GWATS OUTLINE
GENERAL THEMES
1. Inheritance and Public Policy
a. Halbach – What justifies the private ordering of wealth. Ends up leaving a lot of money in hands
that did not earn it.
i. Justifications Inheritance – Viewed in terms of proper rewards and incentives for the
donor, without regards to performance of donee. Good?
1. In private property system, may be least objectionable alternative.
2. Leads to happiness and reinforcement of family ties.
3. Incentive to bring forth creativity, and productivity.
4. For immediate family members – they contributed to the wealth accumulation
process. Like a spouse staying at home.
ii. Reasons Against Inheritance System
1. Unjustified Inequalities of means and power
2. Societal divisiveness and conflict
3. Economic inefficiencies – allocates wealth by chance of inheritance. Leads to
dead hand control in terms of trusts.
b. Langbein – Whitebread loves.
i. Because we transfer property in so many ways, we really don’t even need the probate
system anymore. We have life insurance, pension accounts, joint accounts, revocable
trusts
ii. In the US today, the great intergeneration wealth transmission moment is not death, it is
the education of children.
2. Probate System and Wealth Transmission Terms
a. Probate: Judicial proceeding to determine validity of decedent’s will.
b. Personal Representative
i. Executor – Personal Representative named in the Will
ii. Administrator – personal representative designated in intestate succession.
c. Intestate: Person who dies without a will.
d. Escheat: When an estate goes to the state because there are no successors.
e. Heirs: Generally refers to intestate successors.
f. Testator: Someone who leaves a will.
g. Devise: A gift of land.
h. Bequest or legacy: A gift of personal property or money.
i. Ambulatory: The state of a will during a testator’s life.
3. Testamentary Freedom and Its Limitations
a. Constitutional Limitations
i. The 5th Amendment Takings Clause
1. The court cannot create statutes that escheat estates when heirs exist. There is a
right in US to transfer property by intestate succession.
(Hodel v. Irving, S. Ct. held the original version of Tribal escheat provision designed to end the endless fracture
of Indian land, was an unconstitutional taking under the takings clause. The statute gave Indians the right to
transfer their land during life, but after death the land went to the tribe).
ii. The 14th Amendment and the Race Cases
1. When racially restrictive clauses have been attached to trusts the courts have 4
choices:
a. Issued permanent injunctions. (Sweetbriar, Fed. court enforces injunction
forcing college for white women to be used for all women. S Ct. denies
certification.)
b. Applied CY Pres to strike racially restrictive clause. (Tramell v. Elliot,
1973, woman gave money for scholarships for whites, Georgia court uses
cy pres to remove racial classifications).
i. If a charitable trust cannot be preformed as written, and the settlor
had a general charitable intent, court may apply the proceeds of the
trust to the next nearest charitable purpose.
c. The substitution of private trustees to keep racial restriction. (Girard II).
Those three are the most common.
d. In some cases, the courts have jettisoned the trust altogether and given the
trust back to the heirs. (Evans v. Abney)
2. History
a. Girard Colleges (1957-1968)
(Girard left millions to Girard college for orphaned white boys. AA intevenors sued because school was public.
S. Ct. said that public trustees were violation of 14th amendment. Philadelphia replaced public with private
trustees. Girard II, the S. Ct. said private trustees was o.k. In, 68’ 3rd circuit said desegregation was mandatory,
Girard III)
b. Evans v. Newton/Abney – 1966 – shows the “price we pay” for letting
deceased persons do what they want with their own land
(Senator Bacon wanted park for the use of white people even though he had fondest disposition of blacks.
Court held park was unconstitutional. The court found state action because the place was a park, held that
private trustees were not enough. Georgia then held that park must be shut down because Bacon’s wishes could
not be fulfilled. S. Ct. decides that Georgia is right, and that Bacon lacked the general charitable intent
necessary for Cy Pres.)
i. How can we really know intent, the person is DEAD.
3. Why do we allow control over charitable giving?
a. Traditional Idea: If we didn’t people would not give money.
b. Whitebread – Stupid because tax laws mean you either give the money to
charity or you give it to the government.
iii. Religious Bigotry – O.K. in charitable giving.
(National Bank v. Snodgrass, father holds money in trust that is to be given to daughter as long as she does not
marry a catholic, court upholds testamentary wish even against religious restraint)
iv. Restraints on Marriage –
1. O.k., as long as there is not an unreasonable restraint on marriage.
2. Testamentary Conditions that are made to break up an engagement are
enforceable, but conditions to break up marriage are not.
v. Non-U.S. Citizens1. Statutes exist which restrict ability to pass property to people who are not citizens
of the US.
2. Can Send Money if:
a. reciprocity statutes
b. Full or beneficial use statute. (Would the people in the other country get
the use, or would the government take all the property)
(Zschennig v. Miller, The decedent left money to citizens of East Germany. The trial court thought that the East
German government would confiscate the money. Supreme Court held law unconstitutional, said that you could
use state department website.)
vi. Waste1. Some JX hold that a testator’s directions will not be carried out if no one benefits.
(Eyerman v. Mercantile Trust, woman wanted to destroy house she lived in and divide it among beneficiaries.
None of the beneficiaries complained, but neighbors did. Court stopped destruction because no one benefited)
b. Other Limitations on Freedom of Testation
i. Estate Taxes
ii. Rule Against perpetuities
WHY MAKE A WILL
1. Informal family settlement If someone has NO assets, family members settle the estate by everyone
taking what they want.
a. Stumbling block for poor – automobile, must go through probate, even if no other assets.
2. Why people don’t want will?
a. Discussion of money is taboo.
b. Don’t want to confront own Mortality
c. Afraid it is going to be costly to create an estate plan.
3. What is wrong with intestacy?
a. Most people disinherit their children, can’t be done in intestacy.
i. Because 2/3rds usually goes to children, puts a huge administrative burden (post bond,
make reports, etc.) on your surviving spouse in raising the children.
b. No charitable giving
i. Tax benefits of charitable giving to good to ignore.
c. Awkwardness of Administration
d. Wills also creating guardians for children, while intestacy does not.
e. No Trusts-important to protect children from first or later marriages, getting money too soon, etc.
f. 6) No tax planning. Intestate statutes maximize taxes estate will pay.
g. No liquidity in intestate liquidity is instant money—money for your family to live on during
probate and to pay debts and taxes immediately so as to avoid fire-sale of assets.
INTESTATE SUCCESSION
1. Overview
a. Interesting Features
i. Fixed Shares based on familial status.
ii. Courts ill suited to figure out relationship strength so blood connection is used.
iii. The law attempts to approximate the result such a decedent would have preferred if they
made a will.
1. Makes divisions clear so we know when to make a will.
2. Protects family from becoming public charges.
3. Reflects value judgments of the legislature.
iv. Public Policy Reasons for family-centered intestacy
1. Family likely assisted in buildup of the decedent’s estate.
2. Persons most likely to have been supported in buildup of decedent’s estate.
b. Modern Statutes: Increase amount of intestacy share that goes to surviving spouse because most
wills give almost everything to spouse.
c. Degrees of Relationship
i. Lineal Descendents/”Issue”- Children, Grand-children, Great Grand-Children
ii. Lineal Ascendants/Ancestors-Parents, Grandparent, Great Grand Parents
iii. Collaterals: Blood Relatives who are not issue or ancestors. (Brothers, Sisters, Cousins,
Nieces, Uncles)
iv. Priority of Succession:
1. Degrees of Consanguinity/Gradual System –
a. Priority is given to the decedent’s next of kin. Relationship is determined
by degree.
b. For collaterals degree is determined by moving up to nearest common
ancestor and then moving down.
c. Examples:
i. Child/Grandparent – 2 degrees
ii. Neice/Uncle – 3 degrees
iii. First Cousins – 4 Degrees
2. Parentelic System –
a. Priority given to nearer ancestors and their descendants over more remote
ancestors and their descendents.
v. Representation:
1. If someone ahead of you in line predeceases the decedent, you may step into their
shoes for the purposes of asserting your inheritance rights.
a. Ex: Jennie has 2 kids, Earl and Charles. Earl has a daughter Alice, and
Charles has 2 kids Ned and Bourke. Earl is dead but Charles is alive
b. Jennie’s estate will go half to Charles and half to Alice b/c of the idea of
representation.
2. Most JX have removed representation to the 5th the degree for inheritance right.
d. A laughing heir –
i. Distant an unknown relative whose joy at receiving an unexpected inheritance would be
unmitigated by grief at the decedent’s death.
2. Intestacy Statutes
a. IRON CLAD LAWS
i. Lineals take to the exclusion of collaterals.
ii. Living person above cuts off your inheritance rights.
b. Surviving Spouse
i. Wills usually leave everything to spouse, because assumption is that she will take care of
the kids. Spouses share has generally tried to conform to this:
ii. Used to be 1/3rd, then ½.
iii. Current Law: UPC §2-102
1. Gives a substantial amount of money in beginning and then between ¾ and ½.
iv. Common Law Marriage
1. Parties must live together and hold themselves out as husband and wife.
2. Some JX: Specifically agree or consent to be married.
v. Putative Spouse
1. People who believe in good faith that they are married, even if marriage turns out
to be invalid.
vi. Unmarried Cohabitants
1. In non-common law states, these people cannot claim intestate succession.
2. Pooling agreements between non-married cohabitants may be enforceable based
on express or implied contract.
c. Heirs in Existence at Death
i. If intestate and potential successor die together:
1. If no evidence of when who died, property of each person shall be disposed as if
he had survived the other.
ii. Some states require survival for a specific period of time after decedent’s death. UPC
calls for 120 hours.
iii. Children in gestation
1. Treated as being in existence at the decedent’s death.
2. Some states only apply rule to children, not to collaterals.
d. Representation Among Descendents, How an estate can be divided:
i. LINIEALS ALWAYS TAKE TO THE EXCLUSION OF COLLATERALS – Includes
your parents, not your brothers and sisters/nieces and nephews. Parents take only if no
children.
ii. A living person in line cut everyone beneath them.
iii. Per Stirpes –
1. Estate is divided in equal shares among the decedent’s 1st level completely
regardless of whether any survive the decedent.
