Trusts and Estates Outline Part II
Professor Waggoner
Fall 2000
Chapter 8: Revocable Trusts and Other Will Substitutes
A. Validity of Will Substitutes – Form over Substance
1. Revocable Trusts – The Present Transfer Test
 Revocable inter vivos trusts, even one in which the settlor
retains the right to income for life, are valid. Determined by
the present-transfer test: UPON CREATION, THE TRUST
TRANSFERRED AN EQUITABLE REMAINDER
INTEREST IN THE TRUST CORPUS TO THE
REMAINDER BENEFICIARY.
 A present transfer of a remainder interests- even one that is
subject to divestment by power to revoke – satisfies the test
and obviates the necessity of memorializing the trust in a
document that is executed in accordance with the formalities of
a valid will.
 Transfer treated as inter vivos, not testamentary
 Revocable, Self-Declared Trust: revocable inter vivos trust
where settlor acts as trustee for benefit of himself for life,
remainder to chosen beneficiary (transfer that satisfies test is
transfer to beneficiary)
 In re Estate of Pilafas, pp. 406
FACTS: When the signed copies of Pilafas’ will and revocable
trust could not be found at his death, the court held that he had
revoked them both, dying intestate, and thus his five adult
children were his heirs
HOLDING: when a settlor reserves a power to revoke his trust
in a particular manner or under particular circumstances, he can
revoke it only in that manner or under those circumstances.
Because no evidence was presented showing that he complied
with the required method of revocation, the inter vivos trust
was not revoked and remains valid.
 Inter vivos transfer in trust is irrevocable unless the grantor
expressly retains a power to revoke
 Rights of Grantors Creditors and Creditors of the Grantors
Estate: if grantor transfers assets to trust in order to defraud
creditors, creditors can set the transfer aside in order to get paid
(fraudulent transfer principle sets transfer aside). Restatement
2d allows creditors to get paid even if transfer was not to
defraud. Some states have even enacted statutes that allow
estate and creditors to reach assets of a revocable trust.
2. Other Will Substitutes – The Present Transfer Test (1989 UPC §§6-101, -203,
-211 to –214 and Pre 1989 UPC §§6-101 to –113, 6-201)
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tests widely used to validate many will substitutes
Life Insurance and Life Insurance Trusts:
- compliance with formalities for wills is not required
- although they pay at death, beneficiary designation,
when made, is treated as giving a present contract right
- popular for estate planning is a life insurance trust. One
type: transfer full ownership of policy to trustee.
Another type: naming trustee as beneficiary of policy
with directions to trustee to collect proceeds at death
and carry out terms of trust.
Multiple Party Accounts:
- can be Totten trusts, joint, or payable on death
- Totten: created when a person deposits his or her funds
in a savings or bank account in his or her name “in trust
for” another person. Depositor typically retains
exclusive control until death. Usually created to bypass probate. Only form distinguishes them from wills.
Accepted in great number of states, but some courts
won’t give effect to them b/c seems like an attempted
testamentary disposition.
- Joint accounts: contain a survivorship feature and the
balance on hand at death of depositor shifts to the
surviving co-account holder without going through
probate. Funds not owned in joint tenancy. Upon
deposit the other co-account holder acquires a present
contract right to the deposit, payable upon the death of
the depositor.
- POD accounts: created when a depositor registers the
account in his or her name “payable at death” to another
person. In the absence of validtaing legislation,
accounts are held to be testamentary, invalidating the
attempted transfer of ownership.
- Pre-1989 UPC: lifetime ownership of co-account
holders in joint accounts was presumptively
proportionate to each party's contribution to the balance
on deposit. A POD account was owned solely by the
depositor and a trust account was owned solely by the
trustee. Presumptively created a survivorship feature in
all accounts refutable by clear and convincing evidence.
- 1989 Revision is consistent with pre-1989 version, but
major changes include: (1) folding Totten accounts into
definition and coverage of POD accounts; (2) statutory
forms for joint accounts with or without survivorship.
Goal of revision is to encourage financial institutions to
use statutory forms.
Revoking Will Substitutes by Will: courts are divided
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Totten trusts: revoked by appropriate divisions in the
depositor’s will. UPC §6-213 provides that a will may
not alter the survivorship right in any multiple-party
account or POD/
- Life Insurance: most courts hold that a will to be
ineffective to change the beneficiary designation on life
insurance policies
- Superwill: recent discussion of permitting hi so that
testamentary control should be expanded to allow
testators to change the beneficiary designations of all
non-probate transfers other than true joint tenancies
 Joint Tenancies/ Tenancies by the Entirety: validity does not
depend on compliance with formalities of wills. Creates an
undivided interest in the entire property in each co-tenant.
Includes a right of survivorship and property ownership shifts
outside of probate to surviving co-tenant.
B. Will Substitutes and the Subsidiary Law of Wills
 wills statute requirements apply regardless of the testator’s
intent. Other rules of the law of wills, including antilapse
statutes and statutes providing for revocation upon changes
circumstances are different in that they yield to contrary
intentions of testators.
1. Revocation Upon Divorce (1990 UPC §§2-804 and Pre 1990 UPC §2-508)
 Clymer v. Mayo, pp. 425
FACTS: Mayo and his wife were divorced, and Mayo’s wife
died after she executed a will and a revocable trust naming
Mayo as beneficiary.
HOLDING: In the absence of contrary intent, a divorce will
revoke provisions of a spouse’s pour-over trust in favor of a
former spouse.
 Massachusetts revocation-upon-divorce statute at issue in
Clymer is of a type widely enacted throughout the country and
is nearly identical to pre 1990 UPC §2-508. These statutes
expressly apply only to wills
 In Vasconi v. Guardian Life Ins. Co the court held that the
presumption is now that the divorce property agreement
revokes the designation of the ex-spouse as beneficiary. The
ex-spouse is entitled to proceeds only if the agreement
expressly so provides.
 A few states have enacted legislation providing for revocation
of certain will substitutes upon divorce
 UPC § 2-804 calls for revocation, upon divorce or annulment,
of any revocable disposition. This section revokes benefits to
former spouse and former spouse’s relatives.
2. Antilapse Statutes (1990 UPC §§2-702, -706 and Pre 1990 UPC §§2-601, -605)
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apply by their terms only to wills and cases so far have
concerned only revocable trusts.
First National Bank of Bar Harbor v. Anthony, pp. 439
FACTS: When one of the three children provided for in a trust
set up by their father, Anthony, died before the father, the son’s
three children asserted, after their grandfather Anthony’s death,
that they were entitled to their father’s one-third interest in the
trust.
