knaplund Spring 2018 o o o o o o 1. A general gift that specifies the fund from which the transfer is to be primarily made. 2. E.g., $1000 to be funded from the sale of my house. 3. Result: a. Look to fund the gift first from the sale of the house; b. If no house, fund from the rest of the estate. c. Specific gifts adeem: CPC § 21133: i. The transferee has the right to the specifically devised property, but if it does not exist, it adeems. ii. But the transferee is nevertheless entitled to amounts unpaid at death, e.g.,: 1. Any balance of purchase price; 2. Amounts from eminent domain award; 3. Proceeds from insurance; 4. Proceeds from foreclosure. iii. (Any money T received prior to death becomes part of the estate, not the specific gift). c. Exceptions to avoid ademption: i. Classify the gift as a general gift (a mustang, rather than my mustang). ii. CPC § 21134: 1. Where the specific gifts were sold/mortgaged by a conservator/agent acting with a durable PoA for an incapacitated principal, OR 2. The conservator receives the insurance payout, 3. the transferee has the right to the money equivalent of the gift. d. Stock splits: i. Def: where 1 share becomes 2 or 3 shares. ii. CPC § 21132: 1. If T gave interest in securities, 2. And the stock splits after execution, or 3. The stocks are now called something else as a result of merger, 4. The transferee gets all of the resulting shares. 5. This applies to both specific and general bequests of stock (“my” does not matter). e. Satisfaction: (Similar to advancements) i. CPC § 21135: 1. Property given by T during his lifetime to a person is generally NOT treated as the satisfaction of an at-death transfer, unless: a. The instrument provides for the deduction, b. T declares it is in a contemporaneous writing, OR c. Transferee acknowledges in writing, OR d. The property is the same property as a specific gift. 2. Value is fixed as of the time of possession or death (whichever sooner). OR a value expressed in a CONTEMPORANEOUS writing is conclusive. 3. If the transferee dies before T, the gift is treated as a full or partial satisfaction, unless a contemporaneous writing provides otherwise. (I.e, opposite of advancement). f. Exoneration of liens: i. CPC 21131: No right to exoneration 1. A specific gift passes the property transferred, 2. subject to any mortgage, lien, deed. 3. Unless there is very specific language to the contrary. 4. A directive to the executor to “pay all my debts” is not specific enough. g. Abatement: i. Def: where the will gives away more stuff than is in the T’s estate (after the payment of taxes and debts). ii. What goes first? 1. CPC § 21400 – Whatever the will says 2. CPC § 21402: the remainder of the property is wiped out, pro-rata, by class (CPC § 21402): a. intestacy (if there is no residuary clause or it is ineffective “the rest to my dog”), b. residuary gifts, Knaplund Spring 2018 c. general gifts to non-kin, d. general gifts to kin, e. specific gifts to non-kin, f. specific gifts to kin. (kin = anyone who would take in intestacy) 3. Annuities and demonstrative gifts are considered specific if satisfied in the fund or property specified in the gift, and general otherwise. F. Restrictions of the Power of Dispositions: 1. Basics: o a. Definitions, revisited: i. Community property: 1. Not separate property; 2. Property acquired during marriage that is not a gift or inheritance to one spouse. 3. At acquisition, the property belongs ½ to each spouse. 4. CPC § 100: at death, ½ of the property goes to each spouse (absent some other agreement). 5. There are no limitations on recapturing your ½ of CP property that the spouse gave away. ii. Quasi-community property: CPC § 66: 1. Personal property, wherever situated. 2. Real property in CA acquired by a D domiciled in a SP state, that would have been CP if D had lived in CA at the time. 3. The stuff you acquired in exchange for the above. 4. DIFFERENCE from CP – during life, the QCP belongs to one spouse or the other. 5. CPC § 101: at death, ½ of the property goes to each spouse (absent some other agreement). 6. BUT the order of death matters: a. if the non-acquiring spouse dies first, cannot will away the property, because has no interest in it. b. If the acquiring spouse dies first, they can will away their ½ of the property. iii. CPC § 102: Spouse’s Right to Recover QCP: 1. The surviving spouse may retain their ½ of the QCP if: a. D died in CA; AND b. D made the transfer to someone other than the surviving spouse for little or no consideration; AND c. The spouse did not consent in writing; AND d. D retained some kind of rights in the property (e.g., possession, JTROS, trust). o b. Tax consequences: i. There is a huge tax advantage in holding property as CP with ROS, because at the death of a spouse, both halves of the property “step up”, 1. E.g., CP: H uses marital earnings to buy a CA house for $100K taking title in CP with RoS. At H’s death, the house is worth $400K BOTH the W’s and the H’s share step up to this value. When W sells the house for $400K, taxable gain is $0. 