Wills - Herrera

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Wills & Trusts Final Outline

WILLS I. Limits on Property Distribution a. The Dead Hand Control Problem i. The controlling consideration in determining the meaning of a donative document is the donors intention. The donors intention is given effect to the maximum extent allowed by law. b. Shapira v. Union National Bank i. Father David made provisions in his will that if his 2 sons dont marry Jewish women within 7 years they lose their part of their estate. ii. Furthermore, the daughter did not have to take part in this b/c Jewish traditions are passed down from the woman and she was therefore safe. iii. Son challenges this provision under Equal protection clause because of the right to marry whoever you want and its against public policy to have the state enforce a racial provision. iv. Court found it wasnt a state action even if the state enforces it. Probate Process a. Definition i. property that passes under the decedents will or by intestacy ii. Probate provides formal settlement of ownership and clear title b. Non Probate Property (not supervised by a judge in the probate court) i. Property passing under an instrument other than a will. Reasons for non probate transfer: speed, expense, convenience and privacy ii. Examples: 1. Joint tenancy (real and personal) a. Two people both own the entire estate. When one dies, the other still owns the entire part b. Tenancy in Common each person owns 50% of the property and can pass their 50% on to whom ever they wish. 2. Life insurance 3. Contracts with payable on death (POD) provision a. Pensions b. 401(k) c. Bank accounts 4. Inter vivos trusts c. Estate planning Language i. Probate court: the judicial procedure that administers the probate estate ii. Personal Representative: someone who oversees the winding up of a decedents affairs iii. Administrator: a person appointed by the court to manage the assets and liabilities of an intestate decedent. iv. Beneficiary: person designated by the will to receive the gifts v. Executor: a person named by a testator to carry out the provisions in the testators will
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vi. Bond: a type of surety bond required of a trustee, administrator, or executor to ensure the proper performance of duties vii. Codicil: a supplement or amendment to a will viii. Heir: person designated by statute as being the next in line to inherit (next of kin) ix. Descendant: one who follows in lineage (child, grandchild) x. Intestate: to die without a valid disposition of property xi. Intestate succession: process of becoming beneficially entitled to the property of decedent. xii. Trust: the beneficial enjoyment of property to which another person holds legal title xiii. Settler: one who sets up a trust xiv. Trustee: one who, having legal title to property, holds it in trust for the benefit of another. d. Opening of the probate Process i. Couple of places to open probate 1. State of Domicile (primary) 2. Location of the property (ancillary) ii. Letters (testamentary v. administration) e. Formal v. Informal Probate i. Formal 1. The court supervises the actions of the personal representative in administering the estate through a potentially costly and time consuming process ii. Informal 1. The personal representative may administer the estate without court supervision unless an interested party asks for court review. (DE 305, DE-310 examples of forms to probate small estates without full court intervention) f. Administering and closing probate i. Notice (DE -121) ii. Creditors (DE 172) iii. Clear title iv. Pay taxes v. Sell property vi. Distribute assets vii. Court discharge Intestacy a. Generally i. If someone dies without a will or trust, they die intestate or if the will is invalid ii. Default rules 1. No will or not trust: probate code sets out how it will be handled iii. Causes of intestacy 1. Some people dont want to deal with their own mortality 2. Cost
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b. Intestate Succession i. The laws of intestate succession are used to determine who will inherit the estate. In CA, the first question that begins the analysis of who gets the decedents property depends on whether the decedent was marred or in a domestic partnership Intestate Succession (depends on what kind of property it is) a. Separate property i. Spouse gets nothing unless 6401 applies b. Community property PC 100 i. Upon the death of a married person, 1/2 of the CP goes to the surviving spouse and the other half belongs to the decedent. c. Quasi community property PC 101 i. Upon the death of married person domiciled in CA, 1/2 of the decedents quasi-community property belongs to the surviving spouse and the other half belongs to the decedent d. Transfer of quasi Community property PC 102 i. The decedents surviving spouse may require the transferee of property in which the surviving spouse had an expectancy under 101 at the time of the transfer to restore the decedents estate 1/2 of the property if the transferee retains the property or, if not, 1/2 of its proceeds. e. Surviving Spouse 6401 i. (a) and (b) Community and Quasi community property 1. Living spouse gets deceased spouses 1/2 of CP ii. (c) Separate Property 1. Spouse gets entire estate if no other issue, parent, sibling or issue of siblings. 2. 1/2 the estate if only one child or if parent(s) 3. 1/3 of the estate if more than one child or issue. f. Intestate Succession If no Spouse or DP 6402 i. The portion of the estate which does not go to the spouse (Separate property) goes to ( in order) 1. children 2. parents 3. siblings and their issue 4. grandparents and their issue 5. former step children and issue 6. next of kin 7. former in laws and their issue g. Failure to Survive 120 hours after decedent 6403 i. Person who fails to survive the decedent by 120 hours (clear and convincing standard) is deemed to have predeceased the decedent for the purposes of intestate success. ii. Provision only applies when the people die intestate. NOT applicable to people who die with wills written. You can still write in a provision in the will that makes the have to survive you for 120 hours if you want.
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h. Escheat provisions 6404 i. If there are no takers of the intestate estate, it will escheat to the state. i. EXAMPLE: i. CP Transfers 1. H & W are married and hold a $1000 checking account as community property H dies intestate. What happens? 2. Apply 100 (a) one half of the property goes to W. The other half goes to Hs estate 3. Then apply 6401: Ws intestate share of Hs cp is the 1/2 of the community property that belongs to H. W gets all $1,000. j. Division in Equal Shares 240 - in reference to 6402 i. The property shall be divided into as many equal shares as there are living members of the nearest generation of issue then living and deceased members of that generation who leave issue then living, each living member of the nearest generation of issue then living receiving one share and the share of each deceased member of that generation who leaves issue then living being divided in the same manner among his or her then living issue. (Modern Per Stirpes) k. Half bloods 6406 i. Half blood relatives generally inherit the same share they would inherit if they were the whole blood (except in some cases involving severing of a parent/child relationship due to adoption) Simultaneous Death a. Janus v Tarasewics i. H & W were at Hs brothers house for a memorial service (he died from tainted Tylenol pills) the H & W took the same Tylenol pills and both died. ii. Issue: who died first? iii. Trial court says H died first and therefore W inherits, but shes dead so Ws father inherits. iv. Ct. Appeals affirms. b. Simultaneous Death 103 i. If it cannot be established by clear and convincing evidence that one spouse survived the other: 1. Half distributed as if one spouse survived 2. Other have distributed as if other spouse survived. ii. 220. Insufficient Evidence of survivorship 1. If title to property or devolution of property depends upon priority of death and it cannot be established by clear and convincing evidence, property of each person shall be administered as if that person had survived the other. c. Half bloods 6406 i. Half blood relatives generally inherit the same share they would inherit if they were the whole blood (except in some cases involving severing of a parent/child relationship due to adoption CPC
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d. Adoptees, Bastards, stepchildren and foster children 21115 i. Generally, half bloods, adopted persons, persons born out of wedlock, step children, foster children and their issue are included when determining a class gift for purposes of inheritance rights under intestate succession. Transfers to Children a. Establishing Parent/Child Relationship i. Relationship Existence 6450 1. With natural parent regardless of marital status ii. Establishing paternity: FC 7610, 7611, 7630 1. Child born during marriage or within 300 days of termination of the marriage 2. M and F attempt to marry lawfully before the birth or 300 days after 3. Attempt of M and F to marry after the childs birth and the father is named on the birth certificate OR paying child support 4. Father holding out child as his own or judgment 5. Paternity test 6. Sign declaration of paternity in court 7. Fathers: inheritance of Non-marital children a. 14th Amendment prohibits statutes allowing children to inherit from Mothers but not from fathers because it favors fathers martial children b. However a state can enact a statute limiting the non marital childs ability to establish paternity and the right to inherit. The statute must be substantially related to states interest for disposition of property at death. iii. Step children & Foster Children 6454 1. Relationship began during persons minority and continued through he joint lifetimes of the persons and 2. Established by Clear and Convincing evidence that the foster parent or stepparent would have adopted the person but for a legal barrier. iv. Children born out of wedlock 6452 1. a natural parent or relatives of a natural parent can only inherit from a child born out of wedlock if a. the parent or a relative of the parent acknowledged the child b. the parent or relative of the parent contributed to the support of the care of the child v. Domestic Partnerships 1. Same elements as above must be established. 2. Relationship established with non birthing DP by a. Entering into DP within 300 days of childs birth b. Attempting to enter into DP before or within 300 days of childs birth
c. Attempting to enter into DP after birth AND named on birth certificate OR pay support b. Adoption/Equitable adoption 6451 i. Adopted children can inherit from adoptive parents as a natural child would. No difference. ii. Adoption severs the relationship with the natural parent and will not inherit from the natural parent UNLESS 1. They lived together or living natural parent lived with deceased natural parent at time of childs conception AND the new spouse adopts after death of natural parent iii. Minary v. Citizens Fidelty Bank 1. Amelia leaves a trust for her 3 kids for their life and then to their kids. If no kids then it goes to the Church. 2. One of the kids adopts his wife so she can collect the money as an heir. 3. Ct. finds that adult adoption is legal. However the court found that the adoption of Myra was not okay b/c it thwarted the intent of the grantor of the trust. 4. If grantor of trust wanted to provide for spouses of her kids, she could have and she did not. c. Posthumous Heirs i. Definition 1. Child born after the parent dies. ii. Reproductive Technology 1. Creates more problems, b/c of frozen eggs and sperm. iii. Woodward v. Commission of SS 1. Husband and Wife found out H has cancer and so preserved his sperm. 2. He died. Two years later she got pregnant with his sperm and had twins. 3. She filed for SS benefits. She was denied. She appealed 4. SS could not determine if the twins were children of Warren within the meaning of the Act. 5. Balancing test a. Best interest of the children all the children b. Administrative efficiency when are we done administering c. Reproductive rights and consent iv. Unborn Relatives of Decedent 6407 1. Relatives of the decedent conceived before the decedents death but born thereafter inherit as if they had been born in the lifetime of the decedent v. Posthumous Conception 249.5 1. Child or his/her representative must prove by C and C evidence that the decedent a. Left a signed and dated revocable writing
b. Within 4 months of death served the writing on the person designated to control the genetic material c. The child must have been in utero 2 years after death and not a clone of decedent. d. Guardianship of Minors i. Guardianship 1. Of Property or of Person appointed by the probate court. One person can do both through. Parents dont have to be dead, just absent in some way. 2. Controlled by the court step by step. 3. Generally ends at age 18 ii. Conservatorship 1. A guardian of property with investment powers similar to those of trustees, more flexible than guardianship. 2. Not controlled by the court on a step by step basis 3. Can go up to age 21 iii. Custodianship 1. A person who is given property to hold for the benefit of a minor under the UTMA or UGMA. Facility of payment clause 2. Creates a 3rd person fiduciary duty to help manage the assets of the minor child. iv. Trusts 1. Can postpone childs control of property. 2. The parent will determine the age of the child to end the trust and distribute the funds. e. Atty Fiduciary Duties i. Simpson v. Calivas 1. Robert Jr. is suing Atty Chris Calivas for preparing a will. The will gave a life estate to Rob Sr.s 2nd wife in the homestead. That word was ambiguous and was interpreted to mean the house and over 100 acres with it. Rob Jr. bought her out for 400,000 and then he sued the atty for breach of fiduciary duty, 3rd party beneficiary theory and a negligence count. 2. Atty does owe a duty of care to beneficiaries b/c it was a foreseeable result even though there was no privity of K between beneficiary and atty. ii. A v. B 1. Law firm (Hill Wallack) was reping a man and his wife to create a will for the two of them. If one died it gave the property of each to the other. 2. Law firm had a clerical error and took on another client which was a COI. The woman was suing the husband in a paternity suit. Husband was aware of the double rep and didnt tell the firm until the firm asked for discovery and the mans new atty told them they already had that information.
