|
Estates and Trusts Outline
Intestacy Choice of Law Personal Property - location of the domicile “domicile” is physical presence in the state with intention to remain permanently can only have one domicile at a time
Real Property - location of the land
Surviving Spouse - CA Probate Code §6401 Community property or quasi community property: surviving spouse gets 100% of community property unless decedent has willed away his 1/2. ex: husband wills 1/2 of community property house to Demi, other half passes intestate to wife. Demi and wife own house as tenants in common.
Separate Property wife gets 100% of the separate property if there are no survivors in the “inner circle” “inner circle” is children, parents, siblings, nieces and nephews. half-bloods are treated as whole bloods
first look for children, then look for parents, then look for siblings, then look for nieces/nephews.
wife gets 1/2 of the separate property if: decedent leaves only one child or the issue of one child; grandchildren take per stirpes, and do not compete with living children.
there are no surviving children, but there are parents or siblings surviving parents take half per capita if no parents, siblings take half per capita if no siblings, nieces and nephews take per stirpes
wife gets 1/3 of the separate property if: there is more than one surviving child surviving children take 2/3 between them
there is at least one child, but the issue of one or more deceased children first surviving generation takes per capita, remaining generations take per stirpes (i.e. grandchildren split their parent’s share)
no surviving child, but the grandchildren from two or more deceased children first surviving generation takes per capita, remaining generations take per stirpes
No surviving spouse - CA Probate Code §6402 If there are children, entire estate to the children. If there are no children, entire estate to parents If there are no parents, entire estate to siblings/nieces/nephews, per capita at the first surviving generation, per stirpes thereafter. If there are no siblings/nieces/nephews, then entire estate to grandparents/aunts/uncles, per capita at the first generation, per stirpes thereafter. If there are no grandparents/aunts/uncles, then to stepchildren and their issue, per capita at the first generation, per stirpes thereafter. If there are no stepchildren, then entire estate to the “next of kin” who has the closest common ancestor. (Modified Civil Law Method) start with decedent, count up generations through the parents, grandparents, etc., until you reach a common ancestor. Closest common ancestor wins.
If there are no next of kin, then to the in-laws, per capita at the first generation, per stirpes thereafter. If there are no in-laws, then the property escheats to the state.
Posthumous Heirs - CA Probate Code §6407 Relatives of the decedent conceived before the decedent’s death, but born after his death are treated as if they were already born at the time of decedent’s death and therefore take their intestate share. Rebuttable presumption that child born 300 days after decedent’s death was not conceived prior to his death.
Simultaneous Death - CA Probate Code §220 If testators die from the same cause and the order of death can not be determined they are said to have died simultaneously. Probate both estates as if each had outlived the other. keeps property in the bloodline and avoids double taxation issues.
For life insurance, presumption is that the beneficiary died first. For community property, each gets one half of the estate. For joint tenants, each gets one half of the estate.
Adoption Adopted child is treated the same as a natural child for purposes of intestate succession from the adoptive parents. However, adoption cuts off inheritance from and through the natural parents. adopted child can not inherit from the relatives of the natural parents.
Virtual Adoption all of the elements and performance associated with an adoption, except for the lack of a formal certificate treated as a legal adoption for purposes of intestate succession.
Illegitimate Children Treated the same as a child born during wedlock for purposes of intestate succession and family allowance in CA. Paternity adjudication or acknowledgment by the father is required.
Artificial Insemination Husband of the woman is treated as the natural father for intestate succession as long as it was part of a medically supervised program with consent of the husband.
Murder of the Decedent Joint Tenants - if one joint tenant murders the other, the murderer retains his 1/2 interest as tenant in common with the decedent’s heirs, but does not get the whole property because the right of survivorship is destroyed. Killer is disqualified if the killing was felonious (without legal justification) and intentional probate court has the power to make its own determination of intent and legality regardless of what happens (i.e. acquittal or plea bargain) in criminal court.
Transactions Prior to Inheritance Rights Advancements - apply only to intestate shares (not wills). An inter-vivos gift from the decedent, prior to his intestate death, with the intent that the gift serve as a portion of the recipient’s intestate share. It is NOT an advancement if it is NOT in writing: signed by the decedent prior to the gift, or signed by the recipient (acknowledged) at any time.
Value of the gift is determined at the time of the gift. If the person receiving the advance predeceases the donor, then the advancement is NOT taken into account when determining the intestate share of the recipient’s issue.
Hotchpot The recipient of an advancement has the option to put the advancement back into the intestate estate, and then take her intestate share. ex: D dies with an estate of $26,000 and three children A, B, and C. Prior to his death, D gave an advancement of $4,000 to C. C may put the $4,000 back into the estate “hotchpot” and then get her intestate share of $10,000 instead. ($26,000+$4,000 =$30,000)/3.
Other heirs can not force you into a hotchpot.
