Anda di halaman 1dari 34

Todays class

Will substitutes and the subsidiary


law of wills
Pour-over wills
Joint tenancies in realty as our final
example of a nonprobate way to
transfer property
Spouses holding a joint tenancy in their
home
1
Follow up
Earlier, we had a practice question involving
standing to challenge a will, and we saw that heirs
apparent under the rules of intestacy have standing
Who else has standing?
Interested personspeople who are beneficiaries under
the will and people who were intended beneficiaries
under a prior will and would receive less under the
contested will
What about a family member or friend who was
victimized by the undue influence of a caretaker but
doesnt qualify as an heir apparent or beneficiary
under a will?
Tortious interference with an expectancy (pp. 215-220) 2
Will substitutes and the
subsidiary law of wills
While will substitutes are not governed by the
rules for executing a will, many of the rules
regarding freedom of testation or
implementation are applied
Spousal forced share (Oct. 28 class)
Ademption (pp. 380-389) and abatement (pp. 391-
392)
Slayer rules (pp. 145-152)
In todays class, we will consider how other
rules for wills apply to will substitutes
Do the rules for revoking a will apply to a trust?
3
Can creditors of the settlor reach the trusts
Application of subsidiary law of
wills to will substitutes, p.413

Although a will substitute need not be


executed in compliance with the
statutory formalities required for a will,
such an arrangement is, to the extent
appropriate, subject to substantive
restrictions on testation and to rules of
construction and other rules applicable
to testamentary dispositions.
Restatement (Third) of Property: Wills and Other Donative Transfers 7.2 (2003).
4
In re Estate and Trust of Pilafas,
In re Estate and Trust of Pilafas
p. 414

Questions presented:
1) Is the will
revoked?
2) Is the trust
5
revoked?
Pilafas
Did the trust agreement really limit revocation
only to a writing to the trustee?

Does it make sense to have a different rule for


revocation of trusts than for wills? Did Pilafas
really intend to revoke his will but not his trust?
When you have a third-party trustee, the duty to revoke
in writing can be justified in terms of protecting the
6
trustee, who has a legal obligation to carry out the trust
Problems, p.415
1. Does a will revoking the trust count as a
revocation?

2. What if Pilafas had ripped up his will and


trust, and the pieces were found?

3. What if UTC 602(c) applies?

7
State Street Bank and Trust Co. v. Reiser
State Street
Bank and Trust
Co. v. Reiser
p. 416
Sept. Nov. 1972 1973
1971

8
Reiser
If Dunnebier had not transferred his assets to
the trust, the bank could have recovered
against his probate estate for the loan
Can the bank recover against the trust
assets?

9
Trusts and the settlors creditors
after the settlors death
Creditors can reach assets of revocable trust
But jointly-held property cannot be reached, and life
insurance proceeds or retirements benefits generally
are protected when they are paid to a spouse or child.
Unsettled issues
Must creditors exhaust probate assets first, or are the
debts satisfied pro rata from probate and non-probate
assets?
Do exemptions of probate property from creditors,
designed to protect the spouse and dependent
children, apply to nonprobate property?
10
Trusts and the settlors creditors
after the settlors death
Unsettled issues (continued)
Must creditors proceed against the executor of the
estate, who recovers the nonprobate assets for them,
or may the creditors proceed directly against the
holder of the property?
If the latter, and an owner of one nonprobate asset is
successfully sued by a creditor, may the owner recover from
other recipients of nonprobate assets?
Statutes of limitation require filing of creditors claims
against probate assets within a given period after the
decedents death, usually a year. Do the same rules
apply to beneficiaries of nonprobate assets?
11
Effect of divorce on
nonprobate assets
Recall that divorce nullifies will provisions in
favor of a spouse
UPC 2-804 (also nullifies provisions in favor of
divorced spouses relatives)
Ind. Code 29-1-5-8
What about non-probate assets?
Cook and life insurance
Egelhof and retirement benefits
Clymer and revocable trusts

12
Cook v. Equitable Life Assurance Socy
Cook v. Equitable
Life Assurance

p.420
Socy (1)

Doris Douglas Margaret

Why did an IN
court recognize
Cooks holographic
Daniel will?

13
Cook v. Equitable
CookLife
v. EquitableAssurance
Life Socy
Assurance Socy (2)

Cooks Will 14
Cook and life insurance
Did the will revoke the beneficiary designation? If we
were following Cooks intent, what would we say?

What did the court say?

15
Pension and Retirement
Defined Benefit
Plans
Defined Contribution Individual
Plan Plan Retirement Account
Employee Employee owns a Similar to a defined
typically receives specific account contribution plan,
an annuity Employee controls but subject to
If benefit is investment and contract between
annuitized, no distributions in account holder and
remainder to pass retirement custodial institution
at death Remainder passes Remainder passes
Uncommon today outside of probate outside of probate
among private to designated to designated
employers ($2.3 beneficiaries beneficiaries
trillion (2012)) Favored by private IRAs are common
Common today employers ($4.7 ($5.1 trillion
among public trillion (2012)) (2012)), may
employers ($4.6 include roll over
trillion (2012)) from DC plan
Cook and retirement plan
beneficiary designations
You can run into the Cook problem with beneficiary
designations for retirement plans. Testators
sometimes try to change retirement plan
beneficiaries through their wills
Courts often reject the changes on the same groundsthe
terms of the retirement plan contract specify a particular
procedure for changing the beneficiary (p.415, problem 1)
Some states allow beneficiary redesignations by will, but
only if the will is specific about the retirement plan (or
insurance policy) that is being changed. (Nunnenman v.
Estate of Grubbs, 374 S.W.2d 75 (Ark. App. 2010))
Note the lawyer liability problem lurkingif the lawyer does
not ask about non-probate asset beneficiaries, then the
intended beneficiaries may be able to sue 17
Egelhoff and retirement plans
What were the facts in this case?