3. The woman suing ended up proving the kid was the husbands. He didnt want to pay for child support and so she sued for support. 4. Firm wants to notify the wife of the extra-marital child because it could affect her will (the extramarital kid could inherit her assets if she died before the husband and then husband died later assets would go to kid) 5. While the RPC doesnt make it mandatory to disclose the existence of the kid, it is permitted because the husband and wife signed waivers of confidentiality and the hidden kid constituted fraud on the wife. f. Waivers 140-147 i. Spouse can waive rights to property, family allowance, widows election, or interest in property. ii. Must be in writing and signed iii. Must have fair and reasonable disclosure of property or financial obligations iv. Must have legal counsel at the time of signing the waiver VII. Other theories affecting intestate succession a. Advancements a. Common law i. A lifetime gift by the decent to a child was presumed to be a prepayment of the childs intestate share. Child has the burden of proving it was an outright gift b. Advancements against Shares 6409 i. Only considered and advancement IF: 1. decedent declares in a contemporaneous writing that the gift is an advancement 2. the heir acknowledges in writing that the gift is to be so deducted ii. Valuation 1. gift valued at the time of possession or death of decedent, which ever occurs first 2. if value is expressed in contemporaneous writing the valuation is conclusive. iii. Deceased recipient 1. if beneficiary predeceases recipient, advancement will not be counted against beneficiaries issue unless provided for otherwise in writing. c. Advancements Examples i. M has 3 kids: A, B, and C. ii. M gave A 10,000 before death. His estate has 50,000 left. iii. Take 50,000 + advancement of 10,000 = 60,000 iv. Take 60,000 /3 = 20,000 for B and C v. 20,000 10,000 in advancement = 10,000 to A.
b. Bars to succession a. Homicide i. In Re Estate of Mahoney (Vermont 66) 1. Howard was killed by wife. She got 10-15 years for manslaughter. 2. He was survived by wife and his parents. 3. Court initially gave estate to parents. In direct contradiction to the statutes of Vermont that says it goes to spouse. 4. She appealed and argued that she should inherit b/c Restatement of Restitution only approves the application of the constructive trust doctrine where a devisee or legatee murders the testator, not when convicted of manslaughter. 5. Ct. Rules that the Chancery Ct. not the probate court has the jurisdiction to create a constructive trust. Therefore, wife inherits unless administrator of the estate of Howard petitions the Court of Chancery to create a constructive trust: where has to be held in trust for heirs and not for the benefit of the convicted person. ii. CPC 250 Slayer not Entitled 1. A person who intentionally and feloniously kills decedent is not entitled to a. any property, interest or benefit under a will or trust b. any property of the decedent by intestate succession 2. The property, appointment or benefit passes as if killers had predeceased decedent. iii. CPC 251 254 1. Same is true for killing by joint tenant, both personal and real property. Decedents share doesnt go to killer 2. Life insurance beneficiary doesnt get share 3. CPC 254 a final judgment of conviction of felonious and intentional killing is conclusive, if no final judgment, the party who wants to prove felony must prove by preponderance of the evidence that killing was felonious and intentional. b. Disclaimers i. Sometimes an heir or a devisee will decline to take the property, a refusal that is called a disclaimer. ii. Disclaimed interest passes as if declaimer predeceased decedent iii. Procedure to disclaim 1. Must be in writing, signed by disclaimant, identify the decedent and describe the interest being disclaimed 2. State that there is a disclaimer and the extent of it 3. Filed with the fiduciary with a reasonable time after learning of the interest 4. Cannot disclaim after the benefit was accepted 285
5. Timing a. 279 i. Says reasonable time but interpreted as 9 months after death ii. Effect of Disclaimer 1. Disclaimed interest passes as if disclaimant predeceased decedent. Relates back to the date of decedents death iii. Disclaimer on behalf of infants or incompetent individuals 1. They can disclaim on behalf of the child as a guardian might lose benefits from another source if they get the inheritance. iv. Creditors 1. Drye v. US a. Son inherits from mom. He disclaims b/c he owes money to the IRS. The inheritance would flow to his daughter and she sets up a trust to care for her and her parents. Creditors cannot get their hands on the trust. b. Ct. disallows b/c he was exercising dominion over the property. c. The power to channel the estates assets warrants the conclusion that Drye held property subject to the Govts liens. 2. When there is a disclaimer, think about the creditors waiting on the inheritance. b. Elder Abuse 259 i. Abuser deemed to predeceased if 1. It is proven by C& C evidences that the person is liable for physical abuse, neglect, fiduciary abuse of elder or dependant abuse 2. The person acted in bad faith 3. The person found to be reckless, oppressive, fraudulent or malicious in committing these acts AND 4. Decedent, from the time of the acts until the time of death was substantially unable to manage his or her financial resources or resist fraud or undue influence. VIII. Capacity and Influence a. Fraud, duress, tortious interference 6104 i. The execution or revocation of a will or a part of a will is ineffective to the extent the execution or revocation was procured by duress, menace, fraud or undue influence. b. Mental Capacity 6100.5 i. Age 18 and ii. Of sound mind 1. Competent and doesnt suffer from mental disorder that include symptoms such as delusions or hallucinations
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iii. Standard of Competence 6100.5 1. an individual is not mentally competent to make a will if at the time of making the will a. the individual does not understand the nature of the testamentary act: b. the individual does not understand and recollect the nature and situation of the individuals property or c. the individual cannot remember and understand the individuals relations to individuals whos interests are affected by the will c. Burden of Proving Capacity i. In Re Estate of Washburn 1. Katherine made 3 wills. She willed it to her sister first, who died. Then to her niece, Catherine. Then she changed her will to benefit Barbara, her caretaker during her final years. 2. Catherine was protesting the last will and trying to say Katherine was incompetent. 3. Minority View: Proponent of the will (person that wants to uphold the will) has to prove capacity ii. Proving Lack of Capacity in CA 812 1. California follows the majority rule contestant has the burden to prove incapacity 2. A mental or physical disorder does not prove incapacity to convey. An adjudication of incompetent not enough. 3. Does the behavior significantly impair the persons ability to understand and appreciate the consequences of his actions? iii. Factors to Consider 1. Alertness & attention 2. Processing Information 3. Thought Process 4. Ability to control mood d. Capacity - CPC 811 i. (a) requires 2 things: 1. Evidence of deficit in at least one mental function; AND 2. Evidence of a correlation between the deficit or deficits and the decision or acts in question ii. (b) deficit or combination of deficits must significantly impair the person's ability to understand and appreciate the consequences of his or her actions with regard to the type of act or decision in question. iii. (c) court may consider the frequency, duration, and severity of periods or impairment iv. (d) diagnosis of disorder by itself is not dispositive. e. Insane Delusion i. Generally 1. Capacity exists but suffering from a concept of reality that has no foundation in truth and not supported by evidence of any kind.
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2. Testator adheres to belief to the contrary of reason and against evidence. Rational Person Test. 3. Unusual Religious Beliefs are usually not insane delusions. ii. Proving insane Delusions 1. Majority Rule a. Is the delusion insane? i. A delusion is insane even if there is some factual basis for it if a rational person could not have drawn the same conclusion b. Did delusion cause bequest i. Insane delusion materially affected or influenced the will. 2. Minority Rule a. Is the delusion insane? i. If there is any factual basis for the delusion, it is not insane. b. Did delusion cause bequest? i. Insane delusion might have caused or affected the will (i.e., presume causation if there is an insane delusion + an unnatural disposition) iii. Insane Delusion Burden of Proof in CA 1. Presumption is that Testator is sane. 2. Contestant must introduce sufficient evidence to overcome the presumption and must show that the I.D. caused the disposition 3. If sufficient evidence is introduced then the proponent must introduce evidence of capacity. f. Undue Influence i. Elements to Establish U. I. 1. T susceptible to UI or domination by another; 2. Accused had opportunity to exercise UI; 3. Accused has disposition to influence for personal benefit; AND 4. Result isnt a natural disposition of Ts prop. ii. Presumptions & Burden Shifting 1. Confidential relationship + suspicious circumstances = presumption of undue influence (burden shifting) iii. Types of Confidential Relationships: 1. Fiduciary 2. Reliant 3. Dominant-subservient iv. Examples of Suspicious Circumstances: 1. Secrecy or haste 2. Reasonable person would regard it as unnatural, unjust or unfair 3. Donors attitude toward others changed by reason of his relationship with the alleged wrongdoer v. Bequests to Attys 1. Undue Influence
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a. Many courts hold that a presumption of undue influence arises when an attorney-drafter receives a legacy, except when related to the testator. 2. Unethical Conduct a. Model Rule of Professional Conduct 1.8(c) reads: A lawyer shall not solicit any substantial gift from a client, including a testamentary gift, or prepare on behalf of a client an instrument giving the lawyer or a person related to the lawyer any substantial gift unless the lawyer or other recipient is related to the client. 3. Fiduciary Appointments 4. The comment to Rule 1.8 advises: a. In obtaining the clients informed consent to the conflict, the lawyer should advise the client concerning the nature and extent of the lawyers financial interest in the appointment, as well as the availability of alternative candidates for the position. g. Disqualified Transferees 21350 i. Instrument Drafter ii. Relative, DP or EE of instrument drafter iii. Partner/SH/EE of in partnership or corporation in which drafter has an interest iv. Any one with a fiduciary relationship with transferor (except trustee or conservator) or a EE, DP or relative of the fiduciary v. Care custodian (or his/her EE, DP or relative) of transferor (dependent adult) h. Disqualified Transferees 21351 i. Spouses, DPs, cohabitants & relatives of T, (Nonprofit organizations, some trusts or public entities) ii. Will is reviewed by independent lawyer & lawyer must execute a certificate stating that no fraud, menace, duress or U.I existed. iii. Rebuttable Presumption: Clear & Convincing Evidence must be established by transferee. If found invalid, will treat as if disqualified person predeceased the testator Intent a. Must have testamentary intent Formalities a. Attested Wills Requirements i. Must be in writing 1. any type of writing. Doesnt have to be on paper per say, but must be written down. ii. Signed by the testator 1. X is sufficient, initial, just about any kind of mark if made by the deceased