2. You are taking from and through the person in front of you.
iv. Per Capita –
1. Initial division into equal shares occurs at the nearest generation of descendants
which has a member living at the decedent’s death and divide the estate their.
2. Tontine – must divide amongst the living and the dead, or it would perversely
incentive to murder.
v. Per Capita at Each Generation – 64-65
1. Division of estates into equal shares at the nearest generation of descendants. This
ratio is under the “equally near, equally dear” rational. At every level of
generation, the estate is recombined and divided equally at the next level of
relatives.
vi. Lawyers across the board like the per stirpes system.
1. Everybody thinks about own children when thinking about decedents.
2. Per capita promotes family disharmony - every other family member that
becomes another person that takes from decedent’s estate.
vii. Relatives by affinity (spouses of blood relatives-descendants of blood relatives) usually
excluded.
e. Ancestors and Collaterals
i. LAW: A will can be challenged by people mentioned in that will, people named in that
proceeding will, and the intestate successors, other wise known as the heirs at law.
(In Re Wendel’s Estate: Wendel left sixty-five million to charities, had no known relatives and 2300 claimants
claiming she lacked testamentary capacity. Three claimants were found in the 5th degree, they settled.)
ii. Half Bloods: Somebody who has one, but not two ancestors in common.
1. Rule: Half-bloods take equally with whole bloods in intestacy
2. Some JX, for ancestral property, whole bloods take to the exclusion of ½ bloods
as long as whole blood relatives are as near in degree as ½ bloods to the decedent.
3. Children
a. Adopted Children
i. For Children
1. A matter of statutory construction.
2. Majority JX: Adopted child is treated like a child of adopted parents and NOT the
natural parents.
3. Exception: When child adopted by stepparent, relationship remains with natural
parent.
4. Can adopted child inherit from other relatives of natural parents?
(Before UPC Exception, Estate of Donnelly, Child could not inherit from natural father’s parents even though
she was adopted by stepparent after her father died. Outcome would have been different under 1990 revision)
5. Under UPC, if child can collect double intestatcy because of adoption by family
member child is only entitled to take a single intestate share, whichever is larger.
ii. For Parent:
1. Natural parent can only collect if they “have openly treated the child as his/hers
and has not refused to support the child.”
iii. Equitable Adoption
1. Child raised by people that treated child like theirs, except there was never a legal
proceeding where child was actually adopted.
a. Likely in non-traditional families where barriers exist.
2. Agreement between natural and adopted parents,
3. Natural parents gave up custody.
4. Child lived in foster parent’s home.
5. Foster treated child as adopted child.
iv. Adoption of an Adult
1. Allowed in U.S., dates back to Roman times for succession for Emperor.
2. Why adopt an adult:
a. Gives adopted adult inheritance right to exclusion of real heirs.
b. Huge amount for same-sex marriages.
c. Living with someone in hetero relationship, but want to have benefits.
d. To capture the remaining amount of a trust that says to you and your
children.
b. Non-Marital Children
i. Original common law said illegitimate children could not collect.
ii. Maj. Rule in U.S.: No inheritance from father, full inheritance from mother.
iii. Constitutional Tug of war in three cases
1. Labine v. Vincent: Court denied equal protection for legitimate and illegitimate
children for two reasons.
a. Promotes family planning.
b. State concern for disposition of property, huge burden of proof, alternative
rule promotes fraud.
2. Trimble v. Gordon: Illinois statute deemed unconstitutional that only allowed
inheritance from mother. Powell says there has to be rational basis for unequal
protection, rejects all three reasons.
a. Promotion of family life, rejected because condemning a child for public
policy is unjust,”legal burdens should bear a relationship to wrongdoing,
penalizing a child is an unjust way of pressuring the parent. See Weber v.
Etna Casualty CO.
b. Problems of Proof: - No justification
c. Excluding illegitimates is presumed intent – then make a will.
3. Lalli v. Lalli
a. Statute that required filiation order to determine paternity during father’s
lifetime. Constitutional because solves burden of proof. But See Texas
case where one year to complete filiation order was not enough.
c. States have lots of latitude. Some say that paternity must be proved by adjudication or clear a
convincing circumstances, other have no distinction between marital and non-marital children.
d. Presumptions of UPA: (Rebuttable by clear and convincing evidence).
i. Man presumed father if child born during marriage or 300 days afterwards.
ii. If official written acknowledgment of paternity.
iii. Man holds himself out as father.
4. Intestacy Disqualification for Misconduct
a. Breach of Parental Obligations - Refusal to support the child.
b. Breach of Marital Obligations
i. Obviously Divorce – you lose intestate share.
ii. Refusal to support decedent spouse.
iii. Some JX: Adultery
c. Slayer Statutes
i. Old Rule: If entire estate left to person that killed you, prevailing position was, absent
slayer statute to the contrary, killer could take your money.
ii. New Rule: Most states have slayer statutes. Absence of slayer statute, case law invokes a
constructive trust to deprive killer of the benefits of his murder.
iii. Statutes
1. act as if the killer predeceased the decedent. UPC § 2-803.
2. In absence of conviction, court may determine guilt by a preponderance of the
evidence.
3. Most statutes reach murder and voluntary manslaughter. But in California, murder
must be intentional, not just reckless. See Estate of Kramm.
(Tarlo’s Estate, Tarlo killed kids and wife, then killed himself. Court held that because he was never adjudged
guilty, slayer statute did not apply to him. Under current law, there would have been alternate result).
5. Advancement
a. When person who is intestate successor, during decedent’s lifetime received transfer of property.
b. Rule: To be advance, there must be written evidence intent by the decedent that transfer was
advance. Presumption - all transfers are gifts unless written evidence. Writing need not be legal
writing it can even be a letter.
c. Writing can be from heir and not from advancer.
1. Note: If advancer gets too much, they do not have to rebate advance. Other
siblings just get less, and advanced person gets nothing.
2. Advancement at time of transfer, without regard to increase/decrease.
6. Release or Assignment
a. Of expected intestacy share generally held to be enforceable IF made for fair and adequate
consideration.
7. Disclaimer
a. What?
i. An affirmative refusal to accept a gratuitous transfer of an interest in property.
ii. When someone does not want the legacy.
b. Why disclaim?
i. Already too rich already and about to die, money will be estate taxed again.
ii. Disclaiming individual/heir is bankrupt. Courts unanimous in saying that this is not a
fraudulent transfer as to the creditors.
iii. Disclaiming individual is taking public assistance. Courts hold this as fraudulent.
iv. Have 9 months after death, or time interests vestsm act as if disclaiming party deceased.
PROTECTION OF THE FAMILY
1. Overview
a. By statute, almost all JX, surviving spouse enjoys some protection against disinheritance.
b. QUESTION: Does frequency of disinheritance (which is very small) of surviving spouse justify
any of these devices?
i. Lawmakers fear the “weird old guy syndrome”
ii. Two actual general instances of disinheritance:
1. Old spouse, young spouse.
2. Disinheritance because spouse has lots of money.
2. Statutory Allowances and Social Security
a. The Federal Estate Tax – # 1 reason no disinheritance
i. Tax huge: 35 to 50%. Major way to reduce estate - give money wife, tax free.
b. Homestead Laws
i. Prevents the conveyance of your homestead to anyone but your surviving spouse. Even
before creditors. Under UPC – Amount 15K.
c. Exempt Property
i. Spouse, or children if no spouse, also gets 10,000 dollars in personal property (household
items, automobile).
d. Family Allowance
i. Surviving Spouse and minor children are allowed reasonable moneys for their
maintenance during the administration of the estate.
e. Social Security
i. Most families have little or no accumulated wealth. Statutory allowances are, thus,
meaningless and social security does most.
3. Surviving Spouse
a. Dower
i. Entitled Widow to life estate in 1/3rd of all land owned by husband. Attached at moment
of marriage, remained “inchoate” during husband’s life.
ii. Priority over creditors.
iii. Maj. JX: Replaced Dower with Elective Share. Dower unconstitutional because of equal
protection issues.
(Hall v. McBride, Hall wanted her dower interests, sister of deceased said no. Dower unconstitutional because
of equal protection, court says legislature has to figure out alternative. Leg. Abolished Dower.)
iv. Problems
1. No property could be conveyed by husband without wife signing off. Clog on
marketability of property. Since a life estate is an income off of real property, so
much of the real property in this country is not income produce-able.
2. Dower only applied to real property, but vast wealth comes from personal
property.
3. Nobody ever said which one third of the property.
4. Dower could be destroyed through divorce, pre-nuptial agreement and an
agreement to waive a dower right, sufficient clause in your will.
b. Curtesy – abolished in all JX. Dower for men.
c. Traditional Elective Share
i. Principle protection for surviving spouse.
ii. Surviving spouse who does not like what they were given by decedent, may elect to
receive their statutory share.
iii. Why?
1. Why should the public take care of surviving spouse while deceased spouse gives
all their money away. Worried about the weird old guy syndrome.
2. Spouse deserves compensation for all the marital contributions they made.
3. But?
a. Assumes that we are in a single marriage world. In most cases, spouse cut
out of will b/c of age disparity or one spouse is just too rich and decedent
wants to take care of others.
iv. How?
1. Within 6 months of death, spouse must give notice of intent to take elective share.
Spouse must first renounce the decedent’s will.
2. The share, in original form, applies to the net estate, usually is a third of the net
estate. Usually 1/3rd with children and ½ without.