2. E.g., SP, H uses marital earnings in NY to buy a NY house for $100K, taking the property in JT with RoS. At H’s death, the house is worth $400K H owns ½ on death, his share steps up to $200K; the wife’s ½ share does not step up and is still worth $50K. W sells house for $400K, taxable gain is $150K. o c. Disposition of community, QCP, SP: 2. Waiver: o i. CPC § 141: the surviving spouse may waive rights in 1. Intestate property, 2. Property from a will (that is executed before the waiver and not republished). ... 7. taking CP or QCP against the D’s will, Knaplund Spring 2018 8. Right to take statutory share of an omitted spouse, 9. To be appointed personal representative 10. Interest in nonprobate transfer on death property. 11. NOTE CPC § 145: a waiver “of all rights” is all of the above. o ii. CPC § 142: Requirements for a waiver: 1. In writing, 2. signed by the surviving spouse 3. Enforcement like K, but 4. Lack of consideration not a defense to enforcement. o iii. CPC § 143: The waiver is enforceable unless the surviving spouse proves: 1. No fair and reasonable disclosure prior to the signing of the waiver; OR 2. Surviving spouse not represented by independent legal counsel prior to signing. NOTE: spouses are fiduciaries and subject to the highest standards of fair dealing. o iv. CPC § 144: Waiver enforceable anyway (regardless of § 143) if: 1. It is a fair and reasonable disposition of the rights of the surviving spouse; OR 2. The surviving spouse should have had an adequate knowledge of the property. 3. BUT if the waiver is unconscionable at the time of enforcement, the court may refuse to enforce the provisions. o v. Altering, amending, or revoking a waiver: 1. CPC § 146: only by subsequent written agreement signed by both spouses. 3. Election: o a. Spouse can force the other spouse to choose between: i. Taking under the will; ii. Keeping his/her share of CP. 4. Spouse Omitted from Premarital Will: o a. CPC § 21610: Share of omitted spouse: i. If D fails to provide for a spouse in either a will or revocable trust, ii. And they were married after the execution of the will or revocable trust, iii. The omitted spouse shall receive a share in D’s estate consisting of: 1. ½ the CP that belonged to the D; (i.e., the surviving spouse will now have all the CP) 2. ½ of the QCP belonging to the D; 3. A share of the SP equal in value to the share the spouse would have received if the D had died intestate (but capped at ½) i.e., spouse will get ½ or 1/3 depending on the number of kids the D had o b. CPC § 21611: Where the omitted spouse does not receive a share: i. Where D’s failure to provide was intentional, and the face of the will says this; OR ii. D provided for the spouse by some other transfer outside the estate (IV gift, beneficiary on life insurance, JT) and there is some evidence (any kind) that D intended this in lieu of a provision; OR iii. a valid agreement per §§ 40-47. o c. CPC § 21612: Property to share the spouse share: i. Intestacy; ii. Beneficiaries in proportion to value (except for specific gifts for which it would frustrate D’s particular intent). 5. Child (not issue) Omitted from Will: o a. CA provides for an omitted child in 3 situations: i. Where the child was born/adopted after execution of all the testamentary instruments; ii. T erroneously believed child was dead; iii. T was unaware of child’s birth. o b. CPC § 21620: Share of an omitted child: i. If D writes will or revocable trust with no provision for omitted child; class gift “to my children” is not omitted. ii. Child born/adopted; iii. D dies without amending/republishing will; iv. Child receives the share they would have received under intestacy. o c. CPC § 21621: Omitted child gets no share if: i. D’s intent to omit is stated on the face of the will; OR Knaplund Spring 2018 o o ii. D devised all or most of the estate to the other parent of the child; OR iii. D provided for the child in some other way and intended this to be in lieu of a provision in the will or revocable trust. d. CPC § 21622: Unknown child or child believed to be dead i. may be born before the will executed ii. the child will receive the share they would have under intestacy. e. CPC § 21623: Where does the share of the estate come from? i. Intestacy; ii. Beneficiaries in proportion to value (except for specific gifts for which it would frustrate D’s particular intent) TRUSTS Definition: A trust is when someone (trustee) holds property for the benefit of another (beneficiary). Nature of a Trust: Nonprobate property. o Trustee owns as fiduciary, not as individual Trustee holds legal title. Beneficiary holds equitable title (beneficial interest) Four Reasons Why Trusts are Our Friends: (This is mainly for IV Trusts): Avoids probate (IV trusts) and publicity of estate’s assets o Very good when you own real property in multiple states (avoids going to court in 3 jurisdictions). Provide for kids/grandkids while allowing spouse to have a life estate Manage Assets for minors or incompetent persons o This way, the trustee manages the estate, & avoids court appointed guardian Manage Assets to protect trust from creditors/abuse of person receiving portion of estate o Reasoning: legally it’s not the