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iii. Witnessed /Attested 1. Attestation Clause: The foregoing instrument consisting of 3 pages was signed and declared by Joe Smith to be his last will. We now, at his request, and in his presence, subscribe our names as witnesses on this 3rd day of February, 2009. Our signatures below confirm our participation as witnesses. 2. Not required in CA but helpful for presumption that the will was properly executed. 3. Difference between subscription and this: at the end of the will putting your signature above refers to witnesses. iv. CA Formalities 6110 1. A will must be in writing and be signed by the testator or in the testators name by another in the presence of and by the direction of T or by conservator pursuant to court order 2. The will must be witnessed by at least 2 persons who have to be present at the same time when T signs or acknowledgment of T of signature and will AND must understand that it is a will. 3. Witnesses must sign during the Ts lifetime. (this is a new requirement) v. In Re Groffman 1. Widow is challenging will b/c she cant believe that her husband would make her share the estate with her daughter and his daughter. 2. Issue: whether Groffman and both witnesses have to be present together to acknowledge Mr. Groffmans signature. 3. Ct. refused to admit will b/c the provision were not complied with. 4. RULE: Testator is permitted either to acknowledge his prior signature to both witnesses at the same time or to sign the will before both witness at the same time. vi. Presence 1. Line of sight test a. Testator does not actually have to see the witnesses sign but must be able to see them were the testator to look. 2. Conscious presence test a. The testator, through sight, hearing or general consciousness of events, comprehends that the witness is signing. vii. Signature 1. Full name, mark, cross, abbreviation, electronically printed, mark by someone else at deceased direction or nickname can be sufficient. 2. Location: a. Must be at the end of the document generally. b. Subscription at the foot or end thereof, 3. Order of Signing a. Additions to will made after signing may be invalid
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b. Witnesses: i. At the time of Ts signing or acknowledgment as part of one continuous transaction ii. Sign within a reasonable time after execution during testators life time. Purging Statute 1. Estate of Morea a. 2 out of 3 witnesses have to be independent. If 2 of 3 are benefiting they cant be considered witnesses. Here 1 was benefiting, but the second was receiving a bequest, but it was less than he would have received under the laws of intestacy. Therefore the 2nd guy wasnt considered to be benefiting from the will and therefore it is valid. 2. CA purging Statute 6112 a. Must be competent b. Interested witness doesnt invalidate the will c. When interested witness should have two other subscribing witnesses otherwise there is presumption of duress, menace, fraud or influence d. If presumption is not rebutted, interested party takes by intestate succession. Disqualified Transferees CPC 21350 invalidates Gift 1. Instrument drafter 2. Relative, DP or EE of instrument drafter 3. Partner/ SHE/EE of in pship or cor. In which drafter has an interest 4. Any one with a fiduciary relationship with transferor (except trustee or conservator) or Ee, DP or relative of the fiduciary 5. Care custodian (or his/her EE, DP or relative) of transferor (dependent adult) Exceptions to Disqualified Transferees 21351 1. Spouses, DPs, cohabitants & relatives of T, (Nonprofit organizations, some trusts or public entities) 2. Certificate of Independent Review: Will is reviewed by independent lawyer & lawyer must execute a certificate stating that no fraud, menace, duress or U.I existed. 3. Rebuttable Presumption: Clear & Convincing Evidence must be established by transferee. If found invalid, will treat as if disqualified person predeceased the testator Will Contest Planning 1. Contest Grounds & No Contests Clauses a. most common grounds for will contest are lack of capacity and undue influence b. often alleged together; testators mental status overlaps with the susceptibility element of undue influence
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2. Warning Signs a. new testamentary scheme makes a radical departure. b. multiple or blended families. c. imposes conditions that are likely to anger the beneficiary. d. makes a disposition to a person unpopular with the testators family. 3. Record Building 4. Maintain Secrecy 5. Sooth Feelings xii. Forms of Fraud 1. Fraud a. testator is deceived by a deliberate misrepresentation and as a result does that which he would not have done b. willfully deceived as to character or content of instrument 2. Fraud in the inducement a. a misrepresentation causes the testator to execute or revoke a will, to refrain from executing or revoking a will, or to include particular provisions in the wrongdoers favor 3. Fraud in the execution a. a person intentionally misrepresents the character or contents of the instrument signed by the testator, which does not in fact carry out the testators intent. xiii. If you have debt 1. You can write it into the will to be paid off or you can just leave it out there and have it dealt with in probate. 2. Taxes and debts are paid above everything else. 3. If the beneficiary is a spouse on life insurance, you dont have to name it in the will, just make sure the life insurance beneficiary is accurate. b. Formalities for Holographic Will i. Valid if it has Ts signature & the material provisions in Ts handwriting. ii. Date not required but inconsistent secondary instrument may deem the undated holographic will invalid. CPC 6111 Validity a. Testamentary Intent b. Capacity i. 18+ Years Old ii. Must understand & know the nature and extent of property and its disposition (no insane delusions) like who its going to affect. iii. Must clear any will contests 1. Undue Influence 2. Gifts to Drafters 3. Fraud (involves deception by perpetrator & reliance by T) 4. Mistakes & Ambiguities
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Revocation a. Execution v. Revocation i. If you are capable to execute a will, you are capable to revoke a will before your death so long as you have testamentary capacity. b. Revocation 6120-6122.1 i. Any T with capacity can revoke a will by one of the following methods: 1. By a subsequent will that is inconsistent. 2. By a physical act such as destroying, burning or otherwise obliterating the will. ii. A will is also revoked by operation of law (for example: dissolution of partnership or marriage) c. By Written Instrument 6120 (a) i. Express Revocation 1. The terms of a subsequent will or codicil expressly revoke the prior will or portion of the prior will. ii. Implied Revocation 1. Prior statements that are inconsistent to the most recent changes are superseded/nullified. d. By Physical Act 6120 (b) i. Burned, Torn, Canceled, Obliterated, or Destroyed ii. With the INTENT and for the purpose of revoking it by iii. (1) the T or (2) a 3rd party in Ts presence & by Ts direction e. Problem: Revocation by Inconsistency i. If there is a will and it is revoked, all of the codicils are revoked with it as well, not just the will f. What is sufficient to constitute revocation? i. Burning (singeing, not necessarily material) ii. Tearing (material portions) iii. Canceling (X or void - material) iv. Obliterating (material erasing/interlineations) v. Destroying defacing signature revokes whole vi. **Increase by physical act is not allowed, a decrease is permitted. An increase of the residuary is also permitted. g. Holographic Wills i. Attested wills may be revoked by holographic wills and holographic wills may be revoked by attested wills in CA. ii. Interlineations of holographic will --- the altered provision is both a revocation & a valid new disposition. The prior signature is adopted. h. Codicils i. A codicil amends the will. 1. Revoking a codicil does not revoke the will, even if the T intended it. The act must be performed on the will. 2. Revoking will revokes codicils unless T intended the codicil to be independent. (not statutory) ii. When you see a codicil, think revocation!
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i. Partial v. Total Revocation i. What if the will & the codicil are on the same piece of paper? ii. Partial and total revocation permitted but extrinsic evidence must be used to show that intent was to revoke only part and not the whole. j. Harrison v. Bird i. There is a presumption that the will is destroyed if it is not found upon death. ii. Furthermore, if she destroys the copy of the will in her possession, a presumption arises that she has revoked her will and all duplicates, even though a duplicate exits that is not in her possession. iii. The presumption of revocation is rebuttable and the burden of rebutting the presumption is on the proponent of the will. iv. Judgment affirmed against Katherine as she did not rebut the presumption that Daisy destroyed her will with the intent to revoke it. k. Duplicates 6121 i. Revocation of a duplicate will revokes the will. ii. Avoid executing duplicate original wills and label copies. iii. Again, INTENT is the principal factor. The intent must be concurrent. Changing your mind after revoking a will requires you draft a new will. l. Lost Wills 6124 i. Will not found at death is presumed revoked. ii. If will is destroyed without the consent/intent of T or is lost, a copy can be used to prove the contents of the original. iii. September 11, 2001 destruction of wills is an example m. Thompson v. Royall i. Mrs. Kroll made a will and then decided to revoke it. She decided to keep the will as a memorandum for future reference based on advice from a future judge. The judge wrote on the back of the will saying that they were null and void and she signed it. ii. RULE: if the writing intended to be the act of canceling does not mutilate, or erase, or deface, or otherwise physically com in contact with any part of the written words of the will, it cannot be given any greater weight than a similar writing on a separate sheet of paper, which identifies the will referred to, just as definitely as doe the writing on the back. n. Revival of Revoked Wills i. 6123(a) 1. If 2003 Will is revoked by physical act, 1995 will is not revived unless: a. evidence from circumstances of revocation that such was Ts intent; or b. Ts contemporaneous or subsequent declarations indicate such intent. Extrinsic evidence can prove Ts intent. Reinstating a will that T has been revoked by physical act. ii. Example 1. 1995 Will created. 2. 2003 Will created that revokes all of parts of 1995 Will.
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3. Yesterday, 2003 is revoked. 4. Is the 1995 Will now admissible? Is it revived? a. With no other facts, not admissible. iii. At common law prior will automatically revived o. Subsequent Instruments 6123(b) i. 1995 Will Created ii. 2003 Will Created, Revokes 1995 iii. 2007 Will Created, Revokes 2003 iv. 1995 Will is not revived & extrinsic evidence cannot be used to revive it. v. EXAMPLE 1. Delia revoked W2 by tearing it up at her attorneys office. She told her attorney that she wanted W1 to be effective because she had made up with her boyfriend. 2. Delias statements to her attorney could be used to prove her intent to revive W1. However, if she revoked W2 by executing a new W3 that revoked W2, Delias statements could not be used to prove her intent to revive W1 p. Revival by Re-execution or Republication i. Can execute revoked will by having it attested (witnesses & reaffirming signature) ii. Republication by a codicil except where: 1. will revoked by physical destruction; or 2. the original will was never valid. q. Dependent Relative Revocation (DRR) i. Generally 1. The DRR doctrine applies when a T revokes her will because she mistakenly believes that an alternate distribution of the property is effective. 2. If but for this mistaken belief, T would not have revoked, then the revoked will remains in effect. ii. Elements of DRR 1. Requires that there be an alternative disposition that was ineffective. 2. Can be used only to further Ts intent. 3. Must revoke & make a new will simultaneously. 4. Extrinsic evidence is permitted when the will was revoked by physical act. If not revoked by physical act, mistake must be on the face of the will. iii. Example of DRR: 1. T has a valid will that leaves everything to X. 2. A year later he writes a second will leaving $25,000 to Y and the rest to X. 3. T tears up the first will because he believes the second one is valid. 4. At Ts death, the court determines that Ts 2nd will is not valid.