3. Lump sum paid, usually after sale of assets.
v. Illusory Transfer Doctrine
1. Used to test whether a husband has transferred his property before he died in good
faith or whether he did transferred so not to give his wife elective share.
(Newman v. Dore, Strauss was 80 and his wife was 30. They hated each other and he wanted to not give her any
money so he created an inter-vivos trust that he retained control over. Even though trust was valid the court
holds the trust to be illusory b/c he retained too much power over trust, court does not look at intent.)
2. Doctrine problematic, b/c court doesn’t look at intent it has to deal w/ real or
illusory, but these trusts are completely valid by law, so you have to look at intent.
3. So problematic that courts go back to intent or say all trusts are valid.
4. Courts also were using the illusory transfer doctrine in place of whether they
approved of the intent of the trust.
(Johnson v. La Grange Bank, In 1972 Eleanor executed a revocable trust with broad powers remaining in her,
gave bank discretionary money to give husband, but he had 2 mill. Trust made Eleanor’s family beneficiaries.
Court, using illusory trust doctrine held that because of Franklin’s other money, the trust was not illusory, Trust
really had more powers in Eleanor than Strauss’s trust.)
d. Augmented Estate
i. To determine a wife’s elective share now pool both testamentary and non-testamentary
assets and give to wife accordingly. Assets:
1. Probate Estate
2. Gifts Causa Mortis (within three years)
3. Totten Trusts
4. Joint Savings Accounts – Source Test to determine whose estate it’s added too.
5. Joint tenancies with right of survivorship
6. Trust Property where settler has a right to revoke or invade principle.
ii. Deduct what the wife has already received from this property and then divide pro rata
amongst the other beneficiaries until wife receives her elective share.
iii. Excluded from Augmented Estate in Many JX
1. Insurance Proceeds, but included according to UPC.
2. Pension benefits
3. U.S. Savings Bonds
iv. New UPC has range for elective share 3% >1 year  50%>15 years or more of marriage.
v.
e. Waiver
i. Spouse’s right to elective share may be waived in whole or part unless
1. Did not execute waiver voluntarily, the contract is unconscionable b/c spouse was
not provided with reasonable disclosure, the person did not waive their right to
disclosure, r you did not have knowledge of property or financial obligations of
decedent.
(Hook v. Hook, Day of marriage husband asks wife to sign doc. saying “what’s mine is mine, what’s yours is
yours.” She claims unconscionability - court says if document discloses, court won’t inquire into fairness.)
2. California Law – Barry Bonds Law
a. Valid only if signees had 7 days to review the document.
b. Each was represented by independent legal council, or there is a valid
written waiver of independent legal council.
c. To waive right to spousal support, you need seven days, independent
counsel. Unconscionability will also be scrutinized at time of enforcement.
4. Surviving Spouse and Community Property
a. Traditional Community Property
i. Overview
1. Comes from Spanish Law
2. Spouse entitled to 50% of assets owned or acquired by either spouse during the
marriage.
3. No co-ownership in separate prop.: gifts, bequests, property owned pre-marriage
4. FORK: Income in appreciation from separate property in marriage is community
property. No - California, Yes - Texas.
(Estate of Bray, Husband transfers assets to his son who works for him and then dies. Wife tries to revoke 50%
of gifts and court allows it, b/c one spouse cannot give away the other spouse’s property without consent.
Minority of states invalidate the entire gift.)
ii. Right to 50% attaches at the time the money is earned.
iii. Quasi Community Property – You own property in other states. CP state will treat as
community property, property in a non-CP state. Will be treated as if it was CP
b. Uniform Marital Property Act
i. Purpose
1. Recognize the advent of the multiple marriage philosophy in modern society.
2. Adopt the partnership theory of marriage.
3. Only Wisconsin adopted the UMPA, so the UPC tried a lesser approach.
ii. 1990 UPC Revisions – reaction to UMPA, Whitebread thinks nothing but com.
Prop. Will do.
1. Still “Presumes intent of married couples to pool their fortunes on an equal basis,
share and share alike”.
2. Sliding scale of elective share based on length of marriage.
3. Augmented estates – but difference is that it also included separate property
brought to marriage (Called the universal community) (Compare to community of
acquests – all the property acquired during marriage.)
a. Rational for new approach – all stupid
i. Spouses do not bring assets to a marriage – stupid b/c it does not
recognize a multi-marriage society
ii. Most people marry in the same economic class-no they don’t
b. Can opt-out of whole revision through contract – what a cop out.
4. Other weaknesses in revision
a. The decedent’s estate cannot get 50% of the surviving spouse’s assets.
b. Rational
i. Survivor will devise consistent with decedent’s wishes – then why
have elective share anyways
ii. Financially dependent spouse has no right to augmented estate 5. Protection of Children
a. Outside Louisiana, no statutory protection for children against disinheritance.
b. Pretermitted child statute
i. Any child or issue of child not mentioned in will is presumed to have been forgotten and
will be saved their intestate share.
ii. Stupid, why should you have to explicitly disinherit child.
iii. Testators should disinherit their Children.
1. Say “I know my children X and Y, and I do not want them to take anything from
my estate and the same is true of any child born here-after and any child that
presents a claim thereafter.”
(Goff v. Goff, Goff left property to nieces and nephews. He was briefly married, a marriage he denounced
every day of his life. He always said he was not father of child born during marriage. Never saw Joe (child)
again. In will he says he wasn’t married. Joe dies and issue want Goff’s money. Court concludes will forgot
about Joe and kids are saved intestate share, which is 100% of estate. (Litials take to exclusion of collateral)
iv. Modern pretermitted statutes apply only to children and not to issue of children
(Afterborn statute).
c. After-born Child Statute
i. Any child born after the execution of the will will be saved his/her intestate share.
ii. Some states put after-borns on par with other children.
6. Restrictions on Charitable Gifts
a. Limitations used to exist, don’t much anymore.
b. NY for many years had a statute that said a decedent could not leave more than 50% of estate to
charity if that person was survived by children.
c. Limitation on Timing
i. Mort-Main Statutes void any gift to a religious charity made within 30 days of death.
Statute has since been declared unconstitutional.
1. Why: You are under duress at the time. The gift to religious charity is going to get
you into heaven.
GROUNDS FOR WILL CONTEST
1. Testamentary Capacity
a. General Amount of Brain Power Necessary to make a will, very low level of competence
i. Need to know you are making a will.
ii. In very broad terms, need to know what your property is.
iii. Must know the natural objects of testator’s bounty. (You know your relatives).
iv. Must appreciate these elements in relation to each other.
b. Lower standard than someone who has been judged to need a conservator or guardian. Causes
problems for kids trying to help parents or preserve the family estate. (Bonjean)
c. No one item of proof, absent evidence that testator was under item of influence, when will was
created. (Just because drunk, have to prove you were drinking).
d. Evidentiary Factors to Determine Testamentary Capacity
i. Symptomatic Conduct of Incompetence
1. Friends, neighbors, business associates.
ii. Opinion Testimony of Witnesses
iii. Organic Condition of incompetence
1. Physician
2. No special weight given to psychiatrist who treated the testator.
iv. Moral repercussions of transaction
1. Attorney – best witness
2. Terms of the will.
e. General Facts
i. Cases are extremely unlikely to win.
ii. Courts are hostile because they parade private family affairs across courtroom.
iii. Cases almost always have a settlement value.
iv. Effect of successful suit = challenger gets their intestate share.
f. Two Types of Testamentary Capacity
i. General Insanity
1. Insanity must be ties to the unnatural disposition of property. Very high burden,
has to be really weird. Entire will thrown out. (Man rolling around with pigs every
night had testamentary capacity)
a. “No-Contest Clause”/ In Terrorem: If anticipating will challenge, lawyer
should include no-contest provision giving anticipated challenger enough
money in will and providing for a loss of all funds if will is unsuccessfully
challenged.
b. Two things have recently undercut efficiency of clauses:
i. The probability of winning and good faith exception. See Haynes.
ii. The executor can bring challenges itself on the grounds that they
need directions, then the clause is unenforceable.
2. Unnatural dispositions include, unequal distributions between children, alternate
lifestyles, disinheritance of near relatives).
(Marshall v. Barnes, Marshall thought he spoke to God who spited people he did not like, left his money to
charity and gave his daughter $5, she sued for testamentary capacity and won. Unlikely result. Witnesses,
including psychiatrist, son, friends, witnessed his delusional behavior.)
ii. Insane Delusion
1. Not general delusions, but a crazy specific idea.
2. Must tie the delusional belief to the contested writing in will. Only that specific
disposition is thrown out and moved into the residue.
3. Legal Issue
a. Not the truth of the alleged delusion, but the reasonableness of the alleged
delusion.
(In Re Honnigman, Dude thought his wife was cheating, court assessed reasonableness of claim, find claim
unreasonable, guy thought wife was lowering dudes by bed sheet.)
(Estate of Bonjean, woman commits suicide, pissed at her siblings for placing her in home and disinherited
them. Court claims that anger at siblings was reasonable)
4. When someone claims, witchcraft, spiritualism, scientology, ect. as insane
delusion, point to famous/respected people with similar beliefs.
2. Undue Influence
a. Requirements (1-2 covered if confidential relationship exists)
i. Susceptibility to influence
ii. Opportunity to influence
iii. Intent or disposition to assert the influence
iv. Some Result –Dividing an estate unequally amongst similarly situated people.
b. Influencer does not have to exert influence for own benefit, just has to overburden the mind of
the testator.
c. Courts can just strike portions of the will that have been unduly influenced.
d. Presumption of undue influence when there was a confidential relationship between the alleged
influencer beneficiary and the decedent + any other suspicious circumstances
i. Executors
ii. Attorneys – even if not named as a beneficiary. If named as beneficiary, testator should
have own advice.