Expectancy NOT a property right, only a hope or wish. An assignment of an expectancy can be easily defeated if the testator changes their will. Assignment of an expectancy is NOT binding on the assignor’s issue if the assignor predeceases the testator - the assignee only gets the inheritance if the assignor actually inherits something.
Release Heir contracts with decedent prior to death to release any claim he may have on the estate for money right now. if decedent relies on the release as full satisfaction and advancement, then the heir does not take by will or by intestacy.
Release IS binding on the releasor’s issue because it cuts off the inheritance at the source. Release is not effective on an expectancy until the expectancy vests.
Family Protection Community Property - provides no protection for separate property. Ex: Wealthy Widow remarries to H. Neither spouse works, so all is Wealthy Widow’s separate property. WW can leave all of her separate property to someone else besides H, and H gets nothing.
Forced Share or Election In CA, must expressly (in the will) force your spouse to elect between their community property right (by intestacy) and an alternate disposition in the will. ex: H owns Blackacre as separate property, and Redacre as community property. His will might provide that he leaves Blackacre to his wife, but only if she renounces her community property interest in Redacre so that it can be left to the son.
If the election is NOT express, then the spouse will be able to take under the will and exercise her community property rights. ex: H has three ranches, R1-R3 that are all community property. H wills R1 to wife, R2 to son, and R3 to daughter. Wife can elect against the will, and take all of R1 by intestacy (it falls out of the will), and half of R2 and R3 (because H can only will away his 1/2 interest).
Protection against Disinheritance Protection of Issue Obligation to support a minor child ends at death, so ex-husband can leave his entire estate to his mother, cutting off the child support that he was paying. In CA, the state can sue the estate for child support.
Children who are disinherited by a will still take their intestate share (if any). ex: D executes a will giving all to his children A and B, but disinheriting his third child C. If A has no children, and dies before D, then A’s share falls out of the will and passes intestate on D’s death. Thus, B will get 3/4 (1/2 from will + 1/4 from half of A’s share) and C will get 1/4 (other half of A’s share).
Pretermission Pretermitted child A child born after the execution of a will, but not included in the will, is presumed to have been inadvertently omitted and therefore takes his intestate share unless: it appears from the face of the will that the omission was intentional (i.e. disinheriting a class of future children) if one or more siblings is living at the time of the execution of the will, and the will leaves substantially all of the estate to the omitted child’s parent. there is a transfer outside of the will in lieu of a testamentary gift, such as a trust, life insurance, or joint tenancy with the child.
pretermitted child’s intestate share comes out of any intestate property, and if that is not enough, then out of the legatee’s shares on a pro rate basis (abatement). if the child is born before the execution of the will, he is not pretermitted, unless he was omitted because of a mistaken belief by the testator that the child was dead. only applies to CHILDREN not grandchildren - grandchildren are not protected by pretermission statute
Pretermitted Spouse A spouse married after the execution of the will, but not included in the will, is presumed to have been inadvertently omitted and therefore takes ALL of the community property and her intestate share up to a 1/2 forced share of the separate property unless: it appears from the face of the will that the omission was intentional
there is a transfer outside of the will in lieu of a testamentary gift, such as a trust, life insurance, or joint tenancy there is a valid, written waiver by the wife of her interest in the estate (i.e. satisfaction).
Examples of Pretermission: H, while he is single, makes out a will: “All to my brother A.” He then marries W and has a child C. H then takes out a life insurance policy in favor of W. At his death, H’s estate consists of $50,000 separate property, $25,000 community property. The estate will be distributed as follows: W is not pretermitted because of the insurance policy, so she takes only $12,500 which is the 1/2 of the community property that H could not will to A. C is pretermitted so he takes his intestate share of 1/2 of the separate property, or $25,000 A gets the 1/2 of the community property that H could will away to him ($12,500) plus the remaining 1/2 of the separate property not owed to C ($25,000).
H and W1 marry and W1 gets pregnant. H is not aware of the pregnancy and divorces W to marry W2, changing his will to leave everything to W2. W1 then gives birth to H’s first child C1. H and W2 then have a second child, C2. H then dies. H’s estate will be divided as follows: W2 gets all of the community property. C1 is pretermitted and so takes his 1/3 intestate share C2 is NOT pretermitted because substantially all of H’s estate was left to his mother.
Fear of Hell Statutes Not recognized in CA. Dealt with under the undue influence doctrine. Presumption that if you gave your estate to charity within six months of your death that the church exerted undue influence on you.
Execution of Wills Requirements of a Will under the Statute of Wills Must be in writing any reasonably permanent writing will do (i.e. lipstick on a wall)
Must be signed by the testator. must be the complete act intended as the signature (if testator dies before completing the signature, the will is invalid because we can’t tell whether he stopped because he was dead, or because he changed his mind) Initials, Nicknames, First Name Only, are all OK as long as they are the complete act intended. signature by proxy is OK is done at the request of and in the presence of the testator. CA does not require the will be signed at the very end, but some jurisdictions do (logical end or physical end).