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r. By Written Instrument 6120 i. Expressly or Impliedly 1. language that is inconsistent like a codicil. 2. express will that revokes all prior wills/codicils s. By Physical Act i. T must destroy with the INTENT and for the purpose of revoking it. ii. May be revoked by Ts direction and in Ts presence. t. By Operation of Law i. Revocation by Divorce 1. Applies in all but a handful of states where revocation occurs only if the divorce is accompanied by a property settlement. 2. a revoked will can be revived if you re-enter the marriage ii. Revocation by Marriage iii. Revocation by Birth of Children 1. the birth of a 4th child when will says 3 children can revoke the will iv. No Revocation by Other Changes of Circumstances u. Unintentional Omissions 6122 & 6122.1, 21610, 21611 i. Dissolution of marriage or DP (but not legal separation) ends devise. Gift passes as if the former spouse failed to survive the T. Devise may be revived by Ts remarriage to former spouse or DP. 1. If something happens to the marriage, step children dont have a right to inherit UNLESS they can prove through extrinsic evidence that there was an ongoing relationship with the step parent. ii. Nonprobate transfers 5600-01 1. (except life insurance) also revoked unless there is C&C evidence that T intended to preserve the right for the former spouse or DP. iii. Birth of Children 21620-23 1. Children who are born or adopted after will execution and not provided for in the will may take through pretermitted heir statutes so therefore the will is not revoked. v. Republication i. Republication of a Will by Codicil 1. A codicil modifies or alters a will. The same formalities are required as with execution of an attested or holographic will so therefore a codicil can be admitted to probate on its own. 2. T signs executes a will in January 09 but only one witness signs. T then executes a codicil in March 09 and both witnesses sign. T dies. What is admissible to probate? a. A codicil can be admitted to probate on its own if the will is ineffective. 3. When there is a codicil, there is revocation. The original will (if valid) is deemed republished on the date of codicil unless it is revoked. 4. The will and codicil are read together and treated as a single instrument on the date of the last codicil.
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5. The original will is republished or re-executed as of the date of the codicil. Look to the date of the last codicil for clarification on conflicting provisions. 6. Ts intent is key. If Child #3 was born and T thereafter executed a codicil then it was Ts intention to exclude Child #3. XIII. Composition a. Integration i. The issues arise when the will is on more than one piece of paper (or other material) ii. All papers (or other materials) must exist at the time of the execution of the will that T intended 1. Intent shown by physical or logical connection: stapled, stated in will, in a binder iii. Incorporation by Reference 1. CPC 6130 Refers to an external document/instrument that is not part of the will but must: a. exist at the time the Will is executed (not in the future) b. show intent to incorporate that instrument c. sufficiently describe the instrument. d. *Holographic wills can incorporate non-handwritten instruments by reference 2. Clark v. Greenhalge a. Helen Nesmith wrote a will giving property to her cousin Greenhalge. She also kept a notebook where she kept a tally of what she wanted to go to who. The will referenced a memorandum that she kept a tally of items in. b. The nurses testified that the notebook existed at the time the will was written. c. In the notebook she gave the farm picture to her BF Virginia Clark. d. Cousin Greenhalge wanted the will from 77 to be probated b/c the notebook didnt exist then and wouldnt be admitted. e. However, the 80 codicil republished the 77 will and included the notebook distributions. iv. Acts of Independent Significance 6131 1. A will may dispose of property by reference to acts and events that have significance apart from their effect upon the dispositions made by the will, whether they occur before or after the execution of the will or before or after the testators death. 2. This doctrine allows a court to fill in the blanks of Ts will by referring to acts, events or documents that have significance separate and apart from the will (non-testamentary motives). 3. Can be used to identify a beneficiary, a gift but it must have significance separate from its impact on the will. 4. Examples: (determines when you can bring in extrinsic evidence)
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the contents of my safety deposit box my interest in the membership agreement my softball team versus all my household furniture and personal property to those individuals listed on a piece of paper that is going to be found with my will when I die. (or in accessible desk) f. (e.) wouldnt work b/c it doesnt exist independently from the will. 5. Pour Over a. T drafts will that says, All of my assets shall be distributed at my death as stated in the terms of my trust, as amended. b. However, trust amendments added after the will is executed cannot be incorporated by reference. This is a matter of timing. 6. Testamentary Addition to Trust 6300 a. If the trust is i. identified in Ts will and ii. its terms are set forth in a written instrument iii. executed before or concurrently with the execution of Ts will, iv. then an amended trust can be incorporated by reference. 7. Extrinsic Evidence 6111.5 a. Extrinsic evidence is admissible to determine whether a document constitutes a will pursuant to Section 6110 or 6111, or to determine the meaning of a will or a portion of a will if the meaning is unclear. XIV. Contracts Relating to Wills a. Contracts to Make or Not make a Will, Generally i. When an individual enters a contract to make a will or not to revoke a will, contract law applies. ii. A will is probated if it exists but the contract beneficiary can seek a remedy for the breach. Joint and reciprocal wills are not presumed to be contractual. iii. Constructive trusts or damages as remedies. iv. Statue of Frauds Must be in writing. b. Contract to make Will can be established 21700 i. Provisions of a will or other instrument stating the material provisions of the contract. ii. An expressed reference in a will or other instrument to a contract and extrinsic evidence proving the terms of the contract. iii. A writing signed by the decedent evidencing the contract. iv. Clear and convincing evidence of an agreement between the decedent and the claimant or a promise by the decedent to the claimant that is enforceable in equity.
a. b. c. d. e.
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v. Clear and convincing evidence of an agreement between the decedent and another person for the benefit of the claimant or a promise by the decedent to another person for the benefit of the claimant that is enforceable in equity. c. Extrinsic Evidence CPC 6111.5 i. Extrinsic evidence is admissible to determine whether a document constitutes a will pursuant to 6110 (attested will) or 6111 (holographic will), or to determine the meaning of a will or a portion of a will if the meaning is unclear. d. Substantial Compliance and Harmless Error i. Substantial Compliance 1. The court may deem a defectively executed will as being in accord with statutory formalities if there is clear and convincing evidence that the purposes of those formalities were served. ii. Harmless Error Rule UPC 2-503 1. The court may excuse noncompliance if there is clear and convincing evidence that the decedent intended the document to be his will. iii. Mistaken or Ambiguous Language in Wills 1. Reformation a. Arises when there was improper drafting (ambiguity, mistake inherit in the instrument) i. Allows the court to Re-write the will after T dies ii. Applies where there is a mistake or ambiguity iii. Compare with undue influence, lack of capacity, insane delusion b. Honoring the Ts intent is the underlying driver 2. Traditional Approach a. No Extrinsic Evidence, no Reformation b. Ambiguities i. Patent 1. Appears on the face of the will 2. The disposable part of my estate. ii. Latent 1. exists when the words are applied to the reality of the facts. Either nothing fits the description of the gift or too many eligible people/things fit the description the gift. iii. CA does not differentiate between types of ambiguities. c. Causes and Effects of Will Defects i. Cause 1. (cause) Intentional Wrongdoing W/ (effect) Lack of Volition a. Undue influence, Duress: relief granted
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2. (cause) Innocent Acts w/ (effect) lack of volition a. Lack of Capacity, Insane Delusion: Relief Granted 3. (cause)Intentional Wrongdoing w/(effect) Mistaken Terms a. Fraud: relief granted 4. (Cause) Innocent acts w/ (effect) mistaken terms a. Mistake: No relief d. Erickson v. Erickson i. Man writes a will 2 days before the marriage. Theres no provision in the will for the marriage. Daughters of man contest the will b/c they inherit everything instead of their step mother if there is no will. ii. RULE: if the scriveners error and its effect on the testators intent, are established by clear and convincing evidence, they will be sufficient to establish that provision has been made in such will for such contingency. iii. The ct. compared it to fraud and therefore extrinsic evidence would have been admitted. e. Ambiguities in CA 21121 i. All parts of an instrument are to be construed in relation to each other and so as, if possible, to form a consistent whole. If the meaning of any part of an instrument is ambiguous or doubtful, it may be explained by any reference to or recital of that part in another part of the instrument. ii. Generally: Extrinsic Evidence can be used to explain any ambiguity that helps us understand Ts intent 1. Most relevant evidence is first admitted 2. Oral declarations at time or around time of execution to show state of mind 3. Falso Demonstration Non Nocet a false description doesnt make the instrument inoperative. f. Mistakes Overview i. Mistakes in describing property or persons are covered by rules governing ambiguities. ii. Generally, mistakes about the legal implication of an instrument cannot be fixed by a court, even if it is caused by a lawyers mistake. Still, courts can liberally interpret an ambiguity.
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iii. A mistake of law can be cured by DRR (applies only T revokes based on mistake that another disposition is valid). XV. Distribution a. Gift Classification 32 i. In California Gift or Devise or Bequest refers to any distribution of personal or real property. ii. Traditionally: 1. Devise gift of land or an interest in land 2. Bequest gift of personal property 3. Legacy gift of sum of money iii. At-death transfers are classified as follows: 1. A specific gift a. a particular item b. I bequest my 2004 Honda Accord to Jim. c. I give Tiffany my pearl earrings. d. A person receiving a specific devise is entitled to: i. -the gift ii. -the purchase price & any security interest that is owed to the T if there is a sale of the specific gift iii. -the entirety of an eminent domain award 2. A general gift a. General Gift a gift of economic benefit from the general assets of the transferor. i. $50,000 to Jill ii. $1 Million to Zoe 3. A demonstrative gift a. A general gift that specifies the fund or property from which the transfer is primarily to be made. i. I give $500 to Fran and any of my jewelry can be sold to pay this gift 4. A general pecuniary a. Pecuniary Gift a gift made within an instrument that is either stated as a fixed sum or can be determined by the provisions of the instrument. i. Examples: life Insurance policy, shares of stock ii. "I give to Carl the maximum amount that can pass free of tax at my death as described in my Trust." iii. Annuity a general pecuniary gift that is payable periodically. 5. A residuary gift a. Whatever is left in an estate after debts, expenses, and taxes are paid, AND b. all specific, general and demonstrative gifts are satisfied, is the residuary.
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i. The remaining assets of my estate to Karla & Rafael. ii. all my estate b. Lapse & Anti-Lapse i. When a beneficiary dies before T (or before T indicated), the gift to the beneficiary fails. ii. CPC 21109 1. If specific, general, demonstrative & pecuniary gifts lapses, those gifts fall into the residuary. 2. If the residuary lapses, the property is passed through intestate succession statutes. iii. Distributing Lapsed Gifts 1. General Rule: The devisee must survive T to take under the testators will. When the devisee does not survive T, the gift is said to lapse. 2. When the devisee is already dead at the time the will is executed, the gift is void. 3. What happens to a lapsed gift depends on the type of gift, whether an anti-lapse statute applies; and whether the no-residue-of-theresidue rule is still in effect. 4. Lapse Death of B before T a. If a beneficiary does not survive the T, the gift lapses (fails) at Ts death. b. In the context of simultaneous death, if C&C evidence cannot establish that the B survived, then the B is not going to be deemed to survive the T. c. B does not have a property interest until T dies. i. B only has a mere expectancy iv. Anti Lapse 1. Decedents of pre-deceased B inherit if: a. (1) B is a blood relative of T or relative of Ts current or former spouse; AND (2) B leaves issue. 2. These statutes do not prevent lapse but redirect a lapsed gift to the descendants of the B. 3. Anti-lapse statutes are premised on a theory of presumed intent. 4. Anti Lapse Statutes CPC 21110 a. Substitutes a new B for the predeceased B pursuant to CPC 240 b. California has a statute that requires T and deceased B have a close relationship c. CA is one such statute - Kindred (blood relative of T or Ts spouse). d. Also applies to class gifts.