HOLDING: An inter vivos trust reserving to the settlor the
income for life plus the power to revoke, with a remainder over
at the death of the settlor, creates a vested interest in the
remainderman subject to defeasance by the exercise of the
power of revocation. The language of the trust suggests a
disposition to the predeceased son’s estate rather than to the
settlor’s estate.
In re Estate of Button, pp. 442
FACTS: Button drafted a revocable trust covering certain real
property and naming his mother as a beneficiary; however, he
did not provide for the disposition of the trust corpus were his
mother to predecease him, and matters were further
complicated when Button drafted a second trust which
conflicted with the first but was never delivered to the trustee.
HOLDING: When an estate is devised or bequeathed to any
relative of the testator, and the devisees or legatee dies before
the testator, leaving all lineal descendants, such descendants
take the estate. Given the policy of the law against the lapsing
of gifts to relatives of the deceased, it is appropriate to apply
antilapse statutes to inter vivos trusts.
Anthony and Button present conflicting views. The weight of
authority favors the viewpoint of Anthony. The Restatement
sides with Button (statutory language relating to the antilapse
statute should be construed to apply to revocable trusts as well
as to wills whenever that is possible).
Comment to §2-603, the antilapse provision contained in the
1990 UPC, states that §2-603 applies only to wills
Although revocable trusts are will substitutes, this does not
mean that all statutory rules pertaining to wills should be
judicially extended to them.
Precondition to the need for an antilapse statute is the
existence of a requirement of survival. Without such a
requirement, there is nothing for an antilapse statute to
counteract. For wills, a devisee must survive the testator b/s the
testator’s death is when the transfer is made. The donee of a
future interests need only survive the completion of the gift.
No cases have arisen involving extending antilapse statutes to
life insurance, retirement plans, and POD accounts, but the
cases for extension is much stronger b/c there is a survival
requirement.
 Simultaneous or Near Simultaneous Deaths; Uniform
Simultaneous Death Act: when the person whose lie is insured
under a life insurance policy and the person who is the
beneficiary of the policy die under circumstances in which
there is no sufficient evidence that they dies otherwise than
simultaneously, the proceeds of the policy are to be distributed
as if the beneficiary predeceased the insured.
- Janus v. Tarasewicz, pp. 450
FACTS: Stanley and Theresa dies after ingesting
cyanide-laced Tylenol capsules
HOLDING: The determination of legal death must be
made in accordance with the usual and customary
standards of medical practice. Stanley dies on route tot
he hospital while Theresa dies much later at the
hospital. Theresa, therefore survived Stanley and the
proceeds of the policy should go to her estate.
- §2-601 of the pre 1990 UPC imposed a 120 hour
requirement of survival upon the devisees of the
decedent’s will. No cases have sought to extend this
will provision to all donative provisions.
- §2-702 of the 1990 UPC provides that for purposes of a
donative provisions of a “governing instrument”
(includes an insurance policy) an individual who is not
established by clear and convincing evidence to have
survived the death of another individual by 120 hours is
deemed to have predeceased the other individual.
C. Coordinating Parts Into a Coherent Whole
1. Pour-Over Devises (1990 UPC §2-511 and Pre 1990 UPC §2-511)
 Supplemental Funding of Inter Vivos Trusts: adding funds to
trust after the initial funding for (1) tax planning; (2)
coordinate trust assets with other assets, including grantor’s
probate estate at death and insurance proceeds.
- Assets can all be merged into a singles trust entity
through a pour-over.
- To pour-over, grantor creates an inter vivos trust and
then exercises a will devising part or all of the estate to
the trustee of the receptacle trust.
 Uniform Testamentary Additions to Trusts Act (1960):
legislatures enacted statutes that authorized testamentary
additions to revocable or amendable trusts. Incorporated into
the pre 1990 UPC §2-511 and has been adopted in all but seven
states.
 1990 UPC §2-511: Several changes to pre 1990 UPC §2-511.
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Inter vivos trust receptacle need not have been funded
during the testator’s lifetime, but can be funded with a
trust res by the pour-over devise itself.
- Now allows the terms of the trust to be stated in a
writing executed after as well as before or concurrently
with will.
- Allows testator’s will to provide that the pour-over
devise is not to lapse even if the trust terminates or is
revoked before the testator’s death
2. Durable Powers of Attorney (1990 UPC §§5-501 to –505)
 Power of attorney creates an agency relationship between the
maker of the power and the attorney-in-fact. Under traditional
law, power terminated upon the principal’s death or incapacity
 1990 UPC says that a durable power of attorney continues to
be valid after the principal has become mentally incapacitated.
Death of the principal does not automatically terminate the
agent’s authority, wither.
 Uniform Statutory Form Power of Attorney Act: authorizes
the execution of a fill-in-the-blanks type durable power of
attorney that grants the agent the authority to act for the
principal ion one or more or all of the thirteen broad categories
by a check off procedure
3. Custodial Trusts (Uniform Custodial Trust Act)
 Establishes a statutory trust that can be invoked by transferring
property to another person as custodial trustee for the
beneficiary.
 Designed to provide a statutory standby trust similar to the
custodial arrangement for minors established by the Uniform
Transfers to Minors Act.
Chapter 10: Protection of the Family
 In American law, the decedent’s spouse is the only relative
favored by a protection against intentional disinheritance. The
decedent’s children and possible more remote descendants are
granted protection only against unintentional disinheritance
A. The Spouse’s Elective Share (1990 UPC §§2-201 to –214 and Pre 1990 UPC
§§2-201 to –207)
1. The Partnership Theory of Marriage
 Elective share: the percentage of the deceased spouse’s estate
set by statute, that a surviving spouse may choose to receive
instead of taking under a will or in the event of being
unjustifiably disinherited.
 Partnership theory or marital sharing theory: the economic
rights of each spouse are seen as deriving from an unspoken or
imputed marital bargain under which the partners agree that
each is to enjoy half interest in the fruits of the marriage, that
is, in the property nominally acquired by and titled in the sole
name of either partner during the marriage (other than in
property acquired by gift or inheritance)
- decedent who disinherits is seen as having reneged on
the deal and restitution is an answer
- law grants each spouse an entitlement to compensation
for non-monetary contributions tot he marriage
a. Community Property and Marital-Property Systems
 separate property (title based) system derives from English
common-law, while community property developed in
continental Europe
 Under common law system of separate property, husband and
wife are separate owners of the assets they acquire during the
marriage. Under the community property system, husband and
wife own all assets acquired by either of them during the
marriage in equal undivided shares.