Must be authenticated or signed in the presence of two or more witnesses. testator does not need to sign in the presence of the witnesses if he acknowledges his signature to them witnesses must understand that this is the testator’s will or else their signature is invalid - “publication” of will by testator by act or by word “in the presence of” means either: in the line of sight - see the pen touch the paper; or within the conscious presence and awareness - close in proximity and time, and a continuous ceremony.
witnesses may sign before the testator as long as there is one continuous ceremony with very little time between witnessing and execution by the testator.
Requirements of a Witness Must be competent at the time of the signing (not a problem if they later become insane). Witness can not have a pecuniary interest in the will the spouse of a legatee in the will is an interested witness, unless the inheritance is treated as separate property by the wife (as in CA) - problem in non-community property states where there is a forced share. an executor is not an interested witness even though she will receive a statutory fee. a child is not normally an interested witness merely because her parent is a legatee under the will.
Purging Statutes if an interested witness signs the will, then she is presumed to have exerted undue influence on the testator, unless she is a supernumerary witness (i.e. a third witness where only two were required) if the presumption of undue influence is not rebutted, then the interested witness takes no more than their intestate share, and any bequest in excess of the intestate share is “purged” to the residuary clause if any, or passes by intestacy.
Testamentary Intent - need unequivocal present testamentary intent Sham Wills - A joke will is not valid because it lacks the requisite intent Drafts of wills are not valid. Signing the wrong will is invalid. but where a husband and wife executed reciprocal wills at the same time and mistakenly signed each other’s wills, the court allowed both wills for equitable reasons.
Condition vs. Motive a will that expressly requires the existence of a certain condition to be valid is only valid if the condition comes to pass. ex: Upon leaving for Mt. Everest, the climber says that “if I die on Mt. Everest, all to my friend Joe.” - valid only if climber dies on Mt. Everest.
however, a will that merely expresses a motive for making a will is valid regardless of whether the testator dies as a result of the thing that motivated him to make the will in the first place. ex: Upon leaving for Mt. Everest, the climber says that “I am afraid that I might die on the mountain, and so I am making out this will - all to my wife.” - valid even if climber survives Mt. Everest and later dies in a car accident.
Holographic Wills Informal Will Requirements all material provisions must be in the testator’s handwriting. In CA, the use of pre-printed forms is allowed as long as there are handwritten parts, even though it means that not all of the material provisions are in the testator’s handwriting. Handwriting does not include videotapes or audiotapes, or other electronic media. other printed matter on the holograph is treated as surplusage
must be “signed” by the testator writing and signing by proxy is unlikely to be acceptable due to potential for fraud. Signature can come anywhere, not just at the end ex: “I Glen, give everything to Demi” - “Glen” is sufficient signature if in his own handwriting.
No date is required, but a signed, dated formally executed will is presumed to control over an unsigned holograph. Testator must be competent at the time the holograph was written.
Oral Wills no longer recognized in CA only used for servicemen in wartime in contemplation of death, when death occurs within 24 hours. one of the two required witnesses must have been requested by the decedent.
Integration Will must have some physical connection or internal sense of connection to prevent additional pages from being slipped in, as well as to ensure that all pages are present. ex: stapled, numbered, initialed pages with sentences that continue from the end of one page to the start of the other.
Codicils Normally used to modify, revoke, or republish an existing will, whether or not the existing will was valid. ex: Valid will gives car to A, ring to B, and blackacre to C. A valid codicil then gives the car to D, and the ring to E. Result is that D gets the car by the codicil, E gets the ring by the codicil, and C gets blackacre by the original will which was reaffirmed to the extend that it was not amended by the codicil.
Must be executed with the same formalities as any other will (formal or holograph) A codicil that republishes a will brings that will current up to the date of the codicil - might turn a pretermitted heir into a disinherited heir treated as if you read your entire will, and those things that were not changed were reaffirmed. ex: Valid will says “all the stock I now own to my son.” The testator at that time has 5,000 shares. Later, Testator acquires more stock, and executes a codicil which does not amend this provision. Son is entitled to all shares owned at the time of the codicil.
Incorporation by Reference Document must be in existence at the time of the execution of the will or codicil which incorporates the document by reference. ex: can not incorporate a document dated 2/15/97 into a will dated 2/14/97, unless there was a typo and you can prove to the court that the document was already in existence. however, if the writing did not exist at the time of the execution of the original will, but did exist at the time of execution of a valid codicil, then it corrects the defective incorporation.
Must be sufficient identification to identify the document incorporated with reasonable certainty. Must express present intent to incorporate (not just mention it in passing) in the will - words of futurity (I will make a separate memo) are insufficient but may be cured by a later codicil. Holograph may include printed matter by reference.
