Outline Wills and Trusts – Fall 2001
1. Intestacy – dying w/out a will. Testate is dying w/ a will.
2. Wills –
a. Creation and validity
4. Probate process
II. Historical Background
A. Real Property –
1. 1066 William the Conqueror – Battle of Hastings. Before this time real property passed by grant from the king making succession uncertain.
2. Will made a system based on land tenure – gave land based on money and service (feudal system).
3. Will set forth rules about what happened to real property on death = Canons of Decent – rules to decide the takers of a decedents intestate real property.
4. Purposes of the Cannons of Decent.
a. To prevent the fracturing of land – keep large holdings together because they owned kings the most.
b. To keep the passage of land certain – William wanted to know who owed him money.
5. Two Courts formed to enforce the Canons:
a. Royal/common law courts – devolution of land.
b. Ecclesiastical – distribution of personal property
*Above means that there were two different bodies of law to govern property at death.
1. First thing that court did was make the rule that land could not be devised by will, it went automatically to the oldest son – primogenitur.
2. Statute of Wills – (1066) – (1540) land could not be devised.
6. What do the Canons of Decent Mean:
a. Under the rule of primogenitur land goes to the oldest son (see below).
1. X = father, A, B, C, D sons, A has child
a. Father dies, A gets, if A is dead B takes, unless A has children then it goes to them.
b. A and B die first, C and D are daughters – daughters share. 2. X dies w/out children –
a. Ascendants do not inherit (i.e. the parents will not get it b/c they can't make money for the king like a younger male can.) So it would go to the oldest brother.
3. Summary of Above – inheritance lineally = no ascendance (i.e. parents don't get), oldest male child gets it if two, females shared, collaterals take only on failure of issue (again eldest if brother gets, do collateral sisters share (?)).
B. Personal Property –
1. Land was the most important form of wealth in the past, today personalty is. Prior to conquest personalty was distributed on deathbed. After William, the ecclesiastical courts controlled personalty.
a. Testaments – deathbed/oral instructions about personal property.
2. Ecclesiastical coutt made rules about what to do when someone died w/out making a testament. The set of rules made for this is known as the Statue of Distribution –set of rules that dictates what happens to an interstate's personal property.
3. Dying intestate was considered a sin, stigmatizing it, eventually resulting in forfeiture to the King. As a result, the first clause of the Magna Charta says and interstate's goods will be distributed to the next of kin.
C. Chancery - Chancellor was the king's councilor. If you weren't happy in Royal Courts you could appeal to the chancery. Chancery is very important in the law of trust as related to use. Several theories prevail as to why.
a. O conveys to A for the use of B, C and/or D.
b. Middle man has formal title but B, C, D have the benefits, i.e. the profits, rents etc. A holds for the use of.
c. Chancery courts can go after A if doesn't give up to the B, C, D, making them very popular.
2. Henry 8th comes along who abolished it, he needed money. "Executed the use" by allowing use of land, this created an exception allowing A to split the land. This use is the forerunner of the law of trust.
3. Parallel vocabulary – "The last will and testament" this relate to the distribution of land and deathbed giving of personalty.
III. Terminology –
1. Bequest/bequeath = personal property. Legatee takes personal property
2. Devise/devisee = real property.
3. Heirs – takers of an interstate's real property. At common law a spouse is not considered an heir, administered to spouse by dower.
4. Real Property – descendants, heirs
5. Personal property – distributed to the next of kin.
6. Probate – a procedure, a process, and a court.
a. A procedure is the proving of the validity of a will after death.
b. The process of administering, marshaling and administering an estate.
c. The probate court – Diff. States diff names.
1. NY – Surrogate Ct
2. Penn – Orphans court
3. Ga. – Ct of Ordinary
IV. Outline Wills and Trusts Uniform Probate Code - UPC
1. A response to dissatisfaction w/ probate. Unfairness of having decedents property eaten up by lawyers. Reform began w/ ABA; Probate Code formed which is a model for states to adopt.
2. Only about 20 states have adopted. So when she says majority rule it doesn't necessarily mean the probate code. Very little uniformity w/ the code.
3. Original code 1969 revised in 1990.
4. Dacey – wrote probate book – advised avoiding lawyers at any cost and putting money into a living trust.
V. Social Policy Concerns
1. Fred Sparks Case – F: journalist covering middle east. Will specified that his residuary estate was to go to the PLO. Will submitted for probate before the surrogate court, the surrogate admitted the will to probate but invalided the bequest to the PLO. Possible to admit the will but to block a portion of it. How would I argue this case on behalf of Fred w/ regard to prevailing social concerns?
a. Powerful theme of course- interfering w/ a person's testamentary freedom.
1. May want to limit w/ govm't power.
2. Capitalist society – we earn the money we should get to say what happens to it after he dies.
b. What is the argument on the other side?
1. Couldn't give money to them if he was alive, that violates public policy to give to terrorist organization.
1. Judge has tremendous amount of power and discretion in this regard.
2. Cogswell College Case – Cogswell founded a College by trust. "It shall be a SF college" It was supposed to be a technical college. On of the trustees decided to move the school to silicon valley when it started to lose money. Can we deviate from the trust? Policy arguments.
a. Changed circumstances – wills/trusts should be responsive to changed circumstances.
b. Policy against waste – we have a policy against waste.
We shouldn't deviate?
c. Goes against testator's intent.
3. HYPO: Couple having trouble conceiving so try invitro, hubby donates sperm, wife eggs, fertilized in dish, try to implant unsuccessfully, before doing it again hubby dies. Wife wants sperm. Hospital refuses.
a. Wife's strongest argument: Part of her husband's assets and she stands to inherit them, i.e. this is a property interest.
Outline Wills Trusts and Estates Intestate Succession
I. Intestacy: Introduction – intestacy = dying w/out a will.
A. Survey –
1. Most people die intestate = w/out a will. Why?
a. Assume that state will take care of it
b. They are too young
c. You don't have anything
d. No children or marriage.
e. Too expensive to get lawyer – can get a statutory will that is cheaper from state bar.
2. Most people have assets that they don't realize they have.
3. Why people have wills
a. Take care or children
b. Power of attorney for heath care decision-making.
c. Aware that state doesn’t provide enough for loved ones.
d. Generally most spouses want their money to go to a surviving spouse
i. Does the intestate scheme of the state accomplish the goal of leaving all money to the surviving spouse?
e. Even if there is children most still want it to go to the spouse. Again does the intestate scheme accomplish the goal of what most people want?
B. Outline Wills Trusts and Estates Terminology
a. Issue – all of a persons lineally descendents at all generations. Ex. children, grandchildren etc.
b. Generation –
i. I – C1 and C2 = Children, G1, 2, 3 = grandchildren
ii. Generation is a horizontal classification and each level is a separate generation
c. Stalks – lineal descendants – in ex. Above there would be two, because stalks are in relation to the intestate, above 2 children so two stalks.
d. Ascendants – ancestors
e. Decedents – issue, synonymous
f. Collaterals – neither ascendants nor descendants, ex. Bro, sis.
g. Principle: remote descendants do no compete w/ their living ancestors.
II. Share of the surviving spouse
A. Common plan
1. The Statute of Distribution – This is the CL scheme (see handout)
a. Spouse and no issue – wife gets ½ next of kin gets ½. Usually a 1/3 to a ½ to wife under CL depending on state.
b. Spouse w/ kids (w, C1 and C2) – wife gets 1/3, kids get 2/3.
i. Note: in either of above situations most people don't get what they want, b/c most people want all the money to go to the spouse. So if this isn't what most people want and the majority of jxd's adopt this scheme, why?
ii. Historical reason: the statute of distribution deals w/ the distribution of person property at CL, and personal property was insignificant then, the wealth was in land and wife got money through dower and the land went to primogenitur, so essentially this is an unjust scheme from an anachronistic view of society
B. CA – deals w/ community property
1. Community property (CP) – each spouse shares and undivided present interest in any property that they own. Property divided equally among a cal domiciliary.
2. Separate property (SP)– property acquired prior to the marriage or property acquired during marriage if we are talking about rents that issue and profits of separate property whenever acquired. Anything acquired by gift, bequest and devise.
3. Quasi community property – foreign acquired community property. Ex. live all your life in cal then retire in FLA.
4. CA statute §6401
i. CP spouse, no issue, + parents = so, estate of 10,000, she gets its all. As to the date of marriage she gets ½ and when he dies she gets his half. This is the combo of §6401 and § 100.
ii. CP spouse w/ 2 children – same result as above, wife gets it all.
iii. SP, 2 kids, parents and wife – wife gets 1/3.
iv. SP, 1 kid, parents and wife – wife gets ½.
v. SP, wife, no kids but parent – wife gets ½.
vi. SP, no kids, no parent – wife gets all.
5. Sum – so when it comes to CP seems people get what they want but when it comes to SP it reverts back to the old anachronistic way.