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5. Disposition of Failed Transfer CPC 21111 a. Look at terms of the will, if not fail transfer provision, it becomes part of the residue and follow terms of will for residue transfer. b. If nothing in (a) works, then part of the estate and it will be distribution by intestate succession 6. No residue of the residue rule a. We dont want a residue therefore if someone passes, the other beneficiary gets the deceased persons portion as well as the portion they were entitled to under the provisions of the will. NOT followed in CA. We have a lapse statute. 7. Distributing Lapsed Gifts a. General Rule: The devisee must survive T to take under the testators will. When the devisee does not survive T, the gift is said to lapse. b. When the devisee is already dead at the time the will is executed, the gift is void. c. What happens to a lapsed gift depends on the type of gift, whether an anti-lapse statute applies; and whether the noresidue-of-the-residue rule is still in effect. 8. Express Language a. T can provide for the predeceasing of a beneficiary with an express intent that the gift to the predeceased person go to another person EXPRESSLY. b. RULE: anti lapse statute will yield to express language. 9. Do the words if he survives me evidence an intention that Sidneys descendants should not be substituted for Sidney? a. CA/Majority Rule: An express requirement of survivorship, such as if he survives me, evidences an intention that Sidneys descendants should not be substituted for Sidney. Wilma takes Blackacre. b. UPC 2-603(b)(3): The term if he survives me is not a sufficient expression of contrary intent. Antilapse statute applies. Debby takes Blackacre v. Class Gifts 1. Generally a. Used to avoid lapses. b. The members of the class who survive T divide gift. Differentiate between children v. To Monica, Anthony & Mark. c. Class members must share a characteristic but the numbers may fluctuate. d. Can be used for charitable gifts that promote CD. 2. Dawson v. Yucus a. Nellie Stewart died, she had a 1/5 interest in a farm from her deceased husband. She wanted it to go back to his side
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vi.
vii.
viii.
ix.
of the family upon her death. She wrote a will giving her interest to her nephews on that side of the family. One of the nephews died before her b. RULE: a gift of an aggregate sum to a body of persons uncertain in number at the time of the gift, to be ascertained at a future time, and who are all to take in equal or in some other definite proportions, the share of each being dependent for its amount upon the ultimate number of persons. Ademption by Extinction 1. Applies only to specific gifts that do not exist. It constitutes a revocation. 2. Identify Theory extinguishes the gift. 3. Intent Theory Ts intent may be able to save the replacement of the gift. 4. In re Estate of Anton a. Woman marries husband. Husbands daughter from previous marriage deeds them property to build on. b. Woman writes will and gives stepdaughter 1/2 interest in the duplex after husband dies. c. Womans natural daughter Nancy has to sell the house to care for woman during her elder years. d. Ct. finds that stepdaughter is entitled to 1/2 of what is left in the will. Ademption 21133 & 21134 1. Ademption depends on Ts intent to adeem at the time he/she gets rid of the property. 2. Therefore, if agent or conservator is acting on behalf of T, the B takes the net sales price of the gift since T didnt intend to sell the item. Ademption: stock Splits 1. When a companys stock splits, or the company merges, or spins off a subsidiary, a devise of the companys shares should include any shares generated by such split, merger, or spin-offtracing the economic equivalent of the devise. These are changes in form, not substance. Ademption: Stocks 21132 1. T executes a will that transfers stock upon death AND he owns the stock at execution of will, the B will receive any additional stock that T owns at death so long as the stock was acquired after the will was executed & additional stock is 2. from same comp. (not purchase options); a. another comp. acquired by merger, reorganization. b. of same organization acquired as reinvestment plan
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x. Satisfaction 1. A specific, general or demonstrative gift may be satisfied in part or completely by Ts transfer of the gift to B after executing the will, if T intends for the transfer to take effect. 2. T bequeaths $10K to A in 2001 3. In 2002, T transfers $10K to A. Does this satisfy the provision in the will? xi. Satisfaction in CA 21135 1. Ts intent must be in a contemporaneous writing stating that the gift is counted against or deducted from the testamentary gift. 2. B acknowledges in writing satisfaction of the gift; OR 3. The will provides for deduction of lifetime gift 4. Cf. Advancement (Intestate Succession) xii. Exoneration 1. My farm house to Y, the residuary to my three children. 2. Under common law, Y gets home free & clear of any mortgage or other indebtedness and the three children are responsible to pay off that mortgage or indebted from the estates other funds. xiii. CA law does not exonerate 21131 1. The debt attached to any gift of property passes to the beneficiary along with the debt even if the will has a general provision that says all taxes are to be paid. xiv. Abatement 1. If an estate has insufficient assets to pay debts, the bequests must be reduced to yield some $. 2. Ts intent followed if stated order of abatement. 3. If no intent stated: 21402 the order the gifts we will liquidate to pay off debts is: a. - Intestate Property not included in will b. - Residuary Gifts c. - General Gifts (1st to non-relatives, then relatives) d. - Specific gifts (1st to non-relatives, then relatives) xv. Letters Testamentary 1. document that gives me the authority so that I may investigate the financial accounts held by the deceased. XVI. Planning for Incapacity a. Durable power of atty can authorize agent to do whatever you list for however long necessary (as long as incapacitated) b. Limited power of atty might give you the power to do just a certain thing. Could be limited by time frame or by activity. XVII. Family Protection a. Protection of Spouse & Children i. What do we do with income, earnings and assets acquired during marriage? How do we dispose of these assets at death?
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b. Marital Property Systems i. Community Property 1. All property acquired during the marriage is community property, unless both spouses agree to separate ownership. 2. Sharing of acquisitions as equals in marital economic partnership. ii. Separate Property 1. No automatic sharing of earnings; whatever individual earns is his or hers. 2. Protection against disinheritance provided through elective share. 3. Individual autonomy over acquisitions. c. Rights of Surviving Spouse to Support i. Social Security 1. Surviving spouse receives worker's monthly benefits. ii. Eee pension plans 1. ERISA gives spouse of employee survivorship rights to pension plan. iii. Homestead 1. Right to occupy family home for lifetime (CA=6520-6528) iv. Personal property set aside 1. Right to tangible personal property up to a certain value (UPC=$15,000) v. Family allowance 1. For support of surviving spouse during probate (CA = reasonable allowance) (CPC 6540-6544) 2. usually 1 year in length. vi. Dower and curtesy 1. Dower a. Life estate in one-third of husbands property for the wife. 2. Curtesy a. If there are children, the husband receives a life estate in the whole parcel. d. California 704.710 i. Homestead Exemption 1. Protects the equity that may exist in your house but doesnt protect the house itself. 2. amt. depends on whether over age 62, married or single and you have to live in the house. 3. 75 k for under 62 and single. ii. Declared Homestead 1. A recorded document that must contain a statement that the declared homestead is the principal dwelling of the declared homestead owner.
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e. The Elective Share i. Partnership v. Support Theories 1. Partnership a. Awards the surviving spouse 1/2 of the decedents property acquired during the marriage. b. Doesnt matter who makes the money, it was a pship. 2. Supportive Theory a. How much does the person deserve to be supported with? Not looking at marriage as equal pship. b. Often justifies a smaller share but would apply it to all of the decedents property. Also might alternatively justify the survivor receiving all of the decedents property up to a set amount. ii. Forced Shared (Probable Intent) 1. Happens under intestacy scheme. iii. Elective Share 1. Spouse can take under the decedents will or the spouse can renounce the will and take a fractional share of the decedents estate. Spouse can take a Mandatory Minimum that is not limited only to probate property, however precludes taking under the will. 2. Elective Share in SP States a. Surviving Spouse/DP has the option of i. Taking under the will; or ii. Renouncing the will and taking a fractional share of the estate. b. **Elective share has much variance (fixed percentage of net estate, conditioned on issue, a minimum dollar amount plus a fixed percentage, variable percentage based on length of marriage) 3. Widows (Widowers) Election a. Applies in CP states, including California b. The will gives spouse/DP the option to take CP or to take a different share of the estate. c. CPC 100(b) allows a H & W to agree to a different division of their CP. d. Example of Election i. Sue tries to bequest all of her CP but of it belongs to her husband, Cesar. ii. Sue can only dispose of Cesars share with Cesars consent. iii. In her will, Sue gives Cesar the option of taking a life estate in the entire CP provided he gives up his CP interest so that her only son, Rey, will inherit the property after Cesars death. 4. Effect of Election on Will Provisions
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a. Once Spouse/DP takes the election, he/she must renounce all other benefits under the will. b. Spouse/DPs interest will be abated (1st from residuary, then from general gifts, etc.) i. However, spouse can retain interest of CP ii. Quasi CP is not settled re: abatement in election 5. Surviving Spouse/DPs Options a. Take Under the Will or b. Choose the Election or c. Waiver (pre & post-marital agreements) i. CPC 140-147 ii. Independent Counsel 6. Other Considerations: a. QTIP Trust (Qualified Terminable Interest Property) i. Sally transfer the house to Harry ii. Sally creates a trust that gives Harry income for life and the power to appoint the trust principal to whoever he wants at his death. iii. Sally creates a trust giving Harry income for life b. Migrating Couples: Quasi-CP Scenario i. Harry & Sally married and live in a SP state for 30 years. When Sally retired the couple moved to CA. Sally dies 5 years after moving to CA and leaves all of her property to the United Way. Harry is not protected under CP laws because all of Sallys property was acquired in SP state. ii. Under 101 Quasi-CP is all personal property and all CA real property acquired by a decedent while domiciled elsewhere that would have been CP had they resided in CA. 1. Harry gets a forced share. 7. Intervivos Transfers 102 a. Allows the DP or spouse to set aside lifetime transfers of up to of the proceeds, of title or of the value of time of Ts death if: (1) T died domiciled in CA; (2) no written consent and no consideration received; and (3) it was income property, property held with another with a right of survivorship, or property where decedent retained in an revocable trust (or similar instrument that allowed T to control transfer). b. Applicable only to transfers made when the T was living in CA c. The property is restored to Ts estate & not given directly to SS/DP (creditors are key) d. Life or accident insurance, annuity or pension will be paid to SS/DP
