T&E Outline
Background on Trusts and Estates:
What is trust and estates about?
-Distributing wealth at death
-Primarily gratuitous wealth transfers at death. No consideration necessary (usually gifts)
-Could be real property, personal property
What is the appropriate estate tax?
2009: 45%, $3.5 million exemption
2010: 0%
What if the govt. set the estate tax at 100%?
-hiding money
-giving gifts in their lifetime
-hiring them as employees
-paying for more of their bills (such as law school)
-ridiculous spending
-might reduce incentive to work
Certain things can't be done in wills (35)
-can't leave your spouse nothing
-can't have provisions that contain illegal activity
-can't have anything that encourages racial discrimination
-can't encourage separation or divorce
Donor's Intention and the Problem of Dead Hand Control:
-The controlling consideration in determining the meaning of a donative document is the
donor's intention. The donor's intention is given effect to the maximum extent allowed by
law.
-Dead hand - dead people reaching out of the grave to attempt to control the current
situation
-Tension:
-The main function of law is to facilitate rather than to regulate.
-American law curtails freedom of disposition only to the extent that the donor
attempts to make a disposition or achieve a purpose that is prohibited or restricted
by an overriding rule of law.
Shapira v Union National Bank (28)
-Father leaves a will for his son stating that in order for his son to receive his estate, the
son must marry a Jewish girl with 2 Jewish parents in the next 7 years. If he does not, the
estate will go to the state of Israel.
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-P attempts to use Shelley to argue that the state's enforcement of this will is in violation
of the 14th Amendment
-The court disagrees stating that it was not being asked to enforce any restriction upon P's
right to marry (they weren't forcing him to marry a Jewish girl, he would just lose the
money)
-P argues that this is against public policy, however the court held that this was a partial
restraint on marriage which the case law held is reasonable.
**Valid unless unreasonable
Definitions:
Probate Property: property that passes through probate under the decedent's will or by
intestacy (court will be involved)
Intestacy -Situations in which the decedent doesn't specify what they want to have
done with their property
-These are the default rules that will apply if no will is left
-Known as intestate, person is known as just decedent
-Personal representative is known as the administrator (named by the court)
In real property - descends to heirs
In personal property - distributed to next-of-kin
Wills -When a decedent determines who is to get his property before his death
-Known as testate or testator
-Personal representative is known as the executor
In real property - devises
In personal property - bequeaths property to legatees
Jurisdiction:
-The relevant probate court will be where the decedent was domiciled at death.
*Exception: if real property is located in another jurisdiction, ancillary administration is
required.
Formal vs. informal probate:
Formal Probate: The court supervises the actions of the personal representative in
administering the estate through a potentially costly and time consuming process.
Informal Probate: The personal representative may administer the estate without
court supervision unless an interested party asks for court review
Nonprobate Property:
-Property that passes outside of probate through a nonprobate mode of transfer
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Nonprobate transfers:
(1) Joint Tenancy - all you need is a death certificate
-bank accounts, brokerage and mutual fund accounts, and real estate are often
held in joint-tenancy
(2) Life insurance - company will pay upon receipt of a death certificate of the
insured
(3) Contracts with payable-on-death provisions
- pension plans, IRAs, 401(k)s
(4) Trusts - inter vivos trusts -doesn’t have to go through court (most common)
Functions of Probate:
Three core functions of probate:
1. provides evidence of transfer of title to new owners
2. protects creditors by providing a procedure for payments of debts
3. distributes the decedent's property to those intended after the decedent's
creditors are paid.
Ways to get around probate:
The following transfers can be done without probate:
-personal property
-automobiles or small bank accounts
-when the estate is small
*Increasingly probate is necessary only for very large estates or to clear title to
real property
Professional Responsibility:
Simpson v Calivas (58)
-P was the son of decedent and sued the lawyer for failing to incorporate the actual intent
of decedent. Lawyer used the term "homestead" in the will rather than specifying
whether it included a house, or the house and the land and the buildings used in the
family business. Although the lawyer's notes showed that the decedent intended to only
leave the home to his widow, the Court interpreted the broad will to give her the home
and the land and buildings. The issue was whether an attorney who drafts a testator's will
owes a duty of reasonable care to intended beneficiaries.
-Court holds that attorney had a duty to the intended beneficiary and therefore could be
sued even though he wasn't technically in privity of contract.
A v B (64)
-Husband and wife go to lawyer to get will done. Husband has other child that wife
doesn't know about but firm does. Firm wants to tell wife about the husband's illegitimate
child and husband wants to prevent them from doing that. Court holds that the firm can
inform the wife for multiple reasons including: RPC 1.6(c), the spirit of the confidentiality
agreement, the Restatement, and ACTEC.
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What happens if the decedent dies intestate?
Definitions:
Testacy - decedent leaves a will that provides for the disposition of her property at death
-Advantages: designate who gets your money, who takes care of your children, who
is the personal representative. Also reduce probate costs and potentially minimizing
taxes.
Intestacy - decedent leaves no will. The probate estate passes by intestacy. (50% of
people die without a will)
Partial Intestacy - decedent leaves a will that disposes of only part of the probate estate;
the part of the estate not disposed of by the will passes by intestacy
Sources:
1. Restatements: created and published by the American Law Institute (this is not
necessarily the majority rule)
2. Uniform Laws: written by the Uniform Law Commission (UPC, UTC)
Intestacy Rules:
Surviving Spouse:
-most states, the spouse gets at least half
-under the UPC,
-in two conditions the spouse gets 100%
-if decedent has no parents and no descendants OR
-if all of decedent's surviving descendants are also descendants of the surviving
spouse and there is no other descendant of the surviving spouse
-three other options (view cheat sheet)
Descendants:
-In all jurisdictions, after the spouse's share is set aside, children and descendants of
deceased children take the remainder of the decedent's property to the exclusion of
everyone else.
-Representation: In all jurisdictions, when one child dies before decedent, leaving
descendants, the child's descendants shall represent the dead child and divide the child's
share among themselves.
*posthumous children - conceived before the decedent's death but born after
-for purposes of inheritance, child is treated as descendant from the time of
conception, not birth
*nonmarital children - all states agree that the child can inherit (most permit
paternity tests if the father)
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*posthumously conceived children - child both conceived and born after death (new
issue with new technology)
-Class gifts: when a person says "children" this can be vague - many times interpreted to
mean descendants
Ancestors and Collaterals:
-In about 1/2 states and UPC, if you have no spouse or descendants - it goes to parents.
-If no spouse, descendants, parents, in all states - it goes to brother and sisters and the
descendants
-Parentelic system:
Brothers and Sisters (and their descendants)
Grandparents (and their descendants)
Great-grandparents (and their descendants)
-Could also use degree-of-relationship system
*UPC and a few states will give step-children the money if there is no one else (however
in-laws are generally excluded)
*At common law, half-bloods get zero. Now, they are treated as whole bloods (except in a
few states where they get 1/2 share)
Janus v Tarasewicz (80)
-Man and wife both had seizures resulting from poisoned Tylenol. Man had a $100,000
insurance policy that went to the wife because she was the primary beneficiary and
survived him by 3 days. Man's mother was the contingent beneficiary who argued that
there was no sufficient evidence to show that wife survived man. (Standard at the time: If
there is no sufficient evidence as to who died first, the beneficiary is treated as
predeceased.)
-The trial court found that the wife had survived the man and gave the money to her
estate. On appeal the COA held that the trial court's finding was not against the manifest
weight of the evidence.
What happens if there are simultaneous deaths?
Old Rule - If "there is no sufficient evidence" of survivorship, the beneficiary is deemed to
have predeceased the donor
UPC - claimant must establish survivorship by 120 hours (5 days) by clear and convincing
evidence.
*This rule applies even if the reasons for the deaths are unrelated events
*When people actually specify in a will in this circumstance: they usually pick 30 days, 60
days, or 90 days
What are the competing systems of representation?
English Per Stirpes: (about 1/3 states)
-Vertical equity - each line of descent treated equally. The children of a deceased
descendant represent their deceased parent.
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Ex: A has two sons B and C. B has one son D. C has two sons, E and F. B, C predecease A.
-D gets 1/2 (B's share) and, E and F get 1/4 (split C's share)
Modern Per Stirpes: (about 1/2 states)
-Each line of descent treated equally beginning at first generation with a living taker. (If
any children survive, this is identical to English)
-If not, the estate is divided equally at the first generation in which there are living takers.
Ex: A has two sons B and C. B has one son D. C has two sons, E and F.
-D gets 1/3, E gets 1/3, F gets 1/3
1990 UPC: (per capita at each generation - used in 12 states)
-Horizontal equity - each taker at each generation treated equally ("equally near, equally
dear")
-The initial division of shares is made at the level where one or more descendants are
alive, but the shares of deceased persons on that level are treated as one pot and are
dropped down and divided equally among the representatives on the next generational
level.
Ex: A has three sons B, C, D. B is alive. C is dead with two sons E and F. D is dead with
one son G.
-B gets 1/3. E, F, G all get 2/9
*In all three systems, if one branch dies out, it is ignored.
*If you just vaguely say per stirpes, the state will just look at its statute
*Under old rule, no such thing as negative disinheritance. However, under modern will, a
person can disinherit someone (treated as predeceased).
How are adopted children treated?
*The treatment of adopted children has changed over time. In the past, an adopted child
could take from her biological parents. However, in modern times, the child is considered
to be a child of the adopted parents and is cut off from the biological parent. However,
not every adoption is the same.
UPC 2-118(a) - A parent-child relationship exists between an adopted child and the
adoptive parent
UPC 2-119(a) - A parent-child relationship does not exist between an adopted child and
the child's genetic parents (subject to exceptions)
-Exception under 2-119(b) - if the stepchild is adopted by the stepparent, a parentchild relationship exists between the adopted child and his genetic parent, but only
for the purpose of the right to inherit from or through the genetic parent
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Hall v Vallandingham (97)
-Wife and husband have four kids. Husband dies and wife remarries with new husband
adopting the children. 25 years later, biological father's brother dies and children want to
inherit through the father.
-Court holds against the children stating that adoption eliminates the adopted child's right
to inherit from parents.
-"adoption does not confer upon the adopted child more right and privileges than those
possessed by a natural child. To construe the law so as to allow dual inheritance would
bestow upon an adopted child a superior status."
*Not every state agrees with this, some state statutes allowed adopted children to inherit
from both.
*If UPC had applied in this case, the children would have been able to inherit from their
natural father because of the exception regarding stepfathers.
Minary v Citizens Fidelity Bank (103)
-Mom left trusts to 3 sons that were to go to them until their deaths and then to her
"surviving heirs". Last son is about to die so he adopts his wife in an attempt to have the
money left to her.
-Two issues: adult adoption, and adoption and the interpretation of wills and trusts
-Court holds that the fact that the wife was an adult and wife of the son at the time she
was adopted, she was not a legitimate heir because it "thwarts the intent of the ancestor
whose property is being distributed and cheats the rightful heirs."
-Most jurisdictions don’t draw distinctions between adoptions of minors and adults.
However, most states don't allow adoption for lovers.
What are advancements and how do they affect intestacy?
-Advancement: An advance on someone's inheritance given by the decedent prior to his
death
Different interpretations of advancement:
1. Common law: child had the burden of establishing that a transfer from the decedent
during the decedent's lifetime was intended as an absolute gift that was not to be
counted against the child's share of the estate.
2. In many states, a lifetime gift is presumed not to be an advancement unless it is shown
to have been intended as such
3. UPC 2-109: requires that the intention to make an advancement be declared in a
writing signed by the grantor or grantee.