(In re Moses’s Will, Moses married and widowed three time, befriends Holland downstairs who was also
lawyer, sister contests will, Holland being a lawyer creates presumption and Holland contracting other lawyer
ONLy to draft will creates suspicious circumstance, and presumption not rebutted. Unfair because Halland
probably cared more about Moses that that whore sister)
iii. Spouses – may have influence, not “undue” because of community property ideal.
iv. Nurses/Doctors
v. Family Members
(Haynes v. National Bank, mother goes to daughter B’s house to live, they cut daughter A’s kids out of the will
and have their own lawyer create new will. S. Ct. holds that rebuttable presumption exists, and remand to
determine whether presumption is overcome)
vi. Illicit Lovers – not always invokes presumption, leads courts to examine with care.
(Estate of Dilios, Greek Immigrant had lover, Bertha, who sons from Albania did not approve of. Sons cut out
of will and Bertha given bequest based in part on what she was owed. Courts find undue influence because of
illicit relationship and woman reportedly set sons up, unfair result for Bertha.)
e. Burden of Proof
i. Burden of persuasion and production burden initially on contestant.
ii. Contestant can provide evidence one each cause of action for prima facie (rebuttable
presumption) case to avoid directed verdict and justifies judgment as a matter of law.
iii. Then, production burden, but not persuasion burden, shifts to estate. If innocent
explanation exists case goes to trial and persuasion is still on contestant.
3. Fraud
a. Requirements
i. Person made false representation
ii. Knew it to be false with intention that testator rely upon it
iii. Testator relies on information (fraud affected disposition in the will) and to the fraud
inducing party.
iv. Remedy of partial invalidity is available.
b. Constructive Trusts
i. Available in fraud cases where no relief is available. fFiction is that the wrongdoer is
holding property in trust for the benefit of the wronged.
ii. Ex: Decedent wrongfully prevented from making will, no procedure to contest an
intestacy, courts will create a constructive trust for intended beneficiaries.
(Latham v. Father Divine, Divine was religious cult leader, induced Mary to donate money to him, cousins try
to talk her out of it, Divine catches wind of the plan, allegedly kills her. S. Ct. holds that cause of action exists
for fraud, interesting because cousins were not intestate successors)
c. Tortious Interference with Expectancy
i. Wrongful interference with a gift or inheritance.
ii. Much of the same elements as fraud or undue influence
4. Mistake
a. Formal Rule: Wills are given effect only as written, will not get reformed after the person is
dead. Courts only use extrinsic evidence to clarify ambiguous terms.
i. Reasoning: Will is evidentiary proof of intent and the person is dead, we have a social
contract to follow a will is written.
(Matter of Snide, Snide and Rose each gets wills that they sign for the others by mistake. At death they discover
they made the mistake. Court grants reformation for mistake the trust and estates gurus think this is amazing
case. Overturned years of precedent. Dissent thinks now the floodgates are open.)
b. Ante-Mortem Statutes: Testator allowed to issue own will contest while alive.
i. Flawed: Cannot determine heirs until testator dies. Contestants have no incentive to
litigate. Difficult and costly to determine notice.
FORMALITIES OF EXECUTION
1. Attested Wills
a. Overview
i. Functions of Formalities
1. Ritual Function
a. A ceremonial function that reminds testator that they are making more
than a casual direction.
b. Signature shows that will is not preliminary draft.
c. Witnesses show finality of intention.
2. Evidentiary Function
a. Good evidence of intent for what testator wants done with property, adds
to the reliability of the proof presented at court. Leads courts away from
oral testimony that stems from memory lapse or coloring of the past.
b. Signature at end prevents unauthorized additions.
3. Protective Function
a. Safeguards testator against undue influence and other imposition.
b. Questionable because measures already exist to protect from undue
influence. Generally people who right wills are most capable in society.
Why is standard higher for wills than inter-vivos gifts.
b. Wills Formalities in Operation
i. Witnesses
1. Usually two, sometimes three. Always use three in case testator moves to state
that needs three.
2. Present and Sight Requirement
a. Witnesses do not have to see the testator sign, as long as the testator
acknowledges that the signature is his.
b. But the testator has to be able to see the witnesses sign.
(Weber’s Estate, Weber goes to bank to sign will, signs will and waves to employees, employees sign will in
bank but Weber cannot see what they sign because of counter lip, will held as invalid).
c. UPC – 2502, eliminates presence and sight requirement for witnesses.
Witnesses no longer have to be in presence of testator, as long as testator
informs them that he signed.
d. California: Follows “conscious presence” where witnesses sign within
hearing of testator, testator knows what is being done, complete attestation
done in one continuous transaction.
ii. Signatures
1. Testator
a. Testator must sign will to execute it.
b. Longhand signature not necessary, testator’s mark is sufficient or the mark
of another at the direction of the testator.
c. Should be at the end of the will. Fork:
i. Some will make entire will invalid if not at end.
ii. Some invalidate any significant material after the signature.
2. Timing of Signatures
a. Testator HAS To sign first. Witnesses attest that the testator signed the
document with the testators own signature. Witnesses signatures are what
is necessary for proving probate. Witnesses signatures proves testator’s
signature. Be sure that you have a second example of their handwriting to
prove witnesses signature.
(Burns v. Adamson. Frost left will with estate to nephew. Jewell and Ethel were witnesses. Court denied probate
because Jewell signed will before the testator. As a result, entire estate passed through intestacy)
3. Modern courts more lax, and some do away with the necessity of timing.
c. Interested Witnesses ***FYI – Never witness a will at which you take***
i. Old English Rule: If witness legatee, witness was incompetent to testify and the entire
will was thrown out.
ii. American Response – “Purging and Saving”
1. Witness legatee purged unless intestate successor, in which he would receive the
lesser of the benefit or intestate share. Not witness competent.
2. Purged share went to residuary unless witness was residual beneficiary, then to
intestacy.
3. Problem: Wills drafted at dining table, question should be credibility
iii. Modern Trend
1. Witness legatee competent to testify. Only relevance of them being a witness
legatee goes to credibility of testimony.
(Estate of Watts, cannot use the three witness trick allowing witnesses to bootstrap interests, to always have
two witnesses that have been purged for the relevant clause.) California differs,
2. California: Witness legatees never purged, but if will challenged for undue
influence, presumption of influence exists.
d. Excusing Harmless Errors
i. We need to reform for mistakes more often. Why?
1. Rise of the non-probate system, we already do it in trusts, etc.
2. Other JX already do it and are o.k. (Australia)
3. Embarrassing how failure to correct leads to unjust enrichment
4. Spares attorney from needless malpractice liability.
(Will of Ramney, Testator signs will and witnesses sign self proving affidavit, although Ramney does not
explicitly follow formalities, court allows for reformation and probate based on similarities in docs)
ii. Why not reform? Because of social contract.
e. Illustrative Form of Attested Will
2. Holographic Wills
a. Overview
i. Allows un-attested wills so long as in the testator’s handwriting.
1. “Better some will than no will” idea.
ii. Only in Southern and Western States, stems from Napoleonic and Spanish law.
iii. Satisfies evidentiary function.
iv. Memorandum sometimes insufficient because testamentary intent is lacking. Courts will
sometimes look extrinsic evidence for testamentary intent.
(Fisher v. Johnson, Husband sending letter to Attorney asking for changes to his will, but changes never being
executed, letter is not Holographic will because testamentary intent lacking. He had been to lawyers office, but
had not signed the will)
v. Conditional Wills: Look to writing, court may view journey or hospital visit as
inducement to writing a will, not to a condition of the will.
b. Old Rule
i. Any printed material (hotel sationary) - will invalid. Must be entirely hand written with
complete date. Can even be wrong date, just must be complete.
1. Ex: 2/1/06 invalid, because which 06’.
c. Modern Rule UPC §2-503/California
i. Only the signature and the material provisions of the will must be handwritten.
ii. Whitebread Problem: No ritual function, people that have one holographic will have tons
of them. Liberalization is o.k. if no original estate plan, but problematic when there is
attested will and subsequent holograph, ruins ritual.
(Estate of Muder, AZ. moves to the modern rule and holds that because Muder wrote material provisions of will
on a printed form, testamentary intent was shown. Say, “Better some will than no will”)
d. Choice of Law Issues
i. Holographic will valid to personal property in all states, but will must follow formalities
of particular states in real property. So in non holographic states, real property will not
pass from holographic wills.
3. Noncupative Wills
a. Oral wills in presence of witnesses – Unavailable Option.
b. Available for soldiers and sailors. Soldiers friends have to write it down in 10 days.
LAW OF WILLS
1. Integration
a. What documents, taken together, are meant to constitute a will.
b. Factual issue based on testator’s intention. Extrinsic evidence will be permitted to decide what
paper is the will itself.
2. Republication by Codicil
a. Codicils- Refers to a previous will and republishes that will as of the date of the codicil.
b. Codicil is NOT an amendment, needs the same formalities as original will, think of codicil as a
whole new will.
c. If a codicil references an earlier, but not most recent will, codicil republished the referenced will
to the exclusion of the more recent will.
3. Facts of Independent Significance
a. Some conduct of the testator that effects changes of testamentary disposition are o.k., even if not
in the will itself.
b. Must claim that testamentary effect is lifetime conduct with independent significance (there is an
explanation for conduct, other than testamentary intent).
c. Examples: Referencing safe deposit box in will, and constantly changing content therein, 2k to
each employee, then before death fire all employees.
4. Incorporation By Reference
a. When will refers to other document, not following formalities, only incorporated if:
i. Intent to incorporate
ii. Document clearly identifiable.
iii. Conventional rule: Document had to be in existence when will is executed.
iv. UPC: Incorporated documents don’t have to be created before only will for certain pieces
of personal property if sufficiently described, not for money.