6. Same sex partners:
a. Hawaii and Vermont most favorable to same sex couples
. C. UPC – see book page 35
1. Spouse, no issue - §2-102(2) – she gets it all. (200,000 + ¾ balance).
2. Spouse, 2 kids + parents 2-102(ii) – gets it all, if the kids that are alive are the kids of both of them.
3. Points: In modest estates the surviving spouse gets everything. It is progressive so it will take into account remarriage and children from a prior marriage.
4. Problems of Guardianship:
a. Whoever gets custody of child would get the estate. If both sets of grandparents are alive then they have to fight it out. b. Guardianship – giving property to minors (two kinds – can be given to different people)
i.Guardianship of the person –
ii. Guardianship of the property
c. This is a good reason to have a will b/c guardianship is very cumbersome and costly.
III. Share of Issue – all systems require counting roots
A. Common law – Strict Representation – roots counted at first generation even if they all predecease him = root begins w/ intestates children. So grandchildren are going to have to divide a share related to number of parents.
B. CA - CA goes by majority rule = The Any living takers rule – the root generation when the issue are of unequal degrees is the first generation w/ any living takers. Modified representation: roots aren’t counted until you hit a living member. Still can be unfair is some issue survives and others don't.
1. Maud v. Catherwood– Deals w/ how to divide and estate when person dies intestate and has heirs of unequal degree. Heirs had to take by right of representation, b/c of the "they" in the language. Minority approach: The root generation (the closest is the kids) is the generation closest to the decedent that left issue surviving. (This is still good law in cal for those who died before Jan 1, 1985 – which means we can still have a Maud Problem)
2. Modern approach – look at the first generation w/ any living takers or persons who left issue now living (in this case – grandchild level). CA rule.
C. UPC - Per capita at each generation: if 3 issue and one survives he gets one third and the remaining 2/3 is divided among grandchildren so none get more. Divide the share per head at each generation. UPC §2-106. Idea: you should benefit by the generation you are in.
IV. Maud v. Catherwood- deals w/ share of people who are not specifically mentioned in the will. Used intestate language in trust causing problem.
1. Inner circle – people who are specifically mentioned in the statute and next of kin are people who fall outside of that, so you have to look at each jurisdiction separately.
2. Per capita – count the heads, so 1/3rd to A, B, C
3. Per stirpes – divide equally among the stalks and then divide again below.
4. Above work at absence of statute, and some jurisdictions have modified per stirpes.
Importance: it is the minority viewpoint. CA has gone to an any living takers rule (would be 1/6th here), but anyone who has died before 1985 Maud v. Catherwood is still good law.
V. Shares of ascendants and collaterals
Systems of ordering kinship priority – who is the next of kin (these are determinations made out of the inner circle.) A. Civil Law – most common method – applied to the distribution of personal property.
1. Def: we count steps/degrees, count from the decedent up to the nearest common ancestor and then down to the claimant (the individual whose kinship in question)
2. The relevant degree of kinship under the civil law method is the total number of steps.
3. Modified civil law system: when there are several claimants of equal degree but who claim through different ancestors, those claimants who claim through ancestor nearest the decedent takes to the exclusion of those who claim through a more remote ancestor.
B. Common Law/cannon law – developed by ecclesiastics to determine if people could marry in terms of consanguinity = persons who are related by blood. Affinity = persons who are related by marriage.
1. Also count but the difference is that we are concerned w/ the longer of those lines. This system came into being to allow people to marry and if you have a longer line then you are more likely to be able to marry.
2. Cannon law – counting steps but looking at the lines, the claimant w/ the lowest degree of kinship takes. (Just counting to common ancestor not back up again) 3. State has taken over but now the longer line loses because you are not the closest in terms of inheritance. C. Parentelic – based on ancestral right. Look at who are the nearest common ancestors of the decedent and the claimant who are either alive or have issue living and the property is divided b/t them and their issue. Parentelic – nearest common ancestors who are alive or have issue living See Problem on Pg. 45. a. Most states follow the civil law, others the cannon; Parentalic is UPC – only system that dispensed w/ the counting of steps. b. Cal Law: modified civil law system and perentelic and affiniel– pg. 35-6 i. Parentalic – talks about grandparents and issue of a grandparent. See §6402(c) – goes back as far as grandparents ii. Modified civil – (c) those of unequal degree iii. Affinel aspect - (e) issue of a predeceased spouse – moved on the affinity aspect – this relates to community property so the respective heirs would get their portion. c. Provisions that narrow the inner circle: "a laughing heir" is someone that is so distantly related that he or she suffers no grief. These cause problems. d. Final word: normally intestacy situation is when someone dies w/out a will, but Hastings shows that if you use intestate language in a trust then you get the problem. Always have to be on alert for intestacy problem even w/ a will. i. Wills fail ii. Provision of will that fails iii. Provision of a will that is invalidated for reasons of public policy iv. Renunciation – where the entitled person say no they don't want it. VI. Problems of Status - A. Posthumous heirs – 1. Def: a child who is born after the death of a decedent. 2. CL: a child in gestation at time of death and later born alive the child can inherit. They are treated the same as any child living at the death of decedent allowing him to share in the decedents estate. 3. Cal: §6407 – relatives of the decedent inherit as if they had been born at the time. a. "Relatives" – isn't clear, children, colaterals, children of colaterals? 4. What happens w/ a child that is born many years after the decedent? This would throw off the estate distribution plan – the estate may have already long been distributed creating a problem. No case law. B. Aliens – Law has change considerably. At CL England prohibit the taking of land; later provisions were more liberal as to personalty. There are still distinctions here. Some states excluded a nonresident alien from inheriting land. Many say can inherit land but have to sell it in a short period of time. 1. If the distinction refers to resident aliens – the const prohibits discrimination based on alienage. 2. Two situations a. Reciprocity statues: look to see if that country is going to grant reciprocal rights to our citizens. b. Impounding/retention statutes: looks at whether the beneficiary has the full use, benefit or enjoyment of the property, if not the state impounds it. 3. Schernig Case: declared a statute unconstitutional that contained both reciprocity and impounding provision. But SC held particular states statutes constitutional. So states can still make distinctions b/t the right to inherit land and personalty on the theory that a state has a higher interest in land and so they can be stricter w/ regard to it. 4. Cal law - no person is disqualified to take as an heir b/c that person is or has been an alien. So California has eliminated disqualifications based on alienage. C. Half-Bloods – share one parent in common. 1. Step relatives are not related by consanguinity but by affinity 2. Will we treat half blood the same? a. UPC, Cal and most jxd give same rights to half bloods b. Some jxd say that half bloods should be postponed – a smaller share. c. Cal – in terms of administration of an estate, half blood relatives have a lower priority than whole blood 3. Stepchildren – they get nothing unless they are adopted 4. Note on Ancestral property – statutes that say that property that is inherited on one side of the family can only stay on that side of the family – usually applies to real property. D. Simultaneous Deaths – 1. Gen rule: in order to succeed to property on the death of another person if that person dies intestate it is necessary to survive in order to take. Short: in order to inherit you have to survive the person. 2. At CL you didn't have to survive by much – an instant will do. Test: sufficient evidence that husband and wife died together. Modern transp caused proof problems here. 1. The Sufficient Evidence Test: Test: where there is no sufficient evidence that the persons had died other than simultaneously the property of each person is disposed of as if he had survived. 2. Cases tend to turn on what the states definition of death is. This approach causes problems of administration. 3. This was though unfair. Better result was to divide property as if husband and wife die together – this is what modern law tries to accomplish. 3. UPC – §2-104 The Five-Day Rule – relative must survive decedent by 5 days to inherit. This helps to eliminate problems associated w/ instantaneous death. Cal – follows the UPC. E. Illegitimate children – nonmarital children. 1. Issues: a. General rule: nonmarital children inherit from their mother and not their father. i. Policy – predictability, don't want people showing up at the last minute, we always know who a child's mother is but not who the father is (no longer true – DNA, surrogacy).Rule has changed. a. Trimble v. Gordon –. H: statute invalidated as a violation of equal protection b/c it allows inheritance from mothers and not from fathers but in limited circs. i.e. illegitimate children can inherit. b. Lalli - Retreat by SC from broad holding of above. H: a state may have legitimate reasons to apply a more demanding standard for non-marital children to inherit from their fathers than from their mothers. Ct upholds statute and bars son from inheriting c. Diff is proof: ct demands high level and in Trimble paternity test was done, the informal writing in Lalli wasn't sufficient. b. Michael v. Gerald (SC) – conclusive presumption that when a woman is married that any child born during a marriage that the child is fathered by that husband. Again problems of proof, don't want to sully peoples reputations etc. c. Result: now the illegitimate child can inherit from the mother and the father but only in limited situations. F. Adoption – new area of inheritance law. 1. By, From, through – a. CL: Inheritance FROM Adoptive parents: most jxd treat adopted child as natural child of adopted parents. Adoption severs relationship. i. Adopted child takes from the adopted parents and not from the natural parents; she is treated as if show was born into the adopted family. b. If adopted child inherits wealth if both adopted parents die natural parents have no claim. c. UPC §2-114(c) inheritance from or through by natural parent allowed as long as mother openly treats them as his or hers and does not refuse to openly support the child. d. Through – area of considerable litigation. i. Hewitt Case –Ct that the leg didn't provide for adopted child inheritance so go. Many states have changed this rule and allowed adopted children to take from and through their adoptive parents. e. Stranger to the adoption rule: in wills or trusts, the adopted child can take only the share that is given in the adopting parents will or trusts. The adopted child can take only from the adopted parents will or trust. i. this rule still is alive w/ concern to wills and trusts. Wills or trusts have class gift language. The stranger didn't have anything to do w/ the adoption. ii. Revision: Some states will allow to take from a will or trust if the minor child has lived in the household of the person w/ the will or trust – this liberalizes the rule a little bit. iii. Policy – the ct is worried about gay and adult adoption. A case where someone wants to foist someone on a will or trust that is not a child – that is why minor child is emphasized in the revision. 