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Estates & Trusts Fall 2011 I. Introduction to Estate Planning II. INTESTATE SUCCESSION A.

Share of Surviving Spouse [UPC and KSA] B. Share of Descendants: the below is the procedure for determining how to divide the prop. As such, if 1. 2. 3. 4.
[ ] = dead

theres a surviving spouse, must look at statutes mentioned above to remove spouses share from this pot.

Formula: [# of survivors] + [# of non-survivors w/ surviving issue] Per Capita = clean slate at each gen. level, all take equal. Per Stirpes = step into shoes of prior ancestor, split that share (trickling down effect) Systems: a. English Per Stirpes: apply formula at child level; C gen. takes per capita, others per stirpes. b. Modern Per Stirpes: apply at 1st gen. w/ survivor; that gen. take per capita, rest per stirpes. c. UPC 2-106: apply at first gen. w/ survivor; survivors at each gen. level take per capita.
Note: this is the one where theres an extra step to determine pot that drops down.

C. Share of Ancestors and Collaterals 1. Only comes up if decedent has no descendants (or at least none that survive)! 2. Systems: a. English Per Stirpes: apply at 1st gen. below comm. ancestor; they take per cap., rest per stirpes. b. Modern Per Stirpes: 1st gen. below comm. ancestor. w/ survivor; they take per cap., rest per
stirpes.

c. UPC 2-106: applied at 1st gen. below comm. ancestor w/ a survivor; each level takes per capita. 3. UPC 2-103: Shares of Heirs Other Than Surviving Spouse D. Treatment of Potential Intestate Heirs: The Simultaneous Death Act and Posthumous Children E. Factors Affecting Heirs Intestate Share [amt. / if receive at all] 1. Advancement: partial satisfaction of donees intestate share. a. Factor to considerwhether donor had legal or moral obligation to pay b. If deemed an advancement, donee can: (1) keep it, taking $0 from estate; or (2) share in estate,

allowing value of advancement to be brought into the hotchpot. [hotchpot = prob. estate + advancement] c. Multi-Generational Setting: if parent makes advancement to C who predeceases P, the advancements deducted from the shares of that Cs issue, but only if other children of P survive. Qualifications: i. Not bound by advancement if taking per capita (e.g., under UPC 2-106) ii. Not counted against donees descendants if UPC 2-109 applies, even if take per stirpes!

2. Release: full satisfaction of intestate share (forfeiting upwards) a. Decedent transfers prop. to donee, in exchange for donees release to any claim of Ds estate. b. If donee predeceases transferor, binding on donees descendants, unless they take per capita. 3. Assignment: prospective intestate heir transfers prospective. intestate share to 3d p. (forfeiting outward) a. If transfer made prior to ancestors death not enforceable; unless assignment supported by Assign. concerns
arise only if made before ancestor dies

consideration.

b. If assignor predeceases ancestor, assignments not binding on issue c. Transfers made after ancestors death are always valid, even w/o consideration. [b/c is a gift] 4. Homicide: in absence of statute, 3 ways law can handle: a. Apply intestate succession literally killer gets property [bad policy] b. Treat killer as if never existed k. doesnt get prop. [but bad b/c undermines intestate scheme] c. Constructive Trust Theory: k. holds prop. only as const. T for other intestate. Heirs [best option] 5. Disclaimer: traditionally, cant disclaim intestate share, unless statute allows it. a. If allowed, gen. rule is to treat disclaimor as if he predeceased T [then gen. schemes apply] i. Qualification if UPC 2-1106(b)(3)(A) applies, disclaimors interest passes to his issue,
rather than treating it as if he predeceased T (removes strategy concern)

Estates & Trusts Fall 2011 III. WILLS A. Execution Requirements 1. Acknowledgment: used if T pre-signs; wit. must see sig. + T acknowledge. in pres. of all wit. together! 2. Presence Tests: line of sight [sees or was able to]; conscious pres. [comprehends w/ any senses wit. signed] 3. Sig. Order: T first; fallback 1 continuous transaction. [if all in same room + w/in reasonable time] 4. Signature Requirements: a. Symbols qualify only if T had intent at outset symbol would = his signature. i. Exception Doctrine of Ratification [p.8] b/c now T changed his intent. b. Stamp/Typedineffective; but, if stamp+symbol, maybe some evid. of intent. symbol qualify. c. Assistance [always valid; T doesnt have to request; only has to do some work] d. Proxy when T only observes [here must request proxy; presence required] e. Placement usually must be at bottom, even if not req., good evid. of Ts intent. f. Handwritten name, but no signature: not auto invalid, but Q of intent. If at bottom, rebuttable
Added after T signedall above sig. valid, words below not unless merely admin./surplussage. Added before T signedEntire will is invalid. 5. Disinterested Witness: interested witness = wit./devisee or spouse of devisee

g. Additions after Signature [issue only arises if jurisdiction req. sig. be at bottom of will]
i. ii.

presumption T intended written name to operate as signature.

a. Gen. Rule: if any interested wit., entire will void (even if enough valid witnesses!) b. Basic Purging Statute: interest. wit. deemed to forfeit devise; will valid except for that devise. c. Super Purging Statute: forfeits only prop. in excess of either:
i. what would have received as would-be intestate heir [triple status]; or ii. what would have received under prior valid will (if any). iii. Note: if either amt. is more, simply forfeit $0 b/c no concerns about undue influence. d. Supernumerary Witness Statute: if enough valid witness w/o interested wit., treat interested wit. as if never a wit. at all and, as such, she forfeits nothing.

e. Disclaimers invalid for purposes of making a witness disinterested. 6. Attestation Clause: not req., but good b/c raise rebut. presumption all done correctly. a. Present Tense: signatures of witnesses presently acting as witnesses 7. Self-Proving Affidavits a. Past Tense: witnesses are pre-testifying that they did everything correctly. b. Not req., but raises conclusive presume. done right (but, non-procedural matters can be contested) B. Execution of Holographic Wills 1. Holographic Will: must be handwritten by T; no witness req. 2. 1st Gen. Statutes: entirely written, signed, and dated [even if word isnt essential] 3. 2nd Gen. Statutes: material provisions [tunnel vision approach only sig. and material provisions] a. Date is usually considered a material provision. b. Strip away all printed words, read only handwritten portion. 4. 3rd Gen. Statutes: material portions and extrinsic evidence allowed. a. Portions changenow, if date or introductory wording are printed, can still have probate C. Revocation of Wills 1. 3 Means of Revoking a Will: a. Revocation by Subsequent Writing *best method i. 2 Requirements: affirm. act by T [sign sub. will] unless valid proxy + intent to revoke.
ii. Must still meet will requirements for the jurisdiction [e.g., must have witnesses!] iii. Doesnt necessarily have to be a new doc. (e.g., writing on back of will may suffice) iv. 3 Forms of Writing: new will; codicil; doc. revoke prior will, w/o replace dispost. Provis

v. 2 Methods of Revocation by Subsequent Writing: a. Express Revocation: best b/c Ts intent clear; can revoke 1, or blanket revocation. b. Revocation by Inconsistency: later in time prevails, revoke to extent inconsistent.
vi. When Subsequent Writing Takes Effect (Competing Views):

Estates & Trusts Fall 2011 a. Common Law [Majority]: will only takes effect upon Ts death. b. Ecclesiastical Approach: will takes effect on other wills immediately. vii. Partial Revocation: all jurisdictions allow partial revocation by sub. writing. b. Revocation by Physical Act
i.

2 Requirements: affirm. act by T to doc., unless proxy[request + presence] + intent to revoke. a. No requirement of witnesses. ii. Burning/Tearing: by def., burn/tear doc., so dont need contact w/ words to revoke. iii. Cancellation: by definition, you cancel words. Thus, majority rule is that there must be contact w/ words to revoke by cancellation

If part. revoke not recognized, probate entire orig. will.

2. The Harrison Presumption a. 2 Factual Premises Trigger Presumption: i. Will last traceable to Ts possession; and ii. Upon Ts death, will cant be found or is found, but mutilated (torn, burnt, etc.) b. Presumption: T revoked will or, if found mutilated, destroyed w/ intent to revoke.
[rebuttable]

a. Exception UPC 2-507 [minority rule] no contact required for cancellation either. iv. Partial Revocation: partial revocation by physical act only recognized in some states. a. Qualification: if thorough (e.g., T cuts out of doc.), would probate rest of will anyway. c. Revocation by Operation of Law i. No intent requirement; instead, will revoked upon certain events [marriage, divorce, kids] ii. Divorce: treat former spouse as if predeceased T; unless will says otherwise. a. Relatives of former spouse devises not revoked; exception UPC 2-804(b).

3. Duplicate Originals: if 2d remains intact, Ts intent to revoke 1st, still carriers over. a. Harrison presumption still applies, but is stronger if duplicate not found in Ts possession. b. Effect of Unexecuted Copies: no legal significance! 4. Ratification: T can request proxy to revoke will; but, ratification here is not allowed where the

attempted revocation was invalid (e.g., T requests proxy, has intent to revoke, but not done in his presence)

5. DRR Dependent Relative Revocation a. Rebuttable Presumption: T wouldve preferred to reinstate Will 1, rather than die intestate. b. Threshold Question: Do we even need DRR to resurrect Will 1?
i. ii. Was will 1 properly revoked? [partial revoke by physical act; or holographic wills recognized?] Was Ts intent to revoke conditional? [only applicable to Formula 1] Intent Factors: a. Material diff. provisions: if provisions in Will 1 and 2 materially diff., we presume Ts intent was that Will 1 not continue to operate.

b. Physical Proximity of Wills: if found close together, shows act of revoking Will 1 was
second-will minded (so that we would apply DRR).

c. Time Gap: the longer the gap, the less likely Ts intent was conditional. c. DRR Formulas i. Formula 1: a. T revokes Will 1 b/c believes Will 2 will take its place [see cond. intent factors]; and b. Will 2 is invalid or was never made at all. ii. Formula 2: a. T is motivated to revoke Will 1 by a belief that turns out to be false; and b. Will 2 contains a reference to this mistaken belief. d. Reverse DRR: applies when later will is revoked w/ hope it will reinstate earlier will. 6. Revival: a. Premise: 1. Will 1; 2. Will 2, revokes Will 1 [either by express language or impliedly from inconsistent devises only]; (3) T revokes Will 2.

Estates & Trusts Fall 2011 b. Issue Raised: When T revokes Will 2, does it reinstate Will 1? c. 4 Views:
i. ii. English/CL View: no will takes effect until T dies. Thus, Will 2 never took effect, so Will 1 remains valid (no need to revive at all) Instantaneous View (Ecclesiastical Approach): Wills take effect immediately. Thus, Will 2 did immediately revoke Will 1 so that, to reinstate, T must properly re-execute Will 1.

iii. Liberal, Instantaneous View: Wills take effect immediately (like Instantaneous in this way) so that Will 2 did revoke Will 1; however, when Will 2 is revoked, raises rebuttable presumption that Will 1 should be reinstated b/c was Ts intent (no requirement to re-execute). iv. UPC 2-509 a. (a) If W2 wholly revoked W1, raises presumption W1 remains totally revoked; however, if rebutted with evidence of contrary intent, W1 is reinstated.

b. (b) If W2 partially revoked W1, raises presumption W1 is reinstated; however, if rebutted


with evidence of contrary intent, W1 remains partially revoked.

c. (c) If W2 revoked W1, either in whole or in part, and later, W2 is revoked by W3, raises
T intended for W1 to be reinstated, W1 is reinstated.

presumption that W1 remains revoked; however, if rebutted by language in W3 that says

D. Components of a will: 4 documents help determine what will comprises 1. Integration: when papers are integrated into the original will a. Requirements:
i. ii.

Physical Presence: papers must have been in existence at time of execution [see factors] Intent: T must have intended papers to be part of the will. a. If physical presence is established, raises rebuttable presumption of intent. 2. Republication by Codicil: under doc, will treated as is executed on date of codicil. a. To be valid, codicil must refer back to will w/ reasonable specificity. b. Codicil can effectively re-execute prior will that was missing req. formalities. 3. Incorporation by Reference: outside, independent writing can be incorporated into will by reference a. Requirements: i. Outside doc. must have been in existence at time will is executed a. *remember, codicil may have effect on a doc. to make it so that it was in existence. ii. Will refers to outside doc. in present tense (as being in existence). iii. Will refers to outside doc. w/ reasonable specificity. iv. NOTE: outside doc. doesnt have to be signed by T under doc. of incorporation. by ref. b. List Statute Exception UPC 2-513: has the following deviations from incorporation. by ref.: i. Can dispose of tangible pers. prop (other than $) by statement written before or after will; ii. Will must refer to writing, but doesnt have to refer to it as being in existence at exec. time; iii. Writing must be signed by T.

4. Independent Legal Significance a. Doctrine allows an external event, condition, or doc. to ID a devise or devisee under will. b. Test: external event/doc. must be non will-minded.

c. E. Lapsed and Void Devises: death of devisee before death of T. 1. General Rules: a. Rule of Lapse [Trad. Rule] if devisee predeceases T, devise lapses and goes back to Ts

i. Container Contents: more likely to work w/ locked container that only T has access to. ii. Anothers Will: usually treated as an event w/ independent significance. List Statute Effect: also effect independent. legal sig. doctrine by deviating from requirements.

Estates & Trusts Fall 2011


estate either as residue or, via intestacy to Ts intestate heirs.

b. No Residue of a Residue Rule [Minority, CL Rule] if a residuary devisee predeceases T,


that devisees share passes to Ts intestate heirs. i. If 2 Residuary Ds live D frozen at 1/2 and deceaseds share passes via intestacy. a. Exception most states treat 2 residuary Ds as joint tenants w/ right of survivorship. i. BUT, if T says 1/2 residue to A, 1/2 to B diff. result. c. Class Gifts class members treated as joint tenants w/ right of survivorship. d. Void Devises [CL Rule]if D dead at time will executed or ineligible taker, devise void. i. As w/ lapse, void devise remains w/ T either as residue or passes via intestacy. 2. Anti-Lapse Statutes keep devise from lapsing (dont apply to void devises). Typically, give devise to devisee in the person of his or her surviving issue.

a. IF Clause: devisee predeceased T, related to T (usually kids); left surviving issue. b. Exception: Words of Survivorship: T can negate anti-lapse by req. D to survive T.
i.

UPC 2-605 If Clause Variation g-parent or lineal descendant of Ts grandparent.

i. UPC 2-603 (1990 revision of 2-605) mere words of survivorship in sufficient! ii. Common Accident Issue Solution? Gift Over Clause + Defining Survivorship 3. Class Devises: gift of lim. sum to body of pers. uncertain in # & ID at time made. Will split equally. a. Qualification even if T mentions group of specific names, may still qualify as class gift if T gives finite sum to them w/ intent the $ only go to survivors.

b. Class gifts never lapse. Negates no residue of a residue rule.


i.

Anti-Lapse Statutes DO Apply! although doesnt technically lapse, if the If Clause is met, a class members share may remain with that member in person of her issue.

F. Changes in Property After Execution of the Will 1. Identity of Devises a. Specific Devise: spec. item, distinguishable from rest of Ts estate. b. General Devise: spec. value, but not of particular item distinguishable from rest of estate. c. Demonstrative Devise: payable first from particular source, then out of Ts gen. estate. 2. Ademption by Extinction a. Identity Theory [maj. rule/applies on exam]: Ts estate doesnt contain spec. item, devise adeems (fails) b. Only applies to Specific Devises. c. Applies regardless of Ts intent, but can be preempted by express language. d. Circumventing Ademption by Extinction ways courts get around rule.
i. Replacement Rule: construe will at time of death [rather than execution] a. Stmt. of Ruleat death, is there something in estate that matches the devise? b. Exception: Intent can be used to negate rule so there is ademption, but this is only in the minority of jurisdictions that apply the intent theory

e. UPC 2-606(a) [KS] 3. Accession: when gift increases in val. Post-execution but pre-death a. If merely appreciation in value of item, devisee gets increased value.
i. i.

E.g., interest on bond, interest on debt owed (Cs right), growing crops. on real prop. E.g., bank interest on flat sum of $, interest on amount due on debt, harvested crops.

b. If increase = generated income, devisee doesnt get increase (regarded as diff. from gift). c. Stock Dividends: stock div. declared during Ts life dont go to devisee. [treated as income] d. Stock Splits: additional stock gen. from stock split goes to devisee. [treat as appreciation. of stock
itself]

4. Ademption by Satisfaction a. Only applies to General Devises.

Estates & Trusts Fall 2011 b. Raises rebut. presum.T indented intervivos transfer. as early satisfaction (whole or part) of devise. 5. Exoneration of Liens: devisee receives prop. free of mortgage, whats left pd. out of estate assets. a. Exception UPC 2-607 reverses presumption. T can negate w./ specific language. 6. Abatement [rules are fallbacks if will says otherwise, follow instructions in will instead] a. Premise: issue arises when estate has insufficient funds to pay all debts and devises. b. Trad. View: pers. prop 1st, then real in following order: intestate; residue; general; specific. [8 rounds] c. Modern View: both real & pers. prop in following order: intestate; residue; general; specific [4 rounds] d. KS View: intestate [pers.]; int. [real]; residue [pers.]; res.[real]; gen. [both]; specific [both] [6 rounds] e. Under all views, abate final category pro rata. f. Treatment of Demonstrative Devises: 1st clause = specific devise; 2nd clause = gen. devise. G. Restrictions on the Power of Disposition: Ts ability to devise how wishes, sub. to some limits! 1. Rights of Surviving Spouse a. Community Prop. System: income earned during marriage belongs to both. b. Separate Prop. System: income each earns is their own. Surviving spouse has some stat. rights: i. Homestead: right to family home for life. [court can limit homes / acreage] ii. Pers. Prop. Set Aside: right to certain pers. prop items, up to X value. iii. Family Allowance: right to maintenance. Usually only 1 year. iv. Dower and Curtesy: a. Dower = widow gets 1/3 LE in land. (only gets upon Hs death) b. Curtsey = widower gets LE in all wifes assets (gets immediately, but upon birth of kid). c. Elective Share UPC 2-202 i. Mechanics of Calculating and Satisfying Elective Share Amount ii. Effect of Waivers: enforceable, so long as not fraudulently executed 2. Rights of Omitted Spouse [statutes only apply if we have a post-execution marriage] a. Omitted Spouse Statute: entitled to what wouldve received had decedent died intestate b. Omission of Generic Spouses dont qualify as an intentional omission of this spouse c. Rights of Omitted Spouse under UPC 2-301 i. Note that the statute even contemplates will that does mention spouse. 3. Rights of Omitted Issue a. Permitted Issue Statutes: allow kids born post-execution to take as if T died intestate.
i. Codicil Issue: if born post-execution but pre-codicil that republishes will, regarded as being alive when will was first written! As such, cant invoke permitted issue statute!

ii. Disinheriting Issue: unlike spouse, T can disinherit kids. Stop gaps issue down chain as well. a. BUT, stop gap doesnt work up so if T disinherits GC, C can invoke perm. issue stat. b. Rights of Omitted Issue under UPC 2-302 IV. TRUSTS A. Creation of a Trust [elements] 1. Intent to Create a Trust: derived from express language and surrounding circs. 2. Necessity of Trust Property: trust cant exist w/o trust property. a. Mere expectancy cant be subject matter of a trust would need to made 2d declaration. i. A contract is more than a mere expectancy b. The Issue of Profits: i. Profits from trust okay b/c are income, but cant create a trust from profits not yet in existence. 3. Necessity of Trust Beneficiaries: 1 or more beneficiaries, IDd w/ reasonable specificity! 4. Necessity of Written Instrument: a. Gen. Rule: SOF requires intervivos trust of real prop to be in writing; pers. prop. can be oral. i. However, there are situations where, though the oral agreement never created valid trust
to begin w/, law steps in to save the trust.

b. Oral Inter Vivos Trusts of Land: here, no SOF issues b/c trust created by operation of law.

Estates & Trusts Fall 2011 i. Resulting Trust: arises in only 3 situations: a. Failure to Create Express Trust: e.g., b/c beneficiaries not IDs specifically. b. Failure of Express Trust to Dispose of All Trust Prop.
Purchase Money Resulting Trust

Constructive Trust: typically comes up in these situations (but not only) a. Prop. Obtained by Fraud: must have fraudulent intent at outset b. Abuse of Confidential Relationships c. Property Obtained by Homicide c. Oral Trusts for Disposition at Death: S chooses to dispose of prop. in particular way based,
ii. in part, on her reliance on Ts oral promise. i.