18
Egelhoff
Egelhoff v.v. Egelhoff
Egelhoff
p. 426

Kate David Donna


(first wife) (second wife)

???
???
Life
Insurance
Pension
Plan
Samantha David

19
Egelhoff and retirement plans
Why did the Court find preemption and bind
David by his beneficiary designations?

20
Egelhoff and retirement plans
As the dissent observed, the result is problematic
It is not consistent with the usual intent of decedents
It gives Donna windfallshe already had received her
fair share of the couples assets when they divorced; she
now receives a big chunk of his share of the assets
The Courts logic applies to many other state law rules
governing pension plans, like slayer rules
Lower courts have resisted Egelhof by using
federal common law to save the state law rules
But there is less clarity about that than about state law

21
Pour-over wills and revocable
trusts in modern estate planning
The combination of a pour-over will and trust
allows people to avoid probate and to consolidate
all of their property into one instrument.
Avoiding probatecant avoid taxes, but can reduce
other costs
Privacyboth from strangers and disappointed heirs
Choice of lawcan select which states law applies
(which also is allowed under UPC 2-703)
Reduce delaybequests can be disbursed more quickly
Amending estate planjust amend the trust provisions
Blended familygreater control over disposition of
estate with surviving spouse and children from a prior
marriage 22
Pour-over wills and revocable
trusts in modern estate planning
There are some disadvantages
Creditors may have a longer statute of limitations
period for filing claims against a trust than against
a probate estate
Legal fees for a pour-over will and trust may be
greater than for just a will
Less certainty about the application of the
subsidiary law of wills (but most of the issues can
be addressed by a well-drafted trust)

23
Pour-over wills, revocable trusts,
and nonprobate transfers

Residuary
Beneficiary: Donor Beneficiary:
Trustee of Trustee of
Ts Ts
Transfer
Revocable Revocable
of Assets
Trust Trust
Nonprobat Pour-Over
e Will
Transfers Revocable
Trust

24
Model pour-over provision
I give my residuary estate to the then
acting trustee under the trust
agreement executed by me on
_________ __, 20__, and known as the O
20__ revocable Trust, of which I am
now trustee and X is named as
successor trustee, to be added to the
trust estate and held under that trust
agreement as in effect at my death
25
UPC 2-511: Testamentary
additions to trusts, p.444

(a) A will may validly devise property to the trustee of a


trust established or to be established during the
testators lifetime by the testator or at the testators
death by the testators devise to the trustee, if the trust
is identified in the testators will and its terms are set
forth in a written instrument, other than a will, executed
before, concurrently with, or after the execution of the
testators will ... . The devise is not invalid because the
trust is amendable or revocable, or because the trust was
amended after the execution of the will or the testators
death.
26
What were the facts in
Clymer v. Mayo?, p.445

27
Clymer
Clymer v. Mayo
v. Mayo
p.445

Joseph Maria

Life Clara James


Insuranc
e

Marianne Trust
and Life
Insurance Niece and
Nephews
28
What result in Clymer?

29
Clymer and retirement plans
Why did this case come out differently
from Egelhof, where ERISA prevented
the revocation of the divorced spouses
beneficiary status?

30
Joint tenancies in land
The joint tenants have equal interests; most
important actions require the agreement of all
tenants
Not unilaterally revocable, so an imperfect will substitute
(though Brousseau, p. 448, suggests some exceptions)
Joint tenants cannot devise their shares in a will.
Upon death, the decedents share vanishes and is
taken by the other joint tenant(s).
To pass by will, the joint tenants must sever the joint
tenancy and convert it into a tenancy in common.
Creditors can reach a joint tenants interest only
during the tenants lifetime. 31
Revocation of trusts
The settlor may revoke or amend a revocable
trust:
(1) by substantial compliance with a method provided in
the terms of the trust; or
(2) if the terms of the trust do not provide a method or
the method provided in the terms is not expressly made
exclusive, by:
(A) a later will or codicil that expressly refers to the trust or
specifically devises property that would otherwise have
passed according to the terms of the trust; or
(B) any other method manifesting clear and convincing
evidence of the settlors intent.
Uniform Trust Code 602(c)
Ind. Code 30-4-3-1.5(c) [requires a writing for (2)(B)]
Restatement (Third) of Trusts 63 32
UPC 2-804(b): Revocation
upon divorce
Except as provided by the express terms of a
governing instrument, a Court Order, or a contract
relating to the division of the marital estate made
between the divorced individuals . . ., divorce . . .
(1) revokes any revocable (i) disposition or
appointment of property made by a divorced
individual to his [or her] former spouse in a
governing instrument and any disposition or
appointment created by law or in a governing
instrument to a relative of the divorced
individual's former spouse . . .
33
UPC 1-201(18) : Governing
instrument

"Governing instrument" means a deed, will,


trust, insurance or annuity policy, account with
POD designation, security registered in
beneficiary form (TOD), pension, profit-sharing,
retirement, or similar benefit plan, instrument
creating or exercising a power of appointment
or a power of attorney, or a dispositive,
appointive, or nominative instrument of any
similar type.

34

Anda mungkin juga menyukai