2. Stepparent adoption – a. CL rule – once child has been adopted by stepparent that is it. b. What if child is not abandoned by original father? There is a natural hostility in the law that a child have more than one father or mother. Now we have statutes that provide that if the wife remarries and the child is adopted by H2 that the child will also be treated as the child of H1 (Ill statute). 3. Equitable adoption – legal fiction. a. Cal case – Ct has used equitable adoption to grant children adopted child rights where by all appearances except legal child is adopted. Two theories used in different cts for this to reach equitable adoption: i. Contract theory – foster parent is a promisor who K's to effectuate a legal adoption and the cts are specifically enforcing that k. (see Hodge pg. 52). 1. Cts really stretching K theory here, the cts rarely allow the parents to contract for custody, the policy is generally what is best for the child. 2. Can have specific enforcement after death 3. Equity doesn't allow K's for personal services. ii. Estoppel theory – child has detrimentally relied on a promise and equity would step in to let the child inherit. 1. It's hard to show both detriment and reliance here. 4. Adult Adoption –Gays or other adults may adopt to create inheritance relationship. This is really an issue of consent. Fla. is the only state that prohibits by statute gay adoption. D. Slayer Disqualification – states have unworthy heir statutes providing that certain heirs who are unworthy cannot inherit. 1. Most states agree that slayers are disqualified from inheriting. a. Brandly v. Fox – H and W own property in joint tenancy. He murders her. She has a daughter from previous marriage. H: Tenancy severed so no right of survivorship he just gets his ½ interest in property, other ½ to daughter. 2. Many situations not covered by the law: a. Juvenile not adjudicated in juvenile ct – the ct says there would stretch the law and not let them inherit, this would not be fair if juvenile was slayer but technically no conviction. b. If the slayer has children, many statutes say we treat him as if he had disclaimed. They children may still benefit from slayers acts; this is still a benefit to his issue. Problem 2R – statutes deal w/ intentional homicides. VII. Prior Transactions – before an intestate's death. A. Advancements – 1. Definition – (CL) an inter vivos gift of real of personal property by an intestate which anticipates the recipients inheritance and is charged against the recipients share of the decedents estate. Important: Donor Intent. 2. Intention – i. If it is an advancement depends on the intention of the donor at the time of the gift i.e. intends it to be an early distribution of the estate. CL assumed there was this intention. ii. UPC changes the rule: there has to be a contemporaneous writing or the heir acknowledged in writing the gift was advancement or some other indication in writing. (CL presumes intent/UPC says need a writing) iii. Why did UPC change the presumption? There are so many gifts this way that the only way we can know intention is to have writing. iv. Gifts: A gift is a completed transaction, once it is delivered and there is an intent to make it a gift that is it. 3. To whom applies – i. CL – applies only to a child. Spouse's share is unaffected by advancement. ii. UPC – can have an advancement to any heir – significant b/c gifts to spouses can be counted. 4. Hotchpot concept – this reqs that before the donee can participate in the estate the donee has to bring the advancement into the hotchpot. All it means is that you are prepared to have it subtracted. If recipient wants his share he has to be prepared to bring it back into the equation. 5. Effect on shares of Surviving Spouse – i. CL – SS takes a share off the top, her share is unaffected by any advancement of the children ii. UPC – we add in the advancements and then we give her a share. 6. Effect on shares of donee's issue – i. CL – issue are charged w/ the advancement ii. UPC – have to have the intent in writing. 7. Valuation – how is the advancement valued i. CL – is valued at the date the recipient takes title. ii. UPC – first in time – property is valued at death at the time the heir came into possession or enjoyment or whichever is first. B. Releases and assignments – 1. Donough v. Garland pg. 73 I: what is the effect of the assignment of an expectancy on the share of an assignors issue? H: B/c the ct said that she has assigned an expectancy interest it does not cut off her children's rights b/c is has not vested, so the children do acquire rights to it. This applies to an expectancy and an assignment. Release if different – if she released the interest she would release it back to her mother, this would cut off her children. 2. Me: if an expectancy is assigned to another the right of inheritance is not extinguished, and the assignment is enforced as a K to convey the legal estate or interest when it becomes a vested estate. 2. Get clear of difference b/t releases of expectancy and assignment of expectancy. a. Release: when one who later turns out to be an heir has released and expectant interests to the intestate b/f the laters death, it is binding on consideration. b. Expectancy: the expectation or contingency of obtaining possession of a right or interest in the future. Can't be transferred (think it has to vest?) c. Assignment: a transaction in which a party conveys her entire interest in property to another. 1. See Problem 2S pg. 72 in book pg. 18 in notes. 2. Problems w/ advancements: a. Element of unfairness – if the advancement is larger than there share of the estate they do not owe b. The problem of advancements for surviving spouse is that the husband may have given a lot of money to the children, so essentially it is an imperfect system. c. Inter vivos gifts upset distribution.
Family Protection: VIII. Family Protection – accidental disinheritance and intentional disinheritance. In most states testamentary freedom is curtailed by statutes that favored family protection. State leg restricts the power of a person to dispose of his property after death by making provisions for family members. Two basic categories – Below A and B. A. Support Allowances, Homesteads and Exemptions – protecting surviving spouse from predators on one hand from delays of administration on the other. 1. Family support allowance – protection from delays from admin. Allowance for surviving spouse and children during the period when estate is in admin. Every state allows probate to fix a family allowance and most states children as well. In some states amount fixed but in Cal says reasonable amount, sometimes for a fixed period other times what is required. a. If there is no ceiling on amount, this can increase amount of property than the surviving spouse would ordinarily get. b. Can be intestate. It has no regard for what a will is or what the decedents wishes were. It can upset the estate plan if the support needs are high and the estate is in administration for a long period of time. c. Get it by filing petition in probate ct and gets priority over lawyers and ct fees. d. Amount is discretionary w/ probate judge = reasonable maintenance. Usually get the amount you ask for unless it is a large amount that will eat up the estate. e. In most cases of modest wealth there is no need for a family support allowance because of life insurance. 2. Homestead Exemption Laws –protects equity up to a statutory amount, amount is low but idea is to protect. a. Protect homeowner from creditors. Exemption is up to a certain amount - Cal = 60,000. If on only put 25k equity in your home, you don't get the whole. So essentially all it does is protect your equity. . 3. Personal Property exemptions – (personal property set asides – protects special items from creditors) a. Statues in number of states authorize probate ct to "set aside" for surviving spouse and children various personal property, and these items then become exempt from repossession and forced sale by creditors ex. Car, furniture etc. b. Purpose: augment the amount that is going to spouse or child over what is given in the will. c. All these rights b/c important if there is debt, and they give his spouse and children priority. B. Additional Common Law and Statutory rights of the SS - 1. Dower – not widely recognized. Only 10 states. a. CL - Wife gets a life estate in a 1/3 of the real property of which the husband was siesed during the time of the marriage. b. Important aspects of dower: i. Husband couldn’t devise her interest – so if husband devises it during his life she can go to ct and asks to claim her dower interests and she can get it back. Inchoate right: she has to survive him to sue for her dower rights. ii. Pro: not subject to creditors or inter vivos conveyances by husband. iii. Con: clog on the marketability of title. Makes deed uncertain and causes a mess w/ administrative hassles. iv. Why not used much anymore: Trend toward a partnership of marriage, People have more of personal property, clog on the marketability of title.. 2. Curtesy – a. Husbands CL interest in land – husband has on birth of issue a life estate in all of the wife's lands. If no issue were born alive then no curtsey but wife would still get dower. b. Modern day laws seek to get rid of distinctions between dower and curtsey b/c it violates equal protection. Now states that have dower for both so they are equal. 3. Statutory forced share – most states a substitute of dower. a. Statute that provides on death that the SS gets and automatic cut of the estate. gives the SS a fixed share of the decedents estate regardless of the decedents will. The fixed share is usually ½ to a 1/3 sometimes it is the intestacy share. b. Pro: outright share and pertains to real and personal property. c. Con: fraction of the decedents net estate at death. Net estate means it is subject to creditors so take out the debts and give the survivor share of that. Subject to creditors and inter vivos conveyances. Outright share of net estate = what is in estate at death – if nothing then 1/3 of nothing. d. Problems for spouse: i. Fractional share ii. Creditors have priority. 4. Community property – 9 states; 8 + Wisconsin. The couple has a partnership and each has an undivided half interest in any property that they acquired during the marriage so long as they are in a comm. prop state. a. Separate property – prior to marriage or that acquired by gift or inheritance. b. Quasi comm. prop – foreign acquired marital property – Cal treats prop as if it were comm. property even if it were purchased in another state before retirement. c. Most protection to SS than any other system. Why? i. Get property rights as to the date of marriage. ii. Could get what's in the will or take comm. property iii. Protection from creditors. iv. Have rights to property given away during marriage w/out consent. If husband tries to give away comm. prop the wife has a say, she can call it back into the estate, she can call back ½ of funds that are misappropriated, if she calls it back before marriage is over she can get back all of it. Recapture rules: if she calls it back while he is alive she can recapture it all, after he is dead she can recapture half. d. Problem 3b on pg. 113 in book, pg. C. Attempts to defeat Surviving Spouse's (SS) rights – situations where decedent may act to defeat surviving spouses rights either intentionally or unintentionally. 