beneficiary’s until he gets it OR has the right to get it. Common Trusts: Testamentary trusts: o Created in will at death o Always irrevocable. o Always a deed of trust (because settlor cannot be the trustee) Inter vivos trust – created within the settlor’s life. o 1. May be a declaration or a deed of trust: Declaration of trust – settlor is the trustee Deed of trust – someone else is the trustee o Presumption of revocability [when trust is silent] Majority (CL): irrevocable (Treated like a gift) Minority (CA, UTC): revocable Note: a revocable trust does not have the same tax consequences b/c it’s not treated as a “gift.” Declaration vs. Deed of Trust: (NOTE: Both can be either oral or written) o Declaration of Trust=settlor (AKA grantor) is the trustee o Deed of Trust=settlor is NOT the trustee Revocable trusts: o Irrevocable on death of Grantor. Irrevocable trusts: o Immediate tax consequences. Parties to a Trust: Settlor/trustor/grantor: person who created the trust. Knaplund Spring 2018 Determines the type and terms of the trust Can be trustee, beneficiary, and grantor, so long as 1. he’s not the sole beneficiary, OR 2. there is a third party trustee (in which case he would just be grantor and beneficiary). Trustee: holds legal title for the benefit of another. o Trustee is a fiduciary holding legal title for another o Duties: Duty of loyalty to beneficiaries (self-dealing, conflicts of interest; maintain & render accounts). Duty of prudence. Duty of impartiality (not to favor one beneficiary over the other). Duty not to comingle trust property with personal property. Duty to account to the beneficiaries. o Trustee is personally liable to the beneficiary in the case of breach. o Creditors of trustee cannot go after the trust o Trustee can sell trust property at their discretion, so long as they keep their fiduciary duty. o Trust will not fail for lack of a trustee. Ordinarily, the court will ask the executor to be the trustee, but they do not have to say yes. Beneficiary: hold equitable title and receive benefit of trust. o Two Types of Beneficiaries: 1. Income Beneficiaries (life estate): eats away at the income Right to use and enjoyment of the prop during their life 2. Principal Beneficiaries (remainders) Have a PRESENT interest, but not a POSSESSORY interest o Can hold the trustee to account. o Trust Pursuit rule TE gives trust property to her sister If BE wants to get the family house back, they can because it was a gift If BE wants money for the stock, they can TE sells Blackacre without permission and buys Whiteacre BA is gone, you can only get $$ for value of land or WA o o Elements of a Trust: Intent: An intent to transfer property to someone to hold for the use and benefit of another. Knaplund Spring 2018 o There is no magic language. Lux v. Lux: (“real estate should be maintained for the benefit of my grandchildren”) o Trust created where: Grandchildren were minors; Property to be retained for a long amount of time (not usual for an executor). Jimenez v. Lee: (stock for grandchildren’s educational needs to dad “as custodian”) o Trust created where: Saving’s Bond transferred to dad for benefit of daughter. Intent for trust was clear regardless of the wording o Custodianship v. trust: For custodianship, need magic language: “To x UTMA for y” Custodianship, SoL runs from minor’s adulthood. Trusts, SoL runs from full and fair accounting to beneficiary. Custodianship has less onerous duties. If no intent manifested (or one of the other elements fail) what is it? o Custodianship under UTMA – must use these magic letters. o Precatory trust: Testator indicates a “wish” or a “hope” or “on the understanding” that the money will be used for some purpose, but without a clear intent to create a fiduciary relationship. Precatory trust v. trust: “It is my wish & desire that Anna mail parcels of food to USSR.” o No res (not current food in pantry). o Precatory trust – wish & desire. o Equitable charge: Def: a debt in a will, a quid pro quo, taking the estate on the condition that . . . No trustee/fiduciary relationship is created; no equitable interest in the property. Relationship is akin to that of a debtor/creditor (legally binding obligation). No need to have the res separable. Unthank o Gift: Elements: Intent to give the property NOW; Delivery of the property to the donee; o Actual – CL rule: must be delivered if delivery is possible. o Symbolic – e.g., written instrument that is symbolic of the item. Must say “I give to you” not an indication that will give in the future but can gift interest in future profits because the interest is now even though the profits don’t exist, so long as it is in writing (this is symbolic delivery) o 3. Constructive – some means of obtaining/accessing the object (safe deposit key, map). Acceptance by the donee (this is presumed where the donee is silent; not at issue unless there is outright rejection). Hebrew University v. Nye (“gift” of books not yet sent upon donor’s death – had she created a trust with herself as trustee of the books?) RULE: no intent to create a trust where the T kept calling the books a “gift” The press