-Under the UPC, if the decedent outlives a descendant who received an
advancement, it is not taken into account when distributing his share
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Hotchpot - when a gift is treated as an advancement, it is accounted for in distributing the
decedent's estate by bringing it into a hotchpot.
-To calculate: Add the estate and the lifetime gift to get the total. Then divide the
number by the number of descendants and subtract the advancement from the
shares of the descendants who received one during the decedent's lifetime.
How are distributions to minors handled?
Property Management Options (137)
1. Guardianship of the property
-Origin in feudal practice in which a guardian took possession of the ward's
lands; still subject to extensive judicial supervision.
2. Conservatorship
-A guardian of property with investment powers similar to those of trustees more flexibility than guardianship
3. Custodianship
-A person who is given property to hold for the benefit of a minor under the
UTMA or UGMA
4. Trusts (most desirable)
-Flexible and highly customizable property management arrangement. You can
specify any age of when the money is transferred.
What are the bars to intestate succession?
A person is barred from an intestate share for multiple reasons:
1. if they murdered the descendant (slayer rule)
2. if they disclaim their portion.
Slayer Rules (involuntary bar to succession)
In re Estate of Mahoney
-A woman is convicted of manslaughter after shooting her husband. Under the laws
of the intestate statute, she would be the heir but the court gave the money to the
decedents parents and she appealed arguing that there was a difference between
murder and manslaughter.
3 possibilities:
1. title passed to the slayer anyway
2. the title doesn't pass to the slayer
3. title passes to the slayer but equity holds him to be a constructive trustee
for the heir or next of kin of the descendant.
-The Court drew a distinction between intent: murder and voluntary manslaughter
are different from involuntary manslaughter
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*Almost all states now have slayer statutes, but there are other issues:
1. What if the statute only mentions intestate but not non-probate transfers?
-Look to the three options above
2. If the killer is barred, who actually takes the money?
UPC 2-803: provides that the killer is treated as having disclaimed the property
3. Is a criminal conviction required to establish someone as a slayer?
-No, it must be found on the preponderance of the evidence. However, if there
is a criminal conviction, it is conclusive under the UPC.
-If the criminal conviction isn't final, there is a presumption of slayer which
must be overcome.
Disclaimer (voluntary bar to succession)
Two reasons to disclaim:
1. Tax reasons
2. Creditor avoidance (There is an exception if the IRS is a creditor - if there is an
unpaid tax bill)
UPC 2-1106: disclaimant is treated as having "died immediately before the time of
distribution"
Drye v United States (155)
-Descendant disclaimed his interest and let it pass to his daughter to avoid creditors.
Daughter then set up a lifetime trust with parents as beneficiaries. Courts held this
was not valid and that the Govt. had the right to the estate.
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How are wills executed and interpreted?
What are the functions of the various formalities?
Ritual function - the performance of some ceremonial for the purpose of impressing the
transferor with the significance of his statements.
Evidentiary function - supply satisfactory evidence to the court
Protective function - prophylactic purpose of safeguarding the testator
Channeling function - standardization of form simplifies administration
What are the basic formalities for an attested will?
1. writing
2. signature by the testator
3. attestation by witnesses
*Some jurisdictions require subscription - requiring the will to be signed at the foot or the
end
Statute of Frauds
Wills Act
UPC 1990
UPC 1990 (Rev 2008)
Writing
Writing
Writing
Writing
Signature
Subscription
Signature
Signature
Attestation &
subscription by 3
witnesses
Attestation &
subscription by 2
witnesses
Attestation &
signature by 2
witnesses
Attestation & signature
by 2 witnesses OR
notarization
*UPC does not have strict compliance
What is the strict compliance doctrine and how does it affect will
interpretation?
In re Groffman (228)
-Husband dies and in his will the wife, his daughter, and her daughter will split his estate.
The wife challenges the will hoping to take the entire estate in intestacy. Husband
acknowledged the will in the presence of two friends but it was not at the same time and
the Wills Act required that two or more witnesses must be present at the same time.
-Because the will was not executed properly under the Wills Act, the court refused to
admit the will to probate.
*This would have been valid under the UPC 1990
Stevens v. Casdorph (229)
-Man goes to the bank to have his will executed. He signs in front of a notary who then
takes it to two separate notaries to sign the will.
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-The Wills Act in West Virginia stated that the signature shall be made or the will
acknowledged by him in the presence of at least two competent witnesses present at the
same time, and such witnesses shall subscribe the will in the presence of the testator, and
of each other.
-The witnesses did not see the testator sign the will and they did not see each other sign
the will so it failed to meet the statute.
-The Court held that the will was not valid because "mere intent by a testator to execute a
written will is insufficient".
*False positive (strict compliance) vs. False negative (intent of donor)
*Assuming strict compliance, this would be invalid under UPC 1990.
Interested witnesses:
-At common law, interested witnesses were not permitted to testify.
-Under purging statutes, a will attested by an interested witness is admitted to
probate, but any bequest to the interested witnesses are voided.
-UPC: a will is valid even if witnessed by an interested party, and the interested
witness does not forfeit his bequest even if it is greater than that which he would
have received under a prior will.
Estate of Morea (239) - potentially interested witness
-A testator had three witnesses to his will, two of which were interested witnesses. The
state statute required that there be two or more witnesses who were not benefitting
from the will. However, because the decedent's son received less than he would have
intestate, he was not considered to have benefitted. Therefore, the court held that it met
the standards of having two witnesses that did not benefit.
What does presence mean?
-Line of sight test: the testator does not actually have to see the witnesses sign, but
must be able to see them were the testator to look.
-Conscious Presence test: the testator, through sight, hearing, or general
consciousness of events, comprehends that the witness is in the act of signing.
Safeguarding a will:
-Each state has its own formalities, but you as a T&E attorney, want to satisfy the
formalities of all 50 states because you don't know where the testator is going to
die.
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What curative doctrines mitigate the harshness of the strict
compliance rule?
Strict compliance - any error - proponent loses - intestacy
In re Pavlinko's Estate (247) - Strict compliance
-Husband and wife accidentally sign each other's wills instead of their own. They
both die and the wife's brother tried to probate the husband's will. -These are mirror
image wills both of which leave the residual amount to the wife's brother.
-The court prevents the will from going to probate stating that once a court starts to
ignore or rewrite provisions of the Wills Act, the act will become meaningless and
the door will be opened wide to countless fraudulent claims.
Three main curative doctrines:
1. Reformation Doctrine: Some courts excused or corrected an obvious execution defect
In re Snide (250) - Ad hoc exceptions
-Husband and wife signed the wrong wills. Trial court allowed the will to probate
and Appellate Court reversed. COA of NY reversed this allowing the will to be
probated. Court stated that the dispositive provisions in both wills, except for the
names, were identical. They also said that the couple went through the proper
formalities and it is obvious what their intent was.
2. Substantial compliance: The court may deem a defectively executed will as being in
accord with statutory formalities if there is clear and convincing evidence that the
purposes of those formalities were served.
In re Will of Ranney (253) - Substantial compliance
-The two witnesses did not sign the will itself as attesting witnesses as required by
the statute but signed an affidavit in the past tense, designed for a two-step selfproving will. The Court disagrees with the COA that the self-proving affidavit literally
satisfies the requirement of the signatures on the will. However, they allow it to go
to probate because it substantially complies with these requirements. Court states
that, "when formal defects occur, proponents should prove by clear and convincing
evidence that the will substantially complies with statutory requirements."
-Ask: Does its form sufficiently approximate Wills Act formality to enable the court
to conclude that it serves the purposes of the Wills Act?
3. Harmless error (UPC 2-503): The court may excuse noncompliance if there is clear and
convincing evidence that the decedent intended the document to be his will. In harmless
error cases, a hierarchy in the importance of will formalities:
(a) writing (most important) - permanence to terms of will
(b) signature - finality and genuineness of document
(c) attestation (least important) - protection against fraud, duress, etc.
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In re Estate of Hall (259) - harmless error
-Man and wife are creating joint will and ask the lawyer if they can use the draft until
the final copy is ready. They sign the document in front of the lawyer but they have
no witnesses. Two of the children challenge the will based on the lack of witnesses.
-Court holds that because this draft revoked all other wills and because the man had
the wife tear up prior wills, there was clear and convincing evidence that the man
intended the draft to be his will and therefore it was probated
What are attestation clauses and self-proving affidavits?
Attestation clause: recites that the will was duly executed.
-With an attestation clause, the will may be admitted to probate even though the
witnesses predecease the testator or cannot recall the events of the execution.
Self-proving affidavit: typed at the end of the will, swearing before a notary public that
the will was duly executed, is then signed by the testator and the witnesses before the
notary public, who in turn signs and attaches the required seal.
*This makes it easier to probate the will
Two types of self-proving affidavits:
One-step process
Two-step process
Witnesses sign ONCE
Witnesses sign attestation clause
Affidavit language is a part of the attestation
clause
THEN, witnesses sign a separate
affidavit
Notarization of the affidavit
Notarization of affidavit
What are notarized wills and how are they interpreted?
-As amended in 2008, the UPC provides that a will is valid if it is signed by two witnesses
or by a notary.
In re Will of Ferree (266)
-Man had his will notarized but failed to have two witnesses sign as required by statute.
Court held that there was no substantial compliance because here the person was not
even trying to satisfy the formalities.
*This is inconsistent with the Ranney case.
*This would have been probated under harmless error, or under the new notarized
provision of the UPC
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How are holographic wills treated?
Holographic will - written by the testator's hand and you still need a signature (no witness
is required)
*27 states allow holographic wills, however 23 do not.
*A holographic will still must have present testamentary intent
Signature:
-In almost all states permitting holographs, the will may be signed at the end, at the
beginning, or anywhere else on the face of the document.
-BUT, if not signed at the end, there may be doubt about whether the decedent
intended his name to be a signature
Handwriting:
-First generation: "entirely written, signed, and dated."
-Second generation: "Material provisions."
-Third generation: "Material portions" and extrinsic evidence allowed.
Extrinsic evidence:
intent that a document constitute the testator's will can be established by extrinsic
evidence, including, for holographic wills, portions of the document that are not in
the testator's handwriting
Kimmel's Estate (269) - letter in mail constitutes holographic will
-Father writes horribly written letter to children which states "I have some valuable paper
I want you to keep fore me so if enny thing happens all the scock money goes to George
Darl & Irvin… He signs it Father.
-The court holds that this is a holographic will because it does strongly support the idea of
a testamentary intent and that "Father" does constitute a signature.
Conditional language - Example - "if anything happens when I'm in France" generally the
courts hold that the language is not meant for just a specific instance
Estate of Gonzales (274) - pre-printed material used for context
-Court holds that the language on a pre-printed form can be used as context to determine
printed words of the testator as long as it is not material.
In re Estate of Kuralt (280) - letter in mail constitutes holographic codicil
-In 1968 K met B after 5 years of marriage. In 1989, he wrote a holographic will giving
some land and a house in Montana to B. However, in 1994 he executed a formal will
leaving nothing to B. In 1997 he issues a sham sale to B for part of the land and promises
in a letter to have the lawyer visit the hospital to ensure that she would inherit the rest of
the place in Montana. After K died, B sought to probate this letter as a codicil. The estate
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argued that this letter should not be probated because it showed his future intent and not
what he did. Issue: Was there present testamentary intent?
-Court held that this letter could be probated because there was testamentary intent:
they justified this by talking about how the letter mentioned and underlined the word
inherit and because he had previously done the sham sale of the 20 acres.