1. Election by SS – widows election: if decedent intentionally leaves her out of the estate she can renounce her share of the will and take her statutory share. Must either take under the will or renounce. Two concepts: a. Take an elective share against the will – even with a will she can get her 1/3. Wife can renounce the will and take her share. She can also do this if decedent tries to give away her property but the limitation is that she either has to take under or renounce = all or none. i. Problem: when SS takes election it causes total upheaval of decedents estate plan. Her share will come from someone else's. (See Selleck v. Selleck) ii. See problem pg. 121 3c) possibilities of where we could take wife's share: and notes pg. 22. READ THIS. 1. UPC and CL Abatement: see pg. 130. Know that residuary legacies abate first. Pro rata abatement is a reduction of legacy when there isn't enough to go around. 2. Cal Law: Cal steps in and changes normal order of abetment in few cases: if there is a pretermitted spouse (wife who married the decedent after the will was executed see pg. 130) or pretermitted child. In this case we will resort to pro rata abetment for both wife and child. b. The devil's bargain – the husband has effectively disinherited the wife by giving away her property. If she wants to take under the will she has to let him do this. He gives something he has no right to give and she has to agree; so this is a kind of election where she stands to benefit from it. i. On test – fact pattern would show him giving away something that is clearly hers, you will wonder why he is giving away something that he doesn't have a right to, she has to be induced to do it w/ something. She either has to take under the will or renounce. 2. UPC Elective Share - UPC attempts to address problem of attempts to defeat SS's rights, its an imperfect solicitation, few have adopted – The Augmented Estate. a. The elective share or the augmented estate; see pg. 113. UPC elective share takes into account the situation where the decedent has made many nonprobate transfers, which were intended as disinheriting devices. It would give a percentage of the augmented estate so in some situations they will pull back the transfers and give her a percentages – figuratively. If it is a family member you give them less so you can give the surviving spouse more. See pg. 114 – The table. d. Problem – how to establish intent. Can't testify as to what was in his mind. Also a transfer can look legitimate which again makes it difficult to prove his intent to disinherit. Run into evidence rules problems. e. Other problems: This idea is based on the worthy spouse – how much you get depends on how long you have been married. i. Can't measure the worthiness of a spouse by how long someone has been married. ii. The statute is based on the idea that you have a wealthy man that is married and who remarries later, so why should the later spouse be given a substantial fraction of the estate. Teacher dislikes – later wife may have to deal w/ later illnesses. f. what exactly is in the augmented estate see pg. 116 i. Property owned ii. Life insurance is pulled back into the estate; the effect is that she gets more of what is left. iii. The idea of the UPC augmented estate means they are going to pull back the transfers and adjust the surviving spouse's share accordingly. g. See notes pg. 23-24 for practice examples of above. D. Protection of Issue – Omitted Children (Pretermitted Heirs) – Pretermitted children or spouses. Parent has the right to disinherit children in all states but LA all the parent has to do is will the property to someone else, must do it expressly. Policy concern: children have little protection from being cut off. A. Definition – could be spouses or children. Statutes that protect heirs from disinheritance in limited circs. B. Types of statutes – 1. Pretermitted heir statutes – they do not forbid disinheritance. OK as long as the disinheritance is intentional. Two main types of statutes: a. Irrebutable presumption statutes – Glomset case – protection only to children who are omitted. If they are omitted they automatically take, but any mention of the child in will prevents the child from claiming. So once the kid is named = disinheritance. "not unmindful of my son John." Missouri. b. Rebuttable presumption statutes - we will give an omitted child a share unless it is shown that the omission was intentional. The presumption that the child takes can be rebutted by intentionality. Glomset descent. Allows extrinsic evidence to rebut the presumption. Mass and Cal. i. Was the child omitted? ii. Was the omission intentional? c. Some states: whether the omission was intention must appear from the will. admit evidence but it has to be a certain kind of evidence. We want the testator to say they are leaving the child out b/c of whatever reason. d. Cal adopts UPC rule: nothing in will for child but insurance policy for them §6571 Cal Probate Code admits oral evidence to establish intent of lifetime gift of insurance policy or joint account is in lieu of. C. Extrinsic Evidence - Key difference between above two types of statutes is whether extrinsic evidence is permitted, the first won't admit it, the rebuttable presumption states allow rebuttal by extrinsic evidence. D. To Whom Statues Apply – 1. Which children covered? –statutes meant to protect children who were oversights; this is the motivating reason for the statute. Children who were alive at the time and are left out, it is likely that they did so because of disinheritance. 2. Cal – protects those born or adopted after the will was executed. There are two situations where beforeborns are protected – children of whose birth the testator was unaware or if testator mistakenly believes them to be dead. 3. Trend is to protect only omitted children not grandchildren. E. Limitation – 1. Has to be a taker: These statutes do not prohibit disinheritance but the limitation is that the testator has to give the property to someone else. If he doesn't and dies intestate children can claim their intestate share. 2. Pretermitted spouses: testator who makes a will and later marries, the statutes step in to protect spouse against unintentional disinheritance. Cts apply so that any mention of the spouse would cut off her rights. The spouse has to be named as a spouse in the will in order to claim under the pretermitted spouse statute.
I. Testamentary Capacity – 1. Common grounds of contest a. Lack of due expectation: a main ground for protest of a will. b. Testamentary capacity i. Intent v. capacity – capacity means you are not capable, and intent assumes you are capable. Intent refers to an intention that a particular document functions as a will; this is not the same thing as capacity – the ability to execute a will. 2. Generally minimum age requirement – most jxd set the age at 18. a. Parents permission won't suffice: policy is a concern that there is an adverse interest at play. b. UPC – age 18 is limit. 3. Rule: testator has to posses testamentary capacity at the time a will or any codicil's (addition, supplement or revision of the will) are executed. 4. Two kinds of incapacity = mental deficiency and mental derangement. Dealt w/ in case law not statute. A. Mental Deficiency – 1. Factors considered when determining capacity – a. Nature and extent of property i. There is no requirement of actual knowledge – it is enough to know you have items out there. b. Who are the "natural objects of his bounty." c. Disposition or interrelationship of the above two. B. Mental Derangement – usually pertain to people who may be under some kind of delusional state. May be put to a jury but hard to give credence to crazy testator. 2. Perndarvis v. Gibb pg. 81 – cows in the trees. H: man had delusions but they didn't affect his disposition of his property – he knew the objects of his bounty and the kind and character of bounty bestowed. a. Test: nature and extent of property, who are the nature and objects of his bounty and disposition or interrelationship + the additional factor that the insane delusion must affect testamentary disposition of the property (the derangement had an affect on the disposition; the nexus). b. Connection must exist b/t the delusion and the disposition b/f ct will invalidate. c. Invalidate will? Cts try be narrow here and if derangement only affects part of will, may only invalidate that part. 3. Honigmans Will - believes wife is cheating on him. Pg. 84 Test: Irrational beliefs based on facts that are shown to exist see pg. 80-1. 4. Fairly liberal admission of extrinsic evidence in capacity cases – need to admit it. Much is lay and expert opinion – claimant, witnesses or other persons who were able to observe him at time of execution. Psychiatrists. C. Undue Influence – 1. Hoffman Case – 1969 - will left most of his estate to Walter; it was one of a series of wills gradually increased Walter's estate until he left him all. W/ will was a letter to Roberts's family, saying when he Walter he was grateful to him. Brother wanted to set aside the will based in undue influence. a. What gays may do in this situation to make sure property passes: joint tenancy, trust adoption, both names on all accounts and property and make inter vivos gift. 2. Two common ways to prove undue influence: a. 4 factor test (SODU) i. Susceptibility to UI – usually psychologically. Factors: age, personality, physical/mental health, ability to handle bus affairs. ii. The opportunity to influence – a relationship where they see each other often. iii. A disposition to influence unduly for the purpose of getting an improper favor – willingness to do something wrong to get the money iv. Coveted result – "unnatural result" – the result is not going to a family member. b. 2nd test: Prove existence of a confidential relationship and additional suspicious circs. i. Confidential relationship and – 1. Whenever trust and confidence is reposed by one person in the integrity and fidelity of another. There has to be a question of some economic dependence, just a family relationship will not do it. ii. Suspicious circs. 1. Procurement/participation – The initiation of the process of executing the will. Participation is being part of the execution. 2. Unexplained change in the attitude of the testator toward family members or beneficiaries. 3. Secrecy and haste (nondisclosure). D. Fraud – 1. Def: false representations constitute fraud if it can be shown that they were designed to and did deceive the testator into making a will different in its terms from that which he would have made had he not been mislead (book). 2. Carson: F: man was married to another woman she leaves him bulk of estate. a. hard to prove to prove the requisite nexus – that he married her for her money. No evidence that the reason she left him goodies was due to belief he was her husband. 2. Rood v. Newberg – F: nephew gives false info that child is stealing and she leaves it to him. H: b/c of relationship of trust and confidence he had a duty to disclose to her that she was mistaken.