release and memos were symbolic delivery o Resulting Trusts: Not a trust; a remedy. Where facts and circumstances show that a person had the intent to hold equitable title to property although legal title is in the hands of another. THE CLAAAAWWWWW….. Resulting trust operates to move the property back into the estate. Two types: Express trust fails or is incomplete; o E.g. fails: To Union Bank in trust for my dog Roxy. Knaplund Spring 2018 o o d. Res: o a. Resulting trust is how we get the property back from Union Bank. o E.g. incomplete: Pay all the income to X while alive (what happens when she dies?) ii. Purchase money resulting trust. o 1. E.g., A buys house and takes title in the name of B, on B’s oral promise to reconvey to A. a. The oral promise may be equitably enforced. Constructive Trust/ oral trust of real property: (how is this different from a purchase money resulting trust?) Equitable remedy a court imposes to prevent unjust enrichment. a. Oral trusts are not permitted when there is a disposition of real property (due to the SoF), but there are three situations where an oral trust turns into a constructive trust for the benefit of a third party. Fraud or duress (transferee lies to the transferor, saying they will give back the property). Confidential relationship; or o 1. Close relationship; and o 2. Some form of dependence. Transfer made in anticipation of the settlor’s death. (e.g., where I transfer property to A on the oral promise that A will will it to B on A’s death. A refuses.) When the trust is for the benefit of the grantor, only exceptions i. and ii. are applicable. These are a form of equitable relief, so the parties must enter the transaction with clean hands (Pappas). E.g., O to A on an oral promise that A will pay income to B, then convey property to C. If natural object of her bounty, it is presumed a gift and look to exeptions. If not related, try a PMRT i. Trust must have an identifiable, segregable interest in property Must be able to identify what the trust property is) o ii. Brainard v. Commissioner: (is oral declaration to give future stock profits a res?) RULE: An intent to give future profits from stock does not create a res. Note: if there had been some transfer, even a dollar, there would have been a res. Where there is no res at the time of the declaration of trust, the settlor must manifest anew his intent to create a trust when the res/trust comes into being. Putting the stocks into the trust and paying the profits from that to A would be acceptable, but cannot just put the profits into the trus o iii. Speelman v. Pascal: (res is proceedings from a future theater show) RULE: Delivery of the paper created a valid, present (symbolic) gift of a res (i.e., this kind of property can also be the res of a trust. o iv. Unthank (promise to pay money in installments as an annuity) RULE: Because there is no identifiable property to generate the annuity, no res. Unenforceable promise because bo indication of where the money would be coming from Court could have calculated equivalent of 200 for life and set an amount but they won’t do that Proper parties: o Requirements: Trust must have one or more ascertainable (human?) beneficiaries; To whom the trustee owes a fiduciary duty; and Who can hold the trustee to account. Beneficiaries may be unborn or unascertained at the time the trust is created, but must be ascertainable when the trust becomes effective. Class terms are ok so long as there is a statutory or similar definition for the class o Clark v. Campbell: (trust to “friends”) RULE: The beneficiary must be sufficiently identifiable to come to court and claim the benefit of the request. Majority: Invalid; here “friend” has neither a legal definition, nor a definition in the will. Minority: Valid; name the trustee as an individual titled with a “power of appointment.” o Power of Appointment: way to avoid lack of proper parties. Someone with the power of an appointment cannot be a trustee; Not a fiduciary, not personally liable. Fill in the blank o Honorary Trusts for pets/gravesites, gravestones: Knaplund Spring 2018 Majority: valid “honorary trust” where there is: Valid purpose pursuant to statute (animals; upkeep of gravestone, gravesite); and Trustee willing to carry out the terms o Trust fails without acceptance. o (but there is no legal duty to carry out the terms of the trust). Writing only required if necessary under the statute of wills or the SoF. Valid for 21 years or life of pet Minority: invalid. Delivery: from a settlor to a trustee. o Is it an IV or testamentary trust? Testamentary (settlor dead, not trustee) – delivery required o If an IV trust, is it a declaration or a deed of trust? Deed of trust (settlor not trustee) – delivery required Declaration of trust (settlor is trustee) – not required o Delivery means: Delivery of the trust property itself; or Delivery of a written trust instrument. Writing: requirements come from wills law and from property law. o Real property transfers require a writing (per the SoF). Generally a deed transferring property from settlor to trustee. o Testamentary trusts require a writing (per the statute of wills). o Where it is not possible to deliver the actual property – need a writing regarding the terms of the transfer. o Semi-secret trust: 1. Def: trust which does not spell out its terms; terms expressed orally to someone. a. E.g., “The rest to X to distribute according to instructions I have provided.” 