Secret Trusts: Will: to T + Oral: in trust for B = Constructive Trust to B. a. Extrinsic evidence allowed to present evidence of the trust (higher BOP) ii. Semi-Secret Trusts: Will: To T in trust + Oral: for B = Resulting Trust. a. No extrinsic evidence permitted. B. Discretionary/Spendthrift Trusts 1. Rights of Beneficiaries to Distributions a. Support Trusts: need dictates floor and ceiling. b. Discretionary Support Trusts: need dictates ceiling only. 2. Rights of Beneficiaries Creditors: w/ mandatory trust, C can get in line, w/ discretionary trust,

however, C cant get in line. Instead, distribution by distribution basis, only when T exercises discretion!

a. Gen. Rule: Discretionary clause bars creditors, even super creditors b. Spendthrift Trusts i. 3 Forms of Spendthrift Clauses: no assignments; no attachments; both. a. Qualification: attachments language alone is invalid (violates pub. policy) ii. Effect of Clause Cs can only go after assets after distribution made. iii. Generally, Spendthrift Clauses Enforced. a. Exceptions: child support and alimony; tort claims; fed. govt; necessities. i. Unless state statute to the contrary/speaks exclusively on issue. c. Self-Settled Asset Protection Trusts: cant setup spendthrift or discretionary trust for yourself. C. Termination of Trusts 1. Gen. Rule: once trust established, is irrevocable. 2. Exceptions: a. Consent of Settlor and All Beneficiaries. b. Claflin Doctrine: if no material purpose is undermined and all beneficiaries consent. i. Material Purpose = spendthrift clause, support trust; discretionary trust; age requirements. D. Revocable Trusts: Settlor can revoke trust (exception to gen. rule) if: 1. Express language reserved power to revoke; and 2. Settlor follows procedures he put in the document to revoke it. 3. Potential Issue: Did S retain too many rights so that its really an attempted will? a. Gen. Rule: Settlors have a lot of leeway to retain many powers, and still have valid trust.
i. Objective: look at rights retained, and if too substantial, not Ss intent/motive for retaining.

b. Elective Share: though have a lot of leeway, will we regarded as invalid when elec. share at stake? i. NO Sullivan approach. (even if Ss intent was to circumvent elec. share!) ii. YES Newman approach. (but, only invalid to extent necessary to provide for spouse) c. Spendthrift Trust for Yourself = Over Retention. Thus, assets belong to estate when you die. 4. Mechanics for Revoking Trust a. Must be done in accordance w/ methods prescribed in trust doc. itself. b. No Harrison Presumption w/ Trusts. E. Pour-Over Trusts: T of will wants assets of estate to pour-over into an existing intervivos trust.

Estates & Trusts Fall 2011 1. Incorporation. by Reference [Minority]: will incorporates by ref. trust instrument in existence at time will 2. Independent Legal Significance [Majority]: will can dispose of prop. by referring to intervivos trust
that disposes of assets transferred. to trust during life (act that has sig. apart from disposing of trust assets). executed!

3. UPC 2-511: validates pour-over of probate assets into intervivos trust executed anytime. F. Charitable Trusts: 1. Valid, Charitable Purpose Required see list on p..38 and examples on p.39 2. Cy Pres Doctrine a. If purpose becomes impracticable or obsolete, ct. can select alternative close to Ss intent. b. Exception? if Ss intent was all or nothing. c. Discriminatory Trusts: cy pres can be used (unless all or nothing intent). 3. Enforcement/Supervision of Charitable Trusts G. Powers of Appointment 1. General POA: exercisable in favor of others, donee, her estate, Cs, or Cs of Ds estate. a. Fallback Presumption if doc. doesnt specified, assume its general power. 2. Special POA: exercisable only in favor of others. 3. Release of POA voluntary release of POA. Assets go to TiD or, if no TiD, to Donor. 4. Exercise of POA a. Exercise by General Residuary Clause in Donees Will:
i. ii. Majority Rule: gen. clause does not exercise POA, whether power is general or special. Minority Rule: gen. residuary clause does exercise POA if gen. power, but not special. a. New York Variation: can also exercise special power if devisees are also objects. iii. UPC 2-608: gen. res. clause exercises POA only if either: a. No TiDs; or b. Ts will manifests intent to include prop. subject to POA (blanket clause insufficient) iv. Donor can always require specific reference. a. Here, using a blending clause insufficient b/c not specific. UPC 2-704. v. Effect of Anti-Lapse Statute: most courts extent anti-lapse to cover general powers.

b. Limitations on Exercise of Special POA i. Restatement 2d Prop: Donative Transfers 19.4 ii. Sub. Category of Special Powers: Exclusive vs. Non-Exclusive Powers a. Exclusive (Restatement. fallback presumption) donee can exclude entirely 1 or more
objects. b. Non-Exclusive donee must appoint some amt. to each object. i. Majority Rule: can in essence exclude by giving only nominal amt. ii. Minority Illusory Appointment: each obj. must receive sub. amt. c. Fraud on Special POA appoint.in favor of non-object (or by circumvention) = fraud d. Ineffective Exercise of Power: 2 doctrines that can save an ineffective exercise of POA:

i. Allocation of Assets [Special Powers] ii. Capture [General Powers] 5. Failure to Exercise POA a. General POA goes to TiD or, if none, to Donors estate. b. Special POA TiD; or, if none, Potential Objects (equal shares); or Donors estate.

Estates & Trusts Fall 2011

I.

Introduction and the Probate Process (pg. 38-39; 42-47) A. Probate 1. Probate process by which court decides how the decedents estate should be disposed of 2. Purpose of probate to get assets where they are supposed to be a. Assets distributed in accordance with a will b. Intestate succession statute applies when there is not a will that covers assets in question c. Settle creditors/claims i. Paid from the estate ii. Bar them if enough time goes by and creditors have not presented their claims B. Probate process court makes one of two decisions with regard to disposal of an estates assets: 1. The decedents assets should be disposed of via a valid will (either to all or some of the assets) 2. The decedent died intestate and, as such, the assets will pass via intestate succession per that states intestate succession statute C. Functions of Probate three functions 1. Provides evidence of transfer of title to new owners a. Real estate, stock, etc. b. Clears title and makes property marketable again 2. Protects creditors by providing a procedure for payment of debts a. Pay off creditors OR b. If creditors dont present claims within specified time limit, they are barred from collecting i. Nonclaim statute time limit in which creditor is required to assert claims or forever be barred; triggered by notice to creditors a) KS must be filed within 4 months after publication of notice 3. Distributes the decedents property to those intended after the decedents creditors are paid a. Officially, tangibly distributing the property 4. HYPO: No will filed within 6 months, too late for probate. What are the options? a. Determination of descent interested party files petition and court determines heirs and issues decree i. Way to avoid probate a) Can use even when there is a will, but will must match intestate statute ii. Cannot use if someone files for probate D. Probate v. Non-Probate Property 1. Probate property assets disposed of by the decedent, upon his death, either under the decedents will or, in the absence of a will, by the intestate succession statute 2. Non-Probate Property assets disposed of in a particular way because of some predeath transaction/arrangement rather than by will or intestate succession. The transfer is triggered by the decedents death, but the assets are not probate assets. Sometimes called

Estates & Trusts Fall 2011 will subs or will substitutes because it resemble wills, but proper name is nonprobate transfers a. Life insurance assets go to person designated beneficiary; triggered by death but it is a contract b. Joint Tenancy decedents interest vanishes at death, surviving joint tenants have whole property c. Payable on Death (POD) provisions pensions, IRAs, bank accounts, 401(k)s d. Inter vivos trust provisions decedent sets up a trust that he is beneficiary for while alive. Upon death, goes to someone else i. Testamentary trust created under will and passes through probate e. Life estate remainder arrangements f. Property exempt by statute small bank accounts, wage claims E. Probate Procedure/Timeline 1. Death 2. Petition (generally must be w/in 6 months after death; KS 6 months; exception if someone has fraudulently concealed the existence of a will; UPC 3 years) a. Initiated by interested party i. Devisee ii. Executor iii. Creditor iv. Heir b. Can be initiated by would-be intestate heir if there is no will c. Petition for PROBATE if there is a will d. Petition for ADMINISTRATION if there is no will (dies intestate) 3. Court appoints personal representative; once appointed he/she can act on behalf of estate a. Executor of the estate if there is a will i. Letters Testamentary authorization issued by probate court b. Administrator of the estate if there is no will i. Letters of Administration authorization issued by probate court c. Duties of the Executor or Administrator i. Inventory/collect assets of the estate identify assets ii. Manage and maintain assets of the estate iii. Receive claims of creditors and settle a) Including taxes iv. Establish and clear any titles car, real estate, etc. v. Tangibly and physically distribute remaining assets to those who are entitled to receive under the will or statute d. Decision of Executor or Administrator usually hearing required with probate court 4. Hearings requires notice to: a. Heirs, Devisees, Creditors b. Notices happen throughout process 5. Probate Finalized a. Estate closed, assets distributed, Executor or Administrator discharged

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Estates & Trusts Fall 2011 F. Simplified Probate Options (not always available depends on statute) 1. Simplified processes require petition to get them a. Factors to determine whether simplified can be used (ultimately judicial discretion) i. Are there contested matters like competing wills or disputed bills? ii. Value of estate iii. Solvency of the estate (value v. creditor claims) b. KS simplified administration: do away with hearings and PR can do most things w/out court approval i. Redelivery bond (?) ii. More efficient, less expensive c. KS informal administration: intended to be one step process go to court only at very outset i. Available for smaller estates G. Contesting a Will attempt to prevent will from being admitted to probate 1. Must have standing to contest a. Pecuniary interest in estate 2. Must be filed during the probate process before PR is discharged 3. Can argue will improperly executed, revoked or superseded 4. Kansas: a. 59-2225: will must be contested before probate process is over b. Qualification competing will can be considered even if admitted will has been admitted to probate if basis of contest is that another will supersedes what has just been admitted to probate c. 59-617 still applies must be within 6 months of death of decedent

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Estates & Trusts Fall 2011

II.

Intestacy (pg. 71-80, 86-96, 115-117) A. Intestate succession statutes apply in 3 circumstances: 1. Total Intestacy decedent dies without a will 2. Partial Intestacy decedent has a will, but it doesnt dispose of all of his assets. The statute will apply to those assets that are untreated by the will 3. Will or trust itself calls for application of the intestate statute (to my intestate heirs) B. Governed by state statute 1. Personal property governed by law of domicile state 2. Real property governed by law of state where property is located C. Share of Surviving Spouse 1. All provide for surviving spouse a. Typically receive all assets if no surviving issue (Issue = direct lineal descendents kids and grandkids; Issue & Descendants are synonymous) b. If there are surviving issue typically spouse gets and issue get the rest 2. Purpose carry out average probable intent of descendents 3. UPC a. 2-102(1) spouse gets entire estate: i. (i) IF no surviving issue and no surviving parents of decedent; OR ii. (ii) IF all decedents surviving issue are also the surviving spouses issue and visa versa b. 2-102(2) spouse gets the first $200,000, plus of the balance if no surviving issue of decedent, but a parent of the decedent survives the decedent c. 2-102(3) spouse gets first $150,000, plus of the balance if all the decedents surviving issue are also the surviving spouses issue, but the surviving spouse has additional surviving issue that are not issue of the decedent d. 2-102(4) spouse gets first $100,000, plus of the balance if one or more of the decedents surviving issue are not issue of the surviving spouse 4. Kansas a. 59-504-508 i. if decedent is survived by spouse and issue, spouse gets , issue gets ii. If surviving spouse, but no issue spouse gets all (and visa versa for issue, but no spouse) D. Determining Shares of Intestate Takers 1. Terminology a. Per Capita at any given generational level, each person takes equal as compared to each other, with no regard to prior generations i. Horizontal equity b. Per Stirpes (by right of representation) at any given generational level, descendent steps into shoes of ancestor an takes what they would have received i. vertical lines kept separate and distinct from each other 2. Special Formula add up number of survivors alive when decedent dies PLUS number of those who predecease with surviving issue 3. Three Main Systems (see handout!) a. English Per Stirpes prior generation focused; keeps vertical lines intact

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Estates & Trusts Fall 2011 Make count at child level ALWAYS! a) Even if there is no child! b) Property divided into as many shares as there are living children of the decedent AND deceased children who have living descendants ii. Child generation takes per capita, all others take per stirpes b. Modern Per Stirpes hybrid; per capita with representation i. Make count at first generation with a survivor ii. First generation with survivor takes per capita, everyone else takes per stirpes c. UPC 2-106 aka per capita at each generation. not prior generation focused i. Apply at first generation with a survivor ii. Survivors at each generational level take per capita 4. Stop Gap Rule if a person inherits, their descendents are not entitled to anything 5. In-Laws treat in-laws as if they dont exist for purposes of intestate succession a. BUT watch out for fact problems that may involve the Uniform Simultaneous Death Act (see below) E. Share of Ancestors and Collaterals 1. Most statutes prefer issue (vertical heirs, going downwards), so if there are any issue, they stop gap the collaterals and ancestors from taking anything. Thus, any question of collateral/ancestors will only come up when there are no issue 2. Terminology: a. Ancestors those who came before you in your direct, vertical line (upwards, instead of downwards for issue/descendants) i. Parents, grandparents, great pgs and so on) b. Collaterals someone who is related to you merely because you have an ancestor in common. Common ancestor may be the same person, but need not have the same title as each of you. i. Brothers or sisters your parent is the common ancestor ii. First cousins your grandparent is the common ancestor c. Ranking Collaterals (see chart on pg. 93) - Q1 As between two, competing collaterals, who is closer?; Q2 will a further removed collateral still take by representation? i. Step 1 starting w/decedent, count upwards until you reach the common ancestor ii. Step 2 pivot and turn downward to the collateral in question iii. Step 3 repeat for competing collateral. Whoever has the lower number is closer to the deceased iv. Example on pg. 92 a) Grandnephew v. first cousin both ranked #4 b) Great-grandnephew v. second cousin 5 & 6 respectively; great-grandnephew has a smaller number, so he is the winner d. Three Systems as Applied to Collaterals i. English Per Stirpes i.

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Estates & Trusts Fall 2011 a) Formula apply to first generation below common ancestor Modern Per Stirpes a) Formula apply to first generation below the common ancestor with a survivor b) If survivor at brother/sister level, then result will be same as reached via English method iii. UPC 2-106 a) Formula apply to first generation below the common ancestor with a survivor iv. Hypo pg. 92: T dies testate, survived by two siblings, A and B, and two nephews, Bs children, X and Y. Ts will provides that I hereby disinherit my brother B, but makes no affirmative disposition. Who takes Ts probate property? a) Parents are nearest common ancestor. b) English Per Stirpes make count at highest level possible. Apply at first generational level below common ancestor (here, at brother/sister level). This level takes per capita, rest takes per stirpes c) Modern Per Stirpes make count at first level below common ancestor that has a survivor. This level takes per capita, later levels per stirpes. Same result as above d) UPC: make the count at first level below common ancestor with survivor. This level takes per capita, later levels per capita e. UPC Shares of Heirs Other Than Surviving Spouse Any part of the intestate estate that doesnt pass to the decedents surviving spouse, or if there is no surviving spouse, the entire estate, passes in the following manner: i. 2-103(1) to the decedents descendants by representation; ii. 2-103(2) if there is no surviving descendant, to the decedents parents (split b/w if both alive, or all to one if only one alive) iii. 2-103(3) if no surviving descendant or parent, to the issue of the decedents parents or either of them (brothers and sisters of decedent) by representation iv. 2-103(4) if none of the above, but decedent is survived by one or more grandparents or descendants of his or her grandparents, half of the estate passes to the decedents paternal grandparent (or their descendants), and other half to maternal side a) But, if above doesnt apply on either maternal or paternal side, the entire estate passes to the decedents relatives. b) Note that the furthest we go is grandparents for the common ancestor, so if only related by great grandparents, the collateral heir gets nothing! v. Examples on pg. 96 a) (1) decedents mother takes all b) (2) moms side: FC , Dads side: FC 1 & 2: ii.

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Estates & Trusts Fall 2011 c) (3) B=all, A=0, because B is descendant of GP, and A is descendant of GGP F. Survivorship and Simultaneous Death if you want an intestate share, you must survive the ancestor 1. Uniform Simultaneous Death Act a. The beneficiary is required to survive the donor by 120 hours (5 days). Otherwise, is deemed to have not survived the donor. b. To rebut this presumption (if more than 12 hours or other question), must do so by clear and convincing evidence 2. Janus case (pg. 80) husband and wife try to commit joint suicide. Husband died on way to hospital. Wife arrives at hospital and has some signs of life a. Court deems wife survived husband wife receives intestate property, which then goes to her estate b. Medical evidence used to deem survival 3. Issues of survivorship come up in wills, joint tenancy, life insurance, trusts, intestacy 4. Hypos: a. D survived by husband, and then Ds mother dies. Husband claims intestate share of mother-in-laws estate. Is husband entitled to this? i. No. Daughters surviving husband is entitled to nothing; daughter would get nothing because she predeceased her mother, and he cannot get anyting from being a son-in-law b. Mom and daughter die in plane crash. Daughters surviving husband wants to collect because he thinks daughter survived by a couple of minutes. If you cannot tell, use the USDA. Daughter is deemed to have predeceased unless husband can show otherwise. i. Pre-Uniform Simultaneous Death - If the daughter survived the mother even by 10 minutes, the daughter would have an intestate share and that share would probably dissolve on the husband. ii. New Uniform Simultaneous Death Act husband has no claim b/c his wife (daughter) did not survive for 120 hours after mother passed G. Birth and Intestate Succession 1. Posthumous children (conceived before, but born after dads death) a. Presumption if you are born no more than 280 days after death of your alleged father, we presume you were in gestation when he died b. If you are born more than 280 days after his death, we presume you were conceived after your alleged father died. This is, however, a rebuttable presumption (burden is on the child) c. Hypo: i. X devises to my children who are alive when I die. 2 children and one on the way when X dies. a) Under common law, each child would get 1/3 share H. Disinheriting and Intestate Succession 1. If a person wishes to disinherit someone in their will, but he or she makes no affirmative devise, the estate goes to intestate heirs 2. UPC treats disinherited persons as predeceased

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Estates & Trusts Fall 2011 3. Hypo: a. Father believes son has been provided for through inter vivos gifts. Father does not want to leave anything to son through will or intestacy. Will: I hereby leave my son nothing. i. If son is the only intestate heir, all assets would go to him. Father needed to take the next step and devise assets to someone.

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Estates & Trusts Fall 2011

III.