*Problem with court's analysis: was his intent that this particular document be a will?
How can a will be revoked? When is a prior will revived?
UPC 2-507: Revocation by writing or by act
(a) A will or any part thereof is revoked:
1. by a subsequent will that revokes the previous will or part expressly or by
inconsistency
2. by performing a revocatory act on the will, if the testator performed the act
with the intent and for the purpose of revoking the will or part or if another
individual performed the act in the testator's conscious presence and by the
testator's direction…
*revocatory act includes: burning, tearing, canceling, obliterating, or
destroying the will or any part of it.
Codicil: Rather than replaces an earlier will, the codicil supersedes the will to the extent of
inconsistency between them.
Harrison v Bird (287) - presumption if missing
-Woman creates a will and then a few years later wants it revoked. Her attorney,
tore the will into four pieces, tells her that the will is revoked, and mails the pieces
to her along with a letter. After woman dies, the letter is found but the pieces of the
will is not found and one of the proponents of the will argues for it probate.
-The court did not probate, stating that if the evidence establishes that Woman had
possession of the will before her death, but the will is not found among her personal
affects after her death, a presumption arises that she destroyed her will. The
proponent didn't overcome the burden.
*When the will is last in the testator's possession but not found at death, there is
the presumption that the will was destroyed with the intent to revoke.
*If the will is lost, destroyed without consent, or destroyed without meeting all of
the formalities, it can still be admitted to probate if the contents are proved. You can
do this with a copy or other "clear and convincing evidence".
Thompson v Royall (290) - strict interpretation of revocation requirements
-Ms. K had written a will and a codicil that she later wanted to revoke. To revoke the
will, Mrs. K wrote and signed a voiding statement on the back of the manuscript
cover. She did the same thing on the back of the sheet of the codicil. She signed
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these before two witnesses who did not sign. Ms. K dies and the wills are held for
probate.
-Court concludes that the act of revocation is not present because the words "null
and void" were not written on the instrument which therefore did not constitute a
cancellation.
*These two cases seem contradictory.
*The UPC would change the result in Thompson, based on both 2-507(a)(2) which
states that a revocation occurs "whether or not the burn, tear, or cancellation
touched any of the words on the will". The result could also be changed by the
harmless error rule.
Dependent Relative Revocation:
-Revocation of all or part of a will is ineffective if revocation is based on a mistake.
-Ex: If you have a will, and attempt to execute a second will that revokes the first will, but
the second will is ineffective due to error.
*Note: this only applies if the alternative plan of disposition fails or if there is a mistake in
the term of revoking instrument, or in some jurisdictions, if the mistake can be shown by
"clear and convincing evidence"
*The doctrine is one of presumptive intent
LaCroix v Senecal (295)
-Ms. D had a valid will and created a codicil only to clarify the name of one of the
beneficiaries. However, one of the witnesses to the codicil was an interested witness
and therefore it was not valid.
-The Court applies DRR to revive the first will stating that "it is clear that her
intention to revoke the will was conditioned upon the execution of a codicil which
would be effective to continue the same disposition of her residuary estate."
Estate of Alburn (300)
-Ms. A executes 3 wills. A Milwaukee will is executed and then revoked by a
Kankakee will. She then tears up the Kanakee will and dies later that year. Issue: Can
the Kankakee will be admitted to probate or did Ms. A die intestate?
-Court applies DRR because they believe Ms. A tore up the Kankakee will thinking
that the Milwaukee will would be back in affect (but that was not the case in
Wisconsin law).
Revival of Prior Wills:
Example -T executes will #1. T executes will #2, which revokes #1. T revokes will #2.
Is will #1 revived?
3 Approaches:
1. Few states: will #1 is not revoked unless will #2 in effect at T's death
2. Vast majority of states - Will #2 revokes #1
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a. will #1 revives if T intends
b. will #1 cannot be revived unless re-executed/re-published
UPC 2-509:
a. (burden on revival) if will 2 wholly revokes will 1, the revocation of will 2 by a
revocatory act does not revive will 1 unless the proponent of will 1 shows that the
decedent intended the revocation of will 2 to revive will 1.
b. (burden against revival) if will 2 only partially revokes will 1, then the revocation
of will 2 by a revocatory act does revive the rest of will 1, unless the party arguing
against revival shows that the decedent did not intend the revocation of will 2 to
revive those parts of 1 revoked by 2.
c. if will 2 is revoked by a later will, will 3 does not revive will 1 unless the text of will
3 indicates such a result is what the testator intended.
Other important points:
Will - Codicil - Revocation of Codicil: Will? (Will is still in affect)
Will - Codicil - Revocation of Will: Codicil? (Codicil is not in effect unless T intends
otherwise)
UPC 2-804: Divorce automatically revokes probate and non-probate transfers to
both ex-spouse and ex-spouses relatives
How can capacity be contested regarding wills?
Capacity and Contests:
1. Mental Capacity
2. Insane Delusion
3. Undue Influence
4. Fraud
5. Duress
6. Tortious interference
Mental Capacity and Insane Delusion - Internal
Undue influence, Fraud, Duress, Tortious Interference - External
1. Mental Capacity (159)
-The testator must be an adult (over 18) and "must be capable of knowing and
understanding in a general way"
1. the nature and extent of his or her property
2. the natural objects of his or her bounty, and
3. the disposition that he or she is making of that property
4. relating these elements to one another and forming an orderly desire
regarding the disposition of the property."
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*Basically must have a rational desire for the disposition of her property. The test is
one of capability, not actual knowledge.
In re Estate of Washburn (159) - burden on proponents
-Testatrix creates 3 different wills. Will #3 is offered to probate and her niece objects
stating that the T did not have the testamentary capacity to make a will because she
had Alzheimer's disease. The probate court denies the execution of the will.
-Court held that the petitioner offered satisfactory evidence to rebut the
presumption of capacity. In Massachusetts, the proponent has the ultimate burden
of proof to prove capacity and they did not. (This is the minority rule)
Wilson v Lane (161) - burden on contestants
-At trial, jury concludes that T did not have capacity to create a will. However, the
judge put in an NOV. The Georgia Supreme Court affirmed. The burden in this case
was on the contestants to prove that the testator lacked capacity and they failed to
do so in the eyes of the court.
-The dissent states that the facts could have gone either way, so the trial judge made
a mistake in overruling them.
2. Insane Delusion (168)
-An insane delusion involves a false belief about a member of the testator's family.
-Insane delusion vs. mistake: If someone is under mistake they have a mistaken
belief that is susceptible to correction, if they have an insane delusion, they cannot
change their mistaken belief even in the face of countervailing evidence.
Is the delusion insane?
Majority - A delusion is insane even if there is some factual basis for it if a
rational person could not have drawn the same conclusion.
Minority - If there is any factual basis for the delusion, it is not insane.
Did delusion cause bequest?
Majority - Insane delusion materially affected or influenced the will
Minority - Insane delusion might have caused of affected the will (i.e. presume
causation if there is an insane delusion + an unnatural disposition)
In re Strittmater (169)
-Woman's will was challenged on the ground that she was insane after she gives all
of her estate to the National Woman's Party.
-The court held that she did have testamentary capacity however that her insane
delusions led her to leave her estate to the National Women's Party. Therefore, the
probate was set aside.
*However, the authors seem to suggest that the case would come out differently if
heard today.
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Breeden v Stone (171)
-Mr. B committed suicide and left a holographic will at his side in which he left all of
his property to his friend. His brother, sister, and father challenged the will alleging
that he lacked testamentary capacity and that Mr. B had an insane delusion at the
time it was made.
-Probate Court held that the challengers did not prove beyond a preponderance of
the evidence that Mr. B lacked mental capacity. Court also held that although he did
suffer from insane delusions, they did not materially affect the disposition of the
will.
*Court also notes that there are separate tests for mental capacity and insane
delusion.
3. Undue Influence (180, 197)
What constitutes undue influence?
-Coercion
-Restatement: "A donative transfer is procured by undue influence if the
wrongdoer exerted such influence over the donor that it overcame the donor's
free will and caused the donor to make a donative transfer that the donor
would not otherwise have made."
In most jurisdictions, the test is:
Confidential relationship + suspicious circumstances = presumption of undue
influence (burden shifting)
Types of confidential relationships:
-fiduciary - attorney, power of attorney
-reliant - financial advisor, doctor
-dominant-subservient - hired caregivers, adult child with weak testator
Examples of suspicious circumstances (185)
-If the alleged wrongdoer actually procured the will
-If the bulk of the estate goes to someone and the testator had a
weakened intellect
-Secrecy or haste
-Reasonable person would regard it as unnatural, unjust, or unfair
-If disposition in this will varies greatly from a previous will
-donor's attitude toward others changed by reason of his relationship
with the alleged wrongdoer
Estate of Lakatosh (182)
-An older woman that lives alone is frequently visited by a neighbor, Roger, who she
gives power of attorney over her estate
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-Roger begins to give away her money and she revokes his power of attorney but
she still left all but $1K of her estate to Roger in a will drafted by a relative of Roger.
Family contends the will based on undue influence.
-To show undue influence, family must show: (1) that there was a confidential
relationship, (2) that the person enjoying such relationship received the bulk of the
estate, and (3) that decedent's intellect was weakened.
-The Court held that there was undue influence based on an audiotape that the
lawyer made at the creation of the will.
Mechanisms people might use to pre-empt challenges:
Making factual recitation in the will for why a person is disposing of the
property in the way they are doing (not a good idea)
-if there are factual mistakes
-might raise issues about mental capacity
-family members can see what is written and might get offended, also
testamentary libel
-if factual recitation is in legalese, it makes it look like the lawyer might
have unduly influenced
*put it in a separate letter that won't go into probate
No contest clauses -if beneficiary contests will, they take nothing in lieu of
what they would have taken
-problem is that you have to actually leave something for the person to
give them something to lose by challenging
-they might also cut of a valid contest that we would want
-also, most courts don't interpret them entirely as written and allow a
contest if there is a colorable basis with no threat of losing share
Bequest to Attorneys:
Undue Influence
Many courts hold that a presumption of undue influence arises when an
attorney-drafter receives a legacy, except when related to the testator
Unethical conduct
Model Rules of Professional Conduct 1.8(c): A lawyer shall not solicit any
substantial gift from a client, including a testamentary gift, or prepare on
behalf of a client, including a testamentary gift, or prepare on behalf of a
client an instrument giving the lawyer or a person related to the lawyer
any substantial gift unless the lawyer or other recipient…is related to the
client
Fiduciary Appointments
The comment to Rule 1.8 advises: In obtaining the client's informed
consent to the conflict, the lawyer should advise the client concerning
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the nature and extent of the lawyer's financial interest in the
appointment, as well as the availability of alternative candidates for the
position
4. Fraud (207)
What constitutes fraud?
- Testator is deceived by a deliberate misrepresentation and as a result does that
which he would not have done.
-Two types: fraud in the inducement, fraud in the execution
Fraud in the inducement - A misrepresentation causes the testator to execute or
revoke a will, to refrain from executing or revoking a will, or to include particular
provision in the wrongdoer's favor.
Fraud in the execution - A person intentionally misrepresents the character or
contents of the instrument signed by the testator, which does not in fact carry out
the testator's intent.
Puckett v Krida (209)
-The nurses persuaded decedent that her relatives were wasting her money and
wanted to put her in a nursing home. Neither was true.
-The court set aside both a deed and a will favoring the nurses as the products of
fraud and undue influence.
-The nurses confidential relationship with the decedent coupled with their
encouragement of decedent's false beliefs, were enough to raise a presumption of
undue influence and fraud which the nurses did not successfully rebut.