2. Valid?: a. Majority: the trust fails. Where there is a patent defect or ambiguity (obvious on the face of the will), cannot use extrinsic evidence to resolve the meaning. o Trust fails & resulting trust dumps it back into the estate. b. Minority: trust is valid; extrinsic evidence is admissible to resolve ambiguities in the will. o Secret trust: 1. Def: (1) will conveys to property X; (2) T tells X, and he agreed, to hold the property in tryst for the benefit of the needy. 2. Extrinsic evidence is valid in all jurisdictions (CL permitted extrinsic evidence to resolve latent ambiguities) o CA no longer distinguishes between secret/semi-secret trusts Grantor Trusts: Def: a valid trust in which the grantor has retained substantial control and so the income is taxable to the settlor. o i. E.g. 1, Revocable IV trust paying the income to x to life, then principal to y. o ii. E.g. 2, Retain a reversionary interest of more than 5% (i.e., where there is a contingent remainder). IRS Exception – (1) minor lineal descendent; (2) who has the life estate; and (3) payable to descendent on deal of settlor. o iii. E.g. 3, settlor is trustee, and maintains discretion over who gets the income. 1. Avoid this outcome by: a. Naming as trustee someone else; or b. Use a reasonably definite standard regarding the calculation of payment of income. b. Tax Ramifications of Grantor trusts: o i. Grantor pays the income tax on any income generated by the trust property; o ii. The grantor has made a gift if the trust pays income to a third party; o iii. The trust property will be part of the grantor’s taxable estate when he dies. RIGHTS TO DISTRIBUTIONS FROM THE TRUST: Interpreting the terms of the trusts: Beneficiaries: Knaplund Spring 2018 o Income beneficiaries = life estate o Principal beneficiaries = remainders Mandatory v. discretionary: may be o To whom the payments go (among ascertainable beneficiaries); o How much should be paid; o Both o Relate to either the life estate or the remainder. Discretion of trustees: o under “discretion” of trustee: decisions must be Reasonable (objective standard); and In good faith. o under “absolute/sole/uncontrolled discretion” decisions must be in good faith; Violation only where trustee: has violated trust terms or is being arbitrary regarding the distribution of property. o Duty to adhere to terms of trust & duty to enquire: Court will step in regarding objective terms: E.g., “comfortable support and maintenance” = maintenance of the beneficiary’s station in life. Court will not step in regarding subjective terms. 3. Trustee removal: a. Majority/CL: o only removal for cause (serious breach or unfit to serve); o Or as provided in trust instrument. b. Minority: o i. All qualified beneficiaries (would be a permissible distributee if the trust terminated today; not remote remainders) request a change; and either: 1. Removal best serves their interests; and 2. Is not inconsistent with a material purpose of the trust; and (generally trustee identity not material, except when it is family member) 3. A successor trustee is suitable and willing to serve. o ii. Or the trustee consents to removal. Today, most Jx allow removal with 30 days notice C. Construction of Trusts: Future Interests: Basics: Life estate income from a property for life. Income or enjoyment RP = Rent, crops, right to live there Stock = dividends Cash/ bonds = Interst CANNOT SELL THE PROPERTY!!! Remainder: Last party in line gets the principle property after a life estate; (Labradors) o Vested remainder: Presently ascertainable; Not subject to an express condition precedent. Accelerates into possession on termination of the LE. Not subject to RAP. E.g., To A to life, then to B. o Vested remainder subject to open: Class closes when it becomes a possessory interest. E.g., To A for life, then to B’s kids (B is still alive). i.e., class closes when A dies and B’s kids take possession, even if B could have more kids. Any subsequent kids born after A dies get nothing. o Vested remainder subject to complete divestment: E.g., to A for life, then to B, but if B dies before A, to C. Knaplund Spring 2018 READ COMMA TO COMMA – if it says then to B, this is a vested remainder, not a contingent remainder. C has a springing executory interest (where B’s FS is cut short) o Contingent remainder Not presently ascertainable; or Subject to an express condition precedent. E.g., To A, then to B if B survives A. 4. E.g., to A for life, then to B’s kids who reach 21. B has 2 kids C & D who are 11 & 12. o a. turning 21 is a condition precedent. o b. If A dies immediately, O gets the reversion, C&D have a springing EI (C will divest O when reaches 21, D will partially divest C when he reaches 21). o c. The class of kids only closes when the interest becomes possessory, i.e., when C turns 