Advancements and Assignments (pg. 133-136) A. Advancement Property of the decedent given to a child while decedent is still living, deemed to be an advancement (prepayment) of the childs intestate share 1. Advancements are taken into account during splitting of the estate 2. Presumption substantial transfer is an advancement 3. Rationale parents like to treat their kids equally in the long run, therefore, lifetime transfers should be taken into account 4. Inter vivos transaction types: a. Loan the recipient has a debtors obligation to repay i. Loan is considered an asset of the estate b. Gift no obligation on the part of the recipient to repay all i. Not taken into account as asset of estate ii. Windfall bonus for recipient c. Advancement hybrid between previous two i. No obligation to repay, BUT ii. IS factored in when estate assets are calculated 5. How to determine whether transfer is advancement? a. Question of donor/decedents intent i. Factual question ii. Traditional View rebuttable presumption of advancement iii. Modern View most courts do not presume anything; look at intent of parties b. Threshold question What was the decedents intent with regard to this transfer? i. Overall, is a jury question to be derived from all of the circumstances? a) Express Intent written or oral ii. Implied intent factors a) Whether or not the parent had a legal or moral obligation to transfer this property. E.g., 1. Tuition payments, but only for grades K-12 (thus, payment for law school = advancement) 2. Payment of medical expenses b) Size of transfer (larger the amount, the more likely it is treated as an advancement) 6. If it is advancement, how do we calculate estate? a. Hotchpot value of probate estate including advancements i. if you are done and want share of estate of parents, must allow advancements to be brought into hotchpot ii. if you do not want a share, do not have to contact estate a) keep advancement but entitled to nothing else 7. hypos: a. D makes inter vivos conveyances to children: A = $5,000, B = $1,000, C = $0 i. Probate estate = $6,000 ii. Hotchpot = $6,000 + $5,000 + $1,000 = $12,000 iii. Fractional shares = $4,000 for each child

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Estates & Trusts Fall 2011 a) A would want to walk away, because he has a $5,000 advancement 1. New calculation - $6,000 + $1,000 = $7,000 a. Fractional shares = $3,500 for B and C iv. End result: a) A gets nothing, keeps $5,000 advancement b) B gets $2,500 plus $1,000 advancement c) C gets $3,500 b. D makes inter vivos conveyance to children: A = $5,000, B = $1,000, C = $0 i. Probate estate = $12,000 ii. Hotchpot = $12,000 + $5,000 + $1,000 = $18,000 iii. Fractional shares = $6,000 each a) All would want to stay with these numbers iv. End result a) A gets $1,000 plus the $5,000 advancement b) B gets $5,000 plus the $1,000 advancement c) C gets $6,000 c. O has three children. A lives with O on the farm until O dies. Several years before death, O deeds farm to A. Is farm advancement or gift for extraordinary services rendered? i. A argues farm is payment for services rendered that other siblings did not provide a) Most courts would accept this and then treat the estate as if O never owned the farm b) Court might reject idea that parents want to treat all children equally d. O pays $15,000 for tuition to medical school. Is this an advancement? i. Most courts say yes. Educational expenses after high school are advancements, although college now Is a grey area 8. Predeceasing and Advancements a. If D makes an advancement and child predeceases D, amount of advancement is deducted from the shares of the childs descendents IF other children of the parent survives b. Under UPC 2-106 advancement not attributed to grandchild b/c not taking place of parent c. Hypo: i. Parent has two children, C1 and C2. C1 had child, GC1, C2 has child GC2. Parent makes advancement of $40,000 to C1. C1 dies. Later, parent dies. Probate estate is $60,000 a) The hotchpot is $100,000 ($40,000 advancement + $60,000 estate) b) In long run, C1 and C2 would each get $50k, so GC1 only gets $10,000 from the estate in a Modern Per Stirpes Jurisdiction

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Estates & Trusts Fall 2011 1. Rationale: under the Modern Per Stirpes mothod, GC1 would take by representation, which means that GC1 literally steps into the shoes of C1 2. Under 2-106, courts could likely say that GC1 is no bound by the advancement b/c would be taking per capita 9. UPC approach to Advancements UPC 2-109 a. Intent of advancement has to be in writing, otherwise it is not an advancement b. Advancement not considered if recipient does not survive parent i. Also not a factor in grandchilds share, even if per stirpes method utilized B. Releases full satisfaction of your intestate share (forfeiting up to your ancestor) 1. Person surrenders all claim to what would otherwise be his intestate share; must be supported by consideration from mom or dad a. Released person is treated as though he never existed b. Difference between advancement and release i. Intent of the ancestor dictates the result c. Predeceasing and Release i. When released person predeceases and grandchild takes per stirpes, release is attributed to grandchild ii. If all children predecease, grandchildren do not take per stirpes -> release is not attributed to grandchild C. Assignments transfer by a prospective intestate heir of his prospective intestate share to an outside third party. (forfeiting outward, to some third party) 1. Transfers must take place when ancestor is alive 2. General rule not enforceable a. Rationale too prospective, as matter of property law you cant convey something you do not own; cant assign mere expectancy 3. Exception if third party pays consideration to the assignor, then the assignment is enforceable a. Rationale contract law b. If heir dies before ancestor, third party receives nothing because heir would have received nothing c. If ancestor is unaware of assignment, that doesnt make a difference assignment still valid assuming if supported by consideration 4. Transfers made after ancestor dies a. Always valid b. Rationale no longer prospective (thus even property law would consider the assignment valid) and no longer need consideration because you can give a gift c. Thus, any issue with assignments will arise if made prior to ancestors death 5. Risks for third party a. If assignee predeceases the ancestor, third party is not entitled to anything, even if he paid consideration b. The ancestor can always disinherit the assignee by will (devising all assets to someone else)

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Estates & Trusts Fall 2011

IV.

Bars to Succession: Homicide and Disclaimer (pg. 145-157) A. Homicide 3 ways to deal with this (Mahoney case, pg. 145) 1. Option 1 apply the intestate succession literally, so that the killer gets the property a. Issue reward the killer/encourages would-be heirs to kill 2. Option 2 treat killer as he never existed, thus legal title does not pass to killer and instead goes to other intestate heirs a. Issue undermines the intestate succession scheme (something legislatures, not courts, should do) 3. Option 3 (the Constructive Trust Theory) allow legal title to pas to the killer under the intestate succession statute, but only nominally (legal fiction) so that the killer holds the property only as constructive trustee for the other intestate heirs (hybrid of options 1 & 2) a. Best option doesnt undermine legislature and doesnt reward killer; preserves the integrity of the intestate succession scheme because it technically, albeit via a legal fiction, does not interfere with the statute b. Mechanics of Constructive Trust Theory i. Recognize there is a constructive trust and trustee is compelled to convey property to other intestate heirs ii. Not ongoing like regular trusts 4. Types of homicide affect decision a. Voluntary manslaughter and up intent should not be awarded, thus constructive trust applied (Mahoney) b. Involuntary manslaughter and down application of intestate statute c. Also look at circumstances of killing i. Insanity could negate intent possible application of statute ii. Intent to kill is what strikes the court as particularly egregious and it is then when the courts step in and impose a constructive test 5. Relitigation of the killing? a. Majority rule prior conviction of voluntary manslaughter or worse is conclusive in later civil action; relitigation unnecessary; not only need not but cannot be retried i. UPC b. Court may require relitigation since heirs were not party to previous case i. However, burden of proof for civil case is lower c. What if there is an acquittal? Is an acquittal binding? i. Not necessarily, because of the lower burden of proof 6. Joint Tenancy: a. General rule what was once joint tenancy is severed and becomes tenancy in common with homicide; killer ends up with only half, victims estate gets other half i. Critique rewarding killer b. Compromise killer would get all or nothing. The majority rule is in between. 7. Life insurance/pension plans/POD provisions a. Generally, no benefit from evil deed 8. Killer as holder of remainder, victim as life tenant

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Estates & Trusts Fall 2011 a. Different approaches, including constructive trust for duration of expected life of victim 9. Killer commits suicide a. View 1 case law requires a conviction to apply the constructive trust theory, therefore, the property passes to the killers estate and there is no sanction b. View 2 if it can be shown in a civil action that the killer indeed killed the victim, the killer forfeits as does his estate, just as if there was a conviction. B. Disclaimer when the heir or devisee declines to take the property, the refusal is called a disclaimer 1. Traditional Rule: a. You cannot effectively/successfully disclaim your intestate share; you are stuck with it whether you like it or not i. Options: a) Upon receipt, you can give it away, but it is fair game for creditors b) Notice the traditional rule is opposite of inter vivos gift 1. Also the opposite way we have treated devises b. Rationale: i. Dont want to undermine the intestate succession statute/legislative intent 2. Modern Rule most states have changed this rule by enacting a statute that states that heirs can refuse/disclaim a. Effect property passes as though disclaimant predeceased the ancestor b. Qualification you cannot do anything that would qualify as acceptance prior to making a disclaimer. Eg., gift is a home and you move in. Cant then try to disclaim. In this case acceptance is irrevocable c. Example (pg. 154) O has 2 kids, A and B. B dies, survived by one child, C. Then O, a widow, dies intestate. Os heirs are A and C. A has four children. A disclaims. What result in: i. Modern per stirpes jurisdiction? a) If A disclaims, jurisdiction treats A as having predeceased O. Thus, first generation with a survivor is grandchild level. As four children and Bs child, C, will all take per capita so each get 1/5. b) If A does NOT disclaim, First generation with survivor is C level. Apply per capita to A and B, who each take . Bs goes to C by representation (per stirpes), then A gets . ii. UPC the only thing that would pass to As kids is As share 3. UPC 2-1106(b)(3)(A) the disclaimed interest passes to the descendants of the disclaimed. a. Avoids problem of disclaiming for benefit of children 4. Difference between renouncing and devising a. Renouncing applies to intestate share b. Disclaiming applies to devises c. Today, most authorities use terms interchangeably (pg. 152 footnotes) 5. Disclaimers and Creditors

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Estates & Trusts Fall 2011 a. As a general rule, disclaimed assets are off limits to disclaimants creditors b. Assets that a person disclaims are treated as though they never belonged to the disclaimant c. Drye case (pg. 155) if the federal government is the creditor, it can reach disclaimed assets i. Disclaimant had power to accept assets or give to his daughter enough to make them attributable to him ii. Disclaimer not effective against IRS 6. Medicaid and Government Assistance Programs a. It is against public policy to allow disclaimer of an inheritance that would enable party to be self-sufficient b. If party does this, we treat it ias if he owned those assets and they are attributable to him on, for example, issue of Medicaid qualification c. Troy v. Hart (pg. 156) i. Person disclaims so he can stay on Medicaid ii. Court person attributed with the assets, but disclaimer effective iii. Result he doesnt get the disclaimed assets AND he doesnt get Medicaid!

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Estates & Trusts Fall 2011

V.

Execution of Wills (pg. 223-246, 253-258, 268-280) A. Execution of Attested Wills 1. General Requirements Every state has its own statute that prescribes certain requirements that must be satisfied in order for the execution of a will to be valid. 2. Functions of Formalities/Policy Reasons for the Rules a. Impressive Function requirements impress upon the testator and the witness that this event has serious legal consequences b. Evidentiary Function requirements help preserve reliable proof for later use that this document does reflect the testators intent i. But for these requirements, we would have to rely on unreliable things (memory) to construct testators intent c. Protective Function requirements help protect testator from fraud, undue influence, coercion 3. Majority View Traditional Approach: require literal compliance with execution requirements 4. Signature generally, signature or acknowledgement of signature must take place in the presence of 2 witnesses, and the witnesses must sign in the presence of each other and the testator a. Acknowledgement: used in most jurisdictions as a fall-back option of validating the will when you have pre-signed the will not in the presence of the witnesses OR not in the presence of all the witnesses together i. To acknowledge means to announce that this is your name, that you wrote it, and to say the witnesses please bear witness ii. The caveat is that the witnesses must see the signature or have had the opportunity to see it and the testator must acknowledge in the presence of the witnesses together at the same time 5. Creation: requires testamentary intent and a properly executed document 6. Presence: 2 tests (note: the 2 tests dont only apply to signing, they can apply to other situations where presence is required as well, for example proxy for revocation of will) a. General requirements: physical proximity and general awareness b. Line of Sight Test: the testator does not actually have to see the witnesses sign, but must be able to see them if the testator were to look. (Testator must see witness sign, or be able to see) c. Conscious Presence Test: (more liberal than the line of sight test). Under this test, the witness is in the presence of the testator if the testator, through any of the senses, comprehends that the witness is in the act of signing. d. Qualifications: i. No telephonic witnessing (policy concern: person on other end of phone line could tamper with the will) ii. Two panes of glass is too far away to be considered present a) Must be able to see the pen sign (e.g., drive-thru teller situation. T could not see the pen as drive-thru teller inside signed will) e. HYPO: Witness must sign in presence of testator. Testator is in a coma and witnesses signs on his chest. Does this satisfy presence?

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Estates & Trusts Fall 2011 i. No. physical proximity is here, but there is no awareness 7. Order of Signing a. General required order: i. Testator must sign first ii. Testator must sign or acknowledge with all witnesses present at the same time iii. Only then can the witnesses themselves sign b. Qualification: One Continuous Transaction Theory i. If signing is one continuous transaction. E.g., all three are in the room and sign ii. A fallback theory. In the event that the order is not retained, may still be valid under this theory if the testator and witnesses all sign while in the same room and do so within a reasonable time. As a practical matter, the witnesses did what witnesses are supposed to do (attest to what theyve seen, but here, it is just not attesting to what they have already seen which is the rational for the preferred order. c. Reasonable Time Requirement (UPC 2-502(a)(3)) i. Time gap between testator signing and witnesses signing must be reasonable a) If statute requires witnesses sign in presence of testator, testator must be alive b) Gaps between 30 days to 4 years are held to be OK 8. Signature: a. Signature by Symbol (X): valid as long as testator at the outset intends the X to be his signature i. If testator intends to sign full name and can only sign first name, not a valid signature because it doesnt match intent a) Exception: Ratification 1. If testator shows post facto approval of the first name signature in presence of two witnesses, it is valid b. Rubber Stamp: ALL states say this is ineffective, even if the testator himself tamps the name on the will. i. Rationale: high risk of fraud ii. HYPO: Assume the testator stamps his name and in addition marks an X. What result? We ignore the stamp as if it does not exist, and look at the intent (see above). However, the stamp might indirectly help establish intent. c. Typed Name: Allowed as long as other requirements are met and testators intent shows he meant typed name to be the signature d. Ratification: Testator, Patrick, intends to sign Patrick, but after getting through signing Pat he stops and says, thats good enough. i. Ratification because he is changing his intent. e. Assistance: ALL courts say that assistance, someone helping testator sign, qualified i. No requirement that the testator request assistance

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Estates & Trusts Fall 2011 Testator must hold pen and do at least some of the work (even just 1% will suffice) f. Proxy: Testator asks another to sign. (other person is doing all of the work and testator is only observing) i. Testator MUST request for proxy. (unlike assistance) ii. Presence is required MUST be done in presence of testator! g. Placement of Signature: signature must come at end of document i. Some states, by statute, require the signature be at the bottom ii. Rationale for subscription helps to establish intent, this is where most people sign things, indicates you have read the will, prevents changes after the signature iii. Even in states where not required by statute, helps with questions of intent h. Handwritten Wills, No Signature i. If the only place the testators name appears is, for example, in his own writing as I Patrick, do hereby it presents a question of intent. ii. If testator intended for it to be legally authorizing signature, it is valid a) Note: if handwritten name appears at the bottom of the will, triggers a presumption in most jurisdictions that it was the testators intent this be his legally operative signature. iii. May not be valid if state requires subscription i. Additions After Signature i. Setting: Will with signature near bottom, but below that signature are the words, I hereby give Karen Smith my diamond ring. Is will valid? a) Were the words already there when will executed? 1. If so, signature did not come at the end and entire will is invalid 2. If words were added after execution, will is valid and the line itself is ignored ii. Administrative Additions: a) If the additions say something administrative rather than dispositive, we ignore the words insofar as placement of signature is concerned. 1. Unlike dispositive words, we honor the words for purpose of their administrative discretions. (E.g., I hereby appoint Emily my executor ) a. Court looks at this as a wish or request, not mandatory language iii. Surplusage a) Words appear after signature at the moment of execution. Words are not administrative or dispositive, instead extraneous. 1. Most courts say will is valid because words are not essential a. Mere surplusage and not there j. Requirement of Disinterested Witness ii.

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Estates & Trusts Fall 2011 i. General Rule If one or more witnesses are interested, the entire will is void. a) General rule operates so that it ultimately harms the witness/devisee and the will b) General Rule To qualify as a valid witness, you must be disinterested 1. disinterested = cant be a devisee or a spouse of a devisee in the will a. Note: with witnesss spouse, if the statute itself doesnt say this, we imply it via case law. c) Rationale: concern that if the witness is interested, might apply undue influence/coercion. d) Purpose: to prevent fraud as of the frozen moment of execution (very specific) e) An interested witness is not neutral at probate f) Rule applies, regardless of whether there were enough valid witnesses 1. E.g., if the statute requires 2 witnesses, and you have 3, only 1 of which is interested, the entire will is still void! Purging Statutes rescue wills from invalidity, make interested witness disinterested. a) Interested witness (X) deemed to have forfeited her devise so that she is now a qualified witness and the entire will is valid, except for that portion devising to X. b) In order to qualify as valid witness, you must be disinterested 1. Witnesses cannot be devises 2. Traditional rule with non-valid witnesses, the entire will is invalid c) Purging statutes operate to help the will d) Variations on Purging Statutes (in some states) 1. Instead of X deemed to have forfeited her entire devise, the purging statute operates so that X only forfeits the property that is in excess of either: a. (1) what X would have received as a would-be intestate heir (triple status) or b. (2) if there was a prior valid will (where X was a devisee but not a witness), what X would have received under the prior will c. Triple Status Example: X has triple status (witness, devisee, and otherwise intestate heir). If decedent died intestate, X would have received an intestate share of $50k. under the will, the decedent devised $70k to X.

ii.

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Estates & Trusts Fall 2011 i. Under General Rule entire will is void, so that X gets $50k (because now decedent dies without a will) but anyone else in the will that is not an intestate heir gets $0 ii. Under Basic Purging Statute only the portion devising $70k to X is void, the rest of the will is valid iii. Under Purging Statute Variation will is valid, but X only gets $50k and is deemed to have forfeited $20k (keeps her intestate share of $50k) d. Prior Valid Will Example: Under will #1 (where X was not a witness), X was devised $50k. under new will #2, X was a witness and was devised $70k. i. Result: X only forfeits $20k because this is the extent to which the will #2 devise exceeds prior devise e. Rationale: Any undue influence that X may have or did cause only applies to the amount in excess of what she would have received. f. NOTE: if would-be intestate share or the amount under the prior will is more than the amount under the will for which X was a witness, X doesnt forfeit anything because theres nothing in excess and, as such, no concerns about undue influence. 2. Indirectly interested witness some statutes make devises to these persons void too a. E.g., testator devises to witnesss spouse e) Supernumerary Witness Statutes modification of purging 1. requires multiple witnesses, with only one interested 2. will can be valid if the interested witness is extra, and witness doesnt have to forfeit anything 3. If there is an interested witness (X), in addition to the number of witnesses we need under the states statute, we treat X as if she had never been a witness in the first place, and, as such, does not forfeit, period. 4. Ex. State requires 2 witnesses. A, B and C are all witnesses. A and B are disinterested, but C is devised $70k and, as a would-be intestate heir, would receive $50k a. Under the general rule entire will is void, even though there are 2 valid witnesses and the state

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Estates & Trusts Fall 2011 only requires 2 witnesses. Because C is an intestate heir, she only gets $50k. b. Under basic purging statute C is deemed to have forfeited her share and only the devise to C is void, the rest of the will is valid c. Under super purging statute C is deemed to have forfeited only the portion of her shares in excess of her would-be intestate share. Thus, the entire will is valid, but C only gets $50k because she is deemed to have forfeited $20k d. Under supernumerary witness statute C is deemed to have never been a witness in the first place and, because there were enough valid witnesses, the entire will is valid and C gets the full $70k share k. Attestation Clause: where witnesses sign, if there is one i. Attestation clause receites was duly executed ii. Not required, but good to include because a) Presumes all done right b) Rebuttal evidence in event witness later testifies against will c) Prima facie case that the will has been properly executed iii. Present tense part of actual, execution process. contains signatures of witnesses as witnesses iv. Failure to include can subject attorney to malpractice 9. Self-Proving Affidavit signed by testator and witnesses under oath on the will; affidavit states all execution requirements have been complied with a. Allows the witnesses to pre-testify. b. In addition to signing the will itself, the witnesses and the testator sign and attach a notarized affidavit, which states that all of the states execution requirements were complied with. c. UPC 2-504 authorizes but does NOT require (pg. 244 #9) d. Past tense unlike attestation clause, backward looking. Witnesses are saying they did all correctly e. Not required, but should always do so that when the will is probated, wont have to call witnesses to testify that it was properly executed. f. Effect: if done, it is a not rebuttable conclusive presumption that all requirements were followed i. Qualification UPC 3-406(1) the will can be challenged on nonprocedural matters. Cant challenge on basis requirements werent followed, but can challenge for e.g., testator was mentally ill g. Must properly execute: dont have to use a self-proving affidavit, but if you do, the will itself must be executed properly! i. In re Will of Ranney (pg. 253) Testator signs in correct place, witnesses sign only self-proving affidavit. Is the will valid?