(Clark v. Greenhalge, Woman had 1976 will with 1979 memorandum. Memo would have been inadmissible
except she had 1980 codicil that republishes 1976 will in 1980. Memo now incorporated under conventional
rule and Clarke gets farm painting that “interested” executor.)
5. Revocation and Amendment
a. Joint and Mutual Wills (Contractual Revocations)
i. Joint Wills
1. One document for two spouses, almost always limited to spouses. May be offered
for probate as the will of each.
2. Purport to bind the surviving spouse to not change how they dispense of property
after the first spouse’s death.
a. Their must be some evidence of contractual disposition.
(Estate of Wiggins, Rare victory for decedent spouse, court held that Joint will was irrevocable when wife tried
to institute codicil changing joint wills provisions)
ii. Mutual Wills
1. Are separate instruments with parallel provisions executed at same time.
2. Courts are much less willing to imply a contract of irrevocability with mutual
wills as opposed to joint wills.
(Ousler v. Armstrong, Spouses execute mutual wills saying Wife will dispense husbands money after death to
husband’s two kids from previous marriage. Court finds no contract and values freedom of Testation for
surviving spouse.)
iii. In California there is a presumption of revocability for both types.
b. Methods and Effects of Revocation
i. By Written Instrument
1. Can revoke will by a codicil.
2. If new will does not expressly revoke and is incomplete, courts will look to
previous will for guidance for remaining property.
3. If express revocation, unaccounted property passes by intestacy.
(Gilbert v. Gilber, Man dies in ’79, has a 1976 and a 1978 holographic will that does not include an express
revocation of the 76 will. Court holds that 78 will is valid for its terms, but because no express revocation,
everything not accounted for will be dispersed by the terms of the 1976 will.)
ii. By Physical Act
1. Destruction
a. Burning, tearing, cutting, etc revokes a will.
b. According to UPC, destruction must be by the testator.
(Harrison v. Bird, Testator called lawyer and asked him to destroy will. Lawyer destroyed will and sent pieces
to testator. He had duplicate wills one offered second one to probate, probate was not allowed because the
pieces were missing so there was presumption that it was destroyed. .)
c. Rebuttable Presumption: If will was last in hands of testator and now
missing court presumes it was destroyed. (Lawyers should always have
Xerox copy, in case presumption is rebutted. Lawyer should NEVER
make duplicate wills because it deprives testator of freedom to destroy)
2. Mutilation
a. Split: majority has rebuttable presumption that mutilated wills intended to
be revoked.
b. Any additions to a will must fallow will formalities.
iii. Revival
1. If X creates will A in 1990, and will B in 1995 revoking A. Then tears up B in
2000, is will A revived?
2. Four Position
a. UPC - Cal: Courts look to intention of revocation on the old will and
extrinsic circumstances.
b. Common Law: Never is a will revived.
c. JX: Always revival - “better some will than no will.”
d. JX: Turns on provisions of will B, if express revocation then no revival.
iv. Dependent Relative Revocation
1. Where testator crosses out a bequest and that revocation is not legally o.k., then
we restore the bequest. Presumption that testator would rather have original gift
than nothing.
(Schneider v. Harrington, Decedant tries to cut 3rd sister out of will and writes ½ by other two names. Since
revocation was legal but amendment wasn’t, the court restores the bequest because cancellation and
substitutions were inexplicably linked.)
2. When there is revocation, but no mention of disposition traditionally property
passes by intestacy but modern courts divide property to legatees.
v. By Operation of Law
1. Divorce revokes wills and trusts as applied to the former spouse and the family of
the former spouse by operation of law.
(Clymer v. Mayo, In 1973 Mayo and Clymer executed reciprocal wills and trusts. They separated in 75 and
divorced in 78. Clara forgot to change her will before she died. Court held that trust A was terminated on the
grounds that purpose of trust was no longer possible.)
2. Other family changes no longer revoke a will. (Birth of a new child).
6. Interpretation of Wills
a. Ambiguity and Mistake
i. Extrinsic Evidence is inadmissible to vary or contradict the plain meaning of the will or
to supply omitted provisions.
(Mahony v. Grainger, Woman wants to give estate to cousins, due to scriveners error it is given to aunts as heirs
at law. Court does not rectify mistake because of a wills social contract.)
ii. Courts will apply extrinsic evidence to word of personal usage. (Does USCLA mean
USC or UCLA)
iii. When there is a mistake in the will:
1. Some JX: Will try and resolve ambiguity to follow intent of testator.
2. Others: Will strike gift as invalid and property will pass by intestacy.
(Estate v. Russell, Woman splits estate between friend and dog, hates niece and says so. Because gift to dog
invalid (Rule of Perpetuities), court allows share to pass by intestacy to niece.)
b. Changes in Property Holding
i. Ademption
1. If a specific legacy is lost, destroyed, or not found, at probate the legacy is viewed
to be adeemed and the legatee gets nothing.
2. Only applies to specific bequests – gifts of a particular kind of item.
3. Does not matter what the testator actually intended. In California and UPC, we
look at the testator’s intent.
4. Many courts will give insurance proceeds if applicable.
5. Whitebread wants to treat real property as a demonstrative bequest - a specific
amount of money paid out of a specific fund - because presumption that a gift was
for a specific person is unclear.
(Nokoneczny, Father’s legacy to son was 20 acres that he subsequently sold and turned to bonds. He never
revises will and then dies. Court treats land as a specific bequest and applies ademption)
ii. Satisfaction
1. Satisfaction is advancement but under a will. Money would satisfy legacy.
2. All inter-vivos transfers are presumed to be gifts unless evidence otherwise
treating it as satisfaction.
3. Writing can be informal, and from the beneficiary
iii. Abatement
1. What happens when an estate is not solvent for beneficiaries.
2. Order of abatement:
a. Intestacy share  residue estate  general bequests  demonstrative and
specific bequests (abated pro rata).
b. Problematic because it screws residuary, which is usually testator most
wants to benefit.
3. Order of abatement can change if intent is proven.
iv. Exoneration
1. If you give someone land with a mortgage, and also general bequests, the
executor used to have to pay for the mortgage out of the estate.
2. Present position: You take property with mortgage unless client allows or
intended for exoneration
c. Lapse
i. If beneficiary dies before testator, beneficiary gets nothing.
ii. Anti-lapse statute: Enacted in every state except Louisiana, holds that if beneficiary dies,
gift is given to substitute takers (usually issue)
1. Usually requires that the issue have specific relationship to testator.
(Estate of Burns, Will left residuary to 3 sisters, all who die before she did. Will called for redistribution
amongst survivors. One sister had heirs, Court said the sister with issue took the whole estate)
GIFTS
1. Real Property
a. Gifts of Land
i. Characteristics
1. Donative Intent on the grantor’s part.
(Lenhart v. Desmond, father told daughter she get house when he died and gave her key to box where deed was.
While in hospital, daughter claims title to property. Court holds no gift, because no donative intent on the part
of the father, she was trying to preserve her inheritance from a drunk.)
2. Delivery of a written instrument that satisfies statute of fraud.
a. Delivery to agent of the donor does not satisfy SOF.
b. Delivery to agent of the donee does satisfy SOF.
3. Acceptance by grantee.
ii. Consideration NOT essential, can be set aside by grantor’s creditors.
iii. Part Performance
1. Applicable when formalities not abided by.
2. Unjust Enrichment, it would be unfair to take land away after an oral gift of land
if donee takes possession and makes valuable improvements.
a. Satisfies evidentiary function for intent
(Mertz v. Arendt, Parents had land that probate court said 6 children owned as tenants in common. John Jr. sued
to quite title. He farmed land and paid taxes for forty years. Court held parents had given land even absent
writing b/c farming land and paying taxes constitutes part performance.)
2. Personal Property
a. Inter Vivos Gifts
i. Characteristics
1. Donative Intent (cannot be repudiated at a later date).
2. Delivery of . . .
a. Manual – the actual gift
b. Constructive – a key to a car. Some courts only accept constructive, if
manual difficult or inconvenient.
(Greun v. Greun, Father wrote to son telling him he gets Klimt painting, but that father wants to use it while
alive. After father’s death, mother keeps it. Court held that even if donor wants to preserve life estate they can
still make gifts and informal letter to son was sufficient symbolic delivery.)
c. Symbolic – Instrument of gift – securities, even an informal letter.
3. Promise to make a future is unenforceable because no delivery.
b. Gifts Causa Mortis
i. Gifts made in anticipation of death.
(Scherer v. Hyland, man lived with woman for 15 years, day she commits suicide she leaves endorsed check for
17,000. Robert entitled to gift causa mortis because she had donative intent and did everything she could to
deliver by leaving check in place only Robert could find. Satisfies evidentiary function.)
ii. It automatically fails in donor recovers from their apprehended peril, b/c intent
requirement fails.
iii. Donor does not have to die of the exact thing intended in the gift.
iv. If gift is one in a pattern, the gift is considered an inter-vivos.
v. Litigation arises b/c executor sues in fear of liability due to fiduciary obligations.
c. Gifts to Minors
i. A donor can make a gift to a minor while remaining a custodian of the property until the
minor reaches a suitable age.
3. Elusive Distinction Between Life and Death Transfers – SEGUE TO TRUSTS
a. ISSUE
i. Why do we have formalities for wills and then let people dispose of property through
joint accounts and trust arrangements?
Why is one a will and one a trust?
(Butler v. Sherwood, Sherwood on death bed transfers all her interests to husband for $1 and love and affection.