 Uniform Martial Property Act: the property interest that each
spouse acquires in all of the assets acquired by the economic
activities of either during the marriage is a present, vested
ownership right that does not depend on the survival of the
other spouse
 Elective Share thought unnecessary under community
Property: decedent’s surviving spouse is not seen as needing
protection against disinheritance by elective share b/c he/she
already owns ½
 Under community property systems and UMPA the couple’s
property must be classified upon the first spouse’s death.
Presumption that all property is community or marital property.
Courts have also developed rules applicable to certain types of
transactions (pp.520-21). These rules are default rules and
couples may contract out of them
 Migratory Couples: couples that move from separate property
states to community property states and vice versa
- the law of the state where the couple is domiciled at the
time assets were acquired controls ownership of these
assets. Assets that either spouse earned during the
marriage in a separate property state remain separate
property.
 Quasi-community Property: property, other than real property
located in other states, that would have been community
property, but for the fact that it was acquired by decedent when
the couple was domiciled in another state
b. Equitable Distribution Upon Divorce
 Under equitable distribution upon divorce statues, courts have
broad discretion to assign to either spouse property acquired
during the marriage, irrespective of title, taking into account
the circumstances of the particular case and recognizing the
value of contributions of the non-working spouse ort
homemaker to the acquisition of property (views marriage as a
shared enterprise)
- Uniform Marriage and Divorce Act: property subject to
distribution is “property and assets belonging to either
spouse or both however and whenever acquired.”
Creates a “hotchpot” property scheme and eliminates a
characterization problem.
c. Conventional Elective Share Law
 All but one of the separate property states have decided that
disinheritance of the surviving spouse if one of the few
instance in which the decedent’s testamentary freedom must be
curtailed
 No matter what the decedent’s intent, the separate property
states say surviving spouse does have some claim to decedent’s
estate (forced share)
 B/c forced share is expressed as an option that the survivor can
elect or let lapse and not as a re-titling of the decedent’s
property that automatically occurs at death, UPC uses the term
“elective share”
 Traditional elective share statutes give spouse a right to a onethird share of decedent’s estate
 When marital assets have been disproportionately titled in the
decedent’s name, conventional elective share law often entitles
the survivor to less than an equal share. When marital assets
have been disproportionately titled in the survivor’s name,
conventional elective share law entitles the survivor to magnify
the disproportion
d. The 1990 UPC’s Redesigned Elective Share
 1990 revisions of the UPC contain major changes in elective
share. Purpose is to provide the surviving spouse a right of
election that implements the partnership theory for the division
of marital property at death
 Under both the traditional type and the augmented estate type
of elective share statute, a surviving spouse’s share is less than
the fifty percent share of the couple’s combined assets that the
sharing theory would imply. Redesigned share is intended to
change this by bringing elective share law into line with the
partnership theory
 Accrual-Type Elective Share: 3 essential features
- 1.) §2-202(a) establishes a schedule under which the
elective share adjusts to the length of the marriage. The
longer the marriage the larger the elective share
percentage.
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2.) §2-203 to 2-208 elective share percentage is applied
tot he value of the augmented estate, which includes the
couple’s combined assets.
- Augmented estate consists of: DECEDENT side –
(1)decedent’s net probate estate and (2) the decedent’s
non probate transfers to others. IN MIDDLE – (3) the
decedent’s non probate transfers to surviving spouse.
SURVIVNG SPOUSE SIDE – (4) property owned by
the surviving spouse and amounts that would have been
included in the surviving spouse’s non-probate transfers
to others had the spouse been the decedent
- 3.) §2-209 surviving spouse’s own assets are counted
first in making up the spouse’s ultimate entitlement, so
that decedent’s assets are liable only if there is a
deficiency
- Redesigned UPC differs from community property
system bc/t he rights accorded the spouse under the
UPC are conditioned upon survival and UPC adds
together and then splits all of the couple’s assets,
including assets acquired before marriage and assets
acquired by gift or inheritance.
 Implementation of Support Theory; Supplemental Elective
Share Amount: spouse’s mutual duties of support during their
joint lifetimes should be continued in some form after death in
favor of the survivor, as a claim on the decedent’s estate
- conventional elective share law does this poorly by
giving a set fraction as an elective share. Disregards
the survivors needs
- 1990 UPC seeks to implement the theory by granting
survivor a supplemental elective-share amount related
to the actual needs. §2-202(b) provides a supplemental
elective share amount of $50,000. Under §2-209(b) and
(c), if the surviving spouse’s assets are less than the
$50,000 minimum, then the spouse is entitled to
whatever additional portion of the estate is necessary,
up to 100% of it, to bring the survivor up to that
minimum level.
2. Protection Against Will Substitutes
a. Common Law Theories
 Seifert v. Southern National Bank of South Carolina, pp.
535
FACTS: Harry Seifert created a revocable trust into which a
large majority of his assets were transferred and named his
daughters from a former marriage as the beneficiaries, leaving
nothing in the estate to satisfy his wife’s elective share
HOLDING: Where a spouse seeks to avoid the payment of the
elective share by creating a trust over which he exercises
substantial control, the trust may be declared illusory and the
trust assets included in the decedent’s estate. The right to
receive a spousal elective share is a substantial one. Any
attempt to circumvent payment must be met with great
skepticism.
 Courts have adopted one of the other of two approaches to this
problem: the fraudulent intent test or the illusory transfer test,
which the court in Seifert adopted. The illusory transfer test is
the predominant view.
 Leading case adopting the illusory transfer tests is Newman v.
Dore. Court says that the only sound test of validity is whether
the transfer was real or illusory. Test of whether the husband
has in good faith divested himself of ownership or made an
illusory transfer. Case gives spouse very limited protection
against will substitutes. One of the most common – revocable
trust with a retained life estate - has been held not to be illusory
 Sullivan v. Burkin, pp. 540
FACTS: Sullivan contended that the value of real estate placed
in trust by her late husband should be considered part of the
estate for purposes of providing her portion of the estate
HOLDING: the surviving spouse has no claim against the
assets of a valid inter vivos trust created by the deceased
spouse even when the deceased spouse alone retained
substantial rights and powers under the trust instrument.
 Restatement 2d §34.1 – an inter vivos donative transfer to
others than the donor’s spouse that is a substitute for a will, or
that is revocable by the donor at the time of the donor’s death,
is subject to spousal rights of the donor’s spouse in the
transferred property that would accrue to the donor’s spouse on
the donor’s death if the transfer had been made by the donor’s
will
 For purposes of computing the amount of the elective share,
the value of a will substitute that is subject to the elective share
is added to the decedent’s probate estate. 1990 UPC §2-209
and pre 1990 UPC §2-207 state that beneficiaries of will
substitutes are liable in contribution of a proportional part of
their gifts in making up the spouse’s elective share
b. The Decedent’s Non-Probate-Transfers-to-Others Component of the UPC’s
Augmented Estate System (1990 UPC §2-205, 2-207 and Pre 1990 UPC §§2202(1))
 Another function of applying the surviving spouse’s elective
share to the augmented estate is to deal with fraud on the
spouse’s share. Function performed by the decedent’s nonprobate transfers to others component of the augmented estate.