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Estates & Trusts Fall 2011 a) Signing will itself is in present tense I am now serving as witness b) Self-proving affidavit assumption that execution has just taken place; past tense c) If execution statute applied strictly, will is invalid because witnesses did not presently attest to the will d) Court allows will to be probated proponent must show substantial compliance with execution requirements 1. All 3 thought they were signing will, merely lack of technical compliance 2. Most courts would find this invalid 10. Notarized Wills a. Under UPC, notary is equivalent to two witnesses b. Requires statute, not available in KS 11. Safeguarding Wills a. DLTs method i. Execute will first in blue ink ii. Make copies iii. Stamp each page of copies with photocopy iv. Give original and copy to testator v. Keep copy at office b. Some firms still keep originals at office i. Probably not a good idea c. Some jurisdictions allow pre-file with local probate court 12. UPC Harmless Error/Dispensing Statute gives courts power to dispense with execution requirement if certain things are true: a. Proponent must show by clear and convincing evidence that the document represents the decedents intent b. Minority view B. Holographic Wills will written entirely in penmanship of testator (not other person) 1. Defined: A holographic will is a will handwritten by the testator and signed by the testator; no attesting witnesses are required 2. Valid in 27 states not in KS a. In states that do not recognize holographic wills i. Handwritten wills are allowed, but they still need signature of witnesses and testator 3. Advantage: If recognized, advantage is that the will does not have to be witnessed 4. Requirements for Holographic Wills: a. Intent did testator intend for the document to be a will? i. Could just be a letter, set of notes, rough draft ii. Kimmels Estate case (pg. 269) Handwritten letter from father to sons. Informs of valuable papers and directs what assets are to go where if something happens to the father. Signed Father. a) Is the letter testamentary/intended to be a will? b) Is the signature enough?

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Estates & Trusts Fall 2011 c) Court letter is not wholly testamentary, but testamentary enough to prove intent is there 1. Documents have been held as wills even if primary purpose was something else and not wholly testamentary 2. Letter sent to potential devises 3. if anything happens words do not add anything, just say what is implicit in any will a. Conditional Will generally, courts view only as statement of motivation, not legally significant or condition precedent 4. Signature was meant to be legally authorizing signature, even though only Father 5. Extent Holographic Must be Written by Testators Hand (pg. 279) a. First Generation Statutes: entirely written, signed and dated i. Require that everything be in testators penmanship regardless of whether the non-written words are essential to the will ii. The Intent Approach if the word is there, the testator intended it to be there, and, as such, it must be in the penmanship of the testator. iii. E.g., a) Estate of Thorn 1. Testator had real property he called Cragthorn, which , after handwriting one time, he stamped on the will thereafter. Proponent of will argued the stamped words were surplusage because it was handwritten in original description. 2. Court held will was invalid because not everything was handwritten by testator b) Estate of Gonzalez (pg. 274) 1. Will is partially typed and partially handwritten. Testator filled in portions of generic will form. Will intended to be a rough draft. Testator was going to make a neater copy on another form. Witnesses signed the blank form, T signed the first form. Testator died before he had chance to fill out second form, which was his intent. 2. The will was signed by testator but not witnesses a. Problem no witnesses b. Must stand or fall as holographic will. Only choice 3. Court this document does not qualify as regular will because it is not witnessed a. Statute requires signature and material provisions of the will to be in handwriting of testator to qualify as holographic

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Estates & Trusts Fall 2011 i. If the printed words are excised and penmanship words remaining could still be a will, then it qualifies as holographic ii. Do the handwritten words express full intent of testator? 4. Here, printed language contains intent (I hereby devise) and penmanship does not 5. Court printed portions of will form can be incorporated into holographic will where court finds testamentary intent considering all the evidence in the case a. Many courts, however, do not look at preprinted language c) UPC introductory phrases can be printed or stamped b. Signature and holographic wills i. Courts look at intent of testator, not so much placement in the will c. Second Generation Statutes (1969 UPC): material provisions (tunnel vision approach) i. Require only that the signature and the material provisions of the holograph be in the testators handwriting ii. Testamentary Intent: under this approach, some courts were willing to look at the printed (non-handwritten) language to establish testamentary intent. Others, however, were not. Thus, some courts struggled with wills that were partially typed and partially handwritten because sometimes a material dispositive provision was wholly or partially printed and sometimes the language that indicated testamentary intent was printed rather than written out by the testator. Most courts, follow this approach: a) Strip away pre-printed language and treat it as if it doesnt exist; b) Focus exclusively on penmanship words that remain c) Are these words enough to express the testators testamentary intent? If so, can say that pre-printed part is not essential, and as such, will is valid d. Third Generation Statutes (1990 UPC): material portions and extrinsic evidence allowed i. Change from provisions to portions meant to allow the probate of a holograph even if immaterial parts such as the date or introductory wording are printed ii. Extrinsic evidence allowed (biggest change) allowed to establish intent

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Estates & Trusts Fall 2011

VI.

Revocation of Wills (pg. 286-307) Three Ways to Revoke a Will: Revocation by Subsequent Writing, Physical Act, or Operation of Law A. Revocation by Subsequent Writing (best method of revocation) 1. Requirements: both must be true a. Affirmative act by the testator (signing subsequent will); i. Exception proxy: (1) at testators request; (2) in presence of testator b. Intent to revoke 2. Revocation by subsequent writing still requires witnesses to be present (must meet generally applicable will requirements for the particular jurisdiction) 3. NOTE: doesnt necessarily have to be a separate document a. Most courts would treat writing on the back of the will as a subsequent writing if properly executed. 4. 2 ways to revoke by subsequent writing: a. Express Language: the subsequent document revokes the prior document (will or devise) by express language. Can also be in the form of a blanket provision revoking all prior wills or one, particular will b. Implication/inconsistency: implied from inconsistency in a subsequent document (later document devises the very same property to someone else). i. Later will in time has priority (2nd will prevails by implication) ii. Revocation occurs partially and only to the extent of the inconsistencies iii. HYPO: Assume that will #1 conveys Blackacre to A and my Mercedes to B. Will #2 subsequent (properly executed) conveys Blackacre to C. a) Result: Devise to A is revoked; Blackacre to C. Mercedes to B remains in tact 1. First will is revoked by inconsistency, but only partially revoked 5. Competing Views on Subsequent Writings: a. Ecclesiastical Approach: when will is executed, it takes effect immediately in terms of its effect on other wills b. Common Law Approach (majority rule): when a will is executed, it only takes effect upon the testators death. 6. Types of Subsequent Writings: a. Codicil: subsequent document that refers back to the first with reasonable specificity and, as such, is not a separate, independent will but rather a part of the first will. i. Codicil depends on the original will for its life, but not visa versa. b. Second Will: subsequent will that does not refer back to the original will. c. Effect of Codicil v. Second Will: i. If testator revokes the second document first has no impact on first will, regardless of whether a codicil or second will (unless in jurisdiction applying ecclesiastical approach) ii. If testator revokes first document first very important if second document is a codicil or a will.

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Estates & Trusts Fall 2011 a) Codicil revocation of the will impliedly revokes the codicil as well 7. Partial Revocation by Subsequent Writing: Every jurisdiction allows partial revocation by subsequent instrument (unlike partial revocation by physical act). B. Revocation by Physical Act recognized by all states 1. Requirements: both must be true a. Affirmative act by testator i. Some act done to the paper itself; burning, tearing, etc. ii. Exception: proxy (1) at testators request, (2) in presence of testator b. Intent to revoke 2. Revocation by physical act does not require witness to be present 3. Ratification a. General Rule Ratification is not allowed in a case where we have an attempted revocation by physical act done by someone other than the testator. b. E.g., - Testator requests a proxy, but the revocation by physical act is not done in his presence and, as such, requirements for proxy are not met. As a backup argument ratification also will fail. 4. Cancellation: a. A cancellation is physically marking over the original words on the will b. Contact Requirement (majority rule): by definition, you cancel words. As such, the marking on the document must come in contact with the words. i. Rationale: it helps establish testators intent to revoke. Notes in martins are usually there to understand the document, not to cancel it ii. It is traditional and still majority rule c. UPC 2-507 (minority rule) no contact requirement for words/markings (treats in same manner of burning/tearing) 5. Partial Revocation by Physical Act: only allowed in some states (unlike partial revocation by subsequent writing). But, entire revocation by physical act recognized by all. a. Qualification/Exception: If the partially revoked provision is destroyed and theres nothing else to ascertain intent (no photocopies, etc.) even jurisdictions that dont recognize partial revocation by physical act will probate the rest of the will anyway and give up on the partially revoked part so that the net effect is that we basically have partial revocation if the testator did a throrough enough of a job with the physical act. b. UPC 2-507 allows partial revocation by physical act c. If jurisdiction doesnt allow it (and testator didnt do thorough enough of a job for qualification to apply) we probate the entire original will and treat attempted partial revocation as if it never occurred. d. Effect on holographic wills (if allowed) whether jurisdiction recognizes partial revocation by physical act is moot with holographic wills because we allow the testator to make changes to a holographic will by installments over time (continuous evolution). 6. Presumptive revocation and multiple originals a. If testator destroys original in possession, presumption carried over to originals out of testators possession even if they remain intact

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Estates & Trusts Fall 2011 b. If testator has multiple copies in his possession and only destroys one, presumption is weaker C. Revocation by Operation of Law statute revokes will for you if certain events occur in your life. No intent requirement. 1. Rationale: Legislature is doing something for us that we would want done if we had just thought about it but we didnt do because we were preoccupied. 2. Typical Statute: will is revoked if a certain event occurs in the testators life subsequent to the will, for example: Marriage, divorce, birth of children a. Divorce most common. Net result typically is we treat the now-former spouse as if he or she predeceased the testator. Qualification: unless will says otherwise i. Relatives of divorced spouse: a) Usually, devises to relatives of divorced spouses are not revoked; b) UPC 2-804(b) extends automatic revocation of devises to former spouses relatives as well b. Marriage/children. Net result typically is that they get what they would have received under intestate share. Qualification: unless left out intentionally or sometimes, if included in other non-probate transfers D. Missing Will legally, conceptually valid will that is not revoked. No original or copies can be found. How can this be probated? 1. If there is a photocopy, can rely on that 2. Otherwise memory of witnesses and others who might have known, lawyers drafts and notes a. All must add up to clear and convincing evidence b. No clear and convincing evidence = intestacy E. Dependent Relative Revocation if Testator purports to revoke will upon mistaken assumption of law or fact, revocation is ineffective if testator would not have revoked his will had he known the truth. Applies in two situations: 1. Situation #1 - Testator destroys or revokes the will with the intent and purpose of replacing it with a new will immediately or at least reasonably promptly, but is mistaken in thinking that the second will is valid (or will 2 never made at all) a. DRR triggers rebuttable presumption that testator would prefer to reinstate first will over intestacy b. LaCroix v. Senecal (pg. 295) Testator makes will giving half of property to nephew and half to friend. Testator makes codicil changing name of his nephew to his correct name. Codicil witnessed by friends husband. i. Court applies DRR revoked will #1 with intention of replacing with will #2, but invalid due to interested witness. No material change in the will, so original will reinstated. 2. Situation #2 - Testator is motivated to revoke a will or provision by belief that turns out to be false. New will executed correctly and revokes the first will (no physical revocation), and also contains reference to mistaken belief that is motivated 3. Factors to look for: a. Majority of states devise comparison element; are the wills substantially similar? i. Two wills have to be substantially similar

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Estates & Trusts Fall 2011 If will #2 is materially different, might be testators intent that will #1 not operate in any condition b. Were the documents found close together? i. Found apart weaken argument for DRR c. What is the time gap between revocation of will #1 and execution/attempted execution of will #2? i. Long time gap harder to argue revocation of will #1 conditional on making another 4. Reverse DRR: When a later will is revoked with hope it will reinstate an earlier will (the exact REVERSE of DRR). a. If intent is shown and other facts are right, DRR might apply to reinstate Will #2. b. E.g., - Will 1, then Will2, which expressly revokes Will 1. However, testator later tears up Will 2 thinking it will have the effect of reinstating Will 1. i. Most courts will use reverse DRR to reinstate Will #2 ii. Estate of Alburn (pg. 300) Testator has two wills made: 55 and 59. Testator intends to revoke 59 will for 55 to take effect. However, Ecclesiastical state, so once 59 will is executed, 55 will is revoked. Testator needed to reexecute 55 will in order for it to be valid. a) Can DRR apply in reverse? Would testator prefer reinstatement of the 59 will to intestacy? b) Court DRR does apply and 59 will be reinstated 1. Testator clearly didnt want to die intestate, evidenced by the fact that dying intestate would distribute assets to persons not named in either will. F. HYPOS: 1. 2003: T executes will that gives all property to A. 2008: T executes will that gives ring to B and BMW to C. a. Scenario #1 - When testator dies both are in effect. i. As share is cut down by the ring and the car partial revocation to the extent of the inconsistency b. Scenario #2 - Testator destroys 2008 will with intent of revoking it i. Ecclesiastical Rule 2008 document took effect as soon as it was executed and caused partial revocation. If 2008 document revoked later, the 2003 document still partially revoked. a) A would get everything except ring and car, which would go to intestate heirs. 1. If testator wanted to prevent this, he could reexecute 2003 will ii. Common Law Rule 2008 will not be effective for any purpose until testator dies a) A would get everything c. Scenario #3Testator destroys the 2003 document i. Now, it matters if second document is codicil or freestanding will. a) if 2008 document is codicil, revocation of 2003 will automatically revokes codicil ii.

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Estates & Trusts Fall 2011 1. net result = total intestacy b) if 2008 document is freestanding will, revoking 2003 will has no effect 2. Will traceable to testators possession. After testators death, will cant be found. in testate heirs had access to the will a. Court may say Harrison Presumption has been rebutted in this case and will not be revoked. 3. Testator has typewritten will. Testator crosses out dollar amount and writes in higher amount for one devisee. Testator initials and dates. 4. Thompson v. Royall pg. 290 a. Testator executes will and codicil, but later changes her mind. Her attorney comes with the documents and she instructs him to destroy the documents to revoke them. However, instead, he instructs her to keep them intact for memo purposes. What result under the following fact variations? i. Scenario 1: a) Additional facts: (1) On the back of the will, the attorney writes this will null and void; (2) Testator signs below; (3) No witnesses b) Result: Not an effective revocation because lack of witnesses ii. Scenario 2: a) Additional Facts: (1) On the back of the will, the attorney writes this will null and void; (2) testator signs below; (3) this time witnesses present! b) Result: Revocation is valid iii. Scenario 3 a) Additional Facts: (1) On the back of the will, the testator writes, this will null and void; (2) Testator signs below; (3) no witnesses b) Result: Revocation is valid, so long as jurisdiction recognizes holographic documents because in such jurisdictions, holographic documents dont require witnesses G. The Harrison Presumption 1. Presumption Testator revoked the will OR destroyed will with intent to revoke. 2. 2 factual premises trigger the presumption: a. The will in question is last traceable to the testators possession; b. Upon testators death, the will in question can not be found OR is found, but in a mutilated form (e.g., torn, burnt, etc.) c. Presumption is rebuttable d. Note that if no one can testify that the testator is really the one who did the physical act presumption still arises, but, again, it is still rebuttable. H. Duplicate Originals 1. Setting: You have 2 validly executed wills (used blue ink on both) you never want to do this, but if you do, some general rules apply.

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Estates & Trusts Fall 2011 2. General Rule Testators intent to revoke a will carries over to duplicate originals, regardless of whether the duplicate original remains intact. a. Harrison Presumption applies: i. if the two factual premises are met as to one of the duplicates, we presume the testator also intended to revoke the second original, even if the second duplicate original is in the testators possession ii. Presumption is stronger if second duplicate is not in the testators possession I. Effect of Duplicate Unexecuted Copies: 1. A photocopy of a will or any other unexecuted copy has no legal significance. 2. As such, any physical act done to it is insignificant 3. However, unexecuted copies can be used as evidentiary support when needed J. Revival of Wills 1. Factual Premise Will #1 is in place. Will #2 revokes Will #1 (by either express language or impliedly by inconsistency. Will #2 is properly executed (DRR will not apply, therefore). Will #2 is later revoked by physical act. What is the effect on Will #1? 2. Issue: Only reason Will #1 is revoked is Will #2. Now, Will #2 is revoked. Does this have the effect of automatically reinstating Will #1? 3. 4 Views on Issue: a. English/Common Law View No will takes effect until testator dies. Thus, Will #2 which purports to revoke Will #1, never took effect at all. Thus, Will #1 was never revoked and we dont even need to revive/reinstate. None of this is relevant if b. Strict, Instantaneous View (Ecclesiastical View) Will #2 takes effect Will #1 was revoked by immediately and, as such, Will #1 was revoked and remains revoked. To Physical Act. If this is the revive/reinstate, Will #1 must be re-executed or republished by codicil to become case, then Will #1 must effective. be re-executed to be c. Liberal, Instantaneous View Compromise of English and Strict views. Will #2 revived/reinstated takes effect immediately after execution, thus Will #1 revoked. When Will #2 later revoked, Will #1 remains revoked. If Will #2 is revoked and there is evidence that testator intends revocation to revive Will #1, Will #1 is revived. i. Instantaneous revocation presumption that can be rebutted with evidence of intent d. UPC 2-509 different views depending on facts of case a) Option #1 Will #1 Totally Revoked: 1. Will #2 is then itself later revoked. 2. Result: Will #1 remains totally revoked. 3. Rebuttable Presumption: With evidence of contrary intent, Will #1 will be reinstated. b) Option #2 Will #1 Partially Revoked 1. Will #2 is then itself later revoked. 2. Result: Will #1 is reinstated. 3. Rebuttable Presumption: With evidence of contrary intent, Will #1 remains partially revoked. c) Option #3 Will #1 Revoked Either Totally or Partially 1. Will #2 is then later revoked by Will #3.

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Estates & Trusts Fall 2011 2. Result: Will #1 remains revoked. 3. Condition: Unless language in Will #3 shows intent to reinstate Will #1

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Estates & Trusts Fall 2011

VII.

Components of a Will (pg. 307-325) 4 Doctrines that assist in determining what this particular will comprises: (1) Integration of Wills, (2) Republication by Codicil, (3) Incorporation by Reference, and (4) Independent Legal Significance. (NOTE: the last two permit extrinsic evidence to resolve the identification of person or property in will.) A. Integration Process of determining which pieces of paper make up the original will. Gathering process. All papers present at the time of execution intended to be part of the will, are integrated into the original will. 1. Requirements With regard to any particular page to be integrated: a. Physical Presence Page must have been there at the time of execution i. Factors a) If pages are fastened (stapled) before pages are signed there is a presumption of presence b) Testator can initial each page c) Internal coherence from page to page (plot follows from page to page without gaps) d) Orderly scheme (eg., consecutive page numbering, roman numerals, etc.) e) Sentence carry-over b. Intent Page has to have been intended by testator to be part of his will i. Facor a) If physical presence is established, there is a presumption of intent 2. Estate of Rigsby (pg. 308) One page declaring intent to be holographic will with page 2 (listing items of property with peoples names) folded into it. Pages were not fastened. Testator signed only the first page and there was no reference to each other on the pages. a. Court Second page is not part of the will B. Re-Publication by Codicil The original will is deemed to have been re-executed for the first time by the most recent codicil. Thus, any previous codicil or will which had tainted witnesses is remedied. It is considered to be re-executed by being specifically referred to by later codicil. 1. Codicil MUST refer back to the prior will with reasonable specificity (date, time, location, etc.). If it doesnt, then it is not a codicil and there is no re-publication. 2. In jurisdictions where holographic wills are OK, codicils can be handwritten. a. Estate of Nielson (pg. 309) Testator crosses some stuff out in typewritten will and in own writing puts in new devisees. i. Court Handwritten parts were not intended to incorporate the previous will. Handwritten parts were holographic codicil which re-published the typewritten will as modified. 3. Consequences of Re-Publication by Codicil: a. Later in time takes priority over earlier will; b. Can effectively re-execute a prior will that was invalid by providing the missing formalities 4. Johnson v. Johnson Single sheet of paper contains three typed paragraphs. It was neither dated nor signed by testator or witnesses. At the end of the typewritten document is penmanship and devises $10 to brother, James. Now it is signed. Do we treat the typed

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Estates & Trusts Fall 2011 and handwritten parts as one document or separate documents? It is not holographic and the execution does not satisfy all of the requirements (no witnesses). a. These are two separate documents the second is a codicil, not a separate will. Will is VALID! i. Codicil operates as a republication of the will no matter what defects may have originally existed ii. The reference back is implied here since it is on the same piece of paper iii. Holographic codicils are effective only if jurisdiction permits and they are on the same piece of paper 5. HYPOS: a. Will and several codicils executed ineffectively. Final codicil executed correctly. Result? i. Will and prior codicils treated as executed for the first time at execution of final, valid codicil. ii. All documents valid. b. 2007 will properly executed. Will devises everything to A. 2008 will codicil properly executed and devises everything to B. What effect? i. If codicil does not refer back to will, B gets everything ii. If codicil refers back to 2007 will, that 2007 will is republished and B gets nothing c. Will executed properly except testator lacked mental capacity. Later codicil refers back to previous will and is executed at a time testator has regained capacity. What result? i. Original will republished and now valid. C. Incorporation by Reference Takes documents or events outside the will and makes them part of the will even though the outside documents are not executed in a way that satisfies the execution requirements. It may identify the devisees OR define what property will be devised. 1. Outside document becomes part of the will 2. Requirements: a. Outside document must have already been in existence at the time the will is executed. i. Simon v. Grayson Letter not written yet is incorporated by reference in the ill. Codicil later executed when letter is in existence. a) Court Letter allowed to be incorporated by reference even though actual letter had different date. b. Outside document must be described in the will. Language must refer to it as already being in existence. Describe it as a document that has already been written. c. Will must describe the outside document with reasonable specificity (date, location, etc.) i. Clark v. Greenhalge (pg. 310) 1972 memo says certain items go to certain people. There is an amendment to the memo. In 1977, there is a will stating everything to GH except what has been given away in the memo. In 1979, a notebook is found, which says a painting goes to