He had to survive to take and she could revoke. Was document deed, will, gift, trust. Court holds deed as will
b/c he had to survive her and it was revocable. Nothing passed to him when deed was signed, fortuitously he
was still an intestate successor)
(Farkas v. Williams, Williams is Farkas’ employee, Farkas holds stocks in trust for Williams, but has power to
revoke and Williams must survive. Same requirements as Butler, court holds document to be a trust, finding an
equitable interest in the stocks, subject to divestment. Lawyer must BELIEVE, that something actually passes,
when nothing really does. Court stresses, repetition of trust by Farkas, that stocks were small part of estate, and
general fairness.)
ii. Statute of Wills were a social contract that evolved under historical circumstances that
may not be as relevant to today’s society.
TRUSTS
1. Uses, Nature, Utility and Classification of Trusts
a. History of Trusts
i. Early History
1. Trusts used to be called Uses, started in the 15 century and they governed almost
all transfers of land because they avoided feudal tax burdens.
2. Allowed people who were on the wrong side of dynastic squabbles to avoid
forfeiture. Avoided dowry and curtesy. Creditors had no rights.
3. The church held almost all land in use, allowed them to say they are poor.
ii. Tutor Settlement
1. Henry wanted support of lords for separation from church and his divorce.
2. He enacted the Statute of Wills, which gave landowners the right to dispense
property however they wanted.
3. He also enacted Statute of Uses to end trust scam. Was an instant flop b/c it only
applied to passive trusts and did not apply to a use on a use – why today almost all
trusts are active.
4. Modern use of Statute of Uses: Only used when court wants to terminate statute
for completion but wants the remaining RES to go to the beneficiary instead of
the settlor.
iii. Classification of Trusts
1. Active v. Passive
a. Passive Trusts: Trustee has no other duty than to hold and convey land on
demand.
b. Active Trusts: If trustee has any other duty than to hold and to convey
upon demand.
2. Methods of Creating Trust
a. Transfers in trust – A, the settlor, transfers to B, the trustee, in trust for C,
the beneficiary.
b. Declarations in Trust –
2. Requirements for a valid Trust
a. Intent to create a trust
b. Writing in the case of land – Statute of Frauds
c. Presently existing Trust Res when the trust is executed. (except to unfunded pour-over trusts)
i. Some property right which is subject to the trust.
3. Express Trusts
a. Declaration of Trust
i. A, the owner of property, instead of transferring it to B, as trustee, declares himself
trustee of the property for the benefit of C, the beneficiary.
ii. Extrinsic evidence cannot defeat express declarations.
iii. No transfer of property necessary. But is still good practice to do so.
(Taliaferro v. Taliaferro, Husband executes trust with wife as successor trustee. Trust was for unnamed
beneficiaries and remainder for wife. Wife claims he did not transfer property to himself as trustee or treat
property like a trust but court is un-persuaded. How husband treated property has no effect on his intention at
time of creation.)
iv. Defective Gifts
1. American courts usually decline to create trusts with defective gift.
2. RST § 16 - If a property owner tries to make an inter-vivos gift, but fails to make
the transfer, the gift intention will not be given effect by treating it like a trust to
effectuate the decision.
3. But see Ex Party Bye.
(Ex Party Bye, Bye had two families, England and France. To provide for French family, allowed son to bye
annuity as agent of father. But father died before son bought annuity and agency ends. Court allowed letter to
the son as a declaration of trust)
b. Trusts created by precatory words
i. To create trust you don’t even have to say the words, all that matters is intention.
ii. However, courts moving away from precatory words without express provisions b/c it
forces courts to determine trust’s provisions.
(Mckinsey v. Cullingsworth, Testator gave money to brother asking him to take care of his sister “as best he
can.” Court finds no trust created, just a hope that the brother would take care of his sister.)
(Levin v. Fisch, Cohens leave children 8 mill and casually say they want children to give Mother’s sister 2400 a
month. Kids don’t want to pay, think they have law on their side but court says express trust created by
precatory words, essentially a family law case, attorneys may have committed malpractice.)
c. Trusts v. Contracts
i. Three Ways to make Insurance Trust and Satisfy Trust Res Requirement?
1. Contract Theory- Contract to make a trust to begin when the proceeds are paid.
B’s consideration is the trust res.
2. Is there more?
(Pierowich v. Met-Life, No trust found, only a contract)
d. Totten Trusts – POD Accounts (Provided by Statute)
i. An account wherein if there is any money left in a bank account, on death, that money
goes into a trust for the beneficiary.
ii. Not really a trust b/c no trust res.
iii. Allowed b/c provides money for families right away.
iv. Revocation available by
1. Will Provision
2. Oral revocation
(Rodgers estate, Sister created totten trust and later told her lawyer she didn’t want her sister to have anything
because she was mentally unable to take care of herself. Court held a valid oral revocation)
3. Court decree to testamentary gifts
e. The Trust Res
i. Any cognizable presently existing property right that can be subject to trust.
1. “Presently Existing”
a. The contemplated transfer of property into a trust must be completed or no
trust.
(Farmer’s Loan, Testator’s money came from her husband’s estate, wanted to create trust for children, ½ stocks
and bonds handed to trustee, rest was not ready, while waiting for bank, she dies. Because there was no power
of attorney for trustee after death, no property right in trust was presently existing)
2. Sufficient property interest
a. Expectancy to a trustee is not a property interest so cannot convey In re
Gurlitz.
ii. Insurance Contract – Is there trust res?
1. Trust Theory – Present trust at time of creation as B has a contractual right to
receive proceeds of insurance policy subject to divestment.
2. Constructive Trust Theory – Oral trust on the proceeds for the benefit of another.
(Insurance Industry will not make people beneficiaries if they determine that the
person does not have an insurable interest.) Way around problem - name
beneficiary who is related and they agree on an oral trust to hold the proceeds for
the person you really want.
iii. Pour Over Trusts
1. Pouts residuary of estate into an unfunded testamentary trust.
2. Property given to trustee of an inter-vivos trust.
a. Terms of trust are amendable and revocable and do not need formalities of
statute of wills.
b. Historically they were invalid because there was no trust res.
c. UtATA
1. Ok. If no trust res.
2. Trust must be created before, or at same time as will.
3. Not subject to incorporation by reference – can go play with the
trust all you want.
4. Restraints on Alienability of Beneficiary’s Interests
a. Why Necessary
i. Because w/out restraints, income beneficiaries can go to bank and get loan based on their
expected lifetime income.
ii. This loan is something testator does not want child to have.
iii. Restraints protect beneficiary from creditors, because beneficiary has no interest.
b. Spendthrift Trusts – Dumb, why should people get away with not paying bills
i. What - Settlor makes beneficiary’s interest inalienable through express language.
ii. Donor has freedom of disposition and should be able to protect beneficiary from his own
vicissitudes.
iii. Some 3rd parties can collect:
1. Child Support/Alimony
2. Providers of Necessity - necessary supplies/services rendered to beneficiary.
3. Services rendered and materials furnished which preserve or benefit the interest of
the beneficiary.
(Shriver v. Kellog, Kellog retained Shriver for work associated with trust, then refused to pay him. B/c services
must benefit trust, case remanded to determine what the worth of the Shriver’s work – 140 K)
4. U.S. or State Claim against Beneficiary (Even Medicaid)
5. Some JX: For Tort Claimants (gross negligence or intentional tort), creditors can
screen, tort victims cannot)
(Sligh v. 1st National Bank, Beneficiary known as a drunk, mom created trust to protect him. Court allows
sligh’s, who were hit in drunk driving accident, to recover money from trust under public policy)
iv. Cal. allows beneficiary to remain protected from creditors and still assign income to
small class of people identifiable in will, avoiding tax burdens.
c. Discretionary and Support Trusts
i. B/c C has no right to future payments under the trust, creditor cannot compel $, but
neither can beneficiary.
(U.S. v. O’Shaughnessy, Gov. tried to put lien on discretionary trust to pay back taxes. Court holds that
Lawrence has no property interest, only equitable interest, thus creditor has no remedy until payment is
distributed)
ii. After C’s death the property has to go to D.
iii. Discretionary: Trustee (B) in own discretion, decides how much trust income should be
provided for C’s support.
iv. Support: Some JX: trustee must pay “enough” to support C.
1. May ruin rights to public assistance, special needs trusts available though.
d. Self-Settled Trusts
i. A to B for the benefit of A, most consider this a fraud on creditors.
ii. Now permitted as asset protection devise in some JX to compete with off shore havens
and to protect professions from crippling liability but: (still may be special class of
claimants)
1. State manages the trust – provides income to state –
2. Trust must be irrevocable
3. Pre-existing creditors have SOL to claim money
4. In state resident trustee must exist
e. Restraints on Alienation of Principle
i. Valid – According to RST, not modern law.
1. When beneficiary certain to take property at a certain age.
ii. Invalid
1. If beneficiary has right to principle immediately.
2. If principle is transferred to beneficiary’s estate at time of his death.
5. Termination of Trusts
a. Generally
i. Most JX: Trusts considered irrevocable if not expressly permitted in instrument.
ii. Cali: Trusts not created for consideration considered revocable.
b. Pursuant to the Trust Instrument
i. Settlor must only show “sufficient manifest” intent if instrument is not explicit in how to
revoke.
1. JX Split: Whether trust can be revoked by will.
2. If instrument explicit on how to revoke, revocation only possible in that manners
in some states.
3. B/c a trust has explicit ways to revoke does not mean those only ways to revoke.
(Barnette v. McNulty, Barnett allowed 3 ways to revoke his trust: written notice, transfer of stock, notice to
beneficiary. Ended up revoking trust in will and his personal statements, court upheld revocation b/c it showed
intent.)
c. By Completion of Purpose
i. If trust was for a certain purpose, and that purpose completed, remaining assets go to
heirs of settler and trust terminated  Difficult to get.
ii. If two purposes, the court will not analyze whether which primary or secondary.