Facts of Independent Significance A will may dispose of property in accordance with documents or events that are outside the will if the document or event has an independent significance apart from the testamentary distribution. ex: I give $1,000 to each of my brothers-in-law - valid even though they might change if the testator remarries, because remarriage has an independent significance apart from distributing property upon his death. ex: I give to X all of the items that are in my safe deposit box - valid even though the contents might change because the safe deposit box has other independent significance apart from giving away property (probably).
If there is no independent significance, then the bequest fails for lack of compliance with the formalities of the statute of wills (i.e. witnessing, signing, etc.) ex: I give $1,000 to each person on a list that I will place in my top drawer - invalid because the list has no other independent significance apart from distributing property on the testator’s death. - no incorporation by reference because of words of futurity. ex: I give my estate according to the lists inside my safety deposit box - not a fact of independent significance - maybe incorporation by reference if the list already existed. ex: I give all my property in accordance with my wife’s will - if wife has a will, then it is incorporation by reference, if wife does not have a will, then once she does, it is a fact of independent significance because the wife’s will has a purpose apart from distributing the husband’s property.
Interpretation of Will Provisions
Admissibility Extrinsic Evidence Patent Ambiguity - ambiguity that is on the face of the will itself NO extrinsic evidence allowed to interpret the ambiguity because it was not needed to discover the ambiguity give words their plain and simple meaning ex: “I have one brother, Al. All to my brother Rob”. Ambiguity is on the face of the will. No extrinsic evidence will be allowed to show that the testator meant to give the estate to someone else because the bequest is not susceptible to two meanings. Court will probably delete the word “Rob”.
Latent Ambiguity - ambiguity that is disclosed by extrinsic evidence extrinsic evidence IS allowed to interpret the ambiguity because it was used to discover the ambiguity ex: “all to my friend, R. H. Simpson”. R.H. Simpson exists, but the friend is named H.R. Simpson. Extrinsic evidence revealed the existence of ambiguity, so it is used to determine that H.R. Simpson was testator’s friend.
California Rule - extrinsic evidence is always admissible but it can not be used to give meaning to a word if it is not reasonably susceptible to such meaning.
Mistakes that induce Testator to dispose of property differently Mistake must be on the face of the will (showing Testator’s mistaken belief) ex: “because my first son died in the war...” is mistake on the face of the will if the first son is still alive and returns home. (note that in any event the son would be pretermitted).
Alternate disposition must be on the face of the will (what Testator would have done but for the mistaken belief) ex: “Since my son is dead, I give his share of blackacre to my daughter.” - alternate disposition is to give the living son a share of blackacre. Counter-ex: On his death bed, Nurse tells T that his wife has died, and convinces T to leave everything to Nurse. Wife is really still alive. Although there is no mistake or alternate disposition on the face of the will, this would be dealt with under the theory of active fraud.
Revocation Methods of revocation by operation of law: ex: pretermission, forced shares, election of community property rights, etc. dissolution or annulment of marriage revokes gift to your spouse in CA unless otherwise provided in the will (legal separation is not sufficient) - remarriage reinstates the bequest if it still exists.
by physical act by testator with intent to revoke ex: burning, tearing, obliterating, lost original - but this only raises the presumption of revocation, may still prove that someone else did it or that intent was not present. physical act and intent must occur at the same time - i.e. can tear up will by accident, and then later say “well, that’s OK, I don’t like that will anymore anyway.” a simple statement such as “I hereby revoke all previous wills and codicils” is sufficient and recommended. a proxy can destroy a will in the testator’s presence and with the testator’s direction counter-ex: can’t tell lawyer over the phone to tear up the original - not in the “presence” of testator - lawyer could be defrauding testator by ripping up blank piece of paper.
difficult to prove intent of a dead person writing intended to revoke an existing will must touch the words of the will, not on the back or in the margins - unless it is all in the handwriting of the testator and also signed, in which case it may be a valid holograph which revokes the will.
Partial Revocation Testator may cross out a single bequest, and that bequest then goes to the residuary clause, if any, or falls out of the will to intestacy. ex: T lines out the words “$100,000 to Demi” - The bequest is revoked.
Testator may NOT change a bequest by lining it out and then replacing it UNLESS the interlineation is also in testator’s handwriting and signed (valid holograph) ex: Will says “$100,000 to Demi”. T lines out Demi, and writes in “Pat” - valid revocation of gift to Demi because there was a physical act coupled with intent to revoke, but NOT a valid substitution of “Pat” unless it was holographically signed.
Partial Decreasing Revocation - ex: Will says “$100,000 to Demi”. T crosses out last “0” making it $10,000. Valid partial decreasing revocation because of a physical act with intent to revoke. counter-ex: may NOT write in an extra zero. counter-ex: may NOT cross out entire $100,000 and then put $10,000 unless it was holographically signed because this would operate as a revocation of the entire bequest.