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e. Applies regardless of Will or Ts intent or fraud. 8. In re Estate of Prestie a. Man and wife divorced, they remarried and she took care of him through old age and blindness. He left all of his estate to his son through a will and intervivos trust. b. Son argues that wife cannot set aside the will even though she married H after he made the will b/c she got a life estate in the condo through the intervivos trust. c. RULE: the only evidence admissible to rebut the presumption of revocation of a will for an omitted spouse is a marriage K, provision providing of the spouse in the will, or a provision in the will expressing an intent to not provide for the spouse. TRUSTS will not be looked at in probate court (point is to not have trusts in probate court) iv. Incompetent Surviving Spouse 1. In re Estate of Cross a. Husband died. Left entire estate to son. Wife was incompetent and couldnt make the decision to elect or not. b. Nursing home was paid for by Medicaid and would have been discontinued if she had NOT taken the election under the Medicaid statutes. c. RULE: Probate Ct. must ascertain what the surviving spouse would have done for her financial benefit had she been competent to make the decision herself. XVIII. Rights of Children Omitted from the Will a. Pretermitted Heirs i. CPC 21620 1. the omitted child shall receive a share of the decedents estate equal in value to that which the child would have received if the decedent had died without having executed any testamentary instrument. ii. CPC 21621 1. unless the omission was intentional TRUSTS XIX. Trusts a. Generally i. Definition 1. a fiduciary relationship where a trustee holds legal title to property under a fiduciary duty to manage, invest and administer the trust assets and income for the designated beneficiaries who have equitable title. ii. Parties 1. Settlor a. The persons whose assets we are distributing 2. Trustee a. The managerial intermediary
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3. Beneficiary a. The person who is benefiting from the trust iii. Property in Trust 1. res 2. or corpus b. Creation i. Intent 1. During lifetime or at death 2. Express a. Expressed intention of the property owner to create a trust relationship with the property 3. Resulting a. Created from the presumed intention of the property owner i. Lux v. Lux 1. Philomena died testate. She wrote a will she used phrases like shall be maintained shall not be sold. 2. Ct. construed this to mean she wanted a trust for her grandchildren. 3. Therefore the will created a trust for the grandchildren. b. Resulting Trusts i. if there are no beneficiaries the trust fails and property reverts to the settler ii. if settler is dead, then property goes to his or her estate iii. unless the settler received consideration iv. Clark v. Campbell 1. He created a trust where trustees were supposed to distribute his things to his friends 2. This is too indefinite and could mean many things it fails for lack of certainty. ii. Purpose 1. Claflin and Material Purpose a. Traditional Claflin Doctrine: i. If continuance of the trust without modification or termination is necessary to carry out a material purpose of the settlor, the beneficiaries cannot compel modification or termination. b. Examples of Material Purpose (traditional law): i. Spendthrift trust ii. Discretionary trust iii. Support trust 2. Postponed enjoyment: reach a certain age
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iii. Res (property, corpus) 1. Property must be certain and delivered if 3rd party involved. a. Brainard v. Commissioner i. Mr. Brainard orally declared trust of expected profits from stock trading in 28 for benefit of wife, mother and minor children. ii. Did trust arise in 27 with Brainards oral declaration, prior to making the profits. iii. HOLDING: future profits are not res No trust created until 28 when the profit was realized. iv. Trustee 1. Trust will not fail for want of a trustee (ct. will appoint one) v. Ascertainable Beneficiary 15205 (at least 1) 1. Generally a. A trust needs someone to enforce it. b. Beneficiaries must be ascertainable at the time interest matures c. Private trust enforced by beneficiaries d. Class must be sufficiently defined e. Exceptions: Charitable & Honorary Trusts f. Charitable trusts enforced by Atty. General. 2. Beneficiaries Capacity a. Anyone who is capable of holding title to property can be a beneficiary b. An unincorporated association cannot take title but a corporation may take title. c. A child or incompetent beneficiary must have property administered 3. No incidental/Indirect Beneficiaries a. Individuals who derive benefit incidentally or indirectly are not beneficiaries b. Where trust will pay off creditors of X, X is the beneficiary, not the creditors. c. The creditors are indirect/incidental beneficiary d. Just b/c someone is named in the trust doesnt mean that they are a beneficiary trustee professional duties 4. Notice and Acceptance a. Notice B do not need to receive notice b. However, not giving notice does not help when trying to establish present intention. c. Acceptance B must accept. A trust cannot be forced upon a B w/o acceptance d. B may renounce or disclaim 5. Class Gifts a. B must be reasonably definite b. Trustee may have discretion in selecting class members
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c. If too large a class, may be held unenforceable, if so , then T has a gift or power of appointment. 6. Resulting Trust a. If there are no beneficiaries (not sufficiently described or died,) the trust fails and property reverts to the settlor b. If settlor is dead, then the property goes to his/her estate c. Probate process unless Settlor recd consideration and a K underlies the transaction. 7. Unascertained Beneficiaries a. Must be able to identify Bs by the time their interests come into enjoinment b. Unborn kids is okay to Xs grandchildren c. Description must satisfy Statue of Wills or statute of Frauds & may be incorporated by reference or by acts of independent significance. d. Like reference to my sisters my soft ball team changes with time, but still a definite class of people that can be easily ascertained. 8. Delivery of Gifts v. Trust a. Constructive Delivery i. Giving someone a way to access the res (the property) ii. Jewelry in a locked box, no good with out a key b. Symbolic Delivery i. Transfer a deed to a house c. The Hebrew University Cases pg 563 i. Mrs. owns her husbands library of Hebrew text after he dies. She goes to Israel to create a library in their memory, and she announces her gift of the library to the school and signs a press release to that effect ii. She dies before any of the library has been actually delivered. iii. There was a list of the library assets that she signed and forwarded to the school iv. Ct. holds that this informal list is an intervivos gift, NOT a trust. c. Types of Trusts i. Testamentary 1. delivery takes place at death 2. Oral Trusts a. In re Estate of Fournier i. Man left oral trust for less well off sister by leaving 400K with a couple he was friends with telling them to give it to the poor sister when he died. He told them that several times.
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ii. Intervivos 1. Transfer of property during lifetime a. present intent b. if settler is trustee, no delivery required c. statute of fraud applies if real property iii. Private trusts 1. established for the purpose of providing for a specific set of individuals. iv. Charitable trusts 1. Trust that operates to advance a charitable purposes that favors large group of unspecified beneficiaries 2. Charitable trusts must advance a purpose that benefits the public. 3. Chartable trusts v. Private Trusts a. Private trusts i. purpose 1. for the benefit of an ascertainable beneficiary ii. Modification 1. Claflin doctrine 2. Deviation iii. Enforcement 1. Beneficiaries iv. Other b. Charitable trust i. Purpose 1. For the benefit of a charitable purpose ii. Modification 1. Cy pres doctrine 2. deviation iii. Enforcement 1. State atty. general iv. Other 1. Exempt from Rule Against Perpetuities and certain taxes. 4. Charitable Purposes a. Restatement (3rd) of Trusts i. the relief of poverty; ii. the advancement of knowledge or education; iii. the advancement of religion; iv. advancement of health; v. governmental or municipal purposes; and vi. other purposes that are beneficial to the community.
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5. Modification of Charitable Trusts: Cy Pres a. In re Neher pg 761 i. Woman leaves home to village of Red Hook to be used as a hospital in memoriam of her Husband who was also deceased. Village couldnt build it. ii. HOLDING: ct. said she had a general charitable intent b/c she didnt specify anything about the hospital, like what kind of hospital. b. Expansion of Cy Pres i. Wasteful as basis for cy pres: 1. Cy pres allowed if stated charitable purpose becomes unlawful, impracticable, impossible to achieve, or wasteful. ii. Presumption of general charitable intent: 1. Party opposing cy pres must show donor lacked general charitable intent to defeat the cy pres doctrine. iii. Elements 1. Impractical, impossible, illegal or wasteful to carry out the charitable intent of the testator, can then be modified to be directed to benefit a charity that is most close to the testators intent. v. Corp. trusts (not so much in this class) vi. Pour-over 1. Pour Over vs. Testamentary Trusts a. Testamentary i. The trust is created by a will that has the material provisions of the trust within the will. b. Pour-over i. The trust is identified in the will. The terms of the trusts exists separately from the will. The trust already exists. vii. Secret/Semi-Secret 1. Semisecret a. gift to person to hold in trust but fails to name beneficiary b. desire to create trust appears on the face of the will c. terms are undisclosed d. extrinsic evidence not needed to prevent unjust enrichment e. Devise is unenforceable. f. Olliffe v. Wells i. Gift to reverend in will to distribute as he was told to distribute it. ii. The intent is for the reverend to distribute it as the deceased told him to, not to keep it on the face of the will.
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2. Secret a. make a gift in reliance of a promise to hold property in trust for another, Trust doesnt exist on face of will b. devises is absolute on the face of the will c. extrinsic evidence necessary to prevent unjust enrichment d. court will impose a constructive trust on promisor viii. Honorary 15212 1. Trust that is not for charitable purposes and has no private Bs with standing (pets, graves) 2. Up to named to Trustee to carry out terms, if not willing to do so, trust fails and resulting trust is imposed. 3. Trust is not for charitable purpose and whose beneficiaries have no standing. 4. Pet Trusts a. In re Searights Estate i. Searight left his neighbor his dog and $1,000 for the care of the dog in the amount of 75 cents per day. ii. Law does not recognize animals as beneficiaries. If there is no beneficiary for the estate, it reverts back to the residue of the estate. iii. If Florence agrees to take care of the dog, there is no problem, its an honorary trust (cannot be enforced, she just agrees to do it) iv. Does not violate the Rule Against Perpetuities b/c $1,000 will only last 3.5 yrs v. Honorary Trust Stands 5. Trusts for Non-charitable Purposes a. Honorary Trust b. Statutory Purpose Trust i. Statutory trust for pet animal or other non-charitable purpose ii. authorized by UTC and UPC iii. Typically authorized court to reduce excessive trust property and provide for enforcement by settler or court appointee. ix. Spendthrift 1. Spendthrift Trusts a. The trust is a conditional gift so donor can impose conditions. b. Living parent and child, where parent can provide for child c. No recourse against parent for childs creditors. d. Beneficiary cannot transfer interest & creditors cannot reach (except for alimony, child support, tort & government creditors) e. Once income is paid out, it is fair game for creditors.
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f. way around the creditors is to pay it directly to the institutions that are providing services to the beneficiary. g. Deceased parent and child, where trust is to provide for childs support any recourse against trust for childs creditors? 2. Support a. Trustee is required to pay or apply as much of the income or principal that is necessary for the support of the Beneficiary. b. pay all the income to A for her support is NOT necessarily a support trust. c. Not assignable to creditors or otherwise. d. Settlors intention determines how we consider other assets that are used for Beneficiarys support. 3. Discretionary Trusts a. Trustee has discretion to apply & distribute payments to beneficiary. Beneficiary cant compel distribution. b. Interest cannot be reached before the Trustee exercises discretion. c. If the Trustee has notice of an assignment or attachment, the trustee must make those payments to the creditor/assignee unless there is a spendthrift restriction. x. Operation of Law 1. Resulting a. No express trust or lacks trust elements. Law operates to further purpose of trust and prevent fraud. 2. Constructive a. Court imposed to prevent unjust enrichment. It is an equitable remedy that doesnt apply if there is a Bona Fide Purchaser. d. Supervision i. Role of the trustee 1. Trustees Authority a. Express stated in the trust document, by court order or statute b. Implied powers necessary to effectuate trust purpose i. Where there are no express terms setting forth the Trustees powers, the implied powers are: 1. To Sell (unless trust terms indicate otherwise) 2. To Incur Necessary Expenses 3. To Lease ii. Fiduciary duties 1. Fiduciary Obligations
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2.
3.
4.
5.