OUTLINE Will execution – many formal req's. I. Functions of Formalities – 3 functions: 1. Ritual function – paternalistic. Requires a ceremony to impress upon the testator the significance of his or her statements. We want the cts to be able to assume the testators finality of intention to transfer property. 2. Evidentiary function – increasing the reliability of proof. Want to know what happened at that ritual 3. Protective function – safeguard testator against duress, undue influence and that they have testamentary capacity. 4. These functions are accomplished in other systems: Registered wills. II. Formal Requirements – Does the will fail for want of due execution? A. History – 1. Variations in statutes and jxd b/c 2 primary pieces of legislation in will execution: a. Statute of frauds (1677) – establ formalities in terms of land. Pertained primarily to land because personalty was given on deathbed. Required: i. Writing ii. Signature anywhere iii. At least 3 witnesses b. Wills act (1837) – both real and personal property i. Writing ii. Signature at end iii. Two witnesses and both present when will was signed or acknowledged. B. Writing – reasonably permanent writing, can be typed in some jxd, can be written in holographic jxd (about 12) – mostly in the south and west. 1. Reasonably permanent writing – C. Signature – a will has to be signed. A proxy can sign a will but it has to be at his direction and in his presence. Witnesses safeguard that this occurred. Proxy sometimes has to sign their signature as well 1. Definition – can be a nickname, initials, relationship, x, and partial name; are all sufficient. Most cases say a signature is sufficient if it is the complete act intended by the testator to serve as his signature. 2. End Requirement – SOF – anywhere, Wills act must be at the end. Problems if you sign it at the beginning. Most difficult areas are the "social stationary cases." Only a problem in states that have subscription requirement. Two possible tests. 1. Logical end – at the end of the writing 2. Physical end – the physical end of the paper – ct favors this b/c it avoids problems of fraud so things can be added that you didn't intend. 3. Effect of Material After Signature – possibilities: 1. Entire will invalidated 2. More common the will would be valid but the material after the signature would be invalidated. It fails for want of due execution. D. Publication v. Acknowledgment – c. Publication – doctrine that testator declares to the witnesses that this is her last will and testament. Used to be a requirement, few jxd have it now. i. Cal – witnesses just have to understand that it is a will there are signing, they don't have to announce it. It is needlessly formalistic. d. Acknowledgment – testator has signed the will outside the presence of the witnesses and later acknowledges it is his signature or his will in the presence of the witnesses. Acknowledgment of will or signature. E. Attestation - witnessing a will. Jxd usually have 2 or 3. If you have more it becomes difficult to find them all. There is a uniform act – provides for domicile at death, etc to provide for problem if one jxd allows for more witnesses than jxd where will is probated. 1. Presence Requirement – Cunningham – F: Drs. sign will. a. Purpose: avoid fraud, substitution, capacity. b. Different tests for presence: i. Visual presence/ line of sight test – actually witnessed it or could have done so w/out a material change in his position. Ct says too strict. ii. Conscious presence – if it was w/in the sound of his voice or his awareness, he knew what they are doing. Through hearing or general consciousness if the testator comprehends that they are signing. Ct adopts this. 2. Interested v. Competent witness – a. Interested – witness who stands to take if will is valid. b. Competence – can testify as to the facts of execution and the capacity of the testator. See problem pg. 170 and notes pg. 33. c. What is the affect on the will of having an interested witness 1. MPC (precursor of UPC)– just purge the share of the interested witness purging statute says you can only have you intestate share or your will share, whichever is less. This doesn't help those who don’t have an intestate share coming. 2. UPC – a rule of non-forfeiture – even an interested witness will not forfeit a gift. 3. Cal – the interested witness has to rebut the presumption that the will was procured fraudulently. a. §6112 – will not invalid b/c of interested witness, creates a presumption that there was fraud, undue influence that has to be rebutted. 3. UPC Self proved will – obviates the necessity for finding the witnesses. Notarized statement attached or on the will where witness make a statement in front of a notary public. problems: i. If you sign the self proved will and not the will itself this can be thrown out. ii. Finding witnesses: must make "reasonable efforts" to find witnesses. F. Testamentary Intent – testator intended a particular piece of paper to operate as a will. 1. Conditional wills – "I am writing this will in case Davey Jones gets me in the Pacific." Conditional will is only meant to operate under certain circs. This didn't happen so the will is invalid i.e. intestate. Some jxd just evidence of motive. 2. Letter cases – also raise problems of intent – was it intended to have any testamentary significance. Rarely do they meet formal requirements, may holographic, but it has to meet those requirements. 3. Can a deed form qualify as a will? Usually no, b/c a deed is a deed and a will is a will, he is signing a deed not a will. G. Attestation Clauses – not required. raises a prima facia case that the will was duly executed. Clause where the witness attest to fact that the testator duly executed i.e. intent, sound mind etc. Advantage: helps to solve the memory problem of witnesses years later and when you can't find them. H. Safekeeping – problems w/ all options – safety deposit box, give to bennie or executor, give to atty. See notes pg. 34. I. Holographic Wills – not sure how many jxd allow. A. General requirements – 1. Def: Will that is written and signed by the testator. a. Witnesses are not required; requirements vary from jxd to jxd. As to entirely requirement and the date etc. b. The writing requirement usually means in the testators handwriting. c. Cal: allows statutory wills, may be a solution to making a holographic will. B."Entirely" requirement - 1. Historical Approach – required that the will be entirely in the hand of the testator. Purpose – elimination of fraud. a. Estate of Thorn – "I give my country place known as Cragthorn" but the name was in a stamp. This invalidated the will. b. Numerous cases say entirely means entirely. This may be needlessly formalistic and requires the layman to have knowledge of this. 2. UPC – material provisions and the signature have to be in the writing of the testator. Entirely too formalistic. Problem – What is material? 3. CA – Adopted UPC. Signature and material parts in testators writing, no need for date, unless two inconsistent wills then the holograph is invalid = §6111. Began w/ entirety. Then Cal had a number of letterhead cases i.e. hotel stationary which cts invalidate. Then Cal SC said we are invalidating a lot of wills. i. Case that changed the policy – Hotel Sonoma "the hotel that has everything – almost." Cal says intent to incorporate approach. See back of typed notes and notes pg. 35. ii. Various approaches of Cal but have changed: a. Entirely: strict jxd, anything printed invalidates b. Surplusage: disregard the surplus. Prob: what is surplus. c. Intent to incorporate: if intended to incorp printing; invalid. d. Current: §6111 – material provisions and signature. (UPC approach) Problem: what is material. iii. See letter cases problem pg. 177 4h), notes pg. 36. J. Oral Wills – allowed in a number of circs. 2. Advantages: Its easier to execute, Illiterate or very ill testator. 3. Disadvantages: Possibility of fraud. 4. Requirements: SOF went to land only, it recognized oral wills, but says it had to have certain requirements – see nuncupative. 1. Noncupative – oral will. estate had to be below certain amount, only small estates, depends on jxd. Had to be made on last illness, made in place of death, had to be proved by 3 witnesses, be reduced to writing w/in a 6 mo period after the death. Cal does not allow. 2. Soldiers/Sailors – very old rule. Some rules say they have to be in actual military service. Essentially same rules apply to these as do to nuncupative wills. Only applies to personal property, real violates the SOF.
Will Doctrines -
I. Integration – comes up where the will is written on more than one page or on more than 1 document. Which documents shall we admit to probate i.e. Treat as integrated into a will.
A. Requirements –
1. pages in question have to be present at the time of execution – if you can prove this one cts may be willing to presume intent.
2. testator must have intended the page or doc to be part of the will and that intent must be at the time of execution..
i. Maginn's Estate – 7 loose leaf pages fastened w/ paper clip and no internal sense of coherence or adaptation of parts is not a will.
B. Application –
1. Problem 5a on pg. 187 – notes pg. 36
2. Solutions to integration problems:
a. overlapping pages.
b. numbering using ex toto pagination. Ex. 1 of 20.
c. initials of the testator on bottom of page as well as witnesses.
d. concluding paragraph – attestation clause. "This is my will and it is 20 pages."
e. Same color ink, pages fastened together, uniform page type and size, consistent font, blank space avoided, carry over sentences.