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Estates & Trusts Fall 2011 Ginny. There is also a 1980 codicil and 1981 codicil. Who will get the painting? a) Ginny gets the painting like the notebook says: 1. Notebook was in existence before the codicil and was incorporated by reference. Notebook was dragged into the will 2. Will was made in 1977 and Notebook in 1979. However, the will was re-published by codicil in 1980. 3. Had the entry in the notebook been made in 1982, the in existence requirement would not have been met. 3. Rationale The strict requirements exist because we are undermining the execution requirements. 4. UPC 2-513 The List Statute a. You can dispose of tangible personal property other than money, in accordance with a written statement that is written either before or after the execution of the will. It can also be amended after execution. b. Will must refer to a writing, but it doesnt have to refer to that document as being in existence at the time of execution i. Document can be written after execution and amended after c. Writing must be signed by the testator d. Will must expressly refer to such writing. i. Must describe items with reasonable specificity e. HYPO: Testator executes deed to farm naming niece as grantee. Later, testator executed a will reading, I have already deeded my farm to my neice and for that reason I do not devise her my farm in my will. Testator dies and the deed conveyance was deemed invalid. i. Niece argues the deed was incorporated by reference. ii. Court agrees. D. Independent Legal Significance (non-testamentary acts) Devisee or property to be devised is identified by some external event, condition, or document 1. Premise Whatever testator is conveying OR person testator conveys to, must be derived UPC 2-512 Execution or by an outside event or document revocation of 2. Test The external event/document must have non-testamentary impact, i.e., be non willanothers will is minded considered a. E.g., Will reads, I leave all of my assets to my wife (generic reference). Later, independent legal significance. testator marries A. Although the outside event, the marriage of testator and A, has an impact on the will, this impact is incidental to the reason people get married. List of devises can be (Testator and As marriage was not motivated by testators will.) As such, all of totally testamentary. testators assets go to A when testator dies. 3. Containers What happens when testator devises contents of a container to someone? a. Locked containers If container is locked and testator keeps the key it may work because when testator changes the contents, it is an independent act. This is especially true with safety deposit boxes (unless many people had access to the box) b. Unlocked Containers Less likely to work because of high possibility of fraud

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Estates & Trusts Fall 2011 4. HYPOS: a. T devises all XYZ stock to A. At the time of execution, he has 10 shares. Later he gets 10,000 shares. Is the devisee entitled to 10 shares or 10,010? i. A gets all 10,010 shares. Everything is devised. ii. The acquisition of additional shares impacts the will, but that impact was incidental to the main reason why he acquired more stock. Ts acquisition of the additional shares was non-will minded. b. T devises all personal property in accordance with a memo left with executor. What result? i. Not independent legal significance. ii. Memo has no other purpose than completing the will. c. Testator leaves $1,00 to all who are my employees. What result? i. Hiring and firing has impact on the will, but those actions are not will motivated. Independent legal significance. ii. Allowed. d. Will devises assets to charitable trust established by someone elses will. Should we honor this? i. Argument is independent legal significance. ii. The other will impacts this will, but what he does is independent from my testamentary intent. iii. Primary significance of the other will is independent from the impact of this will.

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Estates & Trusts Fall 2011

VIII.

Lapsed and Void Devises (pg. 358-379) A. Lapses Occurs when devisee predeceases testator. 1. Traditional View - Devise lapses upon devisees death and when testator later dies, those assets stay in testators estate as either (1) residue or (2) intestate. 2. No Residue of a Residue Rule (minority/common law rule): if a residuary devisee predeceases the testator, that devisees share passes to testators intestate heirs a. Thus, if we have 2 residuary devisees, and only one survives the testator, the living residuary devisee remains frozen at and deceased residuary devisees share passes to testators intestate heirs. b. The surviving devisee gets his share and the other half is residue or intestacy. c. Treat the situation as if there are two separate devises and each gets half residue. When A predeceases, there is no impact on C. 3. UPC/Majority View Eliminates the traditional view. Surviving devisees take it all. a. Residuary devisees are treated as joint tenants so that if one predeceases the testator, the other devisee takes all by right of survivorship b. Exception: Assume that testators will reads, 1/2 residue to A, residue to B. A predeceases testator. Here, even in a state that has abolished the no residue of a residue rule, B remains frozen at because of the specific language in testators will. 4. Class Gifts A devise to a generic group of people (e.g., to As children), all of whom share a common status. Class is treated as joint tenants. a. typically, no one is referred to by specific name (although can happen) i. to Mary Smiths children b. Class defined at moment of death i. If member of class predeceases testator the remainder goes only to other members of the class a) Survivorship rule applied; deceased members estate doesnt take c. If all members of class predecease testator, devise lapses d. Dawson v. Yucus (p. 376) Testator devises interest in land half to Stuart, half to Gene. Testator states she wants land to remain on husbands side. Both are nephews. Is this a class gift? i. Court No intent to make a class gift has been shown a) Just because individuals happen to be in a class, does not make it a class gift. e. HYPO: i. Testator devises Blackacre to children of A. At the time of execution, A has two children, B and C. B predeceases testator. C gets all of Blackacre because there is only one surviving member of the class. B. Anti-Lapse Statute Statutes that save otherwise lapsed devises. Default rule (apply unless will says otherwise). Typically give the devise to the devisee in the person of his or her surviving issue instead of lapsing to testators estate. 1. Requirements a. A named devisee must have predeceased the testator b. Devisee has to have been of a certain relation to the testator (mandated by statute)

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Estates & Trusts Fall 2011 c. Devise must have left surviving issue 2. Pre-Empting the Statute (words of survivorship) Testator has power to negate an anti-lapse statute by using express language in the will that requires the devisee to survive the testator. a. E.g., I hereby devise to B, if B survives me. (p. 366, case 9) b. UPC 2-603(b)(3) Words of survivorship are NOT sufficient in the absence of additional evidence. i. To negate the anti-lapse statute under UPC, it must take on extra words. a) In no event do I intend for any anti-lapse statute to apply. c. Ruotolo v. Tietjen (pg. 367) Testator gives half of residue of estate to stepdaughter if she survives me. Stepdaughter dies before testator. Does the anti lapse statute apply? i. Lower court survival words preempt statute ii. Higher court reverses a) Survivorship language is often boilerplate and not representative of testators intent b) Devise was residual shows testator didnt want it to go to intestate heirs iii. Decision here is INCONSISTENT with majority view d. Detzel case Testator must make alternative devise (basically a gift-over clause) to preempt statute 3. Where does the property go? If we regard this as a case where it goes first to the dead devisees estate and then to his or her statutory substitute (their issue), then we will probate twice. When it goes to the devisees estate it would be subject to their creditors. But if the property bypasses the named devisee completely and goes directly to their issue, there is no creditor problem. Courts are split here. 4. Who died first devisee or testator? Use the Uniform Simultaneous Death Act. a. Devisee is presumed to have predeceased unless he survives testator by 120 hours. 5. Avoiding Lapse As testator, lapse can be avoided in the following ways: a. Class gifts b. Joint tenancy c. Not devising anything transfer things outside of a will C. Class Gifts 1. General Rule Only the surviving members of the class receive the assets upon testators death. Those members of the class who predecease get nothing and their estate gets nothing. a. Rationale Members are defined as of date of execution. Membership is determined at testators death. 2. Characteristics Tends to be gift of finite sum to a body of persons uncertain in number at the time of the gift with the exact identities to be ascertained at some future time. a. Must be generic typically names are fatal b. Members take in equal proportions c. Where there is a devise to two or more named devisees, courts tend to treat it NOT as a class gift

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Estates & Trusts Fall 2011 3. Specific Names as a Class Gift To my nephews John and David and niece Martha in equal shares. John predeceased without issue. Court held devise to a class to avoid property going to intestacy. 4. Anti-Lapse Statutes Such statutes apply to class gifts. They have the effect of negating the general rule that survivors take all. Assume you have a member of a class who predeceases and there is an anti-lapse statute: a. Majority Rule That predeceased class members share goes to their statutory substitute and the members of the class do not take the predeceased members share. b. Anti-Void Situations Anti-lapse statutes cover void devises so that members of a class who die before the execution of the will can still take (through their issue) i. HYPO Assume Blackacre to As kids. When executed, A has 5 kids but when T dies there are only 4 kids. The general rule is that the 4 kids would take everything. a) Anti-Lapse Statute The share of the predeceased kid is governed by the statute and would likely go to that kids issue ii. HYPO Assume will read To my sisters and the reside to S. At the time of execution there are 2 sisters, A and B. There once was a sister, C, who died before the execution. A dies and leaves issue before T dies. a) Anti-Lapse Statute B takes 1/3 share, As kids take 1/3 share, Cs kids take 1/3 share b) No statute B takes everything survivor rule c. In re Moss Moss for life, remainder in trust for niece and kids of Ts sister. Niece dies before T. T dies. Moss is dead. Remainder must kick in. There are 5 kids of the sister. Is there a class gift or separate devise to the niece? i. Court Class gift because of Ts intent. Court doesnt say why, though. D. Void Devise (common law rule) If the devisee is already dead before the execution of the will (or the devisee is a cat or dog or some other ineligible taker), the devise is void. The result is that the assets go to the residuary and then intestacy. 1. Vague/Ambiguous Devises Can use extrinsic evidence at threshold to decide whether language is this way. If it is, you can bring in all extrinsic evidence. a. E.g., devise of 724 Elm Street. No such building exists 2. HYPO: a. T devises Blackacre to X; however, unbeknownst to T, X is already dead. i. The devise of X is void (not lapses, because X was dead pre-execution) and, as such, Blackacre remains with Ts estate either as (1) residue or (2) intestate b. Estate of Russsell (pg. 359) Holographic will read, All estate to Chester and Roxie. Chester is a close personal human friend of testator. Roxie is a dog friend of testator. i. Trial Court Testators intent was to have Chester care for the dog and give all the estate to Chester to care for the dog, not give half of the estate to the dog. A reference to Roxie is a preference, not a mandate

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Estates & Trusts Fall 2011 ii. Supreme Court Allows extrinsic evidence to testify that Roxie is a dog. Once this is done, the intent is clear and no more further extrinsic evidence is needed. a) to Chester is valid b) to Roxie is VOID and goes intestate c) Language is clear To determine if there is ambiguity in a will, apply a 2-step process: a) Threshold phase is the language vague and ambiguous on its face? b) IF SO, only then can we consider extrinsic evidence. Here, no such ambiguity. Instead, the will devises 1/2 to Chester and to Roxie Russell; however, devise to Roxie is void and, because the same default that governs lapsed devises governed void devises, Chester remains frozen at .

iii.

iv.

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Estates & Trusts Fall 2011

IX.

Changes in Property After Execution of the Will (pg. 380-392) A. 3 Categories of Devises Specific, General, Demonstrative 1. Specific Devise Devise of a specified item owned by T. Identifiable and distinguishable from the rest of the estate. E.g., 2008 BMW. (subject to ademption by extinction) 2. General Devise Devise of a specified value or amount, which is not a particular, distinguishable asset of estate. E.g., $10,000 to X. (NOT subject to ademption by extinction) 3. Demonstrative Devise Devise that is payable frist out of a particular specified source. If that source is insufficient (runs out) the rest of the devise is paid from the rest of the estate. It is quasi-general and quasi-specific. E.g., $2,000 to X first from my savings account, then out of my general assets. (NOT subject to ademption by extinction) B. Ademption by Extinction If the estate possesses no item in the will for a Specific Devise, it is treated as if the devise had never been made. Cash proceeds are NOT given as substitute. 1. This is the traditional rule, and the rule that will apply on the exam! Note: this is known as the Identity Theory of Ademption a. Minority view is intent theory of Ademption do allow devisee replacement if you can show this is what T intended 2. Examples: a. T devises grandfather clock to A. Before T dies, he sells it to B. T dies and A gets nothing. b. T devises Blackacre to J and the rest to M. T then sells Blackacre to X and takes the proceeds to buy Whiteacre. T dies and J receives nothing. 3. Intent = Irrelevant All that matters is whether the estate includes the item that matches the language of Ts specific devise. 4. Applies only to Specific Devises. a. If devise is general and there are not enough liquid funds, usually other assets can be liquidated to satisfy (same for demonstrative) 5. In re Estate of Anton T devises half interest in duplex to G and R. Rest and residue to R and N. T gives power of attorney to daughter and goes into nursing home. Daughter sells assets to pay Ts expenses. T is generally aware but no evidence she knew duplex was being sold. a. Court Modified intention approach applied. If there is removal of devised property from the estate that is involuntary = no Ademption. i. Since T was in competent, she was unable to change the will ii. Even if we assume T was competent, she still had no knowledge and therefore no chance to change will b. Majority Rule knowledge is not important. If item is gone, there is ademption 6. Avoiding Ademption 4 ways to avoid the Ademption by Extinction doctrine a. Avoid Specific Devises Characterize devise as general or demonstrative i. Devise 100 shares of GM stock to X General Devise ii. Devise my 100 shares of GM stock to X Specific Devise iii. Whatever balance remains in bank account Specific Devise iv. $10,000, more or less, entered on my bank book Demonstrative Devise b. Classify the inter vivos disposition as a change in form, not substance

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Estates & Trusts Fall 2011 E.g., My 100 shares of Tigertail Corp stock to A. Later, Tigertail Corp merges into Lion Corp., which retires the Tigertail stock and issues in its place 85 shares of Lion stock for every 100 shares of Tigertail. a) Most courts hold that corporate merger or reorganization is only a change in form, not substance, so that A takes the Lion stock. ii. Parker v. Bozian (pg. 387) T devises certificate of deposit. Postexecution but before death, T converts two smaller CDs with different numbers a) Court no Ademption c. Construe the meaning of the will as of the time of death rather than as of the time of execution. Ademption applies only to pre-death changes. i. E.g., T devises, My Lincoln automobile to A in her 1984 will. At her death, T owned a 1988 Lincoln. The court allowed to take the 1988 Lincoln. a) Replacement Rule at that moment-focused time of death, is there something in the estate that matches the devise in the will? b) Majority Rule If T replaces an item that matches the language of the will and while retaining the will Ts intent was to have the language apply to the replacement, then it passes. No Ademption by Extinction ii. But see in Morris, a devise failed with T sold a diamond watch referred to in the will and bought another diamond watch worth approximately 5 times as much the original. a) Minority Rule! Finding here probably had more to do with the dramatic difference in value. b) NOTE: Although actual intent is generally irrelevant, it can be used to negate the replacement rule so that there is Ademption! iii. Mental Disability Exceptions a) E.g., If T becomes insane or legally incompetent post-execution, usually (but by state statute only), we say that there is no Ademption by extinction so that if the items isnt there, the devisee still gets either a replacement or the cash value. b) E.G., Assume T executes a will and devises and then sells grandfather clock. But T is mentally ill. No Ademption by Extinction when property changes, clock is gone and it must have been Ts presumed intent. This does not apply if T is incompetent because he could not have formed the requisite presumed intent. 7. UPC 2-606 Intent Theory (adopted in KS): Unless covered below, there is a presumption of Ademption by Extinction, but it is rebuttable by evidence that the Testator would have intended no Ademption. a. A specific devisee has a right to the specifically-devised property in the testators estate at death and i. Any balance of the purchase price owing from purchaser to T at death by reason of sale of the property (UPC 2-606(1)) i.

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Estates & Trusts Fall 2011 ii. iii. iv. v. Any amount of condemnation award for taking the property unpaid (UPC 2-606(2)) Any proceeds unpaid at death on casualty/fire insurance (UPC 2-606(3)) Any property owned by T as a result of foreclosing a mortgage (UPC 2606(4)) Any real or tangible personal property owned by T at death, which T acquired as a replacement for specifically-devised real or tangible personal property (UPC 2-606(5))

8. HYPOS: a. T devises a Ford to A. T sells Ford and buys Rolls Royce. i. Traditional approach replacement rule not applicable ii. UPC 2-606 approach Did T buy the Rolls Royce as a replacement? a) Question of intent b. Aunt Fanny Fox collects Chinese snuff bottles. She devises these snuff bottles to Wendy Brown. Aunt Fanny Fox dies. i. There is no record of how many bottles there were. No witnesses ii. Traditional Approach Wendy gets all the bottles are found a) She loses out to the ones that are gone they are adeemed by extinction iii. UPC 2-606 Wendy gets all the bottles found PLUS if Wendy can show Ademption would be against Aunts intent, she could get the replacement value if she can prove how many bottles there were. C. Accession when the property increases in value, post-execution but pre-death. 1. Issue Raised Is devisee entitled only to original gift, or also the additional value that was created? 2. General Rules/Test Is increase in value separate and independent from originally devised item? a. Mere Appreciation if merely appreciation in value of the item devised, the increased value goes to the devisee b. Income Generating if the increase is generated income by the devised item, the increased value does NOT go to the devisee i. E.g., rent from land ii. Pre-death income from the item (rent from land) does not go to devisee. It is regarded as separate, independent property. c. Post-Death Increase If the increase in value involves post-death accession, it clearly goes to the devisee because the base asset (the gift) becomes property of the devisee immediately upon Ts death 3. HYPOS: Is the devisee entitled to the increase in value in addition to the base gift? a. T devises my bond to X, which generates pre-death interest. i. Yes. ii. X is entitled to collect interest on the bond b. T devises $10k to X, which generates interest in the bank i. No. ii. X is not entitled to collect interest on a flat sum of money c. T devises interest on a debt owed (creditors right) to X.