Dependent Relative Revocation If a attempt to INCREASE the bequest to a legatee is declared invalid due to lack of compliance with the statute of wills (i.e. crossed out $100 and put $1,000), then the previous gift is revived on the theory that you would not have crossed out the existing gift but for your belief that the new gift would be valid (if you were willing to give them $1,000, then you are clearly willing to let them still have the $100). does not apply to decreasing gifts. ex: Will says “blackacre to A for life then to B”. This is an invalid unsigned attempt to increase A’s estate to a fee simple. But it is also a valid partial decreasing revocation of eliminating B’s interest altogether. Might argue DRR for A, with remainder to pass by residuary clause, if any.
Revival of revoked will A valid subsequent instrument may revive a previously revoked will merely by incorporating it by reference or stating that it is revived. If the subsequent instrument is not valid, then the revival of the previously revoked will depends on the testator’s intent by other evidence. ex: Valid Will #1 was revoked by Valid Will #2. Then Testator destroys Will #2 with intent to revoke, and writes an invalid unsigned holograph that says: “This is a codicil to my first will, I give my car to A.” - The codicil was insufficient to revive Will #1 on its own, but it may serve as some evidence of intent to revive. Also may argue dependent relative revocation - but for the belief that the codicil would be valid, the Will #2 would not have been revoked.
Will Contracts Contracts to make a will are enforceable under a contract theory. ex: T contracts with N to be his nurse in T’s declining years in return for T leaving N a portion of his estate. If T then breaches and leaves his estate all to X, N may have an action for damages in quantum meruit, or even express contract. ex: Husband wills all of his property to his wife in reliance on an agreement with the wife that upon her death, she will leave his share of the community property to a daughter from a former marriage. If the wife breaches the contract, then as a third party beneficiary, the daughter may bring a contract action against the wife.
Joint Will two or more people execute one instrument intended to serve as the will of either or both. assumption is that there is a contract involved
Mutual Will two or more people (husband and wife) execute separate but related wills. assumption that there is a contract involved unless carefully negated by specific language
Constructional Problems in Estate Distribution Payments for expenses of administration, funeral, family allowance, judgments, liens, etc. must come off the top of the estate. If there is not enough residue of the estate to pay, then individual bequests must be abated. Specific Bequests - a bequest of a particular piece of property ex: “my school ring to A”, or “100 shares of my XYZ corp. stock.” (stock exists in the estate). if stock splits after the will is executed, then the specific bequest becomes 200 shares for 2 for 1 split, 300 for 3 for 1, etc., maintaining percentage ownership in corporation.
specific bequests are adeemed by extinction if the asset is sold, destroyed or otherwise disposed of prior to testator’s death. ex: T wills blackacre to A, and the residuary to B. If T then sells Blackacre and buys whiteacre, B takes all because the specific bequest of Blackacre was adeemed by extinction. counter-ex: if T wills his 1957 Chevy to A, but the Chevy is totaled in an auto wreck before T dies, then A gets the proceeds of the insurance
General Bequests - a bequest payable from the general assets of the estate. ex: “$1,000 to A” or “100 shares of XYZ corp. stock to A” - executor must go out and purchase 100 shares of XYZ out of the general assets if the estate has none. (note absence of the word “my”) general bequests do not adeem.
Demonstrative Bequests - a bequest payable from a specific source ex: “$1,000 from the Swiss Account to A”, or “$500 from the proceeds of the sale of my car” - if there is not enough money in the source, the executor must make up the difference out of the general assets of the estate - if there is money left over, it goes to the residuary or intestate. demonstrative bequests do not adeem.
Abatement When there is not enough money to satisfy the estate’s obligations, the bequests abate in the following order: any bequests identified by the testator as ones that should be abated first. (testator’s intent) any intestate property any residual property all other property on a pro-rata basis, except that specific bequests are last to abate.
Exoneration will may provide that a bequest of a piece of property is to be made free and clear of any liens - executor must pay off the mortgage before transferring title to the legatee.
Satisfaction - do not confuse with advancement A testator may give an inter-vivos gift to one of the legatees in the will as partial or full satisfaction of the testamentary gift. Requirements of satisfaction the intent of the testator must be in WRITING at the time of the gift; or the recipient acknowledges in WRITING, at any time, that the gift is in satisfaction of his testamentary rights
The gift is valued as of the time it is given.
Class Gifts A gift of an aggregate amount to an uncertain group of people at the time the gift is made. ex: “$10,000 to my nephews” counter-ex: “$10,000 to my nephews Huey, Dewey and Louie” is NOT a class gift because in names certain persons.
Class takes title as tenants in common Determination of members of the class - rule of convenience
class closes at the time of the testator’s death as long as the class has at least one member. ex: T wills “$10,000 to my nephews.” Even if T has siblings that survive him (who could have more sons), the class closes at T’s death for convenience of settling the estate.