§2-205 gives a detailed list of will substitutes that are included
in this list (this way courts don’t have to decide which/ whether
certain will substitutes are subject to elective share)
 Under 1990 revision of UPC, proceeds of lie insurance policy
decedent purchased, naming someone else as beneficiary is in
included in non-probate transfers to others component.
 Other feature of 1990 UPC is that decedent’s non probate
transfers to others now include property that is subject to a
presently execrable general power of appointment held solely
by the decedent.
 Article: Jane Bryant Quinn, Insurance Ploy Can Leave
Spouse’s Penniless
- Spousal share applies only to the property that’s left by
will and billions of dollars of assets pass outside the
will: through joint ownership and the named
beneficiaries of living trusts, annuities, Individual
Retirement Accounts, or life insurance policies
- In non-community property states, you can generally
leave this property to anyone you want – even if your
spouse winds up without a dime
- The new UPC would stop that. It says that when a
married person dies, all of assets of both spouses must
be added up, including life insurance proceeds. The
surviving spouse gets a share of the entire pot, but no
less than $50,000 (unless the spouse has formally
waived her rights).
 Matter of Scheiner, pp. 554
FACTS: Scheiner’s widow sought to elect against certain US
Treasury bills Scheiner had purchased prior to his marriage
HOLDING: a decedent’s Treasury bills are not testamentary
substitutes against which a surviving spouse may elect. Certain
money transfers are never deemed to be testamentary
substitutes against which a surviving spouse may elect; per
state law, U.S. savings bonds are within this group.
 §2-120(b) of the 1990 UPC attempts to handle preemption of
state law by federal regulations (like those concerning US
bonds) by imposing a personal liability on the recipient of any
item of property or payment made resulting from federal
preemption
3. The Incapacitated Surviving Spouse
 Clarkson v. First National Bank, pp. 559
FACTS: First National Bank, the trustee and executor of the
estate, appealed from the district court’s decision vacating an
order to the county court electing on behalf of the widow to
take the provision made for her in her husband’s will
HOLDING: When an election is required to be made in the
“best interests” of a surviving incompetent spouse, the only
consideration available to the trial judge in making the election
is what would be in the best interests of the incompetent spouse
without reference to whether he/she may be provided for
otherwise in the decedent’s estate plan.
 Pre 1990 UPC §2-203 provided that the right of election can be
exercised on behalf of a protected person only after a finding
that “exercise is necessary to provide adequate support for the
protected person during his probate life expectancy”
 1990 UPC §2-212 includes several innovations: Under
subsection (b) an election made on behalf of a surviving
spouse who is an incapacitated person requires that the portion
of the elective share and supplemental elective share amounts
that are payable from the decedent’s probate estate and non
probate transfers to others goes into a custodial trust under the
Uniform Custodial Trust Act. Used to benefit the surviving
spouse personally rather than the spouse’s heirs.
 Statutory right of election is personal and does not survive the
surviving spouse’s death
4. Premarital and Postmarital Agreements (1990 UPC §2-213 and Pre 1990
UPC § 2-204)
 Right to an elective share may be waived by a premarital or
postmarital agreement. In the absence of statute, the validity of
these agreements depends on contract law
 Agreement will be closely scrutinized for any overreaching by
either party
 Rosenberg v. Lipnick: in the absence of statute, parties occupy
a confidential relationship and the burden of disclosure rests
upon both of them. Relevant factors to consider when judging
validity are if it is fair and reasonable for party consenting and
if contesting party was fully informed of other party'’ worth
prior to signing
 Simeone v. Simeone, pp. 565
FACTS: Simeone, a nurse, and Simeone, a neurosurgeon,
entered into a prenuptial agreement on the eve of their wedding
which limited support payments to $200 per week with an
overall limit of $25,000.
HOLDING: Prenuptial agreements will be enforced according
to ordinary principles of contract law, unless the parties did not
fully and fairly disclose their financial positions.
 Uniform Premarital Agreement Act (enacted so far in 16 states)
applies to written premarital agreements, signed by both
parties. Enforceable unless the party against whom
enforcement is sought proves (a) that he or she did not execute
the agreement voluntarily; or (b) that the agreement was
unconscionable when made AND that, before execution of the
agreement, he or she was (1) not provided a fair disclosure of
the property or financial obligations of the other party, (2) did
not voluntarily and expressly waive, in writing, any disclosure
of the property and financial obligations, and (3) did not have
or reasonably could not have had an adequate knowledge of the
property of the other party. The 1990 UPC adopts this
approach
 UMPA distinguishes between premarital and postmarital
agreements. For premarital the standard of validity is
essentially the same as that in the UMPA. A ground of
invalidity of a post martial agreement is that is was
unconscionable when made. The higher standard for
postmarital agreements reflects the idea of greater
confidentiality in married relationships.
5. Tax Implications of Election
 One aspect of elective share law that makes election so
attractive is that by electing, the spouse receives absolute
ownership of all or part of her entitlement. To the extent that
the share confers this absolute ownership, it qualifies for the
federal estate tax marital exemption.
 Most courts hold that the amount of the spouse’s share is
calculated on the basis of the estate before estate taxes have
been subtracted
B. Probate Exemptions and Allowances (1990 UPC §2-401 to –405 and Pre 1990
UPC §§2-401 to –404)
 The elective share in common law states and the community
interest in the community property states are not he only
protections against disinheritance afforded the surviving
spouse. Additional layers of protection, such as the right of
homestead, the exempt property allowance, and the family
allowance run in favor of the surviving spouse.
 Under the UPC, these allowances and exemptions can be
distributed to the without delay. UPC does not charge the
exemptions and allowances against devises o the elective share
unless the decedent’s will directs otherwise.
 Homestead: provided for by 1990 UPC §2-402 gives
decedent’s dependent survivors limited protection in the family
home. UPC’s homestead allowance is unique in that it
provides for a lump sum amount rather than a right to occupy
the spouse’s dwelling house as long as the surviving spouse or
minor children wish to do so.
C. Other Restrictions of Freedom of Disposition
 There are two additional measures of family protection against
disinheritance: pretermitted heir statutes (protect specified
family members form unintentional disinheritance) and
mortmain statutes (invalidate specified dispositions in favor of
charitable organizations).