5. Duress (210)
-Duress is defined as a situation in which something is "overtly coercive".
-If the wrongdoer threatened to perform or did perform a wrongful act that coerced
the donor into making a donative transfer that the donor would not otherwise have
made.
Latham v Father Devine (210)
-M dies and leaves all of her estate to a religious cult. M's cousins stated that M
expressed a desire to revoke the will leaving the estate to the cult and had her
attorneys draft a will in which they were the legatees for $350K. They argued that
because of undue influence and physical force the cult prevented the deceased from
executing the said new will. They argued that the cult arranged for M to be killed
before she could execute new will.
-The court holds that "where a devisee or legatee under a will already executed
prevents the testator by fraud, duress or undue influence from revoking the will and
executing a new will in favor of another or from making a codicil…the devisee or
legatee holds the property thus acquired upon a constructive trust."
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Unjust enrichment:
*In Pope v Garrett, constructive trusts are extended onto innocent third parties who
received property as a result of someone else's undue influence on the decedent to
prevent unjust enrichment.
6. Tortious Interference with an Expectancy (215)
PF Case:
1. must be existence of expectancy
2. must be intentional interference with expectancy
3. causation
4. damages
*It is at least arguable that no-contest clauses would not work against this. It is also
a potential lead into punitive damages.
What are the components of a will?
1. Integration of Wills
2. Republication by Codicil
3. Incorporation by Reference
4. Acts of Independent Significance
1. Integration of Wills:
-All papers present at the time of execution, intended to be part of the will, are
integrated into the will
Estate of Rigsby (308)
-A will was two pages. Both pages were entirely in the handwriting of the testator,
and each was initialed and dated on top. Both pages were not fastened together,
the second was found folded with the first and the first page was the only one
signed. The second page also conflicted in part.
-The court admitted the first page to probate, but not the second.
2. Republication by Codicil:
-A will is treated as if it were executed when its most recent codicil was executed,
whether or not the codicil expressly republishes the prior will, unless the effect of so
treating it would be inconsistent with the testator's intent.
*This only applies if the original will was validly executed
3. Incorporation by Reference:
-A writing in existence when a will is executed may be incorporated by reference if
the language of the will manifests this intent and describes the writing sufficiently to
permit its identification.
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*Generally, if the document has been created after the will, it cannot be
incorporated (with some UPC exceptions)
Clark v Greenhalge (310)
-Ms. N leaves a will leaving her cousin as the executor and beneficiary of her estate
and gives him most of her personal property except for which she "designated by a
memorandum left by her and known to her cousin." At some point in 1980, Ms. N
promises to give one of her friends a farm picture which she writes into her
notebook. She marks it down in her notebook and creates a codicil later in that year.
-Following Ms. N's death, the cousin refuses to give the painting to the friend and
she commenced an action against him.
-Writing was in existence before the last codicil so it was in existence, and the will
clearly specifies that the memorandum exists.
-Court states that the notebook could be considered a "memorandum", that more
than one memorandum can exist, and that it was known to him. Therefore, Court
rules that the notebook does constitute part of the will.
UPC 2-513: a will may refer to a written statement or list to dispose of tangible
personal property not otherwise specifically disposed of by the will, other than
money. The writing must be signed by the testator and must be described with
reasonable certainty. It may be prepared before of after the execution of the will.
Simon v Grayson (315)
-Will references a letter that it states will be dated on March 25, 1932 and it is found
but dated July 33, 1933.
-Court held that the letter was the letter referred to in the will, despite the
discrepancy in dates. It also held that it was in existence on the date of the codicil
which republished the will.
Johnson v Johnson (317)
-Issue: Is this instrument one complete, integrated writing, partly typed and partly
handwritten; or is it an unexpected nonholographic will to which is appended a valid
holographic codicil?
-Majority makes multiple mistakes in its analysis:
1. "A will may be so defective, as here, that it is not entitled to probate but if
testamentary in character it is a will, nonetheless."
**This sentence is nonsensical and misses the point of the Wills Act.
2. "The general principle of law is that a codicil validly executed operates as a
republication of the will no matter what defects may have existed in the earlier
document…"
**This is also incorrect, a codicil on republishes a prior will that was validly
executed before
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-Concurrence: Where the evidence of the testator's evidence is clear, we should just
give effect to that intent (basically harmless error doctrine)
-Dissent: Holds that typewritten part is not a will, and handwritten part is not a
codicil. You just have one document that doesn’t meet the attestation requirement
necessary for probate
4. Acts of Independent Significance
UPC 2-512: A will may dispose of property by reference to acts and events that have
significance apart from their effect upon the dispositions made by the will, whether
they occur before or after the execution of the will or before or after the testator's
death.
Ex 1: A drives a Pinto and says in will to give car to B. A buys trades in
Mercedes for Pinto before death. Mercedes goes to B.
-trading in the new car is an act of independent significance
Ex 2: A leaves will to be split evenly upon employees at time of death. At time
of will A has 5 employees, before death she hires 5 more.
-hiring 5 new employees is an act of independent significance which
means that all 10 employees receive inheritance
Ex 3: A states in will I leave everything in my safety deposit box for B.
-attempting to keep the items safe in the box is an act of independent
significance, and therefore, B is entitled to the property.
Contracts Concerning Wills:
UPC 2-514: A contract to make a will or devise, or not to revoke a will or devise, or
to die intestate…may be established only by
(i) provisions of a will stating material provisions of the contract,
(ii) an express reference in a will to a contract and extrinsic evidence proving
the terms of the contract, or
(iii) a writing signed by the decedent evidencing the contract. The execution of
a joint will or mutual wills does not create a presumption of a contract not to
revoke the will or wills.
*Contract law applies to these (in most jurisdictions, the Statute of Frauds
applies so they must be in writing)
How do courts treat mistaken or ambiguous language in wills?
Traditional doctrine:
-The court will bar the admission of evidence to vary the terms of the will.
-Two related doctrines: (1) Plain meaning/no extrinsic evidence rule, (2) no
reformation rule
1. Plain meaning - extrinsic evidence may be admitted to resolve some
ambiguities, but the plain meaning of the words of the will cannot be disturbed
by evidence that another meaning was intended
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2. No reformation rule - Cannot correct a mistaken term in the will to reflect
what the testator intended the will to say
Mahoney v Grainger (336) - No extrinsic evidence; No reformation.
-H is about to die and states to lawyer that she wants he will to be divided equally
among her 25 cousins. The lawyer writes in the will "all the rest of my estate, I give,
devise, and bequeath to my heirs at law…" The problem is that technically, H had an
aunt that was her only heir at law.
-Cousins try to show ambiguity based on the fact that will says "heirs" and "share
and share alike" when her aunt is the only heir.
-The court refused to admit extrinsic evidence where, in the will, there is no doubt
to the property bequeathed or the identity of the beneficiary.
Two Types of Ambiguity:
1. Patent ambiguity - ambiguous on the face of the will
-Traditionally, no extrinsic evidence can be used to clarify
-The trend is that courts do allow extrinsic evidence (not necessarily the
majority rule)
2. Latent ambiguity - not ambiguous when looking at the will, but ambiguous in
application
-Example: Testator knew three guys named Dan and left a gift to "Dan" without
any other description
-Extrinsic evidence has always been allowed
-The trend is that courts are even more increasingly allowing extrinsic
evidence.
*Because extrinsic evidence is now being allowed under both types of
ambiguity, the distinction between the two is beginning to fade away
Traditional Doctrine:
Effect: Lack of volition
Effect: Mistaken Terms
Cause: Intentional Wrongdoing
Undue Influence, Duress,
(relief granted)
Fraud (relief granted)
Cause: Innocent Acts
Lack of capacity, Insane
Delusion (relief granted)
Mistake (no relief)
Arnheiter v Arnheiter (343) - court has "no power to reform" but court reforms anyway
-Decedent requests that her interests in the premises at 304 be sold upon death but she
actually owns the premises at 317 which she leaves no direction for. P applies for the
court to correct the obvious mistake.
-Court holds that it cannot correct or reform a will but that it can apply the principle of
"falsa demostratio non nocet"
25
-Therefore, court construed the will to mean that decedent wanted to sell her actual
property even though it had the wrong number
-Reformation not allowed:
-Changing address from number 304 to number 317 in the will
-Falsa demostratio non nocet (mere erroneous description does not vitiate) allowed
-Disregard the incorrect item and determine if the remainder of the paragraph
is sufficient to identify the property passing
Erickson v Erickson (345) - Openly Reforming Wills for Mistake, Extrinsic Evidence
Permitted
-Man intended to have his will continue after his marriage but did not include a clause
stating so as required by state law.
-Court held that because it was his lawyer's fault, the mistake could be reformed and the
will was held valid after marriage
UPC 2-805: "The Court may reform the terms of a governing instrument, even if
unambiguous, to conform the terms to the transferee's intention if it is proved by clear
and convincing evidence that the transferor's intent and the terms of the governing
instrument were affected by a mistake of fact or law, whether in expression or
inducement.
What happens when the death of beneficiary occurs before the death
of the testator?
Lapse and void devises:
-Lapse: If a devisee does not survive the testator, the devise fails
-Antilapse statutes: substitute another beneficiary for the predeceased devisee
Five types of devise (358)
1. specific devise: a specific asset is devised to devisee (ex: I leave my watch)
-if fails, it falls into residue
2. general devise: a general amount is given to devisee (ex: $10,000)
-if fails, it falls into residue
3. residuary devise: what is left from testator's estate after all specific and general
devises have been made
-if fails, it passes by intestacy to the testator's heirs rather than to the
remaining residuary devisees.
4. class gift: if the devise is made to a group that is defined by their relationship,
rather than specifically naming individuals
-if fails, the surviving members of the class divide the gift
5. void devise: where a devisee is already dead at the time the will is executed, or
the devisee is a dog or cat or other ineligible taker.
-default rules listed above apply
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Estate of Russell (359) - void devise
-T's will states "I leave everything I own to Chester and Roxy". (Chester is a man but
Roxy is a dog)
-Chester argued that this meant that the entire residue should go to him and he
should use it to care for her dog. However, Georgia (niece and only heir-at-law)
argues that one-half of the residue was left to Roxy which is invalid and void and,
therefore, she was entitled to such one-half as the testatrix's sole heir-at-law.
-Court holds in favor of Georgia stating that the will is not susceptible to a
reasonable interpretation that the entire residual is supposed to go to Chester. (It
would have gone to Chester if there hadn't been the no-residue-of-a-residue rule)
Antilapse statutes (UPC 2-605)
-They do not prevent a lapse, they merely substitute other beneficiaries. The theory
behind it is one of presumed intent.
-A typical antilapse statute applies to a lapsed devise only if the devisee bears the
particular relationship to the testator specified in the statute.
-Ex: If you are leaving 1/2 of your estate to your BFF, and he predeceases you,
in many jurisdictions it won't go to BFF's children.
*Keep in mind that these are just default rules, if you explicitly provide
otherwise, your instructions take precedent.
Ex: T devises entire estate: 1/2 to B, 1/2 to A. B dies before T, leaving a child, C.
-Common law: B's share lapses and passes by intestacy. A and C share B's
lapsed share, so A gets 3/4 of the estate, C gets 1/4 of the estate.
-Without the "no-residue-of the-residue" rule: B's share, as a residuary devise
to A and B, goes to A, so A gets the entire estate.
-With an applicable antilapse statute: C takes B's share, so A gets 1/2 of the
estate, C gets 1/2 of the estate.