Lapse If the legatee predeceases the testator, the gift lapses (passes intestate) unless: the gift was made to one of testator’s “kindred”; AND the “kindred” has left issue who can step up to take deceased legatee’s share per stirpes.
Kindred is defined as blood relatives For Residuary clauses: majority rule: if a residuary legatee predeceases the testator, his share falls out of the residuary into intestacy. CA rule - minority rule - residuary clause has a “dragnet” effect, and any remaining residuary legatees split the deceased legatee’s share.
For class gifts majority rule: if a member of the class predeceases the testator, and he is kindred to the testator, and he has issue, then the issue steps up to take per stirpes, otherwise his share passes to the residue or by intestacy CA minority rule: if a member of the class predeceases the testator, and he is kindred to the testator, and he has issue, then the issue steps up to take per stirpes, otherwise his share is split up among the remaining members of the class.
Probate of Wills Anyone with a financial interest in the estate can offer the will for probate If a valid later will is found after the first will is probated, then the legatees may have to disgorge the property, but a good faith BFP is protected Types of Probate Informal - $5,000 or less no notice required to be given to other beneficiaries. other beneficiaries can attack the will later
Formal - larger estates notice required all parties are represented so a contest can not be raised after the property is distributed takes longer
Standing to challenge a will must have a direct pecuniary interest in the outcome of the will challenge counter-ex: creditors and executors can not challenge because they get paid first either way counter-ex: in CA, inheritance is separate property so a legatee’s spouse does not have standing to challenge the will counter-ex: H leaves $10,000 to wife in will, but her intestate share is also $10,000 - wife does not have standing because she gets the same amount either way.
No-Contest Clauses strictly construed by the court because they discourage meritorious claims however, they prevent airing the testator’s dirty laundry after he is dead need good faith and probable cause to challenge a will without triggering the no-contest clause counter-ex: Son was left little in will by mother, who put a no contest clause in the will. Son brings a creditor’s claim against mother’s estate for services rendered during her life. Court found that this was an indirect attack on the will, frivolously attempting to get around the no contest clause, and therefore son forfeited.
Testamentary Capacity - low standard Age - must be chronologically 18 years old (not necessarily 18 mentally) and capable of understanding at the time of execution: the nature and extent of your property; the natural objects of your bounty (who are your inner circle); and the distribution that is being made (who gets what).
Insane Delusion An unreasonable belief in certain facts which are not true, and which belief is held beyond all reason, evidence and probability. ex: Weird Harold says “I’m going to the mountains to meet with the UFOs, and when they take me, I want my estate to go to you for the purpose of informing people about UFO’s.” - may not rise to the level of insane delusion because many people believe in UFOs.
An insane delusion does NOT invalidate a will if the testator does not act on it in disposing of his testamentary property. ex: T believes he is Abraham Lincoln. T leaves all his property to his wife. Will is valid because the insane delusion did not affect the disposition of his property.
Although insane delusion is easy to persuade the jury at trial, it is likely to be overturned on appeal.
Undue Influence Such influence is exerted that the testator’s will is overcome by the will of the person exerting the influence. Begging and pleading and kissing up do not normally rise to the level of undue influence. Can show undue influence in two ways: Long way: highly susceptible testator (old, alone, sick) opportunity to influence for a wrongful purpose (spends lots of time with testator alone, secrecy and haste) disposition to do a wrongful act (character of influencer); and an un-natural disposition of the property (not to inner circle or very unbalanced, sudden change of attitude)
short way: confidential relationship (atty.-client, parent-child, doctor-patient); and un-natural disposition of the property
Attorneys should not do relatives’ wills because of confidential relationship.
Fraud Will provisions induced by fraud are invalid ex: Husband is already married to wife #1, and commits bigamy by marrying wife #2. Wife #2 leaves her entire estate to Husband. But for the Husband’s fraud, the Wife #2 would not have given him her entire estate.
TRUSTS OUTLINE
Equitable Trusts arising from operation of law Purchase Money Resulting Trust If A gives O purchase money for blackacre, but directs O to transfer the property to B, then a purchase money resulting trust arises with B as trustee and A as beneficiary, UNLESS: B is a natural object of A’s bounty (inner circle), in which case it is a presumed gift to B. ex: parents buy condo for daughter at college and instruct the seller to title the condo to the daughter - presumed to be a gift to the daughter.
Prevents B’s unjust enrichment - B must transfer title to A on demand Does not apply to loans, because there is an intent to pay back the loan. Statute of Frauds writing requirement does not apply because it is an equitable remedy.