21. o Reversion: grantor gets property back. O has a reversion unless either: O has transferred a FS; or O has transferred a vested remainder. Even if there are alternate contingent remainders. CANNOT Expressly Create a Rev in a 3rd party This would be a remainder o Executory interests: (Dobermans) Where a future interest divests a preceding estate prior to its expiration. Shifting: EI that divests a transferee upon the happening of a specific event; Springing: EI that divests O upon the happening of a specific event. “I do not have my mitts on the property right now, but the interest is mine right now” Trust F for life, then to H’s heirs; Will residue to J. F dies before H, H has no heirs. J gets FSEL until H dies and has heirs o Heirs have EI, even though unascertained o “Heirs” B & B’s Heirs = To B in FSA B or B’s heirs B = CR; B’s Heirs = CR; O = Rev. To A for life, then to B’s heirs B = nothing; B’s Heirs = CR; O = Rev Disclaiming: o Generally: can always disclaim the interest in a trust, even a discretionary trust where it is not clear what you are disclaiming. o Effect of disclaimer: treat you as predeceased, so the class of our kids closes (i.e., any children you later have will also not receive property). o Strategic Disclaimer (AKA being a jerk) Can disclaim to close a class and cut people out Tax consequences: o Transferability = Taxability o Taxed at death: You will be taxed on death if you have an interest to transfer at death. o Transferable interests: very confusing! E.g., T A for life, then to B, and if B does not survive A, to C. (Interests are created at T’s death) A = life estate B = vested remainder subject to complete divestment C = Executory interest. B dies while A is alive, can she will her interest away? No, there is an express condition. Not part of her probate estate; not taxable. C dies while A is alive, can she will her interest away? Yes, even though it is not a vested remainder You cannot will away an interest contingent on your own survival o Alienation of interest in revocable trusts: E.g., S S for life, then to W for life, then to kids (A, B & C). A dies before S. Can A transfer his remainder? 1. Characterize interests o S = life estate Knaplund Spring 2018 o o W = life estate Kids = vested remainder (because there are kids) subject to open & complete divestment (if they die before S & W die). This seems to violate our assumption #3 that we do not imply a survival requirement; I would have just called it a VR subject to open. How do I know when to do this and when not to? 2. Maj: lapse & anti-lapse not applicable to any trusts o Maj: can transfer remainder. o No implied requirement for survival 3. Minority (CA): lapse and anti-lapse are applicable to revocable trusts. o CPC 21104 – Will and revocable trusts are all testamentary instruments. o CPC 21109 – If you fail to survive, you do not take under the instrument. o Apply lapse and anti-lapse to revocable trusts. o Before S dies, you have nothing under this trust (like a will). o A cannot will the interest away because it lapsed (and anti-lapse applies if he has kids; then the property interest goes to kids). o Must survive grantor o “Heirs” must survive until they get their mitt on the property o Majority/everybody rule Single-Generational Class Stays in one box on the table of consanguinity “to my kids”, “grandkids”, “sibling”, etc. Don’t imply Survival of Grantor o In CA, A revocable trust is a “testamentary instrument” so all beneficiaries must survive until it become irrevocable (usually at T’s death) Multi-Generational Class “To my Descendants” MUST survive named ancestor o In CA, must survive until possession They get a CR subject to survival “Descendants” and “issue” are the only multigenerational terms CA treats “heirs” like “descendants” “To P’s surviving kids” is generally viewed as needing to survive both P & O “But if S dies without surviving descendants” o Multi-gen o CL favors early vesting o If S dies before O, it vests in descendants Rule Against Perpetuities: The Rule: No interest in real or personal property is good unless it must vest, if at all, and all classes must close not later than 21 years after some life in being at the creation of its interest. Charitable trusts are exempt. The future interest is void from the outset if you cannot guarantee it will vest or fail. The remaining interests in the trust are not void. The Steps: When are the interests created? o Will/testamentary trust: when the T dies. o Revocable IV trust: when the trust becomes irrevocable: When the settlor dies; or When the settlor amends the trust to be irrevocable. o Irrevocable IV trust: when the trust is set up. o Deed: when the deed is delivered Characterize the interests and determine which are subject to RAP. o Interests subject to RAP: Contingent remainders. Open Classes Knaplund Spring 2018 i.e. Vested remainders subject to open. Executory interest. o Interests not subject to RAP: Reversions. VR subject to complete divestment. Vested remainders not subject to open. Life estates. Pick a life in being (LIB) o Must be alive when the interest is created. Will = in being at T’s death; Irrevocable trust = alive when trust created. Revocable IV trust = alive when trust becomes irrevocable. o Do not choose someone in an open class. o Choose the person who will have the most effect on vesting. Guarantee: can you guarantee that the interest will: o vest; Will A ____ or die trying? “To B for life, then to B’s N&Ns” Class is dependent on B’s siblings, so if B’s parents are alive, this causes problems If parents are dead, the LIB becomes B’s siblings, who will have kids or die trying and interest is valid o or fail; they don’t have kids or die before going to the moon, etc. o and the class will close o within the life in being + 21 years? 