(Frost v. Newton, Trust was primarily for husband and children of sisters and incidentally for 2 sisters
themselves. Courts held no completion of purpose b/c two sisters still had to be cared for)
iii. If trust illegal, impossible or just stupid, courts may terminate trust.
d. By Consent
i. If all beneficiaries consent, a trust will be terminated, unless it violates a specific purpose
of the trust. §337
1. Spendthrift provisions are a material purpose.
(Bailey Trust Co., Trust created for family members with remainder to Museum. All beneficiaries consent to
termination, Museum pays them more money than they would have got anyway, Museum argues they need
money to buy art NOW. Court agrees, shows how banks over litigate trusts)
ii. If the settler consent, a trust can be terminated so long as it does not violate material
purpose of the trust.
iii. If all beneficiaries and settler consents, a trust can be terminated if it violates the material
purpose of the trust. §338
iv. Do heirs at law have any interests under a trust instrument.
1. If Doctrine of Wortheir Title, (which says it is worthier for O’s heirs to take from
will than to take from the terms of a purchase instrument) is actually a reversion
in O, then someone can end the terms of a trust now.
2. Courts also can abolish doctrine and have O’s heirs have a contingent remainder
and take by purchase of the instrument without having a guardian at litem.
(Hatch v. Riggs, Woman created self-settled trust for her benefit, then for the benefit of her heirs. Court held
that for her to terminate, she needed consent of sisters and a guardian at litem who protected the interests of
unknown or unborn heirs. She got it. Doctrine of Worthier title abolished).
(Johnson v. 1st National Bank of Jackson, Daughter creates irrevocable trust for herself, gets into Scientology,
wants the money. Court allows termination b/c she is sole beneficiary. Court will not protect people from their
own folly, unless mentally incapable.)
3. Successive beneficiaries are not material purpose.
6. Statute of Frauds
a. Oral Trusts
i. Can be for personal property, just not real property.
ii. Constructive and resulting trusts can be oral.
(Fairchild v. Rasdall, Rasdall killed man, quick claimed deed to brother and fled control based on oral promise
to hold deed for son. Court would not enforce oral trust b/c it was land. Most courts in America would find a
constructive trust because of fraud in the procurement.)
b. Constructive Trusts
i. Equitable remedy (NOT A TRUST) used to deal with unjust enrichment.
1. For situations involving fraud, undue influence, duress, confidential relationship.
ii. Although constructive trust does not require evildoing, it almost always needs it.
(Sullivan v. Romney, П and ∆ cohabitants, П gave up job for ∆ and was his housewife, she worked as waitress
while he went to law school, he promised to re-title house in her name too, never did. Court held constructive
trust for her benefit b/c of confidential relationship and Пs reasonable reliance)
c. Resulting Trusts
i. There has been a failure of express trust or completion of trust’s purpose without
exhausting trust’s assets.
ii. Purchase Money Resulting Trust
1. One pays the consideration for property and directs transfer of title to another.
2. Presumption that title holding person is trustee for person who paid for property.
3. Exception: We presume a gift if the titleholder is a dear relative or spouse.
7. Charitable Trusts
a. Overview
i. Charitable trust needs all requirements of normal trust except no identifiable beneficiaries
– state attorney general is responsible for entire trust in JX.
ii. Gifts to religions charitable because idea is that it will all work out in the end.
iii. Private or Charitable Trust
1. Almost any designation will be construed as charitable so long:
a. realistic
b. no private benefit to donors or heirs that is unearned (salary for work in
charity ok)
2. Charitable Purpose – Is trust giving the public benefit?
a. Monument to oneself if worthy of erecting monument.
b. Upkeep of own gravestone.
3. Non-Charitable Purpose
a. Parade for yourself on anniversary of death.
b. Colleges for spiritual mediums and $ too support atheism.
(Maurice v. Bishop of Durham, woman left money in trust for Pastor to dispense in his benevolence and
liberality. Court held no trust for charitable purpose, would have been decided differently today).
b. Charitable Trusts and Gifts Subject to Charitable Restrictions
i. Charitable Trust or Gift
1. A restricted gift to a charitable corporation does not itself create a charitable trust.
(But attorney general can enforce restriction)
2. Two Theories Wherein Gifts may be deemed trusts:
a. Gift was given in a trust during conveyance.
b. Charitable recipient treats gift as trust through subsequent acts.
(Lefkowitz v. Cornell, Wright gave wind-tunnel and money to create CAL to continue research and
development. Cornell wanted to sell wind-tunnel due to opposition of the Vietnam War, attorney general argues
two theories above, Cornell made statements calling it a trust and loses, but Cornell can only use proceeds to
further science and education, theories still potent)
ii. Advantages of Charitable Trust
1. No taxation on income, property tax of the trust.
2. Estate tax exemption to the donor.
3. Enforcement by state attorney general
4. Cy Pres
5. Exempt from the rule against perpetuities.
6. Courts will appoint successor trustees.
iii. Charitable Remainder Trusts
1. Trust where settler or other beneficiary retains income from trust, to be
transferred to charity on death.
2. Way to avoid capital gains tax, make significant gift and over 5% on income.
3. Income can be based on growth of portfolio or fixed income scheme.
iv. Cy Pres –
1. When bequest for a charitable purpose cannot be effectuated as written, court may
apply money to another charitable purpose as close to settlor’s original request as
possible.
2. 3 Stage Analysis – People always want to go to stage three . . .
a. Can trust be effectuated as written?
b. If no, was there general charitable intent?
(Failed colleges ? will be did settler have a tie to a particular school or just an general charitable intent.)
(Simmons v. Parsons, Settlor gives ½ to Drake and other ½ to parsons. Says if trust fails $ should go to heirs,
Parsons fails, no general charitable intent, Drake does not get other half of money.)
c. What is the next nearest charitable purpose for $?
(Estate of Wilson, Wilson made trust for scholarship for males. П wanted to jump to stage three and make
scholarship for all, court created a private trust instead, so settlers intention could be effectuated as written)
v. Standing to Enforce Charitable Trusts
a. State attorney general
b. Heirs at Law
c. Some JX: Identifiable beneficiaries with a specific interest do but those
without specific interest do not.
PROBATE
1. JX
a. Double Domicile –
i. Domicile:
1. A state where the decedent dies domiciled. Usually a person’s home
ii. With Double Domicile, 2 or more states are claiming decedent domicile for tax purposes.
1. Often happened when decedent made all their money in Rustbelt state, then
moved to sunbelt state.
(Riley v. NY Trust, Georgia found domiciliary, NY subsequently found domiciliary and Delaware approved
NY holding, non-withstanding the inconsistency.)
iii. How to avoid Double Domicile
1. Since bad faith, no promise problem is unavoidable.
2. Put out of state property in a trust with the heirs as beneficiary and you as
administrator.
3. If you really trust your heirs, put the property in their name with understanding
that you will occupy it.
4. UPC: Tries to remedy double domicile as giving JX to the first court to declare it.
b. Ancillary Administration
i. No one is claiming double domicile, but property in separate states require separate
litigation for each property. If you know you will need ancillary administration nominate
someone as administrator and designate choice of law in the will.
ii. Leads to a duplication of administration costs.
iii. Idea that personal representative’s authority extends only to tribunals which appointed it.
iv. Purpose is to protect local creditors, venue is more convenient for them, not clear how
useful this is today, where creditors can easily get JX everywhere.
v. Stock may require ancillary admin. because situs of stock is place of incorporation.
1. Min. JX: Stock situs is where certificate is located when there is a certificate.
(Albuquerque v. National Bank, 5th Circuit adopts majority rule that Oil stock’s situs is at place of corporate
domiciliary, in Texas, not where decedent domiciled, in New Mexico)
vi. Reform
1. Many JX now avoid ancillary admin. If no creditors in ancillary estate or if local
personal representatives pay off creditors in ancillary JX and then transfer assets
to domiciliary state.
2. Some state statutes have expanded the power of domiciliary representatives to sue
and be sued in other states.
vii. JX to Tax
1. Real Property-Tangible Personal – situs of that property
2. Personal Property –
a. State which property located
b. State of Domicile
3. Stock
a. Domiciliary State
b. State Stock Located
c. Site of incorporation
4. Trust
a. Domicile
b. Located
c. State Providing Services to Trust
2. Establishing the Validity of the Will
a. Definition of Probate and Due Execution
i. 5 Formal Requirements for Probate: (Requires external validity of document)
1. Proof of death – the death certificate.
a. If no proof, there is 7 year presumption that person is alive, then can get
death.
b. Personal legislation laws exist to help people in extraordinary
circumstances.
2. Show JX of the court
3. Notice to:
a. Interested Parties
b. Either by personal service or public notice.
4. Have to show will is last in time and that it meets the formal requirements.
5. Testamentary Capacity of testator
a. Most states shift burden on too person contesting the will. (Proving
witnesses, not testator’s signature.
ii. Anyone who is under the possession of a will is under a duty to produce it.
b. Necessity and Effect of Probate
i. Bequest v. Legacy – now no practical purpose exists
1. In theory real property passes from testator directly to heir or devisee
2. Personal property passes to executor then to devisee
3. But... real property can be used to satisfy debts so…
4. Practical purpose is that you can file claim for real property before probate, gives
you a head start.
(Hausen v. Dahlquist, Because П was seeking partition of real property and 2/4 fee simple interest in land, П
did not have to wait for probate to be filed to file his claim)
ii. If will is found after intestacy proceeding, beneficiaries of will may sue the intestate
successors but not bona fide purchasers of any testator property.
(Eckland v. Jankowski, Estate passes in intestacy and property sold to Jankowski. Eckland found will in Dec.
and sued Jankowskis for property. Eckland should have sued intestate successor for unjust enrichment.)