Constructive Trusts Imposed on property as an equitable remedy to prevent unjust enrichment of the constructive trustee. ex: Heirs by force prevent T from executing a will on her death bed, thus allowing T’s property to pass intestate to the heirs. Court will place constructive trust on the property for the benefit of the persons named in the unexecuted will to prevent heirs from being unjustly enriched by their wrongful act. Heirs duty under the trust is to pass title to legatees.
Active Trusts vs. Passive Trusts A trust will exist only as long as is required to carry out its active purpose. When there are no active duties for the trustee to perform, the statute of uses executes the trust, and title vests in the beneficiaries free of the trust. ex: Trust to pay the income to A for life, and then the remainder to B. At A’s death, the trust becomes passive because the trustee has no other duty than to transfer title to B. Thus, the trust terminates.
Things that are not a trust: A normal contract for insurance is not a trust - it is a contract for the insurer to pay a certain sum to the beneficiary upon the happening of a triggering event. A normal pension contract is not a trust - it is a contract for the company to pay the employee a certain sum upon retirement. A person can not hold a debt in trust that the person owes to a creditor because nobody could enforce the trust if the person did not pay (can’t sue himself for breach).
Elements of a Trust Basic requirements for a trust: A settlor or trustor with the present unequivocal intent to create a trust. ex: H leaves $50,000 to Friend. “I want Friend to take care of my wife.” Since Friend is not in the inner circle, strong presumption that H had intent to create a legal obligation in the Friend, otherwise he would have given the money to wife outright. counter-ex: H leaves property to W as “her absolute estate”, with the “request” that she pass the property to his heirs on her death. Fee simple created with no trust because there is no present intent to create a trust - “request” is precatory language which did not legally obligate W to do anything. counter-ex: S says that next week he will set up a trust in favor of A. No present intent, words of futurity. A has no remedy unless under a contract theory there was some consideration for the promise.
A trust res or corpus there must be “delivery” of the res or corpus - can be constructive delivery of a trust deed to escrow agent unless the settlor retains the right to revoke from the escrow agent.
A trustee with positive duties to perform and a fiduciary duty to someone anyone who can hold legal title to property can be a trustee, except the court will transfer title to a person with the capacity to contract if the named trustee is a minor or incompetent. testamentary trust will not fail for want of a trustee - court will assign one if not named or if named one dies however, the court will not appoint a trustee in an inter-vivos private trust is the settlor is still alive. trustee can NOT be both settlor and sole beneficiary because he can’t sue himself, but as long as there is a remainder beneficiary, a settlor may become the trustee of his own property to pay income to himself for life and the remainder to B.
A beneficiary to receive the benefit of the trust A valid trust purpose.
Duties of A Trustee Highest fiduciary duty imposed by law must administer the trust solely for the benefit of the beneficiaries. self-dealing is prohibited unless the trust expressly provides that the trustee can transact with the trust, and then the transaction must be fair.
Must preserve the trust property and make it productive duty to both the income beneficiary to get the best income and the remainder beneficiary to preserve the corpus. ex: a vacant lot is not productive, and the trustee must sell it and invest the proceeds productively or develop it.
Duty to segregate and earmark the trust property can not co-mingle the trust property with private funds ex: trustee must maintain a fence between the trust property sheep and neighboring sheep.
Duty to keep accurate accounts/records.
Duty to make decisions rather than delegate them to agents. prudent investor rule - trustee must invest with the care that a prudent investor would use, unless the trust document relieves him of this standard by providing more discretion.
If trustee violates his duties, he loses his compensation as trustee, and becomes personally liable for losses, and may also be removed.
Trust Property Trust property can be real, personal, tangible or intangible, a vested future interest, etc. ex: S gives Patent to T in trust for A for life, remainder to B. B may then set up a trust to put his vested remainder in trust to C. majority rule is that contingent future interests also may be placed in trust. ex: S gives Patent to T in trust for A for life, remainder to B if B survives A. B may still put his contingent remainder interest in trust to C.
Trust property may not be a speculative interest in property. ex: S gives “all profits from future record sales” in trust to T for the benefit of A. Not a valid trust because the corpus is not yet in existence, it is only speculative. (also maybe a present intent problem). however, CA may have allow symbolic or constructive possession of the future profits if there is a tangible product that is likely to produce such profits. ex: if in the above example, S already has the record and is marketing it, there is symbolic possession of the profits and the trust is valid in CA. counter-ex: if S does not already have the record, and has not even signed a record contract, then there is no tangible product that is likely to produce such profits.
Beneficiaries A beneficiary does not need to know that he is a beneficiary for the trust to be valid. A beneficiary may refuse to accept the beneficial interest in the trust. Unborn children are valid beneficiaries - guardian ad litem may be appointed to protect their interests ex: S to T in trust for A for life, remainder to A’s children. Even if A has no children at the time the trust is created, it is valid. But if A dies without children, a resulting trust to S results.