Two questions to determine if antilapse statute applies:
Question 1: What is the scope of the statute?
Question 2: Since antilapse is the default, is there explicit language that takes
precedent?
Words of survivorship: "if he survives me"
-This is ambiguous because we don't know whether this states an intent for the
antilapse statute not to apply
-Majority rule is that words of survivorship are sufficient to preclude antilapse
statutes from applying
-However, the UPC states that words of survivorship are not sufficient to prevent
antilapse statutes from applying
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Ruotolo v Tietjen (367)
-Mr. S executes a will leaving one-half of the residue of his estate to his
stepdaughter, H, "if she survives me". H predeceases Mr. S and the question is
whether or not the court should apply an antilapse statute.
-The court holds that the antilapse statute was not prevented from applying by the
words of survivorship and they give the one-half residue of the estate to the
stepdaughter's daughter.
Class gifts:
-If a class member predeceases the testator, the surviving members of the class
divide the total gift, including the deceased member's share.
-Questions to determine if class gift: Did they use a group label such as brother,
sisters, etc.? Can the group shares fluctuate?
-Modern view: use a more rule-based approach
Dawson v Yucus (376)
-N devises her interest in husband's family farm to 2 nephews, S and G. G
predeceased the testator.
-Issue: Whether the gift to the nephews was a class gift?
-Court holds that this was not a class gift because no class label was used, only 2 of
the 5 nephews are named (so its not like it was a class gift to all 5 nephews), and she
used a survivorship gift in another part of her will.
Note - Most jurisdictions conclude that antilapse statutes trump class gifts.
Ex: If one member of the class dies, most jurisdictions believe the testator
would have preferred that his share go to his children rather than be split
among the remaining class members
Example: T has 3 sisters: A, B, C. He executes will to "my sisters" residue in S. C dies
prior to will executed. A dies and then T dies.
-No antilapse: B gets 100%
-Antilapse: In most jurisdictions: A's children (1/3), B (1/3), C's children (1/3).
*However, in some antilapse jurisdictions: A's children (1/2), B (1/2) Because C was dead before will was executed, she was not in mind for
the class of "my sisters"
How do changes in property affect wills?
1. Ademption by extinction:
-Will includes a specific devise of an item of property which the testator sells or gives
away before death
-Specific Devise: a disposition of a specific item of testator's property (Ex: My watch
to A)
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*Ademption does not apply to general, demonstrative, or residuary devises
-General: not a particular asset
(Ex: $100,000 to A)
-Demonstrative: hybrid - general devise yet payable from a specific source
(Ex: the sum of $100K to be paid from the proceeds of sale of my Apple
stock)
-Residuary: conveys that portion of the testator's estate not otherwise
effectively devised by other parts of the will
(Ex: devise to A of "all the rest, residue, and remainder of my property
and estate"
Two ways to look at it:
1. Identity theory: If item isn't there, it gift is extinguished
2. Intent theory: even if the specific gift is not in the testator's estate, the
beneficiary may nonetheless be entitled to the replacement for, or cash value
of, the original item, depending on whether the beneficiary can show that this
is what the testator would have wanted.
UPC 2-606 (387)
-Combines the 2 theories: A specific devisee has a right to the specifically devised
property and: (1) any balance of the purchase price, owing from a purchaser to the
testator at death by reason of sale of property; (2) any amount of a condemnation
for the taking of property unpaid at death
Insert Ademption exceptions - Example insurance money if not paid out (388)
2. Stock splits:
-Considered change in form but not substance
-Absent a contrary showing of intent, a devisee of stock is entitled to additional
shares received by the testator as a result of the stock split.
3. Satisfaction:
-Applies when the testator makes a transfer to a devisee after executing the will.
-If the testator is a parent of the beneficiary and sometime after executing the will
transfers to the beneficiary property of a similar nature to that devised by the will,
there is a rebuttal presumption that the gift is in satisfaction of the devise made by
the will.
4. Exoneration of Liens:
-Whether devised land passes free of the mortgage
-In some states, the other part of the estate pays off the mortgage so the house is
inherited without the debt.
-However, the majority of statutes reversed the common law rule making the
devisee inherit the property with the existing mortgage
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5. Abatement:
-Arises when the estate has insufficient assets to pay debts as well as the devises; in
such a case, some devises must be abated or reduced.
-Devises ordinarily abate in the following order:
1. residuary devises are reduced first
2. general devises are reduced second
3. specific and demonstrative are the last to abate and are reduced pro rata.
UPC 3-902 (392) if the testamentary plan would be defeated by the usual order of
abatement, the shares of the distributees abate as may be necessary to give effect
to the intention of the testator.
*This is applicable in the cases in which the residuary is the most important person
to the testator and will suffer greatly from an abatement
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What are Nonprobate transfers?
What are the different types of nonprobate transfers?
1. Life insurance
2. Pension accounts - IRA, 401(k)
3. Joint Tenancy (Bank, Brokerage, and Mutual Fund accounts)
4. The Revocable Inter Vivos Trust
*Currently, more transfers take place through nonprobate than through probate
(intestacy, testacy)
Langbein on Nonprobate:
Nonprobate transfers are functionally indistinguishable from wills because they are all
"revocable, gratuitous transfers at death"
"Pure" Will Substitutes
"Impure" Will Substitutes
Life Insurance
Joint Tenancies
Pension Accounts
Joint Accounts
Revocable Trusts
*Joint tenancies are not "pure "will substitutes because the cotenant acquires an interest
that is no longer revocable and ambulatory.
What is a revocable inter vivos trust?
Two Types of Trusts:
1. Testamentary Trusts:
-Created by will
-Irrevocable
2. Inter vivos Trusts:
-Created during life
-Can be irrevocable or revocable
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Two types of Revocable Trusts:
1. Deed of Trust - the settlor transfers the property to be held in trust to the trustee
2. Declaration of Trust - the settlor simply declares himself to be trustee of certain
property for the benefit of himself during his life, with the remainder to pass to others at
his death.
*Revocable trusts seem to functionally do the same thing as wills but you don't have to
have the same Wills Act formalities
Farkas v Williams (398) - valid revocable trust
-F is both the trustor and the trustee with a contingent remainder interest in W. F
reserved the right to revoke, the right to income, the right to principal, and the right to
change beneficiary. After F dies, the co-administrators argued that these trusts are invalid.
-Court asked 2 questions:
(1) Did W acquire an interest in the stock upon execution?
-Yes. W did enjoy a present interest because F manifested an intention to bind
himself. He could not deal with the stock the same way as if he owned it
absolutely.
(2) Did F retain such control over the trusts as to render them attempted
testamentary dispositions.
-Court states that F, as a trustee, must so conduct himself in accordance with
standards applicable to trustees generally. Therefore, he did not retain too
much control to make it invalid.
UPC Section 603(a): Settlor's Powers
-While a trust is revocable (and the settlor has capacity to revoke the trust), rights of the
beneficiaries are subject to the control of, and the duties of the trustee are owed
exclusively to, the settlor.
Linthicum v Rudi (403) - "interested persons" to trust
-C executes a will and a revocable trust. As settlor, C named herself trustee and reserved
the power to amend or revoke the trust throughout her lifetime. E and M named as
successor trustees and beneficiaries. C executes a new will and amendment to trust. R
replaces E and M as beneficiary and successor trustee. E and M challenge the amended
trust as "an interested person" seeking constructive trust or cancellation.
-Court holds that E and M do not constitute "interested persons" under the Nevada
statute because C retained the right to revoke the trust. At most, their interests are
contingent, and therefore they don't have the standing to challenge this.
What are the advantages and disadvantages of revocable trusts?
Reasons for revocable trusts:
-To avoid probate costs
-Faster
-More privacy
-Avoiding will contests
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-No real tax advantage
-Ancillary probate
-Avoiding restrictions protecting family members
Disadvantages:
-Lack of certainty - more ambiguities about which laws apply
-Slightly more expensive in terms of attorney's fees
-Perceived complexity
What are Payable on Death Contracts and how are they treated?
In re Estate of Atkinson (407) - PODs testamentary (different from UPC)
-W made 3 certificates of deposits to his 2 daughters which were POD. W marries E and in
his will explicitly disinherits E. E elects to take her forced share and argues that the CDs
must be considered as part of the estate for the purpose of calculating her 20%.
-Daughters argue that there is no difference between CDs marked POD and bank accounts
or securities which have been effective to pass title.
-Court holds that the daughters had no present interest of any kind so the words POD are
clearly testamentary.
*If the court had looked at whether this met the functions of the will formality it would
have probably come out differently.
UPC Section 6-101 (411)
*Modern law no longer denies that these are will substitutes because they are
functionally doing the same things that wills do and should be allowed
-"A provision for a nonprobate transfer on death in an insurance policy, contract of
employment, bond, mortgage, promissory note, certificated or uncertificated security,
account agreement, custodial agreement, deposit agreement, compensation plan,
pension plan, individual retirement plan, employee benefit plan, trust, conveyance, deed
of gift, marital property agreement, or other written instrument of a similar nature is
nontestamentary"
Estate of Hillowitz (409) - other nonprobate transfer
-Pursuant to a provision in the partnership agreement, widow is paid the sum of $2,800 in
A's interest in partnership. Provision stated "In the event of the death of any partner, his
share will be transferred to his wife, with no termination of the partnership."
-Court holds that this is "unquestionably valid and may not be defeated by labeling it a
testamentary disposition."
*Court bases this on partnership law but it could have also used the functions of will
formality to justify this decision.
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What is the Subsidiary Law of Wills?
-Slayer rules, divorce, abatement, simultaneous death, revocation, creditors, lapse and
antilapse are all considered subsidiary law.
-Restatement: "Although a will substitute need not be executed in compliance with the
statutory formalities required for a will, such an arrangement is, to the extent
appropriate, subject to substantive restrictions on testation and to rules of construction
and other rules applicable to testamentary dispositions."
Pilafas (414) - revocable trusts - presumption of revocation and the text of the trust
-P executed a will and a revocable trust in which he made himself the trustee. He
amended the trust agreement and executed a new will and then died. Neither the will nor
trust agreement are found after search of his house and belongings.
-Court held that the will was revoked because of the common law presumption that if the
will is not found, the decedent destroyed it.
-Court held that the trust was not revoked because decedent "could exercise his power to
revoke the trust only through 'an instrument in writing delivered to the Trustee" as stated
in the text of the trust.
Reiser (416) - revocable trusts - creditors' rights
-D creates inter vivos trust in which he conveyed the capital stock of 5 closely held
corporations. He executes a pour-over will. Creditors made him an unsecured loan for
$75K. D dies in an accident and his estate has insufficient assets to pay off the loan.
-The Court held that the settlor's creditors, to the extent not satisfied by the settlor's
estate, may reach the assets owned by the trust which the settlor had at the time of his
death. (treated as a will)
Cook (420) - revocation on divorce - life insurance - must follow policy on insurance
-DC purchased a life insurance policy which listed his wife as the beneficiary. DC later
divorced his wife and failed to change the beneficiary in the will. DC gets remarried and
has a son. He creates a holographic will leaving his insurance policy to his wife and son.
However, the insurance policy required written notice to the company to change the
beneficiary.
-Court holds that the life insurance policy goes to his first wife. While the court was
sympathetic, it felt that a departure from the general rule would cause danger of eroding
the law and would lead to uncertainty in the future.