II. Republication by codicil- Process of treating an old will as if it were executed at a later date. codicil + intend effect of republication A. Requirements - codicil = a document that is a supplement. Usually executed to add or modify an existing will w/out entirely revoking it. Often codicils name/revoke executors. a. Doesn't have to be dispositive. It can say nothing more than "I revoke all prior wills", or just that "I revoke my executor." a. Have to be executed w/ the same statutory formalities as a will. If jxd says no holographic will then no holographic codicil, and visa versa. b. A codicil may be admitted to probate by itself. A will can be invalid and a codicil still valid for probate purposes. It can function in and of itself as a will, so if will invalid probate just codicil and rest falls intestate. 1. Historical importance: At CL if testator said I give all my property to x it would only include property he had at that time not after acquired property. This problem is solved by the Doctrine of Republication – subsequent codicil ct would interpret the will to be updated to time of codicil so after acquired land would go to x. 2. Doctrine: a will is republished by a codicil. The codicil republishes the will – it means it speaks as if newly executed as of the date of the codicil. If the codicil is valid if picks up any after acquired property. 3. Today's wills are ambulatory, they always include after acquired property but still have the doctrine. B. Effect – Cts look to see what the effect of the doctrine would do and see if this is in accordance w/ what the testator would want. 1. Testators intent: Many cts apply republication by codicil based on the intent of the testator: Did the testator intend the codicil to be part of the will? Would the testator have wanted this particular effect? Did he intend the affect of republication? 5. Problems on past tests: 1. codicil republishes the will. 2. republication doctrine works according to intention – not testamentary intent (was intended to be a will). Did the testator intend the affect of republication? C. Application – prob. Pg. 191, notes pg. 39.
III. Incorporation by Reference – 1. Definition: Often helps when integration doesn't apply, addresses the situation when papers that cannot be integrated but can be given effect. Ex. Doc that wasn't present at time of the execution but the testator intended it to be part of the will. 2. Papers that can't be integrated into will b/c weren't present at execution may be given effect under this doctrine under appropriate circs. UPC rule basically same = see below. 3. 4 requirements (see book notes): a. Existing document rule – cts most concerned w/ this. Extrinsic writing must in fact have been existence when the will is executed. b. Reference requirement – look to doc to see if it references the other. Ex. the codicil refers to the will, but could be either, you could incorporate will into codicil or codicil into will, and incorporate by looking at either doc to see if it references the other. c. Intent to incorporate (on face of will) – appears in will. d. Identification and conformity (sufficient description) – must be identified w/ reasonable certainty and must conform to the description in the will. i. Clark v. Greenhalge pg. 193 ii. F: Will – 1977 Executor = Greenhalge. "Distribute my personal property per memorandum." 1979 list, 1980 2 codicils. I: was the 79' notebook incorporated by reference? H: NO, but republication by codicil applied. iii. Problem pg. 192-3 5d), notes pg. 39 – Run this problem! 1. Republication by codicil -Whether you call something a codicil or a will doesn't matter. They can be introduced together. The ct is going to treat each document as what it is, this is important b/c you can have republication by codicil even if it is not called a codicil. (A rule). It is not a fatal flaw if it doesn’t have the right name. 2. a requirement that an instrument you are republishing has to have been valid at one point. 3. Biggest problem here may be if jxd has entirely req. IV. Facts of Independent Significance - 1. Doctrine by which certain details of a will are supplied by looking outside the will to certain extrinsic facts or acts. Usually applies to description of beneficiaries or property. A way to fill in certain blanks. Ex. leave car to son, was gremlin, now jag. 2. Rule: Cts will permit this kind of identification of persons or property provided that these acts or events have a substantial significance apart from their impact on the will. 3. When I see a question where this would apply ask the following questions: a. Substantiality of significance requirement - Does this act have sufficient significance apart from its impact on the will? If yes, OK. b. Independent significance requirement – Whether these acts would have occurred w/out regard to their affect on the will? If yes, OK. Has to have significance other than testamentary. 4. See problem pg. 196, notes pg. 40. Good examples. 5. UPC §2-512 Events of Independent significance – much more far ranging than the traditional rule. Pg. 198. a. A will may dispose of property by reference to acts and events that have significance apart from their effect upon the dispositions made by will, whether they occur before or after the execution of the will or before of after the testator's death. The execution or revocation of another individual's will is such and event. 6. UPC §2-510 – Incorporation by reference – essentially same as other rule. a. A writing in existence when a will is executed may be incorporated by reference if the language of the will manifests this intent and describes the writing sufficiently to permit its identification. 7. UPC §513 – Separate writing identifying devise of certain types of tangible personal property. Last 3 lines extremely different than the rule. a. … The writing may be referred to as one to be in existence at the time of the testators death; it may be prepared before or after the execution of the will; it may be altered by the testator after its preparation; and it may be a writing that has no significance apart from its effect on the dispositions made by the will. V. Extrinsic Evidence – Many rules that limit the introduction of extrinsic evidence and some of these doctrines conflict w/ one another. May have to look to it if there is ambiguous language to find out testators intent. A. Definition 1. Outside evidence. 2. Policy – helps to realize the testator's intent. B. Rules - 1. Plain Meaning – We won't let in extrinsic evidence when there is no ambiguity. Being more liberalized. See ex. pg. 41. a. Estate v. Kremlick pg. 215 – easing of rule. F: Michigan Cancer Society, meant Am. cancer society. H: Ct says let in extrinsic evidence. No ambiguity here so ct is fairly liberal. Traditional rule is that there must be an ambiguity to let in extrinsic evidence. 2. Patent v. Latent Ambiguity – Patent = unclear on the face of the will, latent = hidden, does not appear on the face of the will but it is discovered when you try to apply the terms of the will to persons or property. a. Breckhiemer v. Kraft pg. 206 – Who was present wife? I. Traditional Rule: extrinsic evidence is admissible to clear up latent ambiguities not patent ambiguities. Latent lets in extrinsic. b. Siegly v. Simpson pg. 208 – The term my good friend is the problem. That status doesn't apply to RH, his good fried was HR. Same analysis. c. California Rule: Estate of Russell pg. 216. Under traditional rules there was not ambiguity. Rule: have to look at extrinsic evidence and circs first to establish that there is an ambiguity. d. Many rules say look to 4 corners of will for meaning, if it is ambiguous look to extrinsic evidence to clarify i.e. surrounding circs (book). 3. Oral declarations – not covered. 4. Others – not covered. VI. Mistake – mistake in omission you cannot rectify; ct won't probate what isn't in the will nor reform the will to supply what has been omitted. Misdescription cases you can rectify. These are like above – "my good friend, RH." A. Execution – ex. Couple goes to make wills, and they each execute the wrong will. i. Trad Rule – such a mistake cannot be remedied. Rat: the element missing here is that we are not sure about testamentary intent, testamentary intent = this doc is supposed to function as a will. It is clear that neither wanted the others will to be theirs. ii. Modern rule: use reformation doctrine to reform will (case in book) B. Omission – leave someone out. Can this be remedied? i. Trad rule – mistakes by omission cannot be remedied (so no extrinsic evidence). C. Misdiscription – ex. Property to wrong wife case. Cts have said that these can be remedied in certain cases. i. Traditional view: patent v. latent ambiguity, need to open door to extrinsic evidence w/ latent so cts can remedy this. ("My friend" case = HR and RH.) Another example – giving home but incorrect address. ii. Traditional rule on scriveners error = no remedy. The only way to remedy this is words in the instrument like my home = latent ambiguity and can be remedied. D. Inducement – 1. mistake in the inducement: Based on mistaken belief by testator even though they intend the doc. i. Rule: A mistake in the inducement will only be remedied: a. If the mistake is on the face of the will b. If the testator specifies what would have been his alternative disposition. i. The standards of this rule are so unlikely to be met essentially the cts aren't willing to remedy this. See Union v. Inman pg. 42. Mistaken spendthrift prov. 2. Fraud in the inducement – fraud in the inducing reasons to make a will. In this situation cts will apply a constructive trust. This is different than above.
OUTLINE WILL Revocation and Revival –
A valid will after is it executed can be revoked by a number of methods; biggies are below, revocation by physical act, by operation of law and by subsequent instrument. Remember: wills can be revoked in whole or in part (partial revocation)
I. Revocation by Physical Act -
1. Requirements - two requirements
a. ACT: Legally sufficient act (below is little preview and summary)
i. Trad rule: cancellation and obliteration on material part of the will. This has been relaxed in modern ct.
ii. CL presumption: A will may still be able to be revived via the lost and destroyed will statutes due to CL presumption – the presumption states that if a will cannot be found at testators death and it was last traced to the testators possession there is a presumption that the testator destroyed the will w/ the intention to revoke. Problems: people die w/out their possessions in good order.
a. Lost or destroyed will statutes: The statues say that where the will has been lost or destroyed it will be admissible to probate in certain specific circs.