For private trusts, beneficiaries must be specifically named an in existence at the time the trust is created or capable of being ascertained within the period of the rule against perpetuities. CA allows corporations and unincorporated associations to be beneficiaries. Class Designations class designations such as “brothers”, “sisters”, are okay. class designation “family” will be interpreted as limited to the bloodline. class designation “relatives” will be interpreted as limited to the inner circle. class designation of “those most deserving” or “friends” is too ambiguous and not capable of being ascertained.
Powers of Appointment - power of appointee to designate beneficiary - shifting use. General power of appointment holder can exercise the power in favor of themselves, their estate, their creditors, or their estate’s creditors. taxable to the holder
Special power of appointment holder can not exercise the power in favor of himself, his estate, creditors, etc. not taxable to the holder
ex: S to T in trust to pay the income to A for life, T to then pay the principle to such person as A may appoint by a writing during A’s lifetime or by A’s will. If A fails to exercise the power of appointment, then principle goes back to S’s estate as taker in default as a resulting trust, unless the trust provides for an alternate taker in default in case of failure to appoint.
The people who are appointed from the pool of potential beneficiaries are called “appointees.”
Trust Purpose Trust can be made for any lawful purpose for which a contract may be made. Two tests: Subjective motive (dominant intent of Settlor) Probable effect test (more objective)
Purpose must not be against public policy ex: S gives house in trust to T for 10 years, with T’s duty is to brick up the house. Against public policy to waste land. Dead hand control - nobody alive to suffer the private consequences of having his house bricked up. ex: S gives house in trust to T for the payment of income to A as long as he remains married to his present wife, but if he divorces, then he gets the entire principle free of the trust. Invalid as an incentive to divorce. (however, it might be argued that it is maintenance due to lack of two incomes).
Restraints - dead hand control a gift contingent upon not marrying anyone is invalid as against public policy a gift contingent upon marrying from a select group, or at a select time are valid only if they do not reduce the sphere of permissible marriages so much that it would make marriage unlikely (partial restraint). a gift contingent upon getting a clergyman’s approval before marriage is valid unless the clergyman unreasonably withholds his consent. restraints on re-marriage are okay. if a beneficiary does not know about a certain restraint, then it is not necessarily invalid because it had no effect on the beneficiary’s behavior. temporary or partial restraints are more likely to be upheld.
Creation of Trusts Capacity Minors can not create trust because they do not have the capacity to contract.
Delivery must be delivery of the trust corpus. in a testamentary trust, the issue is whether the will is valid, not really a delivery problem in an inter-vivos trust, there must be at least constructive delivery (irrevocable placement with an escrow agent) or delivery of keys to safe deposit box, etc.
Revocability Majority view - trust is irrevocable unless otherwise specified. Minority view -CA - trust is revocable unless otherwise specified. Revocable trusts may be taxed to the settlor because he retains control over them
Real Property as the Trust Corpus Statute of frauds requires a writing, unless with the consent of the settlor, the beneficiary takes possession and makes improvements Settlor must sign writing either before or at the time of creation of the trust. Beneficiary may acknowledge the trust at any time.
Personal Property as Trust Corpus - Oral declaration of trust is sufficient, no writing requirement Secret and Semi-Secret Trusts Secret Trust Where a devise is made absolute on its face, but outside of the document, an express or implied promise is made to hold it in trust for someone else. ex: S wills blackacre to T. T orally promises S that he will hold in trust for A. - Secret trust
need clear and convincing extrinsic evidence to show that a trust existed - if successful, a constructive trust is put on the property in favor of the secret beneficiary.
Semi-Secret Trust where a devise is made in trust, but no beneficiary or other terms are provided. ex: S to T in trust “to be distributed as we have previously discussed” - resulting trust to the estate.
Majority Rule - creates a resulting trust in the settlor’s estate - passes by residuary clause or intestacy. rationale - no extrinsic evidence was needed to discover the ambiguity, so it should not be allowed to interpret it.
Minority Rule - extrinsic evidence is allowed to determine who the intended beneficiary is. rationale - if the property can pass under a secret trust, it should also pass under a semi-secret trust.
Inter-vivos trusts Requires a present transfer of the trust property coupled with present intent to create a trust can’t use words of futurity ex: W declares intent to give library to Hebrew University. While packing up the library, W dies. Present intent existed, but there was a lack of delivery. Court found constructive delivery in the delivery of a memorandum listing the contents of the library plus detrimental reliance by the University.
Not subject to the probate court.
Requirements of a Trust Writing Must set forth with reasonable definiteness: the trustee the beneficiaries the trust property and the present intent to create a trust.
Oral Trusts for the Settlor Need to show active fraud by the trustee to impose a constructive trust on property when the promise of a resulting trust was oral. if the trustee fully intended to reconvey at the time of the creation of the oral trust, but later changed his mind, there is no fraud, only moral turpitude and the court will not intervene.
Restatement §182 - Restitution
|
FREE Law School Outlines 