*Most states follow this case
Egelhoff (426) - revocation on divorce - pension and retirement accounts (ERISA
supersedes state law)
-Boeing employee still had his pension plan and life insurance at death. They both still
named his ex-wife D as the beneficiary so his daughters from a previous marriage argued
that they should be entitled to the plans. Washington state statute invalidated any
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provision made to ex-spouse, however, the federal statute ERISA stated that the
beneficiary was designated in the terms of its plan (which employee never changed).
-Court held that the ERISA statute trumped the Washington state statute, making the exwife the beneficiary.
What are Pour-Over Wills and how are the used in modern estate
planning?
-If someone has multiple will substitutes, pour-over wills are coupled with revocable
trusts
-Create a revocable trust
-Make the beneficiary of the nonprobate transfers the trustee of the revocable trust (in
his capacity as trustee, not directly to him)
-Make the residuary beneficiary of the pour-over will the trustee of the revocable trust (in
his capacity as trustee, not directly to him)
*Therefore, all of the property comes into the revocable trust, and you can name your
beneficiaries from there (makes it much cleaner and more efficient)
*UTATA now permits a pour-over to a trust that is created after the will is executed
UPC Section 2-511
(a) A will may validly devise property to the trustee of a trust…to be established…at the
testator's death by the testator's devise to the trustee
Clymer (445) - revocable trust and pour-over-will
-C executes a new will which primarily pours into a revocable trust. Her husband, J, was
the life beneficiary under the trust. C divorces J and changes the designation on the life
insurance to M but left the trust as the primary beneficiary of her pension plans of which J
was left as the primary beneficiary.
1. Did the divorce agreement waive J's rights to the trust? (Court says divorce agreement
did not specifically waive J's right to the trust)
2. Was this trust valid even though it was unfunded during C's life? (Court held that under
UTATA, the inter vivos trust is valid even though unfunded)
3. Was J's interest as beneficiary revoked as the result of the divorce? (Court held that it
was under Massachusetts statute. Even though the statute applied only to wills, the court
held that the divorce revoked the trust) This is a subsidiary law of wills.
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Planning for Incapacity and Limits on Testamentary Freedom
How can testators plan for incapacity?
What are the two issues involved in planning for incapacity?
1. Estate planning
2. Health Care
How can decision making authority be delegated?
Attorney-in-fact
-Agent that is given a written authorization to act on behalf of the principal (doesn't
have to actually be an attorney)
-Agent's authority terminates on principal's incapacity.
Durable power of attorney
-Agent's authority doesn't terminate on the principal's incapacity.
In re Estate of Kurrelmeyer (449)
-L executed durable power of attorney to his wife M. After L became incapacitated,
M executed a trust with herself and a daughter as co-trustees. M transferred certain
real estate owned by her husband "Clearwater" to herself and the co-trustee. Under
the will, M would take a life estate in the property, with responsibility for taxes and
upkeep, with it passing to L's surviving children after her death. Under the trust, she
could occupy the home with the trust making the payments for upkeep. She was
also permitted to sell the home and could use the proceeds to purchase a new home
or to add to the trust principal.
1. Did the power of attorney allow M to make a revocable trust?
-Court held that they would not take strict construction, and referring to the broad
language, determined that M was acting within her powers.
2. Can you delegate this power to create a trust to an agent?
-Court held that it did not violate public policy to allow the settlor to delegate the
power to create the trust.
*There is not a good explanation for why you can delegate the power to an agent to
amend a trust to but not a will.
3. Did M violate her fiduciary duties to the beneficiaries by transferring this to
herself?
-Because the trial court did not consider this fact, the court remanded it for further
proceedings. Upon remand, the trial court held that she did not breach her fiduciary
duties.
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What are advance directives?
-Insert definition from case book
Three Types of advance directive:
1. Instructional directives - specifies treatment in end-of-life situation or in the
event of incompetence
2. Proxy directives - designates an agent to make health care decisions for the
patient
3. Hybrid or Combined Directives - Incorporates both of the first two
approaches, that is, directs treatment preferences and designates an agent to
make substituted decisions
*The standard for an agent making health care decisions is the substituted judgment
standard - What would the patient have chosen?
*An alternative approach is the best interests approach - What is in the best interest
of the patient?
*If no one is named it goes to a default rule - (1) spouse (2) an adult child (3) a
parent (4) an adult brother or sister.
Bush v Schiavo (459)
-T and M are married, M suffers cardiac arrest and never regains consciousness in
1990. In 1998, M petitions the court to authorize termination of life-prolonging
procedures for T.
-Florida legislature passes statute authorizing governor to stay removal and the
governor issues executive order. M successfully challenged the legislation in state
court arguing that it was a violation of separation of powers. T died in March of
2005.
What are the limitations on testamentary freedom?
Two basic issues with testamentary freedom:
1. Protection of Spouse
-Intentional Disinheritance ("support" or "partnership")
-Unintentional Disinheritance (stale will)
2. Protection of Children
-Intentional Disinheritance ("support" or maintenance)
-Unintentional Disinheritance (stale will)
How is intentional disinheritance treated in the United States?
-Can't intentionally disinherit your spouse
-in 9 community property states, spouse already owns half.
-in separate property states, spouse can get an elective share
-Can disinherit your children
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How is the spouse protected?
Two types of states:
Separate Property:
-No automatic sharing of earnings; whatever individual earns is his or hers
-Protection against disinheritance provided through "elective share".
-Individual autonomy over acquisitions
Community Property:
-All property acquired during the marriage is community property, unless both
spouses agree to separate ownership.
-Sharing of acquisitions as equals in marital economic partnership.
*All property acquired prior to the marriage, however, is separate
Rights of surviving spouse to support:
-Social security - surviving spouse receives worker's monthly benefits
-Employee pension plans - ERISA gives spouse of employee survivorship rights to
pension plan
-Homestead - right to occupy family home for lifetime
-Personal Property Set-Aside - right to tangible personal property up to a certain
value
-Family Allowance - for support of surviving spouse during probate
-Dower and Curtesy - life estate in one-third or entirety of land
What is a spouse's elective share?
-Elective share - surviving spouse can take the share they were given under the will
or they can elect to take a forced share
-Public policy limitation on testamentary freedom
-Traditionally there is a mandatory minimum of (1/3 of the estate)
-40 of 41 separate property states give an elective share
-Because of this elective share, certain decedents have attempted to transfer their
assets to non-probate transfers to get around the elective share
-Ex: Case 5 on page 488
-Net or augmented estate - take into account of both assets passing through
probate, as well as, assets passing through non-probate
-This is meant to prevent decedent's from bypassing the elective share
requirements through non-probate transfers
What are the three types of responses to avoidance of elective share?
1. Judicial Responses: Sullivan, Bongaards
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Sullivan v Burkin (488) - revocable trust created by spouse during marriage
-M, E's widow, has exercised her right to take a share of his estate and seeks to
include the assets held in a inter vivos trust in determining her share. E executed a
deed of trust under which the principal and income should go to 2 other people. He
acknowledged that he intentionally neglected his wife because at the time of his
death they were separated.
-Court concludes that the revocable trust was valid even though it did not have the
will-like formalities. Therefore, the second issue was whether, even if the trust was
not testamentary, the widow has special interests which should be recognized.
Citing Kerwin, the court rules against the widow stating that the husband has an
absolute right to dispose of any of his personal property without the consent of his
wife.
-However, the Court states that in the future it will treat "estate of the deceased" as
including the assets of an inter vivos trust created during the marriage by the
deceased spouse over which he had a general power of appointment.
Bongaards v Millen (492) - trust created by a third party
-J was the life tenant of a trust established by her mother. Before he death, she
appointed the trust remainder to her sister N. Her husband, G, wanted the trust to
be counted in his elective share against her estate.
-Issue: What of a trust created by a third party over which the decedent spouse had
a general power of appointment?
-Court held that "the trust property at issue here is not subject to the plaintiff's
elective share for the simple reason that the trust was created by a third party."
*Most states follow this case. However the UPC, Restatement, and a minority of
states hold that a trust with a lifetime general power of appointment is includable in
the elective share.
2. Legislative Responses: New York, Delaware
New York:
-Elective share amount: Greater of $50,000 or one-third of decedent's net
estate
-Property subject to the elective share - Probate estate and specified
nonprobate transfers, such as: gifts made within one year of death; savings
accounts trust; POD accounts not payable, to spouse, etc.
Delaware:
-Elective share amount: One-third of the decedent's net estate
-Property subject to the elective share - All property includible in the
decedent's gross estate under the federal estate tax law
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3. UPC (497 - 499)
1969: Includes in the augmented estate a schedule of nonprobate transfers
1990 (amended in 2008): "To bring elective-share law in line with the partnership
theory of marriage."
-Includes in augmented estate a schedule of nonprobate transfers (elective
share = 50% of the marital-property portion of the augmented estate)
-Marital property portion = based on the length of the marriage.
*Example: Case 6 on page 497.
Can a spouse waive his/her elective share?
-All separate property estates enforce pre and post marital agreements in which a
surviving spouse waives her elective share:
UPC 2-213 (503) - Waiver of Right to Elect and of Other Rights:
(a) The right of election of s surviving spouse…may be waived
(b) Not enforceable if surviving spouse proves that:
1. he did not execute the waiver voluntarily
2. the waiver was unconscionable
-was not provided a fair and reasonable disclosure of the property
-did not voluntarily and expressly waive, in writing
-did not have an adequate knowledge of the property
Examples of spousal protection:
Separate Property:
H = 100K, W = 0K
During life: H = 100K, W = 0K
Intestacy (using a state statute): W = 50K, all other intestate heirs = 50K
(under UPC): W = 100K
Will: either what H left W in the will, or W's elective share
-elective share in most states is (1/3)
-under the will it be (1/3) of probate estate
Trust: 10K = probate estate, 90K = nonprobate estate
-if augmented estate, it will be based on more than just the probate estate
Trust and Intestate: 10K intestate, 90K nonprobate estate
-if intestacy (using UPC): only 5K
-if elective share: 33.33K
*intestacy is only based on probate estate while elective share is usually based
on augmented estate
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Community Property:
H = 100K, W = 0K (salaries earned during marriage)
During life: H = 50K, W = 50K
Intestacy: W = (1/2) of probate estate = 25K (Her total would be 50K + 25K = 75K).
The other 25K goes to other intestate heirs.
(under UPC): W = 50K (Her total would be 100K).
Will: H has the option to give 50K (he has complete testamentary freedom)
-Wife gets no elective share (no elective share in community property states)
What if there was an unintentional disinheritance after decedent
remarries and doesn't update his will?
Three possibilities:
1. Surviving Spouse = intestate share; original devisees = still enforce gifts
2. Common law - premarital will was revoked, SS = intestate share, original devisees
= intestate share or nothing
3. No effect - you still have an enforceable will and SS gets nothing
*Elective share might still apply in this situation
*These are only default rules so if you can show sufficient evidence that it was
not unintentional, these rules will not apply.
In re Estate of Prestie (516) - surviving spouse and the presumption of revocation
-Man marries wife and then divorces. He creates a will leaving everything to his son. He
then gets sick and remarries ex-wife at which time he amends an inter vivos trust to leave
her a life estate in their condo. After his death, wife argues that the premarital will should
be revoked as to her. His son argues that the amended trust is evidence which rebutted
the presumption of revocation of WRS will as to Maria.
-The Court held for the wife stating that the amendment to the trust was not admissible
to rebut the presumption of a will's revocation. The state statute has three exceptions to
rebut the presumption of revocation and an amendment to an inter vivos trust was not
one of them.