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Estates & Trusts Fall 2011 i. Yes. ii. X is entitled to the interest. d. T devises interest on an amount due on a debt to X. i. No. e. T devises Blackacre to X. At Ts death, Blackacre has immature growing crops. i. Yes. ii. X is entitled to, not only Blackacre, but also to the growing crops f. T devises Blackacre to X. At Ts death, there are harvested crops stored on property. i. No. g. T devises Blackacre to X. At Ts death, the crops are mature and ripe (no longer growing, but still attached to the ground), but havent been harvested. i. No clear answer. ii. Pretty good argument for no because the crops have stopped drawing nutrients from the earth 4. Stock Dividends Majority Rule: Stock dividends declared during Ts life do NOT go to devisee. a. Rationale: Will has no effect until T dies. As such, income earned until Ts death is property that is separate and different from the stock devise. Under the majority rule, stock dividends are treated the same as cash dividends b. Consequence: Ownership rights may be diluted if additional stock dividends are distributed and this may not be what T had intended. i. E.g., Will reads, 16 shares of my corporate stock to X. At time of devise, the corporation has only 2 shareholders, T and Y (who also has 16 shares), so that each have 50% ownership rights. Later, the corporation declares a 25% stock dividend, which would generate a 4-share dividend. T dies. What result? a) X gets 16 shares 1. Other 4 shares go to testators estate b) Y has 20 shares c) Reduces X to only 40% ownership rights as compared to Y. d) Doesnt matter under majority rule. c. UPC 2-605 new stock belongs to devisee i. In the example above , the additional 4 shares of stock would also go to A along with the original 16 shares ii. Completely opposite of majority rule 5. Stock Splits (majority rule) Additional stock that is generated from a stock split passes with the base stock and goes to the devisee. Stock splits dont reflect profits, but appreciation in the value of stock. a. Rationale: A stock split is appreciation of the stock itself. When stock increases in value, the concern is that it might be more difficult to sell. So, the corporation will take back 1 share and give the stockholder 2 shares back to make it more marketable. The court views these 2 shares really as the single, initial share 6. Other Property a. Bonds devisee entitled to interest on the bonds

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Estates & Trusts Fall 2011 Cash devisee NOT entitled to interest on case Creditors Claim devisee entitled to interest Transfer of amount owing on debt devisee NOT entitled to the interest Blackacre with immature crops devisee entitled to immature crops (still part of the land f. Blackacre with harvested crops devisee NOT entitled to harvested crops D. Ademption by Satisfaction (satisfaction of general pecuniary bequests) Will devises general pecuniary devise of say money. Post execution, pre-death, T makes an inter vivos gift to devise. When that happens, that triggers a presumption that the gift was part of an early devise. It can be either total or partial satisfaction determined by intent. In essence, it is an early transfer of that devisees devise. 1. Rebuttable presumption that T intended gift to be in satisfaction of devise (similar to advancement of intestate property) 2. Intent is the key 3. Parent/child relationship presumption is even stronger a. Legal fiction parent likes to treat children the same in the long run 4. HYPOS: a. T devises $50k to my son, S, residue of my estate to my daughter, D. After executing the will, T gives S $30k. What result? i. This raises a presumption that the gift was in partial satisfaction of the legacy so that S will only take $20k at Ts death. b. T devises his probate estate to kids X, Y, and Z. T then makes inter vivos gift of $14k to X, $10k to Y and nothing to Z. At death, the probate estate is $75k. What result? i. Option #1 The devises to X and Y have totally adeemed by satisfaction, so Z walks away with the full $75k estate. X and Y get $0 ii. Option #2 (most likely) Add $75k + $14k + $10k = $99k. Divide by 3. a) Each daughter should end up with $33k (in total) 1. X gets an additional $19k 2. Y gets an additional $23k 3. Z gets the full $33k E. Exoneration of Liens: Any encumbrances on the devises should be paid off estate before they are transferred to devisee (majority view assume this on exam) 1. Premise: T devises Blackacre to X. at Ts death, there is an outstanding mortgage on Blackacre 2. Rule: Under this doctrine, a devisee has a right to receive a devise of property mortgagefree and whatever is still owed is to be paid off by other assets of the estate. 3. UPC 2-607 (exception): Presumption of majority rule is reversed so that , as a general rule, devisee receives Blackacre subject to the mortgage. a. This can be negated by a statement by T that he wanted it to pass free of any mortgage. Language must be specific: i. Blackacre to A, with any mortgage paid off or Blackacre to A, without exoneration. 4. Wills generally have clause at top of will saying that debts are to be paid off b. c. d. e.

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Estates & Trusts Fall 2011 a. Not specific enough does not represent intent with regard to any devised item with a mortgage attached F. Abatement Situation where there are not enough assets in the estate to pay debts as well as all the devises. 1. Result: Some assets must be abated or reduced. Superior claims must be paid off first. a. Divvying up a limited pie among claimants of different priorities, abatement operates like bankruptcy 2. Traditional View a. Abatement Order under Traditional View In the absence of indication in the will (personal property first then real property): Traditional View i. Personal Property Devises: Preference for a) Intestate real property b) Residue Specific devises of personal property c) General Devises abate before d) Specific Devises intestate real ii. Real Property Devises property a) Intestate Property b) Residual Property c) General Devises d) Specific Devises b. Dividing Portions i. Partition in Kind (divide land proportionally) ii. Partition by Sale (liquidate the property and give cash to devisee) iii. Let devisee keep property and pay the amount back to the estate iv. HYPO: a) T devises $300k to charity B, $100k to charity C and the residue to son A. At the time of execution, T has $800k in his estate. T becomes ill and pays $500k in medical expenses and then dies. What result? 1. Residue goes first A loses out 2. B and C chip in on a ration basis on the value of the devises. B gives up 75% and C 25% 3. Modern View a. Abatement Order under Modern View: in the absence of indication in the will as Modern View to how devises should abate or be reduced, abate in the following order: NO preference for i. Intestate (both real and personal) real property ii. Residue (both real and personal) devises! iii. General Devises (both real and personal) iv. Specific Devises (both real and personal) b. Dividing Portions i. Partition in Kind (divide land proportionally) ii. Partition by Sale (liquidate the property and give cash to devisee) iii. Let devisee keep property and pay the amount back to the estate Kansas View 4. Kansas View - Land is favored a. Abatement Order under K.S.A. 59-1405 unless the will says otherwise:
- Drop that land preference when we get to the last category that we need - Devises in that category are abated pro rata

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Estates & Trusts Fall 2011 i. Intestate personal property ii. Intestate real property iii. Residue personal property iv. Residue real property v. All general devises vi. All specific devises b. Dividing Portions i. Partition in Kind (divide land proportionally) ii. Partition by Sale (liquidate the property and give cash to devisee) iii. Let devisee keep property and pay the amount 5. Final Category Abated Pro Rata: under all views, when we get to the last category that we need, the devises in that particular category are abated pro rata 6. Special Treatment for Demonstrative Devise: for purposes of abatement, treat demonstrative devises as if devise were 2 separate devises a. E.G., T devises $10k to X, paid first from source A, then out of my general estate. We would treat the first clause as a specific devise, the second as a general devise.

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Estates & Trusts Fall 2011

X.

Rights of Surviving Spouse (including elective share) (pg. 469-480; 495-501; printout; 501-508) A. Policy: Decedent can generally will as he would like, but qualification to protect surviving spouses from being disinherited because the spouse helped generate the wealth. B. Two Basic Marital Property Systems: 1. Community Property Income that each spouse earns during marriage belongs to them both (50/50) a. Premise: marriage is a team effort b. Adopted in 8 or 9 states (not KS) c. Limitations: i. Applies only to income earned during the marriage a) Does not apply to inter vivos gifts or property acquired before marriage 2. Separate Property System Income earned by each spouse belongs to that spouse. Generally, both have the right to dispose of their assets in any way they so wish. a. Adopted in 41 or 42 states, including KS b. No built-in provision for the non-income producing spouse i. Surviving spouse has statutory rights giving the spouse their share right off the top as if the assets were never part of the estate (before we consider devises or intestate or elective shares) a) Homestead Right Surviving spouse has the right to live in family home for rest of lifetime 1. Decedent spouse cannot dispose of home in way to deprive surviving spouse of homestead a. E.g., W conveys home inter vivos to X. Xs rights are subordinate to surviving spouses. 2. Probate court can choose or designate the homestead (if more than one), and even if only one home, the power to limit the acreage (KSA 59-401 max of 160 acres outside city/1 acre inside city) 3. KS home must be occupied by decedent and spouse at time of death a. Off limits to creditors except mortgage holders 4. Exemptions (personal property set-aside): right to have certain tangible personal property items of decedent, up to certain value (e.g., family Bible, photos, videos, computer 5. Family Allowance Probate court is authorized to award allowance for maintenance and support of surviving spouse and minor children. a. Typically lasts thru administration of estate; temporary. 6. Dower & Curtesy a. Dower (common law): Attaches to land owned by husband any time during the marriage as long as it was an inheritable interest (FSA)

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Estates & Trusts Fall 2011 i. He owns Blackacre and then she has a dower interest in the land. It is a life estate for her in an undivided 1/3 share of that land. She is a 1/3 co-tenant for her life ii. Interest begins only when husband dies. If she dies before him, she gets nothing iii. If he conveys land away during marriage, the Dower interest goes with the land and they buy the land subject to her Dower claim b. Curtesy Husband equivalent of Dower it is a full interest in HER land. i. His possessory rights begin immediately, not only when she dies ii. He gets no interest until and unless there is a child born in the marriage iii. Can be avoided by selling land to a corporation c. Modern (KS) Interpretation Surviving spouse (him or her) gets of all real property conveyed by the decedent spouse before death to which he/she does not consent C. Elective Share Surviving spouse statutorily entitled to fractional amount of probate estate (property disposed of by will or intestate statute), regardless of any devises in a will. Thus, doesnt include non-probate transfers. 1. Elective share because surviving spouse has an election: a. He/she can keep whats coming to him/her under the will plus what he/she would be entitled to under the states intestate succession statute, OR b. If he dies first, she can reject what the will says and what is provided under the intestate succession statute and take instead, the elective share. 2. Purpose To protect surviving spouse. a. E.g., H and W have been married 50 years. His will devises entire estate to KU Law. If we honor that, then she gets nothing. The statute guarantees some fractional share of the probate estate despite what his will says 3. Policy Problems: a. Unfair Might strike some as unfair that someone has been a spouse for a short time and still be entitled to even as much as of probate estate b. Over-Compensation Spouse can get surviving joint tenant AND elective share c. Under-Compensation Elective share is based on probate estate. So, if decedent puts all assets in a joint tenancy, they are not part of probate. 4. Non-Probate Estate Benefits Elective share considerations are made separate from any assets received via joint tenancy, life insurance policy, and trust. a. Homestead, Allowance, and exemptions come off top and paid before elective share

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Estates & Trusts Fall 2011 i. Disregard in calculation of elective share 5. UPC 2-202: Elective Share Here, the elective share is based, not on the traditional probate estate, but rather the augmented estate a. Augmented estate = probate estate PLUS certain non-probate transfers b. Adopted in KS c. Policy Premises Goal is to give the surviving spouse their half of the marital property. i. Partnership Model Marriage is a partnership thus, his property is their property ii. Variable Percentage Percentage of elective share increases for each year married iii. Title of Property not Determinative Just because it is titled in only her name or only his name, doesnt mean it is definitely not marital property iv. Property that passes to 3rd parties should be deemed part of marital property (life estates). v. Ultimate goal is to give each - no more, no less. Thus, we take into consideration surviving spouses assets and some of those assets might properly be considered as martial property. (she may already have some of her half.) d. Calculation of Elective Share i. Step 1 Calculate Augmented Estate. Augmented Estate = sum of: a) Decedents net probate estate (e.g., property disposed of by will or intestate) b) Decedents non-probate transfers to persons other than surviving spouse 1. POD accounts, TOD accounts, life insurance policies, joint tenancies, etc. 2. Any transfer during marriage where decedent retained possession of, enjoyment of, or income from the property and in which the decedents right to terminate at or continued beyond death. (i.e., life estate remainders, inter vivos trust arrangement remaining interest, etc.) 3. Assets that passed during marriage and during 2 years immediately prior to death as result of termination of a right or interst in or power over an asset that would have been included under (2) if not terminated before death, and transfers described in (2) during marriage in which decedent retained an interest 4. Transfers during marriage and during 2 years immediately preceeding death to invidivuals other than the surving spouse to the extent the aggregate transfers exdceeded $12k a. NOTE: Irrevocable trusts with a third party as beneficiary are included in the augmented estate

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Estates & Trusts Fall 2011 only to the extent they were set up during the marriage, if before or after then not included c) Decedents Non-Probate Transfers to surviving spouse (POD, joint tenancies, TOD accounts, life insurance policies) d) Surviving spouses individual assets AND non-probate property transfers by her to people other than the decedent ii. Step 2 Determine Elective Share Percentage a) See DLT handout only need to know how long theyve been married b) NOTE: The elected share percentage is NOT the same as the amount of marital property. Instead, the elective share percentage is half of the marital property. As such, for example, if the couple were married 16 years, 100% is marital property, but the elective share percentage is 50%. iii. Step 3 Calculate Elective Share Amount: a) (Augmented Estate) x (Elective Share Percentage) = Elective Share Amount b) Supplemental elective share amount If the elective share amount is less than $75k, we will tack on (via statute) whatever it takes to get to $75k. The portion that is tacked on is the supplemental elective share amount. iv. Step 4 Identify Sources to Satisfy Elective Share Amount a) First Source: Surviving Spouse 1. Assets in surviving spouse name 2. Assets surviving spouse receives from testator 3. Non-probate transfers b) Second Source 3rd Parties 1. Reduce elective share amount by: a. devises by his will to others b. non-probate transfers to others c. third-parties who get their assets because of testators death i. not retrieving, just preventing the assets from going to them c) Third Source Recently transferred assets to 3rd parties 1. Reduce elective share amount by: a. Assets transferred during marriage and within last 2 years of decedents life b. Inter vivos transfers to outside third parties i. Anything in excess of $12k is in play d) If more is still needed, take from probate estate 6. Elective Share Waivers a. General Rule Suriving spouse can waive rights to any allowances, wholly or partially, before or after marriage by signed waiver of agreement as long as it is

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Estates & Trusts Fall 2011 not fraudulently executed, no misrepresentation is involved, no duress, no undue influence, etc. b. Prenuptial/antenuptial agreement Upheld if there is reasonably fair disclosure and opportunity to obtain legal counsel i. Presumed valid in absence of fraud ii. Party attacking validity has burden of proof to prove fraud to rebut presumption (high burden of proof) a) Burden will shift to proponent if the opponent can show the relationship was one susceptible to fraud or coercion c. Reece v. Elliot (pg. 503) P is surviving spouse. P and decedent had children from prior marriages. Each wants to provide for children and renounce elective shares. i. Agreement stated both had counsel and there was full disclosure of assets ii. P argues decedent did not disclose full value of stock owned; agreement invalid iii. Court agreement valid a) Knowledgably proponent of agreement has to prove a full and fair disclosure of the nature and extent and value of partys holdings was provided OR disclosure was unnecessary due to spouses knowledge 1. Was the spouse misled? Did spouse have opportunity to ask questions? Did spouse have chance to discover assets? Did spouse show lack of interest? b) P had many opportunities to find out size of estate c) Constructive knowledge may be attributable if there is access to records or knowledge of real estate holdings iv. General Rule prenuptial/antenuptial agreements upheld if there is reasonably fair disclosure and opportunity to obtain legal counsel d. UPC 2-213 Agreements are valid IF i. Agreement is signed voluntarily ii. Cannot be unconscionable iii. Cannot have a written waiver of disclosure iv. Must have reasonable knowledge of assets at time agreement was executed

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XI.

Omitted Spouse (pg. 515-519) T fails to make adjustments in will for new spouse A. Premise: 1. Will Marriage No change in original will a. Must have a post-execution marriage for these statutes to apply B. Rationale purpose is to protect forgotten spouses C. Omitted Spouse Statute Surviving spouse is entitled to what he/she would have received had the decedent died intestate D. Omitted Spouse v. Elective Share 1. Elective share is generally to 1/3 of probate estate 2. Omitted spouse could end up with entire estate E. In re Prestie (pg. 516) H & W married 2 years. Marriage ends, H executes pour-over will and trust (already have trust and execute will so assets go into trust). W cares for H and H gives her life estate in condo. H and W remarry and H dies. 1. Statute Person marries after making will and spouse survives, will revoked as to spouse UNLESS there is prenup, spouse provided for in will or specific prevention language 2. Court Statute applies. Life estate provision is not enough to prevent trigger of statute F. Exceptions Spouse not entitled to share if: 1. It appears the will was made in contemplation of Ts marriage to the spouse a. Like will made day before marriage 2. The will expresses the intent that it is to be effective notwithstanding marriage 3. T provides for the spouse by transfer outside the will and intent that the transfer was made in lieu of a devise is shown by Ts statements or is reasonably inferred from the amount of the transfer G. Intentional Omission of Generic Spouses language such as I hereby exclude any living relative of future spouse wont usually qualify as an intentional omission of a post-execution spouse. Overall, courts are unlikely to allow someone to disinherit generic spouses. H. UPC 2-301: Entitlement of Spouse; Premarital Will (pg. 518) 1. If Ts surviving spouse marries T after will executed, surviving spouse entitled to no less than the intestate share with qualifications a. First Carve-Out i. Devise to a child of the testator born before the marriage and who was born to someone other than the spouse ii. Devises to descendants of such child b. To satisfy that amount: i. First take into account devises to surviving spouse from decedents will ii. Then abate devises to others that are not issue of the testator born before testator married surviving spouse or a descendant of such issue c. HYPOS: i. Assume T had prior marriage and kid. Marriage ends. T executes a will for kid and for KU Law. T then marries W2. What result? a) Carve out devise to kid, W2 entitled to other half ii. Assume everything was devised to kid. What result? a) W2 gets nothing

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XII.

Omitted Issue (pg. 519-521; 527-536) Protection from an unintentional disinheritance. T executes will that doesnt mention children. Post-execution T has children. A. Pretermitted Issue Statutes (most states) Typically provide for kids born post-execution and, like omitted spouse statutes, provide that the omitted issue is entitled to take as if T died intestate 1. Minority view provide for all kids, even those born before execution of the will B. Disinheriting Issue 1. With kids, the testator does have the right to intentionally disinherit. Unlike a spouse. elective share option NOT available for kids. 2. Caveats: a. Kids will challenge will if omitted (judges and juries are sympathetic to kids) b. If all you do is state you wish to disinherit and do not affirmatively devise property, the child might be able to cash in as intestate heir c. Consider the possibility of future born kids should they be excluded or not 3. If you explicitly disinherit a particular issue, has the effect of automatically disqualifying anyone further down the chain from inheriting as well. a. Treloar case will doesnt mention E because she had predeceased. Husband of E mentioned as executor. Their children try to invoke omitted issue statute. i. Court No specific mention of E, therefore grandchildren can use statute b. Boucher case Devise to M, wife of A is enough of mention in will to prevent As issue from invoking statute i. name of A specifically mentioned and wife devisee C. Effect of Codicil on Omitted Issue: 1. Because a codicil republishes a will so that the will is treated as if first executed on date of the codicil, if a child is born post-execution but before a valid codicil, the child is regarded as being alive when the will was executed and, as such, child does not qualify under the pretermitted issue statute 2. Azcunce case Will in place in 1983. T executes codicil #1, then daughter is born, then T executes codicil #2. State statute children born or adopted post execution are entitled to intestate share. a. Court child barred because will re-executed with 2nd codicil D. Protection from Unintentional Disinheritance 1. Gray v. Gray (pg. 528) T devised everything to wife. Had 2 children from prior marriage, and then another with current wife. T divorced and never changed will (ex-wife statutorily disinherited). State statute says if child unintentionally disinherited, entitled to intestate share. However, not applicable if T had children at time of marriage and devised estate to other parent of omitted child. a. Court Exception applies because statute is mechanical and Ts intent is irrelevant. Child has no share of estate b. Dissent usually this applies when T devises to spouse to exclusion of their kids because of the idea that kids will be provided thru devise to spouse i. Not the case here E. UPC 2-302 (pg. 531-532) Applies to kids born post-execution.

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Estates & Trusts Fall 2011 1. Post-Execution They get what they would have gotten if T died intestate unless the will provides all or substantially all of the estate to the other parent. a. Rationale Trust the other parent to provide for kids. If not, then devises to others abate. 2. Pre-Execution Already with Devises Court takes the devises that were made and pools them all together. After born kid is included with those who are named as if they are part of a class gift and they all get an equal amount. a. Exception i. If it appears from language in will that omission was intentional ii. If T provided for the omitted child with a transfer outside the will with the intent it was in lieu of devise within the will, then it shall be honored. F. Blanket Disinheritance Language of disinheritance clause must purposefully disinherit specific person, or it will be VERY difficult to uphold

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Estates & Trusts Fall 2011

XIII.

Introduction to Trusts (pg. 541-553) A. Introductory Matters: 1. Definition: an arrangement where a trustee manages property as a fiduciary for one or more beneficiaries. The trust holds legal title to the trust property and, in the usual trust, can sell the property & replace it with property the trustee thinks is more desirable. The beneficiaries hold equitable title and, in the usual trust, are entitled to payments from the trust income & sometimes from the trust corpus as well. 2. Parties to a Trust a. Settlor: the original property owner, who transfers that property to create a trust, essentially making a gift of that original property to the trust for the benefit of the beneficiaries. b. Trustee: has the duty of management of the assets and owes that duty to the beneficiaries. c. Beneficiary: holder of the equitable title, receives ultimate benefits, and has rights of enforcement against trustee in the event he/she breaches any trustee duties. d. Note that all three can wear multiple hats so that, for example, Settlor and/or Trustee could also be a Beneficiary. i. Qualification: if only trustee and beneficiary are the same, it triggers merger, and the trustee receives all assets outright, free of the trust 3. When the Settlor transfers the property, it conceptually divides the title so that he conveys: a. Legal Title to the trustee for the benefit of the beneficiaries. i. Not divided. Instead, all remains in trustee. b. Equitable Title to the beneficiaries. i. Usually, the equitable interest is separated in terms of someone having a present interest and another having a future interest. ii. Standard Example: income generated by principle to A for her life, remainder to B. After A dies, trust is over and any remaining principle plus accumulated income goes to B. c. *as such, neither the trustee nor the beneficiaries own the property exclusively. 4. Sub-Categories of Trusts: a. Revocable v. irrevocableassume irrevocable unless otherwise indicated b. Intervivos Trusts take effect during Settlors lifetime; c. Testamentary Trusts established by Settlors will and, therefore, takes effect when he dies. 5. Reasons to create a trust a. Maintain control over assets b. Flexibility of trust c. Give beneficiaries a chance to take advantage of investment expertise of trustee 6. Settlor a. An intervivos trust may be created either by declaration of trust or by a deed of trust. i. By Declaration Settlor declares that she holds certain property in trust (thus, the Settlor herself is also going to be the Trustee). a) Doesnt involve transfer or delivery.