6.
a. Duty of Loyalty i. No self-dealing (includes relatives, business associates) ii. No buying or selling trust assets to benefit self iii. No borrowing trust funds or making loans iv. No selling from one trust to another v. No buying own corporate stock vi. No personal gain through Trustee position b. No Further Inquiry Rule i. Applies when there is self-dealing by a trustee. ii. It makes all self-dealing transactions entered into by the trustee voidable by the beneficiaries, requiring no proof that such transactions were unreasonable or harmful. The trustee must act for the sole benefit of the beneficiaries. Remedy for Breach of FD claim against Trustee a. Trust pursuit rule: when trustee wrongfully conveys property, beneficiaries can pursue those specific assets to their current holders b. Doesnt apply to a BFP c. Can impose trust on substituted assets Co-Trustees a. Unless otherwise stated, decision-making must be unanimous b. Co-Trustees liable for each others acts. To not be liable a co-trustee must show that he/she/it failed to prevent the action, did not participate in the breach or acted to remedy the breach when he/she/it found out about it. Duty of Prudence a. Duty of Care Prudent Investor i. Same as care for other fiduciaries (corporations, spouses) reasonably prudent investor ii. Preserve & maintain trust assets- no speculation iii. To keep trust productive (diversify) iv. Invest timely v. Keep marketable Duty of Preserve Trust & Make it productive a. Collect all claims due to the trust b. Lease land and manage it. c. Record documents that need to be recorded d. Secure insurance on trust properties e. Safeguard securities, funds and documents f. Invest trust funds.** Other Obligations a. No commingling or earmarking funds. b. Account to beneficiaries and be fair to all of them
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c. Defend the trust from attack. d. Good Faith is irrelevant e. No Self Dealing f. Enforce any claims that are outstanding 7. Investments Generally a. Uniform Prudent Investor Act applies unless otherwise expressly stated in the trust. i. Reasonable care, skill & caution ii. Higher skill means higher standard 8. Loyalty & impartiality a. Look at entire portfolio & overall strategy b. Any kind of property or any type of investment ok 9. Factors to Consider when investing a. General economic conditions (inflation/deflation) b. Expected tax consequences c. Appreciation of capital d. Liquidity need e. Total return of overall investment f. Interests of beneficiaries v. remaindermen g. Duty to Investigate!!! 10. Duty to Perform Personally a. Cannot delegate trustee duties but can hire professionals to advice & help. If hiring others, establish scope & terms of relationship, including review of agents actions. 11. Trustee is liable if: a. He/she does not use reasonable care in making decisions (ie appointing agents) b. He/she fails to fix improper acts 12. UPIA Delegation a. (a) A trustee may delegate investment and management functions.The trustee shall exercise reasonable care, skill, and caution in: i. (1) selecting an agent; ii. (2) establishing the scope and terms of the delegation; and iii. (3) periodically reviewing the agents actions. b. (b) In performing a delegated function, an agent owes a duty to the trust to exercise reasonable care to comply with the terms of the delegation. c. (c) A trustee who complies with the requirements of subsection (a) is not liable to the beneficiaries or to the trust for the decisions or actions of the agent .
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13. Delegation of Trustee Responsibilities a. Delegated Trust i. Where a trustee doesnt have the expertise, a trustee delegates responsibilities to professionals with more expertise. b. Directed Trust i. The trust instrument directs that the trustee must follow the direction of a 3rd party. 14. Other a. Successor Trustee can maintain same actions to protect Trust as original Trustee b. Exculpatory Clauses construed narrowly. Will not exclude bad faith, intentional breach or recklessness. c. Liability to Third Parties Tort & Contract 15. Impartiality and the Principle and Income problem a. Conflict of interest between beneficiary for life and remainderman that gets the trust after the beneficiary for life dies. The Trustee has to maintain the trust so as to be impartial to the both of them. 16. Duty to Collect and Protect Trust Property a. Trustee must collect and protect property without unnecessary delay (i.e., as promptly as circumstances permit). 17. Duty to Earmark Trust Property a. Trustee must designate property as trust property rather than the trustees own. 18. Duty Not to Mingle Trust Funds a. Trustee must not commingle trust funds with his own, even if trustee does not use the trust funds for his own purposes. 19. National Academy of Science v. Cambridge Trust a. RULE: entries in the accounts honestly made after reasonable efforts to determine the truth or falsity of the representations therein have failed through no fault of the trustee, will not be deemed fraudulent or provide grounds for reopening otherwise properly allowed accounts. DUTY TO INVESTIGATE. 20. Duty to inform and Report 16060 a. Trustee has a duty to keep the beneficiaries of the trust reasonably informed of the trust and its administration. 21. Irrevocable Trusts 16061.5 a. A duty to provide beneficiaries and heirs with a copy of the trust when the trust becomes irrevocable 22. Duty to account in CA 16062 a. Trustee shall account at least annually, at the termination of the trust and upon change of trustee to each beneficiary.
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23. Trustee & Distribution a. Must be fair to all beneficiaries (impartiality) i. Beneficiaries are entitled to income ii. The remainder men get the principal 24. Breach of Trust: Remedies a. Remove the Trustee b. Set Aside the transaction, problem if theres a BFPV c. Beneficiaries or court may ratify the transaction & waive the breach (if it turned out good for beneficiary) d. Sue for resulting loss e. Trace the money and recover the property (often through a constructive trust) f. If Trustee, commingles assets, the presumption is that lost, destroyed or devalued property is the Trustees so the remaining property is the Trusts property. g. If Trustee takes the advice of a professional and does not use independent judgment, she may be held liable for improperly delegating duties. 25. Co-Trustees a. Unless otherwise stated, decision-making must be unanimous b. If only one acts, to be liable must prove the other failed to prevent the action, participated in the breach or found out about the breach but did nothing. 26. Predecessor Trustee a. Not liable to Bs for breached of trust committed by predecessor trustee unless he i. knew or should have known of breach and failed to take proper steps to prevent further breach or redress damage or ii. failed to obtain delivery of full trust property of predecessor. 27. Other a. Successor Trustee can maintain same actions to protect Trust as original Trustee b. Exculpatory Clauses construed narrowly. Will not exclude bad faith, intentional breach or recklessness. c. Liability to Third Parties Tort & Contract e. Construction i. How are they created? f. Modification/Termination of Private Trust i. Claflin Doctrine 1. A trust cannot be terminated or modified prior to the time fixed for termination by petition by all the beneficiaries if termination or modification is contrary to the settlors material purpose.
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ii. Equitable Deviation 1. The court permits a trustee to deviate from the trust terms if there are changed circumstances not anticipated by the settlor. The deviation must be necessary to accomplish the trust purpose (advantage to beneficiaries not sufficient). iii. Generally 15400-15402 1. CA presumes the trust is revocable unless otherwise stated in the trust 2. Beneficiaries of an irrevocable trust can compel modification or termination if it is necessary to further the material purpose (CPC 15403) - Claflin. 3. Settlor can amend with all beneficiaries consent or with court approval. CPC 15404 4. Trustee does not have the power to amend or terminate unless it is so stated under the terms of the trust. But see CPC 15408 (can terminate if <$20,000 revocable trust) iv. CPC 15407 1. A trust terminates when: a. The term of the trust expires. b. The trust purpose is fulfilled. c. The trust purpose becomes unlawful. d. The trust purpose becomes impossible to fulfill e. The trust is revoked. v. Modification Due to Unanticipated Circumstances 1. Changed Circumstances 15409 a. If circumstances changed in a way that the Settlor did not anticipate, the court can authorize a different outcome if it is deemed necessary to fulfill the Settlors intent and the trusts purpose and it does not deprive beneficiaries of their interests. b. If the purpose of the trust is frustrated and it becomes impossible to complete, the court will terminate or modify. It is also possible to merge it into another trust. 2. Policy Considerations a. How do we anticipate all the changes? b. Do courts need to be more flexible in allowing changes? c. Trust Protectors allows individuals to modify or terminate the trust to further settlors intent. 3. Trust Protectors a. Examples of powers i. Replace trustee ii. Approve modifications to trust provisions iii. Terminate trust or iv. Select a successor trust protector
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XV.
vi. Modification or Termination of Noncharitable Trust by Consent 1. Restatement 65 a. Weakens material purpose b. Authorizes termination if reason outweighs material purpose c. Preserves requirement of beneficiaries unanimity. 2. UTC 411 a. Preserves material purpose b. Weakens requirement of beneficiaries unanimity c. Authorizes termination if interests of absent beneficiary will be adequately protected vii. Trustee Removal 1. Removal of Trustee UTC 706 & CPC 15640 a. not enough to dislike the trustee. b. unless the trustee is doing something inappropriate, ct. will not intervene. g. Disposing of Property at Termination CPC 15410 i. If revoked by Settlor, then Settlor determines. ii. If terminated by settlor and Bs, then based on agreement by parties. iii. If none of above, then whatever is closest to the settlors intent. Will Substitutes and the Wills Act a. Pure Will Substitutes i. Life Insurance ii. Pension Accounts iii. Joint Accounts iv. Revocable Trusts 1. no need to observe the formalities of the Will. 2. Statutes authorize this bypass. b. Impure Will Substitutes i. Joint Tenancies c. Farkas v. Williams pg 398 i. Farkas bought stock for former eee Williams and held it in trust until Farkas death. ii. Issue: was this a valid inter vivos trust or was this a testamentary gift that needed to conform to the Will Formalities? iii. Farkas as trustee had right to revoke, right to income, right to principle, right to change beneficiary HOWEVER, he was liable to Williams as a trustee if he breached his fiduciary duties to Williams. d. Linthicum v. Rudi i. Ct. Held: interests as beneficiary are contingent upon death. No standing to challenge a change in the inter-vivos revocable trust. ii. Have to petition to be a guardian and then have the right to amend the trust through that position, not as mere beneficiaries. e. Payable on Death Contracts & Other non-probate Transfers i. Contract that says this is the person who gets it. ii. In re Estate of Atkinson
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1. Walter made deposits and recorded them as P.O.D. with beneficiaries. 2. He died. Wife now arguing that under Widows Forced Share, the POD accounts should be included in the estate that she receives 20% of under the Forced Share. 3. RULE: P.O.D. doesnt comply with formalities of a will and therefore must be counted as part of the estate and Wife wins. XVI. Will Substitutes and the Subsidiary Law of Wills a. Application i. Third Restatement 1. Although a will substitute need not be executed in compliance with the statutory formalities required for a will, such an arrangement is, to the extent appropriate, subject to substantive restrictions on testation and to rules of construction and other rules applicable to testamentary dispositions. ii. In re Estate and Trust of Pilafas 1. RULE: the trust will be considered valid b/c there was a provision in the will that said a writing had to be executed to revoke the trust and not just the disappearance of the trust. 2. REVOCATION: different between wills and trusts. a. Disappearance of original will = revoked b. Disappearance of original trust = not revoked unless specified in the trust to make that assumption. iii. State Street Bank v. Reiser 1. Dunnebier created a trust and put all his property in the trust. 2. he then applied for a loan and didnt tell the bank that his assets were in a trust, where they couldnt normally get to it after his death. 3. RULE: where a person places property in trust and reserves the right to amend and revoke or to direct disposition of principal and income the settlors creditors may, following the death of the settlor, reach in satisfaction of the settlors debts to them, to the extent not satisfied by the settlors estate those assets owned by the trust over which the settlor had such control at the time of his death as would have enabled the settlor to use the trust assets for his own benefit. iv. Life Insurance non probate asset 1. creditors cannot collect. v. Cook v. Equitable Life Assurance Society 1. Man married and then divorced but had life insurance beneficiary for ex wife and didnt change it. 2. Later executed a will that changed the beneficiary to new wife, but never signed the paperwork for insurance. 3. RULE: the named beneficiary will always win over a will that purports to change the insurance beneficiary solely through the will. MUST change the insurance form itself.