1. Protection Against Unintentional Disinheritance (1990 UPC §§2-301 to –302
and Pre 1990 UPC §§2-301 to –302)
 Children may be intentionally disinherited in every American
state except Louisiana.
 Nearly all states have pretermitted-heir statutes that grant
children a measure of protection from being unintentionally
disinherited. Most protect only children born (or adopted) after
the execution of the will; a few protect any omitted child. The
UPC appears to have broken new ground by providing that
non-probate transfers to a child can defeat that child’s statutory
protection.
 1990 UPC §2-302 says that if the testator had no child alive
when he or she executed the will, an omitted after born or after
adopted child takes no portion of the estate if the testator
devised al or substantially all of the estate to the other parent of
the omitted child and the other parent survives the testator and
is entitled to take the property. UPC also says that if testator
had one or more children alive when the will was executed and
devised property to at least one of them, the after born child
does not take a full share but only a pro rata share of the
property devised to the then-living children.
 Azcunce v. Estate of Azcunce, pp. 581
FACTS: Rene Azcunce executed a will that provided for his
wife and three children, but included no provision for afterborn children; after having a fourth child, Patricia, Rene
executed a codicil to the will which failed to provide for her.
HOLDING: Where a codicil to a will expressly republishes the
original will, a child born before the execution of the codicil is
not entitled to a statutory share of the parent’s estate under a
pretermitted statue. These statutes provide for children born
AFTER.
2. Mortmain Legislation
 In a few state, statutes impose various forms if restraint on gift
by will to charitable or religious organizations
 Purpose of requirement is to prevent a dying person from
giving his property to charities to the exclusion of his lawful
heirs
 Only restrictions on charitable gifts in the US are statutory.
Many state’s statutes restrict either (1) the power of a
corporation to take and hold real and personal property, or (2)
the power of a testator to devise his property to charity, or (3)
combination of (1) and (2).
Chapter 13: Trusts: Formation and Formality
A. Introduction
 Private trusts and, to a lesser extent, charitable trusts sit at the
core of modern estate planning practice
 A trust is a fiduciary relationship with respect to property,
arising as a result of a manifestation of an intention to create
that relationship and subjecting the person who holds title to
the property to duties to deal with it for the benefit of a charity
or for one or more persons, at least one of whom is not the sole
trustee.
1. Historical Development of Trusts
 Settlor/ Grantor/ Trustor/ Founder/ Donor/ Creator – the maker
of the trust
 Trustee – the holder of legal title
 Beneficiaries/ Cestui Que Uses – the one for whose benefit the
property is held
 Property/ Corpus/ Principal/ Res – the subject of the trust,
whether real or personal
 Inter vivos/ Living Trust – settlor creates it during his or her
lifetime; can be either revocable or irrevocable
 Testamentary Trust- settlor creates it by will
 Today a trust is seen as a property arrangement under which
ownership of the property is divided: the trust property’s legal
title goes to the trustee and its equitable title does tot he
beneficiary or, more usually, is divided along temporal lines
between income beneficiaries and beneficiaries or future
interests in corpus.
 Holding legal but not beneficial title carries with a fiduciary
duty with respect to the property; holding equitable title
confers rights in personam to enforce these duties
 The trustee’s fiduciary duties run in favor of the beneficiary.
Unless the settlor is also a beneficiary, the settlor has no
standing to enforce the trust.
 Statute of Uses: In 1536, Parliament enacted this statute to
eliminate subtile practiced feoffements, abuses and errors to
the subversion of the good and ancient laws. Although it
sought to abolish existing uses, the mechanism used to achieve
that objective was not to deprive the beneficiary of his interest,
rather, the statute converted that beneficial interests into a legal
interest. Converting the interest into a legal one brought it into
the jurisdiction of the courts of common law rather than the
Court of Chancery. Use was allowed to persist. Modern trust
arises out of situations in which the court held that the statute
didn’t apply. IT was held that it didn’t apply to an active use.
So, the modern trust, placing active duties on the trustee, is
unaffected by the Statute of Uses so long as the trust remains
active.
 Express trusts: intentionally created for the ongoing
management of the trust property, whether for private or
charitable beneficiaries or for a combination of the two. Exist
over a period of time.
 Constructive trusts: not a trust at all, but a remedy. Closely
associated with a quasi-contract.... law’s principle answer to
unjust enrichment. Even though there is no express agreement,
courts will treat the situation as if there had been for the
purpose of restitution
 Resulting trusts: not a trust, but a property interests analogous
to the reversion retained by a grantor who conveys one or more
legal interests in property for life or for years without creating
a remainder thereafter. The kind of trust that arises when an
express trust fails or doesn’t completely dispose of the trust
property
2. Estate Planning Uses of Trusts
 Reasons to create trusts include probate avoidance, property
management, tax reasons, and control through successive
generations
 Revocable trusts: avoid probate, provide independent property
management, self-declared allows the settlor to retain lifetime
management of his or her own property.
 Irrevocable trusts: create significant tax advantages
B. Formation of a Trust
 In order for any trust to exist there must be a specific trust res,
or property, a trustee, identifiable beneficiaries, and a specific
trust intent.
1. The Trust as a Property Arrangement
 Any legally recognized property interests that is transferable
can be the subject matter of a trust
 Brainard v. Commissioner, pp. 687
FACTS: Brainard petitioned for review of the Board of Tax
Appeals finding that income received from a trust established
to benefit the members of his family was taxable to Brainard as
a part of his gross income
HOLDING: When a person purports to establish a trust with
respect to an interest not yet acquired, no trust arises when the
interest comes into existence absent a manifestation of the
person’s intent to that effect at that time. An interest which has
not yet come into existence cannot be held in trust.
2. Intent to Create a Trust
 Trust is created when ownership of the res is divided into its
legal and equitable portions. The transfer of equitable title to
beneficiaries doesn’t require the same formalities as would be
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required for making an outright gift. The trust may be created
either in writing, ort if relating to personal property, by parol.
The declaration need not be made to the beneficiary, nor the
writing given to him; in fact his ignorance of the trust is
immaterial.
There must be proof of a declaration of trust in writing to pass
real property
Farmers’ Loan and Trust Co. v. Winthrop, pp. 696
FACTS: Under an established trust, the settlor gave the trustee
the revocable power of attorney to collect funds due the settlor
and put them in trust, but settlor died before all of the funds
due had been collected
HOLDING: when a settlor makes a gift in trust, he must
manifest a present intent to effectuate a present gift which will
operate immediately to establish a trust. As the situation stood
at the settlor’s death, the power could have been revoked and
the settlor could have retained the funds. The settlor did not
declare herself trustee and the trustee never got legal title to the
property, so the funds must pass under the will to residuary
legatees
That an imperfect gift won’t be salvaged by attributing to the
would-be donor a fictitious intent to create a self-declared trust
has pretty well been settled. For a man to make himself a
trustee
There must be an expression of intention to become a trustee,
whereas the words of a present gift shew an intention to give
property over to another, and not retain it in the donor’s hands
for any purpose, fiduciary or otherwise.