3. RAP Irrebuttable Pressumptions: Fertile octogenarian: o Assumed you will still have more kids no matter their age. Unborn widow: Someone’s unnamed widow/widower: o “To A for life, then to A’s wife, if any, for life, then to B” o Assumed you will marry someone who was note even born yet o is a contingent remainder (because not ascertainable until their death; i.e., at the time the interest is created). o Cannot be the LIB (because may not be alive at the interest’s creation). Rule of alternative contingencies: o If there are alternative contingencies, one of which offends RAP while the other does not, the interests are separated and validated separately (see example f. below). Slothful executor: o “To T’s descendants living upon distribution of T’s estate” o Where the will is probated several years after T’s death (see example g. below) o If there is a true condition precedent for survival after distribution of the estate, we assume the estate will not be probated for life + 21 years. e. Magic gravel pit/war that never ends: o Interests fail when contingent upon events with no set end time. o We assume the gravel pit will never be exhausted and the war will never end Weird Birthday Rule o You actually turn 21 the day before your “21st birthday”, so you must say “when A turs 21”, not “On A’s 21st Birthday” 4. Examples: T A for life, then to first child of A’s to be admitted to the bar. o Interest created on T’s death; o Characterize & Determine: A = LE (no RAP) A’s Kids = Contingent remainder (RAP) T = reversion (no RAP) o LIB: A (not excluded, has most effect) o Vest or fail 21 years after A dies? Vest = when child passes bar (could occur at any time) Knaplund Spring 2018 Fail = all of A’s kids die. Can’t guarantee either of these things within 21 years after A’s death = fail. o Characterize remaining interests: A = LE T = reversion. O A for life, then to B if B goes to the planet Saturn. o Interests created on O’s death; o Characterize & determine: 1. A = LE 2. B = contingent remainder. (subject to RAP) 3. O = reversion. o iii. LIB = B (will have the most effect on vesting). o iv. Guarantee: 1. Interest will vest if B goes to Saturn. 2. Interest will fail when B dies. 3. These events must occur within B’s lifetime. 4. Interest is valid. c. T A for life, then to A’s children for life, then to A’s descendants then living. o i. Interests created on T’s death. o ii. Characterize & determine: 1. A = LE 2. A’s children = VR subject to open in LE (RAP) 3. A’s descendants = CR (because express survival condition) (RAP) 4. T = reversion. o iii. LIB = A (most effect on vesting) o iv. Vest or fail within A’s life + 21 years? 1. A’s kids: a. Class will close within A’s life. b. Valid. 2. A’s descendants: a. Vest – when all A’s kids die b. Invalid – can’t guarantee when this will occur. d. T A for life, then to such of A’s nieces & nephews as live to attain the age of 21. (Assume: At the time of T’s death A is living and has a sister B, and 4 N & N under age 21. Only B can create N&Ns) o i. Interests created – at T’s death. o ii. Characterize & determine: 1. A = LE 2 A’s N&N = CR (RAP) 3. T = reversion. o iii. LIB? B (person who can create N&Ns) o iv. Guarantee? 1. A’s N&N: a. Vest – when they turn 21 b. Fail – die before age 21. c. Valid – these have to occur within 21 years after B’s death. 2. Assumption – B’s parents dead (if they are alive, B is in an open class, cannot be LIB, M&D become the LIB). e. T To my son for life, then to my son’s widow, if any, for life, then to my son’s children, but if no child of my son is alive at the death of the survivor of my son & his widow, then to American Red Cross. (son has kids – vested remainder) o i. Interests created – at T’s death. o ii. Characterize & determine: 1. S = LE 2. Son’s widow = CR in LE (RAP) 3. Son’s kids = VR subject to open & complete divestment; (RAP) 4. ARC = EI. (RAP) Knaplund Spring 2018 o o iii. LIB = Son. iv. Guarantee or fail? 1. Son’s widow = vest at son’s death; fail at son’s death = valid 2. Son’s kids: a. Class closes at son’s death; interest fails at son’s death = valid 3. ARC: (tricky) a. Vests or is destroyed at death of son or widow. b. Widow could die more than 21 years after son dies. c. Invalid. f. T bequeaths to my son A for life, then to A’s widow for life, then upon the widow’s death or upon A’s death if A leaves no widow to A’s issue. o i. Interest created at T’s death. o ii. Characterize and determine: 1. A = LE 2. A’s widow = CR in LE (RAP) 3. A’s issue with no widow = CR in FS (RAP) 4. A’s issue with widow = CR in FS (RAP) 5. T = reversion. o iii. LIB – A. o iv. Guarantee? 