1. Fox Case (WWII) – what does destruction mean? Doesn't refer to motive but the agency of destruction – agency of destruction was by a 3rd party w/out testators knowledge or at his consent i.e. the war. Since it was fraudulently destroyed in this case it could be probated under lost and destroyed will statute.
b. INTENT: Concurrent intent
2. Proxy revocation: allowed but has to act in presence of testator and at his direction.
3. Cal: no longer req of witnesses
4. Partial Revocation: In more than ½ the jxd partial revocations are permitted. If jxd doesn't recognize partial revocation stuck w/ will as is. Problematic: if line through part did testator want just line or whole will revoked?
5. Rules regarding revocation of wills and codicils pg. 226
a. A few statutes expressly provide that a revocation of a will also revokes all codicils. Generally held that a physical act performed on a will also revokes its codicils, even if the codicils are not marked. However revocation of a codicil does not normally revoke a will.
6. Physical acts legally sufficient for revocation: Burning, tearing, cutting, canceling or obliterating and maybe some other means. (see UPC pg. 225)
i. Diff b/t canceling or obliteration: when you obliterate something you make it illegible, but a line through or writing cancel is canceling.
7. Traditional Rules: Used to be for the UPC obliterating and canceling it had to be on a material part of the will = touch the words of the will. Burning and tearing didn't have to touch material parts of will. (UPC today, no need to touch material parts)
a. Thomas v. Royall pg. 227 – Good analysis of rules pg. 43. F: requests lawyer to destroy her will and a codicil, but lawyer suggests that she preserve them for future reference, he does writing on back. Result = probate the will.
B. CL Presumption – can't find original will CL presumption of revocation.
1. Rule: a presumption exists that if the will can't be traced to the testator's possession and you can't find it at her death then it is presumed revoked. This presumption extends to all copies, even those that aren't in the testator's possession.
a. Kelly v. Donaldson pg. 229: if you can't find the will then CL presumption. niece is able to rebut that presumption – produces evidence as to the disorder of the house and several people knew about the will, even a month before her death.
C. Lost/Destroyed Wills – ct concerned about extrinsic evidence here. Can help to overcome the presumption above.
1. WWII case – Fox in war. Will in bank vault in Berlin, building and will destroyed. fails to make a new will.
a. Does will fit in lost or destroyed will statute – wills that are lost and destroyed can be admitted to probate (NY).
i. NY statute – the will that is lost or fraudulently destroyed can still be probated on proof of the contents.
b. Problem: what is fraudulently destroyed. Fraudulent destruction doesn't refer to motive, but the agency of the destruction = someone other than the testator w/out his authorization or destruction. Ct agrees w/ that and gives property to cousin.
2. Cal §8223 – Lost or destroyed will: nothing about fraudulent destruction.
a. The petition for probate of a lost or destroyed will shall include a written statement of the testamentary words or their substance. If the will is proved, the provisions of the will shall be set forth in the order admitting the will to probate.
II. Revocation by Subsequent Instrument –
1. Two types: A subsequent instrument expressly or impliedly revokes a prior will:
a. Express – will number 2 says this is my last will and testament and I revoke all prior wills. "I hereby revoke…"
b. Revocation by inconsistency (implication)- testator executes instrument giving all to John, then makes a later one w/out revoking, giving all to Mary. Will is revoked by inconsistency. (see UPC pg. 224)
i. Some jxd say "wholly inconsistent" means have to revoke entire estate
2. Revocation of a subsequent instrument is effective only if instrument is executed w/ same statutory formalities. Ex. if subsequent holographic revocation, does it meet statutory formalities; does jxd recognize holographs?
3. A will may be revoked in whole or in part.
III. Revocation by Operation of Law – change in status usually, marriage, birth of issue, divorce, property settlement.
1. Different situations:
a. Marriage: A will then a marriage then testator dies w/out having provided for spouse, Does the marriage revoke?
i. Some jxd say yes, others get same result by forced share.
ii. anitnuptual will statutes – the will predates the marriage = pretermitted spouse situation. Does spouse take a share? Any mention of the spouse may leave them out per pretermitted spouse statutes. "50k to neighbor Hetta" then marries her and no will as wife. She gets bequest of the 50k but not the estate as a wife – unfortunate conflict of policy.
i. At CL: divorce was not sufficient to revoke provision for spouse.
ii. UPC and Cal and most states: Divorce does revoke a will as to that spouse, but does not revoke whole will entirely.
IV. Re-establishing Revoked Wills – Two ways:
A. Revival – reinstatement of a will that the testator has already revoked. (UPC pg. 224)
1. Important Sequence:
a. Will #1 All to Al
b. Will #2 I revoke will #1, and give all to Betty
c. Destruction of Will #2 = revocation of a revoking instrument.
2. Revival doctrine – revocation of a revoking instrument, must have:
1) A valid revocation (which means must meet the two req's of revocation) and;
2) The instrument that is being revoked has to itself be a revoking instrument. Once you meet the two prongs you have to look at the law in a given jxd: Two possibilities:
a. CL = automatic revival – Statement of the rule: When a revoking codicil is revoked, this automatically revives a former will.
b. Majority Rule: Anti revival rule. Presumption against reviving will #1 unless there is some evidence of intention i.e. is this what the testator wanted. Statement of Rule: Revocation of a revoking instrument that does not revive the earlier testamentary doc unless there is some evidence of testator's intention that will #1 survive.
c. Critical question here: What evidence is sufficient to rebut the presumption?
i. Old view – terms of revocation or re-execution of will number 1.
a. Terms of revocation – some jxd say terms of revocation sufficient to rebut. Some jxd say it is what the terms say. Subject to case law interp. This means written terms – something on the face of the will.
b. Re-execution – some jxd require reexecution of will #1 write it over or sign it again.
ii. UPC and Cal – More liberal about what evidence is allowed to rebut presumption: evidence allowed is circumstances, or testators oral contemporaneous or subsequent statements to show testator intended previous will to take effect.(UPC pg. 237)
iii. Analysis: 1) Was it a legally sufficient revocation? 2) Do we have a revoking instrument? c. Problem pg. 231 6b) – pg. 46. GOOD EXERCISE. d. Pg. 225 part C – UPC §2-507 Revocation by writing or Act (a) a will or any part is revoked: (a)(1) by subsequent will that revokes previous will in part expressly or by inconsistency; or (a)(2) – by performing a revocatory act on the will if the testator performed the act w/ the intent and for the purpose of revoking the will or part or if another individual performed the act in the testators conscious presence or at his direction. Revacactory act …includes burning, tearing, obliterating, destroying the will or any part of it. [these acts are revocatory] whether or not [they] touched any words on the will. (CL had to touch material parts, not here) (b) if not express revocation in later will, the later will wholly revokes by inconsistency if testator intended the subsequent will to replace rather than supplement the previous will. (c) – the testator is presumed to have intended subsequent will to replace rather than supplement a previous will if [it] makes a complete disposition. (d) testator is presumed to have intended a subsequent will to supplement rather than replace a previous will if the subsequent will does not make a complete disposition of the testators estate…; each will is fully operative on the testators death to the extent they are not inconsistent. B. Dependant Relative Revocation (DRR) - 2. Class Def: mistake in the inducing reasons to revoke a will. Revocation is dependant on and relative to a mistaken belief. Usually testator executes a 2nd will which revokes the first believing the 2nd is effective. Purpose: doctrine is designed to carry out the probable intention of the testator. 3. Def: a fictional process which consists of disregarding revocation brought about by mistake on the ground that the revocation was conditional. permits ct to disregard valid revocation of will number 1. a. In re Kaufman's Estate pg. 239 - Will #1 to Christian Scientists. Will #2 same but new executor (need executor in cal).Dies w/in 30 days of making the will, mortmain statute invalidates will provisions made two close to death. I: can we reestablish will #1? Rat: DRR says we are going to disregard the revocation. 4. DRR is not the same as revival. It is a branch of the mistake doctrine. It disregards the revocation of will #2 based on testator's intent. The ct says they only intended to revoke will number 1 b/c they though will number 2 would be affective. 5. Often involves the admissibility of extrinsic evidence: need to admit it to find out the intent of the testator – have to be liberal w/ extrinsic evidence. This is especially true w/ revocation by physical act. Extrinsic evidence liberally allowed. a. Wolf v. Bollinger pg. 241 - Will 1 = 40 acres to Katherine Bollinger, then crosses out her name and writes in Christina Wolf. Ct applies DRR to give it to Katherine based on probable intent. She says case was wrongly decided, it is a mechanical application of the doctrine. Policy = distaste for intestacy. 6. Palmer view – restriction on the doctrine. We won't apply the doctrine unless there is a new and alternative disposition. Don't admit extrinsic evidence if there is no alternative disposition. the doctrine wouldn't apply in the case when the testator destroys a previous will w/ a plan to make another one and doesn't. a. Variety of restrictive views: i. only apply DRR only if there is a revocation by physical act. ii. Palmer view: apply DRR only in cases in which there is a new and ineffective disposition.