Precatroy language: unless a testator or other transferor
manifests an intention to impose enforceable duties on the
transferee, the intention to create a trust is lacking and no trust
is created
Factors to consider when determining if transferor intended to
impose enforceable legal duties rather than moral obligations
listed on pp. 702
Colton v. Colton, pp. 702
FACTS: Martha Colton and Abigail Colton filed bills in
equity requesting a construction of David Colton’s will that a
bequest to Ellen Colton was charged with a trust for the benefit
of Abigail and Martha and appealed form a decision sustaining
demurrers to the bills
HOLDING: When in connection with a bequest or devise to
one person, words expressing a wish, request, or
recommendation that the person use the bequest for the benefit
of others are used, a trust may arise if the testator, in using
these words, intended them to operate as an imperative. No
specific language is necessary to create a trust by will, if it is
evident that the testator intended that the property conveyed is
to be held for the benefit of another.
3. Parties to a Trust
a. The Trustee
 An owner of property can create a trust either by declaring
himself trustee for designated beneficiaries or by selecting
another person as trustee and transferring title of the property
to that person. Once established, principal relation with respect
to the property is between the trustee and the beneficiaries
 Adams v. Adams, pp. 704
FACTS: Mrs. Adams filed a bill in equity against Mr. Adams
and Appleton, the trustee, requesting the establishment of a
trust for her benefit of property conveyed by the execution of a
deed in trust for her, and Mr. Adams appealed the decisions
granting Mrs. Adams the relief requested.
HOLDING: A trust cannot fail for want of a trustee or by the
refusal of the trustee to accept the trust.
 A trustee can always disclaim (refuse to accept) a trust, but
once accepted, the trustee can resign only with the permission
of the appropriate court, or in accordance with the terms of the
trust, or with the consent of the beneficiaries if they are
competent to give such consent.
 Trust documents usually expressly designate a successor
trustee
b. The Beneficiaries
(1) Unborn and Unascertained Beneficiaries
 No doubt that a valid trust can be crated that contains unborn
and unascertained persons among its beneficiaries
 Morsman v. Commissioner, pp. 708
FACTS: Morsman, a bachelor, declared himself trustee of
certain securities. His descendants were named as ultimate
beneficiaries. Some of his securities were later sold and the
Tax Commissioner contended that the profits from the sale
were taxable as income to Morsman individually
HOLDING: the present severance of legal and equitable title is
a prerequisite tot he creation of a valid trust. When the settlor
constitutes himself as trustee and beneficiary as well, legal and
equitable title are merged in the same individual.
(2) Merger: Beneficiary as Trustee
 A transfer of legal title to a person to hold in trust for himself
or herself, as sole beneficiary, doesn’t crate a trust. There is a
merger of legal and equitable title. Yet, in truth, no separation
of legal and equitable title ever occurred so as to bring about a
merger.
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Commonly said that equity will prevent a merger in order to
effectuate the settlor’s intent and while the maxim is stated
more frequently than it’s applied there seems little reason to
doubt that it sometimes will be applied
(3) Indefinite Beneficiaries
 Clark v. Campbell, pp. 713
FACTS: The trustees of the estate were directed to give
decedent’s personal effects to the friends they knew she wised
to receive them.
HOLDING: Where the beneficiaries of a non-charitable trust
cannot adequately be determined, the trust fails. A trust must
have an identifiable beneficiary or there must be adequate
standards provided under the trust instrument for their
identification in the future.
 Discretionary powers are almost always valid unless the group
of objects is so indefinite that it is impossible to identify any
person the donor intended should be objects of the power
 Estate of Searight, pp. 722
FACTS: The testator, by will, left $1000 to his executor to pay
another for the care of his dog for the rest of the dog’s life; the
probate court found it was a valid trust and that the recipient of
the dog could be taxed only on the dog’s worth, over the
objection of the Department of taxation that it was not a trust
and the $1000 was taxable.
HOLDING: An “honorary trust” is valid where it is for a valid
purpose and the trustee accepts the testator’s wishes, event
though there is no beneficiary who can enforce the trust.
 Trusts have been upheld that provided for the saying of masses,
for the erection of a tombstone, the upkeep of a burial plot, and
the care of a specific animal.
C. Formalities in the Creation of a Trust: The Unjust Enrichment Dilemma
 Both the Statute of Frauds (SOF) and the Statute of Wills
(SOW) impose formalities in trusts for evidentiary purposes
 In some situations, the question arises whether the
restitutionary principle of avoiding unjust enrichment should
override these evidentiary concerns.
1. Inter Vivos Trusts of Land: Statute of Frauds
 Most states have statutes that require trusts of real property to
be evidenced by a signed writing
 Generally though that the writing affects the trusts enforcement
and not its existence
 Requirement typically met by a formal written instrument that
is signed both by the settlor and the trustee, or in the case of a
self-declared trust, by the settlor alone
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Even if the statute states that an oral trust is void, courts have
treated such trusts as voidable only. If the trustee doesn’t raise
the SOF objection, the trust is enforceable
Person v. Pagnotta, pp. 727
FACTS: In contemplation of her death, which she believed to
imminent, Person conveyed a remainder interest in land to
Pagnotta’s daughter and reclaimed the property after she
recovered.
HOLDING: An oral trust will not be invalid due to the SOF if
the transferee at the time of the transfer of the property was in a
confidential relationship with the transferor or the transfer was
made in contemplation of death. Constructive trust can be
created despite SOF.
The wrongdoing on the part of the grantee (promisor) provides
a ground for the imposition of a constructive trust. If the
grantee orally promised to hold the land in trust for the settlor,
the constructive trust is imposed in favor of the settlor. If the
grantee orally promised to hold the land in trust for a third
person, the third person can regularly obtain constructive trust
relief in his or her own favor.
Abuse of a confidential relationship is ground for the
imposition of a constructive trust.
Fraud is another basis for the imposition of a constructive trust.
Fraud requires establishing that the grantee never intended to
keep the oral promise.
Sharp v. Kosmalski, pp. 733
FACTS: Kosmalski refused to marry Sharp but acted as a
domestic companion; however, after Sharp had transferred full
ownership of the farm on which they both lived to Kosmalski,
Kosmalski forced Sharp to move out.