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Estates & Trusts Fall 2011 b) Intent Requirement: does require some manifestation of Settlors intent that she is now holding these assets in trust (no longer her own). c)Statute of Frauds: if the trust involves real property, SOF will normally apply so that the declaration must be in writing. 1. However, if non-real property assets, declaration can be oral. 2. Note that, as a practical problem, oral declarations may present proof obstacles later By Transfer / Deed of Trust Settlor transfers property to another person as trustee.

ii.

7. Trustee a. Can be one trustee, or several trustees. b. Can be an individual or a corporation. c. Trustee can be: i. Settlor (declaration) ii. A third party (transfer) iii. Beneficiary a) Qualification? trustee can not be the sole beneficiary. d. The No Trust Fails for Want of Trustee Rule: If Settlor intends to create a trust, but the documents fails to name a trustee, court will step in as a court of equity and name a trustee. i. Same result if the named trustee declines to serve or if named trustee dies while serving. ii. Exception? If the trust document expresses Settlors intent that this particular trust be in existence only for so long as X serves as trustee. e. Trustee can decline to serve. i. However, if the trustee does accept at the outset, can only be released from duties if either: a) All beneficiaries consent to release trustee from responsibilities; or b) Pursuant to a court order. f. Summary of Trustees Duties [p. 550]. Trustee has the following duties: i. Fiduciary to act only for benefit of beneficiaries a) Self-dealing prohibited: thus, trustee cant purchase something from trust, or sell to trust. Even if the deal is fair / trustee thinks this is good for the trust. ii. Safeguard assets and make assets productive so as to generate income for trust. iii. Distribute income and principle to beneficiaries in accord w/ principles of trust. iv. Keep trust assets identifiably separate a) Distinct from trustees own assets b) Distinct from assets of other trusts v. Keep accurate records of all transactions and periodically make an account. vi. Act with reasonable prudence vii. Not to delegate Trustee duties to another.

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Estates & Trusts Fall 2011 8. Beneficiaries a. The enforcers of the trust. b. Receive tangible assets of the trust c. Proceeds Rule if the trustee, in wrongfully disposing of trust property, acquires other property, the beneficiary is entitled to enforce a constructive trust on the property so acquired, treating it as part of the trust assets. i. Cause of action against trustee, if they violate their duties d. Trust Pursuits RuleSimilarly, where the property ends up in the hands of a third person, unless the third person is a b.f.p. for value and w/o notice of breach of trust, beneficiary can go after that third party. i. Cause of action against X, if trustee sells assets to 3rd party X, beneficiary can recover assets e. Creditors of Beneficiaries: generally, creditors can not attach the assets of the trust; however, they can attach the beneficiarys interest in the trust (essentially, step into shoes so that are the new beneficiary). i. Obtain court order directed to trusteeorders trustee to make future distributions to creditor, not beneficiary f. Equitable Title i. Present interest in certain assets, then to another when 1st person diesthen trust ends

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XIV.

Creation of a Trust (pg. 557-562; 572; 578-588; 593-596) 1.Elements of a Trust: a. Intent to Create a Trust: there must be an intent, on part of Settlor, that there be mandatory obligations imposed on the Trustee. i. Intent can be derived from Language and Surrounding Circumstances. ii. Language: no particular form of words is necessary to create a trust and the words trust or trustee need not be used; however, when language is not clear, can present problems. a) Simplest Form: To T in Trust; or To T, as Trustee. However, these words arent required to create a trust. b) Precatory Language: If the language is not as clear, it may be considered precatory language. The issue that arises is whether, by this language, the testator intends to create a trust with mandatory legal duties imposed on trustee, or rather if the language is merely a moral obligation, unenforceable in a court. c)Case Examples: 1. Colton v. Colton [p. 522] 2. Lux v. Lux [p. 557] a. Will could have been make more clear by using specific language b. Court decides it is a trustbecomes a question of Ts intentdetermined by looking at all circumstances 3. Jimenez [p. 558] a. Defendant uses proceeds from bond to invest in bank stock b. Mere fact that trustee sold trust assets to purchase Commerce Bank stock did not end the trust 4. T devised entire estate to his wife and then continued, I recommend to her the care and protection of my mom and sister, and request her to make such gift and provision for them as in her judgment will be best. a. Holding: Wife took the estate not absolutely, but rather, subject to a trust for the benefit of the testators mother and sister. b. Rationale: likely b/c of circumstances present in the case. 5. I wish, but do not legally require, the C permit D to live on the land. a. Here, clearly precatory language. As such, not a valid trust. b. Necessity of Trust Property: Because a trust is a method of disposing of, or managing, property it is said that a trust cannot exist without trust property. i. General Rules: a) Mere Expectancy Cannot be Subject Matter of Trust if this happens, courts treat it as a non-event.

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Estates & Trusts Fall 2011 1. E.g., I declare myself trustee of shares of stock in a corp. I may hereafter acquire. Even if he later acquires stock in that corporation, no trust b/c is regarded from the outset as a non-event. 2. Second Declaration Rule In such a case, the Settlor would need to make a second declaration of his or her intent to establish a trust of that property in order to actually have a valid trust. 3. Contract Qualification a contract is more than a mere expectancy. a. E.g., Settlor enters into K with X to acquire property. S provides consideration in form of cash in return for Xs promise to convey that particular property. Here, although S doesnt yet own the property, S can establish a valid trust and theres no need for a second declaration when S does acquire the property. 4. Profits from valid trust are okay. 5. HYPOS: a. O orally declares to A: I give you 5% of the profits of a musical play based upon Shaws Pygmalion, if I produce it and if there are any profits. i. No valid trust, if profits do come into existence, requires 2d declaration. b. O orally declares himself trustee for one year of all stocks he owns, with any profits from stock trading to go to A. i. Valid trust b/c O does already own the stock. Moreover, part to A is fine b/c any profits it generates are income from the trust. c. A declares himself trustee for B of future season KU football tickets. i. No valid trust. With sports programs, not always a guarantee that youll get tickets each year so if A later does receive the tickets, not bound by promise b/c a trust was never created in the first place. c. Necessity of Trust Beneficiaries: a trust must have one or more ascertainable beneficiaries. i. Rationale: a) Need an Enforcer there must be someone to whom the trustee owes fiduciary duties; someone who can call the trustee to account. As a general rule, Settlor doesnt have power to enforce! Once Settlor has set up trust, its regarded as a complete gift and, as such, Settlor no longer has standing to receive anything.

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Estates & Trusts Fall 2011 b) Balanced Conveyance remember that trustee gets legal title and beneficiaries get equitable title. ii. Identified with Reasonable Level of Specificity. If the trust document is too vague as to ID of beneficiaries, the trust fails. Consequence? property goes back to Settlor via resulting trust. a) Bequest for Benefit of My Friends Fails. Unlike relatives, theres no working definition of friends or some legal, objective criteria to determine whether someone is your friend or not. Clark v. Campbell [p.579]. d. Necessity of Written Instrument: An intervivos oral declaration of trust of personal property is enforceable. Conversely, the SOF requires any intervivos trust of land to be in writing. And, of course, a testamentary trust must be created by a will. Nonetheless, under certain circumstances a court will enforce an intervivos oral trust of land or an oral trust arising at death. *Remember, these are situations where an oral agreement never created a valid trust to begin with, but the law steps in to save the trust. i. Oral Inter Vivos Trusts of Land a) Generally, SOF requires conveyance of land to be in writing; however, SOF typically doesnt apply to an interest that arises by operation of law. As such, no SOF issues in this type of situation b/c the law steps in to create a trust by operation of law. b) Resulting Trust: arises by operation of law when facts and circs. show that a person had intent to hold equitable title to property although legal title is w/ another. 1. Can Only Arise in 3 Situations: a. Failure to Create Express Trust i. E.g., beneficiaries not defined w/ sufficient specificity, didnt indicate a trust purpose, or failed to comply with rule against perpetuities.

b. Failure of Express Trust to Dispose of All Trust Property i. E.g., To T in trust in F.S.A., with the income to go to B for life. When B dies, its over and theres no one to continue giving the income too. As such, the legal and equitable title are unbalanced. c. Purchase Money Resulting Trust i. E.g., A pays money to B, and B, in accordance with the agreement b/w them, conveys certain property to C, rather than to A, even though A is the one who paid the consideration.

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Estates & Trusts Fall 2011 ii. Such a situation triggers a presumption that C holds the property for A. c)Constructive Trust: an equitable remedy court imposes to prevent unjust enrichment. 1. Typically Comes up in 3 Situations (but not an exhaustive list): a. Fraudulent Conduct i. E.g., T promises S that if S conveys property to T, T will apply property for benefit of B. At that very moment, T has intent of reneging and using property for his own benefit. ii. Moment-Focused remember that fraud means you lied from the outset. b. Abuse of Confidential Relationships (e.g., parent-child relationship) i. Hieble [p. 596] ii. Pappas [p. 596]no constructive trust b/c Dad doesnt have clean hands c. Property Obtained by Homicide i. E.g., S is prospective intestate heir and murders his father. S will hold his intestate share under constructive trust for the other heirs and courts treat the situation as if S predeceased his father. d) In BOTH Cases, Trust is Merely a Misnomer with these trusts that arise by implication, there is no ongoing fiduciary relationship b/w trustee and beneficiary. 1. Resulting Trust: the holder of the legal title (trustee) simply has the obligation to convey the legal title to the holder of the equitable title (beneficiary). The beneficiary of a resulting trust is the person who had the implied intent to hold equitable title and thus is also the settlor. If the settlor has already died, the beneficiaries of a resulting trust are the settlors successors in interest; that is, the settlors heirs if the settlor died intestate or, if the settlor died testate, the beneficiaries of the settlors will. 2. Constructive Trust: ct. decides that person w/ apparent full ownership of prop. actually holds only legal title b/c it would be unjust for that person to retain the beneficial interest in that property. Then, the judgment of the court acts to transfer legal title from the evil property owner (trustee) to the person who would have owned the property, but for the property owners inappropriate conduct (beneficiary). Oral Trusts for Disposition at Death

For good exam review, see cases from CN_28.

ii.

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Estates & Trusts Fall 2011 a) Three Scenarios: common theme in each is that S chooses to have property disposed of in a particular way when he dies based in part on her reliance on Ts oral promise. 1. S devises by will Blackacre to T, but does so only after T has orally promised that he will hold Blackacre in trust for B. 2. S devises Blackacre to T in a will executed one year ago. Now, T promises orally that he will hold Blackacre in trust for B. 3. T is Ss only intestate heir. T promises that if S dies intestate, he will hold Blackacre in trust for B. b) Generally, unenforceable b/c of either the execution requirements for wills or due to SOF b/c involves land. As such, issue that arises in these situations is whether law recognizes an exception. c)Secret Trusts Will: to T + Oral: in trust for B = Constructive Trust to B. 1. General Premise: a will that purports to make an absolute gift but where there is actually an agreement b/w the beneficiary and the testator that the beneficiary will hold the property in trust for a person the testator has separately indicated. If beneficiary retained the property, he would be unjustly enriched. As such, courts will establish a constructive trust for the intended beneficiarys benefit. 2. General Rule: in this type of situation, oral beneficiaries can present evidence of that trust. a. Qualification? must satisfy by clear and satisfactory proof (higher standard of proof than normally required). 3. Must have a Will! If the portion that purports to make an absolute gift is not via will, the secret trust exception doesnt apply. d) Semi-Secret Trusts Will: To T in trust + Oral: for B = Resulting Trust. 1. Here, called semi-secret b/c at least we do have a writing indicating its some kind of trust. What is secret it its terms and beneficiary. 2. Here, we dont allow extrinsic evidence. Instead, we know that T isnt supposed to have it so instead of using extrinsic evidence to ID B, it goes back to S via resulting trust (in form of Ss successors in interest).

See: Handout 11/2

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XV.

Discretionary and Spendthrift Trusts (pg. 597-627) 1. Rights of the Beneficiaries to Distributions from the Trust: a. Mandatory Trust the trustee must distribute all the income. i. E.g., O transfers property to X in trust to distribute all the income to A. This is a mandatory trust. The trustee has no discretion to choose either the persons who will receive the income or the amount to be distributed. ii. Case #1, p. 598 b. Discretionary Trust the trustee has discretion over payment of either the income or the principal or both. Discretionary powers of a trustee may be drafted in limitless variety. [case 2, p. 598] i. Type of Discretion: when, from where, who, amount ii. Level of Discretion: even if the discretion is absolute, its always governed by the implied standard of reasonable prudence (thus, never really total absolute discretion). iii. E.g., O transfers property to X in trust to distribute all the income to one or more members of a group consisting of A, As spouse, and As children in such amounts as the trustee determines. The trustee must distribute all of the income currently, but has discretion to determine who gets it and in what amount. iv. Support Trust: where the trustees discretion is limited by an ascertainable support standard (e.g. such as amounts as are necessary to support my children in the style of living to which they are accustomed). a) Need dictates both floor and ceiling. 1. Trustee is obligated to make distribution for beneficiaries needs; BUT 2. Trustee cannot made distribution beyond those needs. v. Discretionary Support Trust combines an explicit statement of discretion with a stated support standard (e.g., such amounts as trustee shall, in his uncontrolled discretion, deem necessary to support my children in the style of living to which they are accustomed.) a) Need dictates ceiling only. b) However, for all purposes, same as a support trust b/c courts hold that this discretion is governed by an objective standard of reasonable prudence (rather than the trustees own, subjective discretion). Marsman v. Nasca [p. 598] vi. Trustees Duties under Support Clause: a) Cant refuse to make payments b) Make distributions only to extent facts meet the need; c)Authority to make those distributions, but no more! d) Duty to make a reasonable investigation as to the beneficiarys needs; e) Duty to inform beneficiary as to whats available in the trust to meet those needs. vii. If B doesnt know, Bs consent to not receiving payments is not a waiver because it was uninformed consent 2. Rights of the Beneficiarys Creditors

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Estates & Trusts Fall 2011 a. Mandatory Trusts: Creditors can always attach and get in line before other Cs. i. If Trustee doesnt pay C, but instead pays B, trustee is personally liable to C b. Discretionary Trusts: because a beneficiarys interest in a discretionary trust is a mere expectancy, although a Creditor can technically attach the interest, this can only be done when theres an exercise of the trustees discretion! Therefore, its really on a distribution by distribution basis and C must wait in line w/ other Cs. i. Because the beneficiary cant compel the trustee to make a distribution, neither can the C because he is in no better position than the beneficiary. As such, trustee can choose not to exercise discretion at all. a) Possible Exception? implied standard of reasonable prudence. b) NOTE: Here, talking exclusively about the Expressly Total and Absolute discretionary trusts b/c in case of an expressly limited discretionary trust (e.g., need-based) beneficiary/creditor can compel distribution when the need is present. ii. General Rule: Discretionary Clauses Bar Creditors, Even Super Creditors! This is true even if theres a spendthrift clause on top of a discretionary clause. E.g., Shelley [p.618] iii. What Constitutes an Exercise of Discretion? a) Generally, any manifestation of intent on the part of the trustee to release control of assets in favor of the beneficiary is an exercise of discretion. b) Can also be dictated by the terms of the trust. c. Spendthrift Trusts: one way to preempt this sort of attachment is via a spendthrift clause. i. 3 Forms of Spendthrift Clauses: a) No Assignments Language: language in trust that prohibits the beneficiary from assigning his interest in the trust to some outside, third party. b) No Attachments Language: language in trust that prohibits a creditor from attaching the beneficiarys interest in the trust. 1. NOTE: although this is conceivably possible (language prohibiting attachments, but allowing assignments), most courts hold that this language is invalid b/c it violates public policy. Rationale? allows debtor/beneficiary to pick and choose which of her creditors are paid. c)Both: language that prohibits both assignments and attachments. ii. Effect of Spendthrift Clause C can only go after assets after distributions have been made (cant get in line early) distribution by distribution (post facto / never prospective). iii. General Rule: spendthrift clauses are valid and honored.

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Estates & Trusts Fall 2011 iv. Exceptions Spendthrift Bars situations where spendthrift clauses are ineffective (general rule): a) Child Support and Alimony [Shelley, p.618] 1. Income spendthrift is no bar 2. Principal discretionary clause is a bar. b) Tort Claims c) Federal Government not effective to protect against tax claims. d) Necessities 1. A person furnishing necessary services or support (e.g., medical necessities and food) can penetrate a spendthrift clause and a support clause e) Exception to the Above? if the state has a statue that speaks exclusively to this so that the courts cant carve out their own exceptions. E.g., Scheffel [p.616]

P. 625, #6

d. Self-Settled Asset Protection Trusts i. General Rule: cant set up a spendthrift or discretionary trust for yourself. ii. Rationale? shouldnt be able to enjoy benefits of your property while simultaneously avoiding creditors. The protective justification for allowing a donor to insulate a gift from the claims of donees Cs collapses when the donor and the donee are one in the same. iii. Net Result? Creditor can reach the maximum amount that the trustee could pay the Settlor out of his or her discretion.

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XVI.

Termination of Trusts (pg. 641-643; 653-658)

A. General Rule: once a trust is established, it is irrevocable. B. Exceptions: a. Consent of Settlor and ALL Beneficiaries if the settlor and all beneficiaries consent, an irrevocable trust may be modified or terminated. This is b/c no one else has any beneficial interest in the trust including the trustee. Thus, the trustee cannot object. The right to modify or terminate with consent of all beneficial parties exists notwithstanding a spendthrift clause. b. Claflin Doctrine trust can be terminated or modified if no material purpose of the trust would be undermined by termination or modification and all beneficiaries consent. [p. 642] i. Here, even if Settlor is dead or objects, can get trust terminated if other elements are met. ii. Examples of material purposes that would prevent termination/modification: a. Spendthrift clause b/c material purpose is to protect beneficiary from himself. [p. 657, note 2] b. Support trust c. Discretionary trust all discretionary trusts embody settlors intent to protect B. d. Age requirements e.g., if trust requires holding P from B until she reaches 21. iii. Example of things that are not a material purpose a. When a trust provides merely for successive beneficiaries, the settlors only purpose is to provide successive enjoyment. Really its just a time schedule (one interest after another) and, as such, not a material purpose that would prevent termination. b. In re Estate of Brown [p. 653] i. 2 issues to consider for termination(1) do all beneficiaries agree?, (2) will termination undermine purposes of trust? ii. Facts: trust had 2 purposes: educations for nephews and lifestyle maintenance after educational needs were metP wants trust terminated b/c educational purpose has been met, and fulfilling the 2nd purpose would best be served by just giving them the moneytrustee argues its a support trust or a spendthrift trust, and thus cannot be terminated iii. Court says its not a support trust or a spendthrift trust, but still cannot be terminated because the 2nd material purpose has not been fulfilledit was meant to be a lifelong flow of income at the discretion of the trustee, the settlor intended more than just successive enjoymentif all money were given now, there is a risk the beneficiary would squander it before the end of their life.