UPC 2-301. Entitlement of Spouse; Premarital Will
The surviving spouse is entitled to receive, as an intestate share, no less than the value of
the share of the estate he would have received if the testator had died intestate as to that
portion of the testator's estate, if any, that is neither devised to a child of the testator
who was born before the testator married the surviving spouse and who is not a child of
the surviving spouse
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How are the decedent's children protected?
Intentional Disinheritance of Children:
-No law against the intentional disinheritance of children (except in Louisiana)
Unintentional Disinheritance of Children:
-Pretermitted Will Statutes: address situations in which the parent might have
unintentionally disinherits a child
Gray v Gray (528) - child omitted from will
-D's will leaves all of his estate to his wife M and did not include his 2 living children.
He then has another child J with M. He later divorces M and the settlement included
a provision for creating a trust for J. After D's death, J argued that he was entitled to
a share of D's estate.
-The state statute entitles a child who is born after the execution of the D's will to an
intestate share unless one of 3 exceptions applies:
(1) It appears the omission was intentional; (2) when the will was executed the
testator had one or more children and devised substantially all his estate to the
other parent of the omitted child; or (3) The testator provided for the child by
transfer outside the will and the intent that the transfer be in lieu of a
testamentary provision be reasonably proven
-Court held that J was not entitled to a portion of the estate because the (2)
exception applied directly to this case.
Kidwell v Rhew (536) - child omitted from revocable trust
-Court held that pretermitted-heir statutes, which speak only in terms of the
"execution of a will," does not apply in instances in which there is no will.
*Could the law of subsidiary wills apply if chosen by the court?
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What is a trust?
What are the three types of trusts?
1. Business trusts
2. Charitable trusts
3. Private trusts - trusts created gratuitously for the benefit of individuals
Who are the three legal parties involved in private trusts?
1. Settlor/Trustor/Grantor - settlor transfers property to the trustee and pays trustee a
fee for his services.
Two ways to set up a trust:
1. Inter vivos trust - trust created during life
-declaration of trust: trusts where the settlor declares he owns the
property as trustee (revocable)
-deed of trust: settlor transfers property to a trustee (they are not the
same person)
2. Testamentary trust - trust created by will
2. Trustee - trustee makes promise to settlor to manage the property for the benefit of
the beneficiaries. Makes distributions to the beneficiaries.
-Trustee is the intermediary between the settlor and the beneficiaries. Trustee has
legal title to the property.
-Promises to manage property in best interest of the beneficiaries.
-Trustee is paid "reasonable compensation". It used to be a set formula.
-Subject to fiduciary duties: duty of loyalty, duty of prudence, subsidiary duties (duty
to inform, duty of impartiality, duty not to comingle)
*UTC allows for resignation of trustee with 30 days notice to all interested parties.
Who can be a trustee?
-It can be an individual or a corporation (or both)
-There can be as many trustees as possible. The trust won't fail for want of a trustee.
The court will appoint one is not named.
-The settlor and the beneficiary can be trustees. However, if the only beneficiary is
the trustee, there is no trust because they have both legal and equitable title. As
long as the trustee is liable to one other person, it is a valid trust.
What are the roles of the trustee?
1. Investment - initial selection of securities, monitoring investments, investing in
new funds, voting the shares
2. Administration - includes the range of accounting, reporting, and tax filing.
3. Distribution - making distributions
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Recent Trends:
-Co-trustees - individual and a corporation can work as co-trustees
-Delegation - trustee can delegate certain responsibilities to others who will do it
better
-Trust Protector - supervisor of the trustee that can order certain distributions,
modify trust, replace trustee
-Directed Trust - a third-party issues directions which the trustee will follow
Two Personalities of trustees:
-Trustee as trustee - creditors of trustee can be paid from trust, but not from
trustee's individual assets
-Trustee as individual - individual creditors can be paid from individual's assets, but
not from the trust's corpus
3. Beneficiaries - receives distributions of property from the trustee. They have equitable
title to the property.
-They can enforce the provisions of the trust against the trustee by invoking claims
based on breach of fiduciary duty (they can sue for breach)
Distinction between income and principal received by beneficiary:
-Income: settlor just wants the distributions to be made from the income being
generated from the corpus
-Principal: actually diving the corpus of the trust
What is required to create a trust?
1. Intent - intent to create the trust
-No magic words necessary (not even the word trust or trustee is required), but it is
smart to be clear in declaration of trust
-A transfer of property to an individual to hold "for the use and benefit" of another
person manifests an intention to create a trust.
*Precatory language is language such as "wish," "hope," or "recommendation" does
not clearly indicate whether the testator intended to create a trust.
Lux (557)
-P dies testate and the issue is whether she devised certain property to her
grandchildren outright or in trust. Court concluded that P intended that her real
estate be held in trust for the benefit of her grandchildren.
Jimenez v Lee (558)
-"It is enough if the transfer of the property is made with the intent to vest the
beneficial ownership in a third person." D's own testimony that his mother wanted
the bond to help her educational needs was enough to manifest intent of trust.
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2. Property - "res"
-A trust cannot exist without trust property. The trust res may be $1, may be real
property, may be pour-over will
Unthank v Rippstein (569)
-Decedent penned a lengthy personal letter to R stating that he would bind his
estate to make $200 monthly payments each month for 5 years. After unsuccessfully
trying to probate the letter as a holographic codicil (court held no testamentary
intent), R attempted to argue that this was a trust. Court held that this was not a
valid trust because the letter did not expressly declare that any specific portion of
his property would constitute the corpus or res of a trust for the benefit of R.
3. Beneficiaries - must have 1 or more ascertainable beneficiaries
-Exceptions: A charitable trust, beneficiary unborn or unascertained when the trust
is created.
-408 (animal/pet trusts) and 409 (trust to maintain grave site) are also now
exceptions under the UPC
Clark v Campbell (579)
-"I therefore give and bequeath to may trustees all my property embraced within
the classification aforesaid in trust to make disposal by the way of a memento from
myself, of such articles to such of my friends as they, my trustees, shall select."
-Issue: Whether the bequest for the benefit of the testator's "friends" must fail for
the want of certainty of the beneficiaries?
-Court holds that this trust is unsuccessful because "friends" is too indefinite.
Trusts for Noncharitable Purposes:
Honorary Trust:
-transferee is not obligated to carry out settlor's purpose
-If transferee declines, she holds the property on resulting trust and property
reverts to settlor and settlor's successors
-Used in Searight's Estate
Statutory Purpose Trust:
-statutory trust for pet animal or other noncharitable purposes
-authorized by UTC Sections 408-409 and UPC 2-907
-typically authorize court to reduce excessive trust property and provide for
enforcement by settlor or court appointee
4. Writing - generally no, however testamentary trusts are subject to the Wills Act.
-Also, the Statute of Frauds requires an inter vivos trust of land to be in writing
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What are the rights of the beneficiary?
Mandatory trust - the trustee must make specified distributions to an indentified
beneficiary
Discretionary trust - the trustee has discretion over distributions. Discretionary trusts may
be drafter in limitless variety
-Discretion in who the beneficiaries are, discretion in how much is distributed,
discretion in who gets the property and how much they get
Three ways in which the settlor can direct how the trust property is allocated:
1. spray trust - although trustee might have discretion as to who the beneficiaries
are, he can't keep income to add to principal or trust corpus
2. sprinkle trust - you can distribute some of the income to the beneficiaries, but
you can also add some of it to the corpus
3. support trust - settlor sets objective standard for how the trustee should make
distributions to the beneficiaries (ex: support and maintenance)
Advantages/Disadvantages
-Advantage - trustee can react to changes in circumstances
-Disadvantage - the trustee must be monitored to ensure that he is following the
trustor's wishes
Marsman v Nasca (598)
-Court holds that, although there is a breach, S2 gets the house because he was a
good faith purchaser for value. Regarding F, the court held that although there was a
breach, the exculpatory clause prevented him from liability. For M, the court held
that she was entitled to the money from the principal of the trust that should have
been given to C to maintain the bills on his house.
*Most jurisdictions now put the burden on the lawyer/trustee to prove that they
disclosed and explained the exculpatory clause to the settlor
Extended Discretion:
-Trustee discretion is "sole", "absolute", or "uncontrolled"
-In spite of extended discretion, trustee is still subject to judicial review
-Trustee must not act arbitrarily and capriciously, or abuse its discretion, and must
act in good faith.
Exculpatory Clause:
-Trustee is excused from liability or breach of trust
-If trustee is draftsman, trustee must show disclosure of clause and its meaning to
settlor
-Cannot excuse liability for bad faith, reckless indifference, or intentional or willful
neglect.
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Mandatory Arbitration:
-Claims for breach of trust must be resolved by arbitration
-Whether clause is enforceable, precluding judicial review, is unresolved
-Authority is scarce and contradictory
What are the rights of the beneficiary's creditors? (Asset Protection)
Mandatory Trusts:
-Beneficiaries' creditors have a right to the money. Because the trustee must make
the distributions, the creditors can take them when they are distributed.
Discretionary Trusts (609)
1. Pure discretionary trust - trustee has absolute, sole, or uncontrolled discretion
over distributions to the beneficiary
-Provides protection because the trustee can prevent beneficiaries' creditors from
getting at the property by not distributing to the beneficiary.
-Creditor may be entitled to a court order directing the trustee to pay the creditor
before making any further distributions to the beneficiary.
2. Support trust - Trustee is obligated to make distributions as necessary for the
beneficiary's needs
-Beneficiary cannot alienate her interest nor can creditors of the beneficiary reach
the beneficiary's interest, except to suppliers of necessaries, who may recover
through the beneficiary's right to support. (Also now child support and alimony)
Unification of Pure Discretionary and Support Trust (611)
-Restatement 60 - Creditors can get the distributions
-UTC 504 - creditor cannot reach the distributions except for child support and
alimony
3. Discretionary support trust - Combines an explicit statement of unfettered
discretion with a distribution standard.
-Beneficiaries creditors - no right to compel
-Exception: Hamilton order - creditor can obtain an order effectively requiring that, if
any distributions are to be made from the trust, the creditor shall be paid before the
beneficiary.
Spendthrift Trusts (614) - created by imposing a disabling restraint upon the beneficiaries
and their creditors
-A beneficiary cannot voluntarily alienate her interest. Nor can her creditors reach
her interest in the trust.
*This is true even if the trust provides for mandatory payments to the beneficiary.
*Valid in any jurisdiction in the United States, but in many jurisdictions, a spendthrift
clause must be expressly inserted
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Issue: Should there be a distinction between voluntary and involuntary creditors?
-Voluntary - Contract creditors
-Middle ground - Spouse
-Involuntary - tort creditors, children
Scheffel v Krueger (616) - tort creditors
-Should the court recognize an exception to spendthrift trusts for claims by tort
victims?
-Court held that, because tort creditors did not fall within the 2 exceptions of the
statute, they could not recover from the spendthrift trust.
Shelley v Shelley (618) - child support and alimony
-G has two sets of wives and kids. Court held that G's interest in the trust income of
a spendthrift trust was subject to the claims of his children and former wives.
However, neither the spouse nor the children could not reach the principal because
they were discretionary payments.
-However, the court held that if the income payments were not sufficient, the
children could access the principal under an emergency provision in the trust.
UTC 503 - spendthrift trusts are valid but unenforceable against: beneficiary's child,
spouse, or former spouse. Another exception for a judgment creditor who has
provided services for the protection of a beneficiary's interest in trust (like the
lawyer)
Self-Settled Asset Protection Trust (APT)
-Traditionally, the settlor cannot shield assets from creditors by placing them in a
trust for the settlor's own benefit.