HOLDING: If a transferee of property conveyed in reliance on
a promise make pursuant to a confidential relationship or
fiduciary relationship- would be unjustly enriched by retention
of the property, equity will impose a constructive trust on the
property in favor of the transferor
Watts v. Watts, pp. 735
FACTS: the Watts, though unmarried, lived together, held
themselves out as husband and wife, and agreed to equally
share in their earnings and property acquired during their
relationship.
HOLDING: When unmarried cohabitors enter into an
agreement to accumulate property and earnings through their
joint efforts, for which consideration, independent of the sexual
nature of their relationship, exists, but one cohabitor tries to
retain an unreasonable amount of their joint wealth upon
termination of the relationship, claims arise for breach of
contract and unjust enrichment.
2. Testamentary Trusts: Statute of Wills
 Secret Testamentary Trusts: if the plaintiff, who claims to be
the intended beneficiary, proves that the devisee promised to
hold the property in trust for the plaintiff, whether the promise
was made before or after the will was executed, most
jurisdictions impose a constructive trust on the devisee in favor
of the plaintiff. The rule is founded on the principle that the
legacy would not have been given, or intestacy allowed to
ensue, unless the promise had been made; and hence the person
promising is bound, in equity, to keep it, as to violate it would
be fraud.
 Whenever it appears that the testator was prevented from
action by the action or silence of a legatee, who knew facts in
time to act or speak, he will not be permitted to apply the
legacy to his own use when that would defeat the intentions of
the testator.
 Oliffe v. Wells, pp. 743
FACTS: Testator devised residue of estate to the executor with
an instruction to distribute it, according to his discretion, as to
carry out the testator’s pre-expressed wishes
HOLDING: Where a will upon its face shows that the devisee
takes legal title only and not he beneficial interest, and the trust
is not sufficiently defined by the will to take effect, the
equitable interest goes by way of resulting trust, to the heirs or
next of kin, as property of the deceased not disposed of by will.
Chapter 14: Spendthrift, Discretionary, and Support Trusts: A Question of
Control
 Spendthrift Trusts: a disabling restraint has been imposed on
alienation of the beneficiaries equitable interests. Restraint on
alienation purports to nullify any attempted assignment by a
beneficiary of his or her equitable interest and any attempted
attachment of a beneficiary’s interest by the beneficiary’s
creditors. Indestructible in that the beneficiaries cannot compel
the trustee to prematurely terminate it.
 Discretionary Trusts: the trustee is granted discretion to pay to
or apply for the benefit of the beneficiary only so much of the
income and principal or either as the trustee sees fit
 Support Trusts: the trustee is directed to pay to or apply for the
benefit of the beneficiary so much of the income and principal
or either as is necessary for the education and support of the
beneficiary
 Disabling restraints on alienation of equitable interests in trust
are valid
A. Restraining Alienability of Beneficial Interests/ Shielding Beneficial Interests
From creditors
1. Spendthrift Trusts
 Broadway National Bank v. Adams, pp. 751
FACTS: The settlor created a trust, with the provision that the
trust interests could not be transferred or taken by the
beneficiary’s creditors
HOLDING: Any person having the right to dispose of his
property may place it in trust for another as income
beneficiary, and may directly provide that such a trust income
cannot be alienated by the beneficiary by assignment and
cannot be taken by the beneficiary’s creditors in advance of its
payment to him.
 Dead Hand Dilemma: general idea that freedom of disposition
can be invoked on either side – for or against the validity of
spendthrift trusts. Seem weird that a man should have an estate
to live on, but not an estate to pay his debts with
 Apart from statute, any person can be the beneficiary of a
spendthrift trust in a state recognizing them. Without regard to
the beneficiary’s ability to look after himself and his business
affairs. Nor has case law placed any limitation on the amount
of income that can be validly protected from the beneficiary’s
creditors
 Spendthrift Trust Legislation:
- recognized y statute in many states, but they vary in
form
- NY statute says creditors can reach income in excess of
a specified amount
- California statute adopts a station in life test that
fluctuates according tot he case
 Life insurance: more than half of state have statutes that shield
beneficiary’s creditors form life insurance proceeds
 Bankruptcy: to extent restraint is valid under state or federal
law, it is also effective in bankruptcy
 Many private trusts drafter by lawyers contain spendthrift
clauses that client’s don’t understand or even know about
 Estate of Vought, pp. 761
FACTS: Vought assigned his remainder interest in his father’s
estate
HOLDING: A testator may restrict the ability of a vested
remainderman to assign his interest. The trustees have control
over the principal and May sell or otherwise alienate it for the
benefit of the trust. Such restrictions do not adversely affect
the alienation of the principal.
 All authorities agree that both income and principal are
transferable and attachable once received by the beneficiary
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Moffat v. Lynch: court held that an agreement that upon death
of any of the beneficiaries, the survivors would pay the portion
of income over to decedent’s children.
2. Discretionary Trusts
 Straight Income Trusts: requiring the trustee to pay the income
to a specified beneficiary or divide it equally among a specified
group of beneficiaries
 Simple Trust: income is required to be distributed currently,
no amounts can be devoted to charitable purposes and no
distribution of the corpus is made in the taxable year
 Marital Deduction Trust: a testamentary trust created to take
full advantage of the marital deduction; especially a trust
entitling a spouse to lifetime income from the trust and
sufficient control over the trust to include the trust property in
the spouse’s estate at death
 Bypass Trust: a trust into which a decedent’s estate passes, so
that the surviving heirs get a life estate in the trust rather than
the property itself, in order to avoid estate taxes on an estate
larger than the tax credit sheltered amount
a. Range of Trustee’s Discretion
 By conferring discretion, the settlor manifests an intention to
trust the trustees judgment. Restatement 2d §187 provides that
a court will not substitute it judgment for that of the trustee,
unless the trustee abuses that trust.