1. A’s widow – vest or fail at A’s death = valid 2. A’s issue with no widow – vest or fail at A’s death = valid 3. A’s issue with widow – could vest or fail more than 21 years after A’s death = void 4. T = reversion. 5. Effect of alternate CR doctrine: At CL we wait and see if A has a widow upon death. If he does, kid’s interest is destroyed. g. T T’s descendants living upon distribution of T’s estate (gift may be held void because all descendants may be dead by then) o i. This is a true condition precedent (upon probate of will is not) o i. Interest created = T’s death o ii. Characterize & determine: 1. T’s descendants = springing EI (no reversion because no LE) (RAP) o iii. LIB – T’s kids (huh?) o iv. Guarantee or fail? Assume will not be probated within life + 21. 4. Perpetuities reform (USRAP): a. Steps: o i. Apply CL RAP; if all interests are valid at CL, the analysis is done. o ii. If 1 or more interests invalid at CL, USRAP says all interests are valid for 90 years. F. Charitable Trusts: Elements: Delivery – same; Writing requirement – same; Res – same; o But mortmain (dead hand) statutes limit the percentage amount of property charities can hold. Proper parties: o Usually cannot identify parties; o Should benefit a broad base of people – have a legitimate purpose: the relief of poverty; the advancement of knowledge or education; the advancement of religion; the promotion of health; governmental or municipal purposes; and other purposes that are beneficial to the community. o E.g. trust to provide education for one medical student who practices in small town = valid because the beneficiaries are the community. Knaplund Spring 2018 o o OK to have the trustee choose the particular recipients if the trust just benefits “orphans.” Non-valid purposes: Political party; Pet Intent: o Must intend to set up a trust within a set of permissible purposes Not just to make kids “happy” 100% charitable trusts NOT subject to RAP. o Def – all interests go to the charity; o No remainder in the beneficiary. o If a trust fails as a charitable trust, check if it is a valid private trust, including RAP. o Scholarship for the benefit of O’s family would not fly preference for O’s family would still be charitable (But would not be tax-exempt) o Scholarship for benefit of town is charitable o Trust for “whatever cause the trustee sees fit” is wishy washy, but fine Modification of trust: Restatement/CL: Doctrine: Cy pres (as nearly as possible): o Charitable trusts can go on forever so we could get into trouble here o If property is in trust for a particular charitable purpose; o And it becomes impossible or impracticable or illegal to carry out the particular purpose; UTC/ modern adds wasteful category o And the settlor has manifested a more general intention to devote the property to more general charitable purpose; Restatement – burden is on the party trying to modify (harder to modify); UTC/ modern presumes general intent burden is on the person trying to fight the modification. o Court may modify the trust to carry out the general charitable purpose. o UTC Would allow the removal of a geographical location Could also remove requirement to psend all income (IRS requires a certain % be spent anyway) o UTC allows modification of distributive term i.e. who gets it or how much Try to discern what the now-defunct purpose is, then modify it as little as possible to advance what the settlor intended. Gift over: o Def: alternate beneficiary if the first purpose becomes impossible. CL/Restatement – no cy pres UTC – “factor” regarding the application of cy pres (must be able to argue that the modification is very close to the original or cy pres will still fail). Only actually used cy pres once and it was a work-around No modification? o The property goes back to T’s estate. o If the trust was set up some time age, courts are more apt to modify. Administrative Deviation o Admin terms v. Dispositive terms o Applies to all trusts o Elements 1. Show that original term would defeat of substantially impair trust purpose 2. Due to change in circ. Not anticipated by settlor o Barnes Foundation Could not move paintings and a bunch of other stupid conditions Violation of Equal Protection clause o For a private trust, courts will enforce the discriminatory clause and the trust will fail o For charitable trust, court will refuse to enforce because it is against public policy to give credence to the racist term Standing to sue: Beneficiaries: o With “special interest” – those that are receiving a benefit under the trust that is not available to the public at large. o “Eligible” for benefit – not sufficient. Donor: Knaplund Spring 2018 o Majority: no ability to enforce trust unless you retain some kind of interest in the trust. Do not do this – terrible tax liability. o Minority: yes (executor/estate) may enforce the terms of the trust even where there is no reversionary interest in the donor. Attorney general: all states. IRS Charity with a “gift over” – yes.