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XVII. Revocable Trusts (pg. 397-403; 488-495; 414-418) 1.Gen. Rule: inter vivos trust is irrevocable, unless power to revoke is expressly retained by settlor. a. Must be done by express language in the trust document; b. The settlor must then follow the procedures that he himself put in the document to revoke it. 2.Potential Issue: did the settlor retain too many rights in the property? In these cases, some may argue that if theres too much power over the assets, its really an attempted will rather than a trust; however, that will fails because of failure to satisfy the states will requirements, and property stays with the original owner i. General Rule: generally, courts give settlors a lot of leeway to retain many powers and still have a valid, enforceable trust. a) Farkas v. Williams [p. 398] Settlor retained lifetime benefits over corporate stock, upon his death, beneficiary gets title. Settlor also retained right to vote stock in corp. decisions, right to sell, right to change beneficiary, and right to revoke. Intestate heirs claim trust was testamentary and therefore more like will. Because the will was not properly executed, its invalid and the property should pass via intestate succession. Even though settlor retained this power, court held it was an effective inter vivos trust (not attempted will). 1. Rationale? under arrangement, his revocation was ineffective unless he followed certain procedures, so the settlor did give up certain elements of control. Also, his administrative control wasnt really determinative since those rights are subsumed by his right to revoke anyway and finally, he manifested an intent to create a trust. 2. Overall, settlor can retain a LE and power to revoke and still create effective trust. *This is also the position of the Restatement. b) General rule: case-by-case issue, there is not definitive rule ii. Effect of Elective Share: though gen. rule is a trust is valid, even if settlor over-retains power, will it be regarded as invalid when the surviving spouses elective share is at stake? a) Sullivan (objective test) NO. Trust remains valid and wife has no rights to the assets as part of her husbands estate subject to her elective share, even if the settlor did this with the intent to circumvent the elective share statute. b) Newman (subjective test)[p. 493, note 1] YES. The elective share is a special factor that could tip the balance in the opposite direction. 1. Kansas has followed Newman so that we could say in Kansas we have a special interest in protecting the surviving spouses interests generally (both elective share and intestate share).

Overall, need to know distinction b/w 2 cases/positions.

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Estates & Trusts Fall 2011 2. IF the court does apply this approach, the trust is only partially invalid so that its only invalid to the extent necessary to provide for the surviving spouses interest. 3. Looks at whether the settlor established the trust to avoid spouses elective share c) General Rule (majority) is to use the Objective test (used in Farkas and Sullivan). As such, we only look at the rights retained and whether they are too substantial, without regard to the settlors intent or motive. 3.Mechanics for Revoking a Trust: a. No Harrison Presumption w/ Trusts: if a will was last traceable to the Testator and we cant find it, the Harrison presumption assumes that the T destroyed w/ intent to revoke. No similar presumption w/ trust documents. We dont revoke trusts by physical act, unless the trust document itself provides for such revocation. i. In re Estate & Trust of Pilafas [p. 414] b. Overall, can only revoke a trust if the document itself allows for revocation and if so, revocation may only be accomplished by the methods prescribed for in that document. c. Examples i. [p. 415, note 1]: will stating to revoke a trust, likely wont lead to revocation of the trust because not all requirements for revocations are met. ii. [p. 415, note 2]: If Pilafas tore the will an trust into many piece, the will would be successfully revoked, but the trust would not be 4.Spendthrift trust/discretionary for yourself = over-retention. Assets will belong to your estate when you die. a. State Street Bank & Trust v. Reiser [p. 416] i. After creator of a discretionary trust dies, the assets are open for creditors to take, but only to the extent that debts arent covered by probate assets b. Exception: does not apply to joint tenancy in land!

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XVIII. Pour-Over Trusts (pg. 443-447) 1.Pour-Over Trusts: In general, an inter vivos trust exists and the testator of the will wants the assets of the estate to pour-over into that trust upon his or her death. 2.General Premise: (1) Settlor sets up a revocable inter vivos trust naming X as trustee. Settlor transfers to X, as trustee, his stocks/bonds. (2) Settlor executes will devising residue of his estate to X, as trustee, to hold under terms of inter vivos trust (i.e., pour-over from probate estate into trust) 3.Methodology of Pour-Over Trusts Validity: a. Incorporation by Reference (Minority/Old View): a will can incorporate by reference a trust instrument in existence at the time the will is executed. i. Strictly applied, which limits its application (may read to result less reflective of Ts intent) ii. Document must be in existence at time will is executed. iii. Will must refer to trust document with reasonable specificity. iv. Also problematic b/c it allows the original assets of the trust to become fair game for Cs. b. Independent Legal Significance (Majority/Modern View): a will may dispose of property by referring to an inter vivos trust that disposes of assets transferred to the trust during life (an act that has significance apart from disposing of trust assets). i. More flexible, so likely more reflective of Ts intent. ii. One advantage is that the instrument doesnt have to be in existence when the will is executed; however, the trust must have some assets in it before T dies. iii. No possibility of pulling in original trust assets, so they wont become open to elective share and/or creditors claims. c. Example i. Intervivos trust to XWill to pour over to trustamended trust to Y a) Under incorporation by reference, will pours over into first trust b) Under independent legal significance, will pours over into 2nd trust d. UPC 2-511 (adopted in KS): [p. 444] validates a pour-over of probate assets into an inter vivos trust executed before, concurrently, or after execution of the will. Doesnt make original trust testamentary (thus, follows doctrine of independent legal significance); as such, doesnt subject original assets to Cs (however, the new assets do go through probate and are subject to their claims) i. Statute negates incorporation by reference. B. Can pour-over into an unfunded trust (unlike at common law). See Clymer v. Mayo [p. 445]

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XIX.

Charitable Trusts (pg. 751-768; 774-787; 793-795) 1.Advantages Over Private Trusts: a. Does not have to comply w/ Rule Against Perpetuities. b. Cy Pres Doctrine if settlors exact charitable purpose cannot be carried out, court may step in and continue trust by directing the application of the trust property to another charitable purpose that approximates the settlors intent. Whereas a private trust terminates once the purpose ends. c. Do not need ascertainable beneficiaries. In fact, if the beneficiaries are too precise, it fails as a charitable trust and instead is a general trust. Instead, beneficiaries must be general. 2.Validity: a. Charitable Purpose: a charitable trust must have a valid, charitable purpose. Purposes include: i. Health (e.g., to set up a hospital); ii. Religion (e.g., to build a church); iii. Advancement of education (e.g., scholarships); iv. For the relief of poverty; a) Rule: when a gift is mere financial enrichment, its only charitable if restricted to the poor. Shenandoah Valley Natl Bank v. Taylor. [p.752] v. Government of municipal purposes; vi. Other purposes, the accomplishment of which are beneficial to the community. a) Mere financial enrichment is not enoughcan maybe get around this if funds are only going to needy people b. HYPOS: i. Trust to pay law professor Charitable, b/c advances education. ii. Trust to build church for wealthy residents of Mission Hills Charitable, b/c it promotes religion (doesnt matter if theyre rich). iii. Trust for general benefit of lawyers not charitable. iv. Trust to benefit a particular political party not charitable. v. Trust to promote socialism/general structure & methods of government Charitable, b/c its educational by exposing people to new ideas and it improves the government by encouraging the exchange of ideas. vi. Trusts with a limited number of people who directly benefit (scholarships)Charitable (does not include trusts to educate a single, identifiable person) c. A trust may be a valid charitable trust, even though the persons who ultimately benefit are limited in number. The key is that the selection pool must be large enough so that were considering that community as a whole. Thus, a trust awarding scholarships for educational achievement is charitable, even if only one or two students will receive them, provided that the class of eligible recipients is broad. But a trust to educate one, particular person is not charitable b/c it does not benefit the general public. 3.Modification of Charitable Trusts: Cy Pres:

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Estates & Trusts Fall 2011 a. Premise: Settlor sets up a trust for a general purpose, but w/ a specific beneficiary. Later, the intended purpose becomes either obsolete or impossible/impracticable to perform. b. Rule: under the doctrine of cy pres the court is empowered to step in as a court of equity and selective an alternative that is as close as possible to the Settlors original intent (cy pres means as near as possible). i. Only for charitable trustsdoes NOT apply to private trusts ii. Qualification All or Nothing Intent if its be found that the Settlors intent was that this charitable entity/purpose and only this one be the recipients, we wont apply cy pres. a) Could use a gift over clause c. General Charitable Purpose: There must be a general charitable purpose for cy pres to even apply b/c otherwise, might indicate Settlors intent that cy pres not be available. i. E.g., Settlor sets up trust to be used as hospital in memory of her husband. This was held general. It didnt specify any specific type of medicine. Result? court applied cy pres to hold that the building could be used for administrative purposes (not even a hospital) so long as the administrative building was medical in some way. In re Nehr [p.761] d. Cy Pres is not available merely b/c the assets could be put to better or more efficient/worthy uses. See e.g., The Buck Trust [p.765]. e. Discriminatory Trusts: i. Premise: have a charitable trust that limits use of assets on, for example, gender or race. a) Public Entity: If it calls on a public entity to administer the trust, courts have held it violates the equal protection clause (in case of race). As such, most courts use cy pres. b) Private Entity: might still have an issue if there are state statutes that prohibit private entities from discriminating. If so, courts would use cy pres. ii. Exception? again, if settlor expresses all or nothing intent, no cy pres, trust fails, and wed have a resulting trust back to Settlor or Settlors estate. 4.Enforcement and Supervision of Charitable Trusts a. Traditional Rule: the Attorney General has the power to enforce a charitable trust or a co-trustee has power to enforce against a fellow co-trustee. i. Herzog [p. 776] b. Special Category / Exception persons who have a special interest in the administration of the trust. Someone who is entitled to receive a benefit under the trust in a way that is not available to the public as a whole has standing in many courts. E.g., Smithers v. St. Lukes-Roosevelt Hospital Center (see p.776) c. UTC 405(c) allows the Settlor to enforce a charitable trust.

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XX.

Powers of Appointment (pg. 803-810; 812-836) 1.Defined: a power given by the original property owner (donor) that gives the recipient of that power (the donee) the power to determine who is entitled to receive the final interest in the prop. 2.The Players to a Power of Appointment: a. Donor: original property owner; creates the power b. Donee: person who receives the power, has power to decide who ultimately will receive the property and usually the power to determine the extent that party will receive (amount)anyone can be a donee c. Objects: the people in whose favor the power could be exercised (candidates). d. Appointees: who ultimately receives the property; selected from objects e. Taker in Default [TiD]: named in doc. as those who will take property if donee fails to exercise POA. i. Note that you do not have to have a taker in default. As such, if the donee fails to exercise the power, the property would merely go back to the donor or donors estate. 3.General versus Special Powers: a. General Powers: a power that is exercisable in favor of others, but also in favor of the donee himself, his estate, his creditors, or even the creditors of his estate. i. Fall-Back Presumption: if document doesnt specify, presume its a general POA. ii. The donee of a general power can do anything with the assets b/c they are essentially his and he would treat them as such. Thus, could : (1) appoint in favor of someone free of trust; (2) create a new power of appointment down the chain to a donee of his choice; or (3) appoint to a trustee for the benefit of some beneficiary (appoint in further trust). b. Special Powers: a power that is only exercisable in favor of others (thus, not exercisable in favor of the donee, his estate, his creditors, or the creditors of his estate.) i. Thus, unlike a gen. power, donee of a special power would not regard the assets as his own. 4.Testamentary versus Inter Vivos/Presently Exercisable: powers of appointment may be created so as to be exercisable either by deed or by will or by deed alone, or by will alone. a. Testamentary: give donee power to choose by will, and only by will. b. Presently Exercisable/Inter vivos: donee can exercise power at anytime, inter vivos. 5.Elective Share: assets off limits/not considered part of donees prob. estate for purpose of elective share. 6.Release of a Power of Appointment: a. As a general rule, the donee of a testamentary power of appointment can not legally contract in advance that he will in the future make that appointment in favor of a particular object; however, the donee can achieve a kind of early exercise by simply releasing his power. b. Release: a voluntary and conscious surrender by the donee of his or her rights under the power of appointment.

See p. 804, case 14

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Estates & Trusts Fall 2011 Available in all jurisdictions. Consequence? assets go to the TiD or, in absence of a TiD, back to donor/donors estate. c. Seidel v. Werner [p.827] i. Facts: Steven owns LE + a testamentary POA, w/ his issue as TiD. Steven & wife divorce. Under the div. settlement, Steven promises to exercise POA in favor of Frank and Anna (kids) in form of trust. When S dies, his will exercised POA in favor of new wife, Edith. ii. Issue: B/c Steven agreed to exercise POA of F and S via divorce agreement and F and A are 2 of his issue (so theyre also TiDs), was this a voluntary abandonment of his rights under the power so that it was released and the assets go to his TiDs (all of his issue, so not just Frank and Anna, but including Frank and Anna rather than his current wife Edith)? iii. Holding: Not a valid release. Although F and A cited some case law holding that if the owner of a power of appointment promises to appoint to persons who are also his takers in default, the court here found that even if they agreed with that authority, on these facts, the promise under the separation agreement was not synonymous with a release. iv. Rationale: (1) language in div. agreement didnt convey intent to be a release b/c was all in future tense; (2) effects of release diff. from effects under agreement b/c: (a) under agreement, prop. goes only to F & A, under release to all issue; & (b) division agreement called for S to create trust for F & A but if it were a release, theyd take the property outright (free of trust). v. Net Result: B/c he never exercised the power (K to do so in future is unenforceable) and because it wasnt released, his will was the first valid exercise of the power so Edith takes. 7.Exercise of a Power of Appointment a. Basic Requirements i. Manifestation of intent ii. Compliance with requirements set out by donor & applicable law iii. Exercise must be permissible under terms of power b. Exercise by Residuary Clause in a Donees Will i. Setting: issue arises in 2 situations. Theres either a clause at the top of a will I hereby devise all of my assets to . OR there is a general residuary clause at the bottom of a will. ii. Key Factors: these are the key factors to look for when dealing w/ issue of whether a residuary clause in a donees will exercises a POA: a) Whether the power is general or special; and b) Whether the residuary clause is a blanket residuary clause (e.g., all the rest and residue to X versus a specific clause that actually refers to the POA or any POA). iii. Majority Rule: a general clause does not, in and of itself, exercise a power of appointment, irrespective of whether the power is general or special. iv. Minority View: a residuary clause does exercise a general power, but not a special power. (this is the rule in Massachusetts) i. ii.

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Estates & Trusts Fall 2011 a) Qualification unless there is language to the contrary that its not an exercise of a general power. b) New York Variation Some states, including NY, take this minority view a step further to hold that a special power of appointment may be exercised by a general clause if the residuary devisees are also the objects of the power of appointment. UPC 2-608: [p. 819] a general residuary clause expresses an intention to exercise a power of appointment only if either: a) The power is a general power and the creating instrument doesnt contain a gift over clause (no takers in default); or b) Ts will manifests intent to include the property subject to the POA (meaning, a blanket clause is insufficient). c) EXCEPTION this provision only applies if there is not a requirement that the POA be exercised by a reference or by an express or specific reference to the power. Beals v. State Street Bank & Trust [p. 813] a) Facts: Ts will established a trust for his wife. At her death, trust to be divided into 3 portions for each daughter, giving them a general testamentary POA, with the TiDs as their intestate heirs. One of the daughters partially released her power by limiting the objects to the testators descendants (instead of any of her intestate heirs). As such, it became a special POA. She later died without issue and her will contains a blanket residuary clause leaving the rest and residue to her sisters issue. Note that b/c her sisters kids would be the Ts grandkids, they are also objects. b) Issue: Did the residuary clause of her will effectively exercise her POA? Note that if it does, her sisters kids would take the entire share. However, if it did not, theyd only take 1/2 b/c would have to share with the other TiDs (descendants of T). c) Holding: Although this case was tried in N.Y., the court held that the donors domicile applies and, as such, Mass. law applied. Mass. follows the minority view that a general residuary clause can exercise a general POA; however, her power had changed to a special POA. Yet, the court found that this was a special case where the residuary clause should still be held to exercise her power. d) Rationale? was once a gen. power & her track record of dealing w/ power indicated that she regarded these assets as her own (whereas w/ a special power, you would not). Donor May Require Specific Reference: the donor can always include provisions that require the donee to exercise the power in a certain way so as to prevent an unintentional exercise of the power. For example, the donor can provide that the power can be exercised only by an instrument that refers specifically to the power. If this is the case, courts are strict in requiring such a ref.

See p.818, note 2 of text.

v.

vi.

vii.

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Estates & Trusts Fall 2011 a) E.g., Estate of Hamilton [p. 820, note 1]: T gives wife POA in 1966 will. Later, revokes that will and creates 1982 will, which still gives wife power. In both cases, T called for a specific reference to exercise power. Wife dies. Her will refers only to the 1966 POA. Court held that it did not exercise her POA b/c not a specific reference. b) Blanket Exercise Clauses: a blanket exercise clause is a blanket reference to all of your assets, including those over which you have a POA. Again, can come up in clause at top of will (all of my estate, including assets to be disposed of by any POA I may have.) or with a general residuary clause at the bottom of a will (all the rest and residue of my estate, including assets over which I have a POA to .). 1. UPC 2-704 the mere use of a blanket exercise clause is ineffective to exercise the power b/c it does not make a specific reference. 2. Qualification if extrinsic evidence shows the donee intended to exercise the power by a blanket exercise clause, then its okay. c. Limitations on Exercise of a Special Power i. If you have a general power, you can do basically whatever you want ii. Traditional Rule: a) Maybe Cant Appoint in Further Trust: donee of a special power cant appoint in further trust, even if the beneficiary is an object, unless the creating instrument expressly permits appointment to a trust for the benefit of the objects of the power. As such, could only appoint the property outright to objects. b) Maybe Cant Create a New POA Down the Chain: Assume T gives A a power to appoint among As issue. Can A exercise the power by creating in his daughter, B, a LE + a special POA to appoint among Bs children (who are also objects of the original power)? Because A could appoint outright to B, seems he could; however; the older cases are split on this point. iii. Restatement (Second) Property: Donative Transfers 19.4 a) Donee of a special power can create a general power down the chain to someone who is an object of the special power. b) Donee of a special power can also create a special power in any person (even non-object), giving that person the power to appoint to an object of the original special power. (thus, the donee is essentially delegating the POA). c) Donee of a special power can create a special power in a trustee (appoint in further trust), with the trustee having the power to appoint to objects of the original special power (thus, the donee is essentially delegating the POA). iv. Exclusive versus Non-Exclusive Powers: Within the category of special powers, special powers can be further broken down as either

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Estates & Trusts Fall 2011 exclusive or non-exclusive powers. Look to language of the creating instrument to ascertain Ts intent as to whether exclusive or not. a) Exclusive: donee can exclude entirely one or more objects of the power. 1. Restatement 21.1 fallback presumption, special powers presumed exclusive. b) Non-Exclusive: donee must appoint some amount to each of the permissible objects. 1. Premise: donee of a non-exclusive power gives only a nominal amount ($1) to A and the rest to B, so that hes not technically excluding A, but essentially is. a. Majority Rule: donee of a non-exclusive special POA has the right, in essence, to exclude an object by giving them only a nominal amount. b. Minority Rule = Illusory Appointment Rule: each potential object must receive a substantial or at least a significant amount so as to avoid a constructive exclusion. d. Fraud on a Special Power: the general rule is that an appointment in favor of a person who is not an object of the power is invalid. Similarly, an appointment to an object for the purpose of circumventing this limitation on the power is a fraud on the power and is void to the extent it was motivated by such purpose. i. See: In re Carrolls Will [p. 824] e. Ineffective Exercises of Power i. Allocation of Assets [Special Powers] under this doctrine, if the donee blends both the appointive property and the donees own property under a common dispositive instrument (usually, donees will), the blended property is allocated to the various interests in such a way as to increase the effectiveness of the disposition w/ the goal of coming as close as we can to the devises that T intended (in terms of amount). a) Typically applies in cases involving an ineffective appointment to a non-object of a power or an appointment that violates the Rule against Perpetuities. ii. Capture [General Powers] a) Premise: if the donee, who has a general power of appointment, of a power makes an ineffective appointment, and the donees intent cant be given effect through allocation of assets, the general rule is that the property passes to TiD or, if none, to the donors estate Not the donee or the donees estate. However, Capture is an exception to this general rule. b) Requirements: capture is triggered when the following 2 things are true: 1. Donee has a general power (doesnt apply to special powers); and 2. Donee used language that indicates an intent to assume control of the appointive assets for all purposes (meaning, not merely to exercise the power,

See Allocation of Assets handout (11/22 #2)for examples.

See Case 9 on p.824 & Case 10 p. 826 for a good examples.

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Estates & Trusts Fall 2011 but in a way that claims ownership as if the assets were her own). a. Way this is usually shown is via blending. i. Will had language that messes own assets with POA c) Net Effect of Capture: if the donee fails to exercise the general POA properly, but theres been blending, the assets go to the donees estate rather than back to the donor. 8.Failure to Exercise a Power of Appointment a. Failure to Exercise General POA: if the donee of a general POA fails to exercise the power: i. Takers in Default (this is the general rule); or, if no takers in default ii. Donors Estate. b. Failure to Exercise Special POA: if the donee of a special POA fails to exercise the power: i. Takes in Default (again, the general rule); or, if no taker in default ii. Potential Objects in equal shares (almost a sort of implied TiD); or, as a last resort iii. Donors estate

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