 Article: Edward C. Halbach, Jr., Problems of Discretion in
Discretionary Trusts
- When there are no words such as “absolute” or
“uncontrolled” enlarging the trustee’s discretion, a
court will intervene if the facts show the payments are
an unreasonable means of carrying out the terms of the
trust as construed by the court
- The words “absolutely” and “unlimited” are not
interpreted literally but are ordinarily construed as
dispensing with the standard of reasonableness
- Nonexercise will not be permitted merely b/c the trustee
has discretion, nor will bad faith be tolerated
b. Alienability
 If a trust is a true discretionary trust, as where the trust
instrument gives the trustee discretion, or “uncontrolled” or
“absolute” discretion, to pay or not to pay income or principal
to the beneficiary, the beneficiary can’t compel the trustee to
pay, nor can an assignee or creditor of the beneficiary compel
the trustee to pay any part of the income or principal to him. In
this sense, the beneficiary’s interest in a discretionary trust is
inalienable, whether or not the interest is subject to a valid
spendthrift restriction
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Protective Trusts: typically gives the beneficiary a right to the
income but provides that, upon attempted alienation, voluntary
or involuntary, the beneficiary’s right is forfeited and the trust
becomes as discretionary trust. Commonly used as a substitute
for a spendthrift trust in the few remaining jurisdictions that
don’t recognize them
3. Pure-Support Trusts/ Discretionary Support Trusts
 Pure support trust: is mandatory, not discretionary. Trustee is
required to pay out and the beneficiary is entitled to receive so
much of the income and principal or either as is necessary for
support. Seldom used in actual practice
 Entitled to a certain specified, reasonable amount in terms of
an objective, ascertainable standard
 Discretionary Support Trust: hybrid containing elements of
pure discretionary and pure support trusts. Trustee is
authorized or directed to pay the beneficiary so much of the
income and principal or either as the trustee, in hi or her sole
absolute discretion determines is necessary for the
beneficiary’s support
a. Range of Trustee’s Discretion
 Article: Evelyn G. Abravanel, Discretionary Support Trusts
- the discretionary aspect of even a pure support trust
arises by reason of the imprecise nature of the support
standard
b. Alienability
 Except in cases where the settlor is the beneficiary, the
beneficiary’s interest in a support trust is inalienable, whether
or not subject to a spendthrift provisions
4. Self-Settled Spendthrift, Discretionary, and Support Trusts
 In nearly all states, a settlor may not create a spendthrift,
discretionary, or support trust for his or her own benefit. Such
a “self settled” trust is not void, but the settlor’s interest in a
spendthrift trust is alienable and can be reached by creditors
5. Special Claimants
 Hurley v. Hurley, pp. 789
FACTS: Hurley’s mother established a spendthrift trust
providing him with income for life; upon Hurley’s divorce
from his wife, he skipped town and did not pay child support,
so his ex-wife sought to garnish his trust income
HOLDING: Income of a spendthrift trust of which a former
husband is the current beneficiary may be reached to satisfy his
former wife’s claim for alimony, separate maintenance, or
child support
 ERISA also requires such plans to provide for the payment of
benefits in accordance with the applicable requirements of any
qualified domestic regulations for child support, alimony
payments, or marital property rights
 Restatement does not list tort creditors as having special rights
to overcome a spendthrift restraint or the inalienability granted
to support trusts. It does list claimants who provided the
beneficiary with necessary services or supplies. Same section
also treats government claimants as special
B. Termination (or Modification) by the Beneficiaries
 Clafin v. Clafin, pp. 795
FACTS: Son was to receive payments from trust fund at ages
21,25, and 30 years. Sued trustees to terminate the trust and
pay him the balance upon reaching the age of 21.
HOLDING: A trust will not be terminated by judicial decree
where perpetuation is necessary to carry out the express intent
of the trustor even though the sole beneficiary has attained
maturity, has a vested interest in the proceeds of the trust and
desires termination
 Clafin doctrine is widely followed in this country.
 American rule is that the beneficiaries of a trust cannot compel
the trust’s premature termination or modification unless: (1) all
beneficiaries consent (and are competent to do so) and (2)
premature termination or modification will not defeat a
material purpose of the trust
1. Material Purpose
 Trusts that contain a material purpose precluding their
termination or modification, are sometimes called
indestructible trusts. Postponement of enjoyment, spendthrift,
support, and discretionary are all deemed to contain a material
purpose, making them indestructible.
 Postponement of Enjoyment: settlor wants the beneficiary to
have the trust property and its income, but not until the
beneficiary reaches a specified age, a certain time period has
lapsed, or a certain date.
 Spendthrift: court does not have discretion to permit
termination of a trust on petition of the beneficiaries id the trust
is subject to a valid restraint on transfer of the beneficiary’s
interest
 Support Trusts/ Discretionary Trust: indestructible, too since
the purpose is to provide for the beneficiaries’ support
 Successive Beneficiary Trusts Without Spendthrift Provisions:
Restatement treats them as destructible. The reason given is
that the creation of a successive beneficiary trust does not of
itself indicate that it was a material purpose of the trust to
deprive the beneficiaries of the management of the trust
property for the period of the trust. Purpose of the trust is to
give the beneficial interest in the property to one beneficiary
for a designated period of time and to preserve the principal for
the other beneficiary.
 Schmucker v. Walker, pp. 799
FACTS: Testatrix bequeathed her home to her son for his life
time and upon his death to his wife until she died or remarried
HOLDING: A trust may not be terminated until the settlor’s
expressed intention and the trust’s purpose have been
accomplished.
 Although a trust contains a “material purpose,” it is widely
held that the beneficiaries can compel its termination if they
obtain the settlor’s consent
2. Premature termination of a trust requires the consent of all of Beneficiaries’
Consent
 The beneficiaries, none of whom is under a legal incapacity.
There also cannot be a material purpose that would be violated.
 If the unascertained beneficiaries are the children of a
designated woman, come courts hold that if the court is beyond
the age of child bearing or otherwise physically incapable of
bearing children, the court may terminate the trust. Other
courts hold that there is a conclusive presumption that the
possibility of issue is not extinct until in a female until death.
 UPC §2-207: By creating a substitute gift to descendants of
remainder beneficiaries who predecease the distribution date,
the UPC would change the identity of beneficiaries whose
consent is necessary to terminate a trust
 Very few trusts can terminate before the distribution date b/c
they contain a boilerplate spendthrift provisions or b/c they
grant discretionary powers or discretionary support powers to
the trustee. In addition, most trusts create future interests in
classes that are still subject to open
 Restatement provides that even though some of the
beneficiaries do not consent to the termination or are incapable
of giving consent, the court may decree a partial termination of
the trust if the interests of the beneficiaries who do not consent
are not prejudiced and if the continuance of the trust is not
necessary to carry out the material purpose of that trust.
 Phillips v. Lowe: court held that the settlor who was the sole
beneficiary of a trust could terminate the trust even though the
trust instrument was irrevocable.
 Some courts hold that consent can be given on a beneficiary’s
behalf by the guardian of an incapacitated beneficiary’s
property
 Hatch v. Riggs National Bank, pp. 807
FACTS: Hatch established an irrevocable trust with a life
tenancy in himself with a remainder to his heirs
HOLDING: The Doctrine of worthier Title cannot be used by
the Trustor/ Life tenant to terminate the trust. Hatch will not
know who his heirs are until death, so he cannot obtain
consent. In order to revoke or modify, he must seek consent of
a guardian who can act on behalf of his heirs,