1. Whitebread thinks there should be statute of limitations b/c there is social contract
to put will in a place it will be found.
c. Finality of Probate Decrees
i. A debtor who has paid a debt to original representative of decedent may not be called
upon to pay debt in subsequent administrative proceeding.
(Allen v. Dundas, Dude pays 50K to estate, they find a new will and want him to pay again, does not have to.)
d. Compromise Agreement
i. If all beneficiaries compromise on a certain outcome, the courts will allow that outcome.
ii. Often happens when sibling gets cut out of will, all family in will must be in agreement.
iii. Thomas Jefferson – the earth is for the living, flies in the face of freedom of testation.
3. Techniques for Reducing Court Supervisions
a. Why Probate So Shitty?
i. There is period when executor has all testator assets in their name. To prevent fraud we
attach a variety of costly protection for the beneficiary.
ii. Old system was cost effective for large estates, but not effective for the rest of them.
iii. Entire thrust of the UPC and modern law is to allow testator to choose how much
formality they want in execution of their estate.
1. Now assumes non-intervention probate and testator must ask for solemn form.
b. Degrees of Formality, Starting with the informal . . .
i. Informal Family Settlement
1. Family takes what they want and gives rest away. Works when family gets along.
ii. Statutory Administration of Small Estate
1. Authorizes immediate distribution of estate to family without probate or
administration. In CA, estate >100K
iii. Common Form Probate
1. Normal probate without notice to any parties.
2. Leaves validity of will open for challenge for 6 months.
iv. Non-intervention Probate – Presumption
1. Personal representative does not operate under court supervision, unless good
cause shown.
v. Court Supervised Probate –UPC Model
1. Only now by request.
2. Three Types:
a. Informal Probate with Administration –
i. Only contact is between the personal representative and the
registrar of will.
b. Formal Testacy Proceeding w/out Administration (Beg. or End)
i. Presumption under the UPC when someone is silent.
ii. Everything is done by the registrar of wills until the end.
iii. Obtain final adjudication of will without court supervision.
c. Supervised Probate
4. Fiduciary
a. Who can be a fiduciary?
i. Make sure successor fiduciaries in case person you put refuses. Same with trustees. May
consider co-fiduciaries for large estates.
1. Who Cant Serve: Non-domiciliary of the state - sometimes.
ii. Two classes of fiduciary
1. The Person
a. Advantage: A personal trust.
2. A business entity – the corporate fiduciary
a. Bank, Trusts Companies.
b. Advantage: Professional Management of the Assets, particularly the trust.
b. Removal and Resignation – Personal Surcharge
i. We do not prefer removal or resignation during service, we prefer personal surcharge for
malfeasance, misfeasance, or nonfeasance.
ii. Almost no court will allow resignation after beginning of service,
c. Actual Conflict of Interest
i. We usually do not remove fiduciary when COI was known to testator.
ii. If the COI was unknown to testator, some courts will remove testator but most will
charge personal surcharge.
d. Compensation – usually set by statute for executor, should not waive it, involves work. See Getty
Estate.
i. If compensation involves legal work, every penny must be justified.
e. Steps in Probate – As an Executor
i. Go to registrar of wills and begin probate process.
ii. Join, notify and serve the interested parties, collect witnesses signatures and death
certificate.
iii. Go to court and show due execution.
iv. Judge hands you letters testamentary, authorizes all property to be titled in your name.
v. File a bond against your malfeasance
1. Very expensive, testator can waive general bond, and have special bond just to
cover what is owed to creditors.
2. General – the face value is entire value of estate
3. Special – face value of which is value of creditors claims
vi. Get title changed, publish death for creditors (they have six months to respond).
vii. Appraise Inventory and Marshall assets of estate.
1. Appraisal accounts for most probate expenses, appraisers crooked so testator
should name appraisal in will.
viii. Pay all taxes and liens, and then file a preliminary account with the court.
ix. Order of Paying Debts – Only a problem if estate b/c insolvent.
1. 1st Group to get paid – administrative expenses (lawyers).
2. 2nd Group: Funeral Expenses
3. 3rd Group: Expenses of last illness.
4. 4th Groups: Tax leins
5. 5th Group: Secured claims on land
6. 6th Group: Secured creditors
7. 7th Group: Unsecured Creditors.
x. Show final account. Distribute estate pursuant to final account and discharged.
5. Supervisory Role of Courts over Trusts – Always Exists
a. There is unstated, ultimate advisory role of the courts, where interested parties can go get and get
equity relief.
b. No matter how broad discretion of trustees, trust will always have advisory role.
(Estate of Stillman, П’s beneficiaries of a discretionary trust made for their benefit. Well into 70’s, they each
requested a paltry sum from the large principle. Although the court did not admonish trustees for refusing
request (they made lots of money) the court said the purpose of trust was for their benefit so request permitted.)
c. Deviation from the Trust Instrument
i. Courts will deviate from the trust instrument either for equitable reasons or to satisfy
trust’s ultimate purpose.
d. Court will intervene to by enforcing trustee’s duty to conserve trust property for the beneficiary.
(Mayo, Settlor was concerned about depression, set up trust in real estate with conservative req. that were eating
away at the principle. The court says trustees overriding duty was to conserve principle not obey restrictions.)
(Colonial Trust v. Brown, Trustees asked for deviation from a trust instrument that required that no building be
taller than 3 stories. Court willing to stretch B letter law to deviate from a requirement that made no sense.)
(Estate of Barnes, Barnes had incredible art collection and also strict requirements for its viewing. Gives trust to
Lincoln College who could not keep it profitable under those conditions. Court allowed trust to deviate and
allowed museum to hold art, exactly what the settler did not want.)
6. Duty of Loyalty
a. Fiduciaries have a duty of loyalty to estate and to trust.
b. Usually when there is a COI between personal interests and the best interests of the trust.
(Matter of Rothko, 2 of 3 trustees of Impressionist painter Rothko trust sold paintings to Marlboro Galleries for
personal purposes. Stamos wanted his paintings sold their, Reice wanted gallery to liquidate his own assets.
Third executor liable b/c he allowed other two trustees to act. 2 with obvious conflicts were responsible for
replacement value today, 3rd trustee liable only value at time of sale.)
(Leadbetter Estate, Bank was trust which had trust stock in bank and beneficiaries tried to have bank merge,
bank refused merger. Bank had COI b/c they wanted to protect their jobs and trust would have made lots of $)
c. No Further Inquiry Rule
i. If fiduciary makes a personal profit of investments in subject matter of trust there will be
no further inquiry into whether there was a breach of loyalty. Trustee has to pay it back.
ii. If trustee wants to invest, should get a previous court order allowing investment.
7. Duties with Respect to Fiduciary Investment
a. Prudent Investor Rule
i. Historically: used to be conservative list of possible investments for fiduciary.
ii. If you invested in the list you were immune from suit, but list could not keep up with
inflationary periods.
iii. Current Rule: Uniform Prudent Investor Act
1. A trustee shall manage such assets as a prudent investor would their own money.
They shall exercise reasonable care and caution. The investment must be
evaluated in the context of the entire trust as a whole.
2. Factors:
a. General economic conditions
b. Effect of inflation or deflation
c. Tax consequences and need for liquidity
d. The role investment plays within the overall trust portfolio. Allows for
balancing (test used to be based on each asset in particular).
e. The assets special relationship to the purposes of the trust or to one or
more of the beneficiaries,
3. Allows up to 50% of assets to be placed in common stock.
4. Hold Harmless Provisions
a. Allow for no liability for trustee, no matter how broadly they are written
they can never obviate all duties.
b. Looked down upon for banks.
5. If investor touted their “special skills”, they have a duty to use those skills.
6. Langbien does not like rule b/c settlers cannot make stupid decisions anymore.
b. Duty to Diversify
i. Unless the special needs of a trust reasonably dictate otherwise.
(Estate of Jane, Trust had tons of Kodak stock that plummeted in price over three years so that principle was
worth ¼. Trustees had a duty to diversify the trust, but damages should be loss of principle, not loss of profits.)
c. Duty to Treat Beneficiaries Impartially
i. Inherent conflict between increasing the principle of trust and providing for the income
beneficiaries.
ii. Trustees should usually follow settlers wishes unless there is a gross inequality.
iii. Take into account beneficiaries relative economic conditions.
(Dennis, Alice creates trust with interest in property. Trustee receives high rent for income beneficiary, but
allows property value to decline to dismay of principle beneficiary. Court says trustee violated his duty and
should have sold property earlier, responsible for principle lost.)
8. Duty with Respect to Delegation of Fiduciary Obligations
a. Fiduciary cannot delegate all responsibility to others, and use delegation as a defense.
b. Usually happens with a faithless attorney, if you delegate, there is duty of care – negligence.
c. Between fiduciary and beneficiary, executor should be liable for his breach of duty.
9. Prohibition Against Co-Mingling
a. Duty to keep trust property separate from your own, or the property of other trusts.
b. Duty has been relegated for corporations. They make money from huge trust pools.
10. Variables Affecting the Imposition of Liability
a. Unanimity needed for trustee decisions, only majority needed for executors.
b. Corporate fiduciaries judged by a higher standard than personal ones.
c. Consent of Beneficiaries
i. Beneficiaries can consent to action before or ratify action after the fact.
ii. Silence is not consent and liability still can be imposed.
d. Advice of counsel: Does not confer blanket immunity.
e. Fiduciary can obtain prior court approval for action – confers immunity.
11. Income and Principal
a. Corporate Distribution 6% Rule
i. Any stock dividend less than 6% is considered income, anything more is considered an
addition to the principle. An all or nothing, so 7%, - all goes to principle.
b. Uniform Income and Principle Act
i. If dividend is in the form of cash, then money is income.
ii. If dividend is in the form of stock or any other entity, it is added to principle.