-However, at least 11 states have enacted statutes that reverse the traditional rule,
thereby giving rise to the self-settled asset protection trust
-APT is used to limit the settlor's personal liability exposure (Example: doctors to
limit exposure to malpractice suits)
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How can a trust be revoked or modified?
-Revocable trust - freely revocable
-Inter vivos irrevocable trust - settlor and all beneficiaries agree - trust may be modified or
terminated
What happens if settlor dies or does not consent?
-Under what circumstances could the beneficiaries change the trust?
-When can the trustee change the trust?
Claflin doctrine: even if all of the beneficiaries consent, the trust cannot be modified or
terminated if it would contradict the material purpose of the trust (Primary doctrine to
know for examine)
Examples of Material Purpose (under traditional Claflin Doctrine)
-Spendthrift trust
-Discretionary trust
-Support trust
-Postponed enjoyment
In re Estate of Brown (653)
-"the trust shall continue for the care, maintenance and welfare of my nephew and
wife for and during the remainder of their natural lives."
-Can the trust be terminated? Is there any other material purpose preventing
termination?
-Court held that "the remainder of their natural lives" was a material purpose, and
therefore the trust could not be terminated.
Equitable deviation doctrine: the court will permit the trustee to deviate from the
administrative terms of a trust when compliance would defeat or substantially impair the
accomplishment of the purposes of the trust on account of changed circumstances not
anticipated by the settlor.
In re Trust of Stuchell (643)
-S dies. Will creates trust for family. When E dies, principal to be distributed to her
children or their descendants per stirpes. JH, E's son, is unable to live independently.
Can trust be modified to provide for continuation as special needs trust if necessary
to preserve JH's public assistance?
-Court would not allow the deviation "merely because such deviation would be more
advantageous to the beneficiaries"
Restatement (645) -The court may modify an administrative or distributive provision
of a trust…if because of circumstances not anticipated by the settlor the
modification or deviation will further the purpose of the trust. (Same in UTC)
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In re Riddell (645)
-G and I die. Wills create trusts for family. When R and B dies, principal to be
distributed to their children. N is unable to live independently. Can trust be modified
to provide for continuation as special needs trust for N's benefit? The court allows
equitable deviation to modify the trust.
Does the trustee have a duty to request equitable deviation?
-Restatement - Trustee does have duty regarding administrative provision.
-UTC - no duty on trustee.
Trust Protector:
-Because donor cannot foresee all of the problems or opportunities that her family
might face after the gift is made, she may name a trust protector with broad powers
to build flexibility into what otherwise might be a rigid trust. These powers include:
(1) Replace trustee, (2) Approve modifications to trust provisions, (3) Terminate
trust, (4) Select a successor trust protector
Modification or Termination of Noncharitable Trust by Consent
Restatement 65:
-Weakens material purpose
-Authorizes termination if reason outweighs material purpose
-Preserves requirement of beneficiaries' unanimity
UTC 411:
-Preserves material purpose
-Wakens requirement of beneficiaries' unanimity
-Authorized termination if interest of absent beneficiary will be
adequately protected
Trustee Removal
-Traditional law is to permit removal only for cause
-Well drafted trusts often include a provision that overrides the default law
UTC 706: Court my remove trustee if:
1. the trustee has committed a serious breach of trust
2. lack of cooperation substantially impairs the administration of the trust
3. because of failure to administer trust effectively... court determines that
removal of the trustee best serves the interest of the beneficiaries
4. there has been a substantial change of circumstances
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What are fiduciary duties?
-Principal agent problem - the interest of the trustee might not be perfectly in line with
that of the beneficiary. The concern is that in exercising his discretionary authority, the
agent will favor his own interests over those of the principal.
1. Duty of Loyalty
-trustee has a duty of undivided loyalty to the beneficiary meaning he must administer the
trust solely in the interest of the beneficiary
Hartman v Hartle (675)
-Will directs executors to sell real estate and divide proceeds among children. Executors
sell farm at auction for $3,900 to L, purchased on behalf of J, spouse of an executor. Two
months later, J sells farm for $5,500 and P sues executors for self-dealing, seeking 1/5 of
profit.
-Court agrees that there is a breach of loyalty. "It is settled law that a trustee cannot
purchase from himself at his own sale, and that his wife is subject to the same disability."
P receives 1/5 share of the profits.
In re Gleeson's Will (676)
-M leases 160 acres to C for one year. M dies and her will leaves farmland to C, in trust,
for the benefit of her 3 children. C renews lease to himself for another year with an
increase in rent plus a share of the crops. The next year, C leases farmland to another
tenant.
-Court holds that even if C was acting in good faith, he could not self deal.
No further inquiry:
-if the trustee engages in a transaction that involves self-dealing, the trustee's good faith
and the reasonableness of the transaction are irrelevant.
*Exceptions: that the settlor authorized it in the trust instrument or that the
beneficiaries consented after full disclosure. He could also seek prior judicial
approval. (Or if you were interested in the property, you could decline to be the
trustee)
*Categorical exceptions: entitles trustee to take reasonable compensation from the
trust, allows a corporate trustee to deposit assets with its own banking department
*Structural conflicts: if trustee is also a beneficiary, it is okay to distribute to
yourself. There is still an inquiry to see if it is in the best interest of the beneficiaries,
however, you are not in the "no further inquiry" area.
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2. Duty of Prudence (care)
-the duty of prudent administration which doesn't just apply to investment decisions (Ex:
Cappy)
Prudent Man Rule (Old Rule) - directed trustees "to make such investments and only such
investments as a prudent man would make of his own property." This rule had major
problems including hindsight bias. It also looked at investments in isolation and
encouraged conservative investing.
Prudent Investor Rule (New Rule - 1994) - trust investments are "evaluated not in
isolation, but in the context of the trust portfolio as a whole and as part of an overall
investment strategy having risk and return objectives reasonably suited to the trust."
*Investors realized that you could go outside of blue chip stocks, but they still couldn't do
whatever they wanted.
In re Estate of Janes (702)
-J dies. $3.5 million of estate put in trust, $1.8 million of which is in Kodak common stock.
Price of Kodak stock falls from $139/share to $47/share. Trustee files accounting. Ms. J
objects, seeks surcharge for losses incurred by "imprudent retention of high concentration
of Kodak stock."
-Court held that the trustee acted imprudently and held that damages should be
calculated based on the loss capital. (Determined by the value of the stock on the date it
should have been sold) Court also says that the Bank is subject to higher standard of care.
Delegation: UPIA Section 9
(a) A trustee may delegate investment and management functions…The trustee shall
exercise reasonable care, skill, and caution in:
(1) selecting an agent;
(2) establishing the scope and terms of the delegation; and
(3) periodically reviewing the agent's actions…
(b) In performing a delegated function, an agent owes a duty to the trust to exercise
reasonable care to comply with the terms of the delegation
(c) A trustee who complies with the requirements of subsection (a) is not liable to the
beneficiaries or to the trust for the decisions or actions of the agent
3. Impartiality
- implicated when a trust has two or more beneficiaries. The trustee must strike a balance
between the beneficiaries, giving due regard to their respective interests.
Example: This problem occurs in a situation where B1 gets the income and B2 gets
the remainder of the principal. Depending on the investments chosen by the trustee,
sometimes the income will be high (benefit to B1) or sometimes the increase in
value will be high (benefit to B2).
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*Cash dividends on common stock and interest on bonds are classified as income,
but appreciation in f the stock or bond price goes to principal.
Howard v Howard (726)
-SS is getting income from trust. When SS dies, the remaining principal will go to
decedent's son. Son thinks SS's other resources should be considered when deciding
how to invest the trust principal. Court rules in favor of SS, stating that her other
resources need not be considered because "the trustee must carry out those duties
in light of any preference expressed in the trust instrument."
Restatement Third of Trusts - says that if you are a trustee, your goal should be to
maximize the total return, without worrying about whether it falls into income or
principal. If it turns out that you are not being impartial between beneficiaries, you
can just make an adjustment.
*45 states have adopted this and 28 have adopted some form of unitrust-conversion
statute.
*Unitrust - permits trustees to elect a regime in which income is calculated
according to a fixed formula and based on the net fair market value of the trust
assets.
In re Matter of Heller (731)
-Court holds that a trustee's status as a remainder beneficiary does not in itself
invalidate a unitrust election made by that trustee.
4. Subrules Relating to Trust Property
1. Duty to collect and protect trust property
-Trustee must collect and protect property without unnecessary delay
2. Duty to earmark trust property
-Trustee must designate property as trust property rather than the trustee's own
3. Duty not to mingle trust funds
-Trustee must not commingle trust funds with his own, even if trustee does not use the
trust funds for his own purposes.
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5. Duty to Inform and Report
UTC Section 813 (not mandatory) - A trustee has the duty to keep the reasonably
informed, shall promptly furnish a copy of the trust instrument, shall notify the
beneficiaries of the trust's existence, and shall send at least annually a report of the
trust.
Fletcher v Fletcher (739)
-Ms. F executed a revocable inter vivos trust including three separate trusts for the
respective benefit of P and his two children in the amount of $50K each. J argues that he
is unable to satisfy his duty to ensure that the trustee is satisfying his duties. The trustee
states that he has shown J the provisions relating to his trusts and there is no reason for
him to see the other trust provisions.
-Court holds that J is entitled to view the trust in its entirety.
Duty to Account
The law protects a trustee from liability to the beneficiary for breach of trust if the facts
underlying the beneficiary's claim:
1. are fairly disclosed in an accounting filed with the court,
2. notice of the accounting is properly served on the beneficiary, and
3. the beneficiary does not timely object to the accounting.
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Additional Issues Relating to Trusts:
Charitable Trusts v Private Trusts:
Private Trust
Charitable Trust
Purpose
For the benefit of an ascertainable
beneficiary
For the benefit of a charitable
purpose
Modification
Claflin doctrine, deviation
Cy pres doctrine, deviation
Enforcement
Beneficiaries
State Attorney General
Other
Exempt from RAP and certain taxes
Charitable Purposes include:
-the relief of poverty
-the advancement of knowledge or education
-the advancement of religion
-the promotion of health
-governmental or municipal purposes
Terminology and Types of Powers of Appointment (803)
Persons
Type
Donor: Creates the power
Donee: Holds the power
Objects: Persons in whose favor the power may be
exercised
Appointee: Person in whose favor the power is
exercised
Takers in default of appointment: Persons who
take if the power is not exercised
General power: A power that is exercisable
in favor of the donee, his estate, his
creditors, or the creditors of his estate.
Special power: Any power that is not a
general power (i.e., a power not
exercisable in favor of the donee, his
estate, his creditors, or the creditors of his
estate.
*Precatory language does not suffice, although the term "power of appointment" is not
necessary to create a power of appointment
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Types of Future Interests:
Future Interests in the transferor:
-Reversion
-Possibility of reverter
-Right of entry
Future Interests in the transferee:
-Vested remainder
-Contingent remainder
-Executory interest
Types of Reform on RAP (897)
-Self Help: Savings Clauses
-Reformation (Cy-Pres) Doctrine
-Wait-and-See Doctrine (90 year period)
-Abolition of the Rule
*About (1/2) of the states allow perpetual trusts (dynasty trusts)
Wealth Transfer Taxation:
-World War I: Congress enacts an estate tax
-1932: Gift tax to prevent avoidance of the estate tax
-1976: Single rate schedule to apply to gift and estate taxes
EGTRRA:
-Exemption increased to $3.5 million by 2009.
-Maximum tax rate lowered to 45 percent by 2009.
-No tax in 2010.
-Repeal sunsets, hence return to 2001 levels in 2011.
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