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vi. Term Life insurance 1. If you die before a certain period designated in a K you will get a pay out. The people that die after the term pay for the people that get the pay out by dying before the term is up. vii. Whole Life Insurance 1. Amount of pay out reduces as you get older and older, but it is paid out no matter how old you get (just smaller amounts) viii. Pension and Retirement accounts 1. Egelhoff v. Egelhoff (WA) pg 426 a. Issue: whether the ERISA preempts the statute that says the designation of a spouse as a beneficiary of a non-probate asset is revoked automatically upon divorce. b. RULE: Federal guidelines preempt state guidelines and it is not revoked automatically by death. c. Pensions are non-probate assets. ix. Multiple Party Bank and Brokerage Accounts 1. Varela v. Bernachea a. Varela put on joint bank acct with Bernachea with joint tenant with right of survival. b. Had debt card to use the account, free to use as she saw fit. c. Family made her move out and cut off access him after he had heart attack. d. She made 200K withdraw in retaliation. e. RULE: when there are no restrictions placed on the account at the time the 2nd person is added, they are entitled to 1/2 of what is in the bank account. x. Pour Over Wills and Revocable trusts in modern Estate Planning 1. Donor creates a revocable trust with assets in it. Create a pour over will that says everything I own goes into the revocable trust. 2. Trust may also contain a number of non-probate transfers. 3. However, you may want the non-probate assets outside the trust. 4. The pour over will says that if there is something I missed when I transferred my property to the trust during my life time, it goes into the trust at my death. XVII. Rights of the Beneficiary to Distributions: Discretionary v. Mandatory a. Discretionary Trusts i. Marsman v. Nasca 1. Sara married Cappy. She sets up a trust for Cappy upon her death. 2. Atty didnt give enough money to Cappy to keep up the property and the taxes. 3. Discretionary trust gives the trustee discretion about when or how or how much to distribute to the beneficiary. 4. RULE: there is a duty of inquiry into the needs of the beneficiary follows from the requirement that the trustees power must be exercised with that soundness of judgment which follows from a due appreciation of trust responsibility.
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5. RULE: exculpatory clause was included in the will and upheld, relieving trustee (atty.) from any liability unless willful neglect or default which was written into the will by the atty. himself. (person suing would have to prove abuse by atty. for including provision) b. In a pure discretionary trust: i. The trustee has sole, absolute or uncontrolled discretion over distributions. c. In a discretionary support trust i. Is a hybrid in which the trustee has uncontrolled discretion to make distributions for the beneficiarys education or support or some other standard. d. Extended Discretion; Exculpation; and Arbitration Standards i. Extended Discretion 1. Trustee discretion is sole, absolute, or uncontrolled. 2. In spite of extended discretion, trustee is still subject to judicial review. 3. Trustee must not act arbitrarily or capriciously, or abuse its discretion, and must act in good faith. ii. Exculpation 1. Trustee is excused from liability or breach of trust. 2. If trustee is draftsman, trustee must show disclosure of clause and its meaning to settlor. 3. Cannot excuse liability for bad faith, reckless indifference, or intentional or willful neglect. iii. Arbitration Standards 1. Claims for breach of trust must be resolved by arbitration. 2. Whether clause is enforceable, precluding judicial review, is unresolved. 3. Authority is scarce and contradictory. XVIII. Rights of Beneficiarys Creditors a. Discretionary Trusts: UTC 504 i. (b) a creditor of a beneficiary may not compel a distribution that is subject to the trustees discretion, even if: 1. The discretion is expressed in the form of a standard of distribution; or 2. The trustee has abused the discretion. ii. (c) To the extent a trustee has not complied with a standard of distribution or has abused a discretion: 1. a distribution may be ordered by the court to satisfy a judgment or court orderfor support or maintenance of the beneficiarys child, spouse, or former spouse; and iii. The court shall direct the trustee to pay to the child, spouse, or former spouse such amount as is equitable under the circumstances... 1. In CA 15303 (a), cannot compel trustee to distribute, but they can get an order saying that if any distributions are made, then the creditor will get paid before the beneficiary.
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iv. Scheffel v. Krueger 1. RULE: Only 2 exceptions that will allow a wronged person to attach a tortfeasors trust (1) self settled trust or (2) fraudulent transfer into the trust v. Shelley v. Shelley (case holding different from above) 1. RULE: Difference between income and principle. (1) trust income was subject to the claims of his children and former wives, (2) Interest in Principle is different b/c it is non-discretionary and therefore not available to the wives and children. b. CPCs i. 15300 Discretionary Trust if the trust says that a Bs interest in income is not subject to voluntary or involuntary transfer the Bs interest in income under the trust may not be transferred and is not subject to enforcement of a money judgment until paid to the B ii. 15301 Restrain on Transfer of Principle - Once principal is paid to a beneficiary, a creditor can petition the court to force payment of the lien from that distribution. iii. 15302 Support Trust creditors cannot touch any distributions before trustee pays it out for education and support iv. 15303 Trustees Discretion if the trust provides that the trustee shall pay to or for the benefit of a beneficiary so much of the income or principle in the trustees discretion, a creditor cannot compel the trustee to pay an amount that may be paid only in the exercise of the trustees discretion. v. 15304 Self Settled Trusts if settlor is a beneficiary of a trust created by them and their interest is subject to a provision restraining the voluntary or involuntary transfer of the settlors interest the restrain is invalid against transferees or creditors of the settlor. vi. 15305 Child/spousal support if the B has the right to compel the trustee to pay income or principle the court may order the trustee to satisfy all or part of the support judgment out of the future payments of the trust. vii. 15307 Excess Edu funds can be garnished by court viii. 6300 Testamentary additions to Trusts can have pour over wills and devise in will to trust is not invalid even if the trust is amended after execution of the will or b/c the trust is amendable or revocable. c. Alienability i. Voluntary Alienation 1. Unless a trust provision or statute states otherwise, the interest of a trust beneficiary are freely alienable but such interest carry with it all conditions and limitations. ii. Involuntary Alienation 1. Unless a trust provision or statute otherwise states, creditors can reach trust assets. XIX. Advantages of Powers of Appointment a. Postpone and delegate decisions about who will receive future distributions of trust property.
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b. c. d. e.
Addresses problem of changes in circumstances. Tax avoidance. Can be structured to avoid taxation when exercised. Terminology and Types of Powers by Appointment i. Persons 1. Donor: Creates the power. 2. Donee: Holds the power. 3. Objects: Persons in whose favor the power may be exercised. 4. Appointee: Person in whose favor the power is exercised. 5. Takers in default of appointment: Persons who take if the power is not exercised. ii. Type 1. General power: A power that is exercisable in favor of the donee, his estate, his creditors, or the creditors of his estate. 2. Special power: Any power that is not a general power (i.e., a power not exercisable in favor of the donee, his estate, his creditors, or the creditors of his estate). f. Irwin Union Bank & Trust v. Long i. Mother left Philip trust with general power of appointment to take out 4% of the corpus of the trust annually. ii. He gets divorced and wife gets judgment against him for 15K. iii. She wants to compel him to take the money out (as he is authorized to do) and pay her off. iv. Ct. holds that he cannot be compelled to exercise his power. She could only get it if he did it of his own free will. g. Tax considerations for Powers of Appointment i. General Power 1. Donee is treated as owner of appointive property and taxed accordingly (income, gift, and estate). ii. Special Power 1. Donee is not treated as owner of appointive property for tax purposes (income, gift, and estate). 2. Possible to give donee something close to functional equivalent of ownership without additional tax. 3. Used regularly in contemporary estate planning to preserve flexibility without tax cost. 4. Where RAP has been abolished, can create a dynasty trust, exempt from transfer tax, in perpetuity.
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***************************************************************************** Info for Exam Two questions, 3 hours One question will be similar to bar question/midterm question. Mix of wills and trust. One question will be similar to performance exam but shorter. Library will probably have DE111. Make sure to make it neat and organized. Use headings. State the rule, the code #s are irrelevant. Future interest not covered on exam. h. Generally i. Organize what you learned about wills under the following areas; when you get a will, if it is not stated that it is valid, check under these categories: 1. validity a. intent b. capacity (duress, undue influence, fraud) c. formalities 2. Composition a. incorporation by reference b. codicils c. integration 3. Revocation a. How ( physical act, operation of law, republication) b. DRR & Revival 4. Distribution a. types of gifts & order of payment b. ademption, satisfaction, abatement, c. exoneration, lapse/antilapse, survivor rights 5. Intestate succession a. order b. surviving spouse/ i. Community Property (CPC 6401) ii. The Decedents share of CP goes to the surviving spouse or DP if no will The other already belongs to spouse or DP iii. Separate Property iv. Surviving Spouse or DP takes 1/3 of decedents SP if decedent is survived by more than one child or the issue of one or more child(ren) v. Surviving Spouse or DP takes 1/2 of decedents SP if decedent is survived by one child or the issue of one deceased child or a parent or issue of parent.
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vi. If no issue, parent, sibling or issue of sibling, then surviving spouse or DP get it all under intestate succession. c. DP right to separate property i. Children ii. Issue of Children iii. Parents iv. Siblings v. Issue of Siblings vi. Grandparents vii. Issue of Grandparents viii. Modern Per Stirpes ( per capita w/ right to representation) CA 6402 1. If issue are not the same degree of kinship, they take with right to representation. Remote generations take the share of the deceased parent. If nearest generation is all dead, then go to the next nearest generation. 2. In CA if a will or trust doesnt specify the distribution manner, then a division of equal shares will be presumed. 240 d. advancements e. 120 hour rule f. simultaneous death i. Overview of Trusts i. Creation 1. intent (express v. resulting) 2. purpose (charitable v. private) 3. res (definite & delivered) 4. trustee (no trust fails for lack of trustee) 5. ascertainable beneficiary (exception is charitable trusts) ii. Types 1. testamentary trust created by a will 2. pour over exists separate from will, but named in will 3. secret/semi secrete 4. honorary 5. spendthrift 6. support 7. discretionary support 8. operation of law 9. charitable iii. Supervision 1. trustees role a. authority
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b. trustees obligations c. allocation of income and Principle: impartiality d. remedies e. 3rd party liabilities 2. 3rd party a. court b. creditors c. beneficiaries d. thrust protectors iv. Construction 1. freely alienable a. except, discretionary, spendthrift, or support trusts 2. creditors can attach a. except, discretionary, spendthrift, or support trust 3. laps & anti-lapse v. Modification/termination
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