Will Contracts- I. Types of will contracts – 1. many types: a. K to make a will b. K not to make a will (to die intestate) c. K to devise certain property d. K not to revoke a will e. K not to contest a will f. K to perform a service in return for inheriting property 2. Most common situations where will K's arise: a. Life care situation b. Couple who marry late in life w/ children from prior marriages and want there estate to pass in a certain way i.e. to the survivor of the couple and then to children, often equally 3. Examples to illustrate will contract doctrines: See full examples pg. 49. a. Ex. #1 – Written promise (letter), no will. i. Can the letter be probated? A letter cannot be probated (unless it is a holographic will.) But generally cts will say a letter is a letter not a will, it is only a promise and cannot be probated. 1. Whitehead pg. 50 – letters not a will, but may be able to use them for breach of K action. Look to usual considerations of K law: offer, acceptance, consideration, bilateral k or unilateral K. Remedy is at K law. b. Ex. #2 and oral promise + a revoked will. i. Can revoked will be admitted to probate? A revoked will cannot be probated even if the revocation was in violation of a valid K. Further SOF problem. ii. Remedies: 1. legal remedy is damages 2. equitable remedy. Ex. specific performance, quantum meriut – value of their services but wouldn't give expectation interest, constructive trust – to prevent unjust enrichment. a. Both SP and CT would satisfy expectation interest. iii. How can we overcome SOF here (see theories to surmount below) 1. Part performance – something you never would have done had it not been for the K. Evidentiary theory – proof of the existence of a K cuz you wouldn't have done it otherwise. a. Problems: i. Cummings case: when she probated the will that was part performance. 2. Reliance/estoppel – heirs would be estopped to a SOF since the testators accepted the benefit of the K. 3. memorandum of the K: can use the will as a memo of the K. Don't like to use letters as memo's or wills unless it specifically recites the terms of the K. c. Ex. #3 written promise, + will in breach. Promise, will is found, but instead of leaving it to client leave it to all kids in equal shares. i. Will that is in breach of the promise will be probated and you have to bring a separate cause of action. ii. General ideas from above: 1. Probate law does not control the issues in this area but by contract law, a valid will be probated. 2. A K is not a will that has been executed w/ formalities. It is a K not a will and you can't probate it. II. Existence of Contract – How do you prove the existence of a will K? These generally tend to be oral and even if there is a K the terms are not all spelled out. The most important term is whether the survivor has a right to revoke. It should be explicit i.e. "this will was/wasn't executed pursuant to the K." A. Presumption? – In the presence of ambiguity, resort to presumption. Some jxd say if there are reciprocal/mutual wills e.g. minority says if that will looks exactly the same we are going to assume there is a will K. The majority say there is no presumption, it has to be explicit. 1. Joint and mutual wills – d. Joint will - a single instrument that is executed by two persons, executed on date of each. e. Mutual will – is the separate will of two people that has reciprocal provisions. i. Litigation breeder. Are these wills executed pursuant to a K? ii. Majority view is that the existence of a will does not create a presumption of a K, you have to prove it. (extrinsic evidence) B. Cummings Case – see above under problems of part performance. 1. 1929 will, express K (H and W), 1931 Reciprocal wills, H dies, Phoebe's new will. a. Part performance is incorrect theory – she would have taken the benefits anyway. Estoppel should be used – heirs were estopped b/c she took under the k. 2. Charles Slour – children lose b/c they couldn't prove there was a K i.e. the presumption. The best thing to do is say that his will is pursuant to a K or say that it is no pursuant to a K. III. Defenses to K Formation – A. Statute of Fraud – Key problem here SOF but this is not an insurmountable problem: is discussed above under Ex. #2 B. Theories to Surmount the SOF – see ex. #2. 1. Part performance doctrine – (these two get confused, below). Evidentiary doctrine –someone partly performed his or her side of the bargain and that is evidence of the k. 2. Reliance/Estoppel doctrine – the survivors actions estopped possible contestants for claiming a share of the estate. Detrimental reliance 3. The will is a memorandum of the K – this usually doesn't help IV. Revocability – How do you prove there was a right to revoke? A. Power v. Right – everyone has the ability to revoke a will, you can just take it and tear it up, but can you revoke it w/ impunity, i.e. Will you be liable for it? Most common situation: one member of couple dies in reliance on the K and the surviving party breaches. How do you prove the existence of the K? How do you prove the survivor could not revoke? (These are two questions that need to be answered in these cases). B. Case of both parties still alive – and one breaches, must less common. English case says no remedy. Rat: no one has changed his or her position in reliance, no death no reliance. Another theory says that the law is reluctant to intervene when the couple is still married. 1. Stone v. Hoskins pg. 255 – says that where husband and wife are both still alive and one breaches there is no remedy. (Dicta). No one has changed position in reliance and no one has died. (case says also that when one dies it becomes irrevocable so if surviving party breaches = liable under K). V. Remedies for breach – See above under problem #2. No remedy at probate in terms of introing a revoked will or a letter as a will, generally have to sue on the K. Might be remedy for breach, damages, or quasi K action, or equitable action: specific performance, constructive trust. VI. Effect of Will Contract on share of surviving spouse – 1. Matter of estate of Judd. H: The after acquired property is subject to the K. The K became binding once the will was executed, rights vested at that point, so after acquired property was covered. 2. How can she evade will since it is irrevocable? a. Can put some in trust, convey it inter vivos b. Make inter vivos gifts. i. What is the line b/t gifts that are permissible and those made w/ intent to defraud? a. Problem: very hard to prove intent to defraud b. Some states have presumptions to prove this: gifts made too close to death, size of the gift in proportion to estate – the larger the gift or the closer to death may lead cts to say such gifts are impermissible. 3. Problem: pg. 256 – Third party rights a. Husband and wife own blackacre as joint tenants. W dies in conformity w/ agreement, then H sells X the property, H invests proceeds and loses them. What are A and B's rights? (Go to book for details). i. Sue for breach of K. a. Problems: have to prove the existence of a K – likely can do this here cuz the will is clear. ii. Can they go after x? x is a bona fide purchaser; he didn't know anything about this will K. Normally A and B's rights are cut off by a bona fide purchaser. iii. Is there anything A and B could have done to have protected themselves? Put the will K in the deed records so it will be picked up in a normal title search.
Will Substitutes – The advantages of will substitutes is they avoid costs and delays of probate. These are not wills; they are not subject to the req's of will, alternative forms of providing disposition of property on death. I. Life Insurance – K b/t the owner of the policy and the insurer. 1. Two forms of policies: a. Term – fixed term, once you get beyond that term and if you don't pay your not insured. Its renewable. b. Whole life – like a savings account, builds up cash reserves which you can tap into 2. Annuities (similar to life insurance) – owner puts money in, gets interest on it during lifetime, then when you die the money put in goes to who you specify. (Rainey) 3. Suicide – generally if you take out a policy and commit suicide in a certain period of time, it is contestable by the insurance co. But if it is after that period then generally they will pay off. 4. Double indemnity – coverage that pays double if the insured dies in an accident. Have to pay extra for it. 5. Key problem: make bennie designation to "spouse" get divorced and don't change it; goes to spouse #1. Important to change beneficiary if you divorce or separate. Method is to go to insurance co b/c they are other party to the K. 6. Kansas City Life v. Rainey pg. 268 a. F: Is insurance policy D purchased actually a will? I: Whether the policy is invalid as a testamentary disposition not in the form prescribed by the statute of wills? H: NO, b. Rule: an insurance policy is a K. A policy payable to a third person is a K for the benefit of the third person. c. The argument: To say something is testamentary in character, you are arguing it is invalid, it is invalid b/c it doesn't meet the statute of wills, it doesn't meet the statute of wills b/c it doesn't meet some req of a will. 7. Problem pg. 269 - (1) H has life insurance W is beneficiary. (2) H's Will says half to W and half to B on his death. H has a trust for W for her life and remainder to B or B's issue. a. Can an individual change life insurance beneficiary in his will? NO, to do so you go through the actual instrument, you have to change the K w/ the insurance co. 1. This is an election situation – good discussion pg. 55. II. Joint Ownership – often think about joint tenancy. There are different rules about joint ownership; rules are different for different things. Arises w/ bank accounts an real property. a. Joint tenancy – we own property in joint tenancy and in my will I give house to my best friend. What affect? Property still goes to husband b/c in JT passes automatically to surviving joint tenant. The will doesn't operate on joint tenancy – it passes outside the estate. 1. Can you convey your interest in the joint lifetimes? YES, but changes it into a TIC = severance. A. Joint Bank Accounts – a. Franklin v. Anna pg 271 – elderly put younger relative on account but doesn't want her to get money on death. a. Rule: when an account is created as a joint account there is a presumption of a gift but it is a rebuttable presumption. Was rebutted here b/c he tried to change it (i.e. this was an agency or convenience account). b. Problem: joint bank accounts subject to lots of litigating, b/c people do this for convenience and they don't realize that anything in the account that passes outside of probate. B/c of this allow extrinsic evidence c. UPC – any sums that remain in the account belong to the survivor unless there is clear and convincing evidence of a different intention when the account was created. b. Riddle v. Harmon (real property) 1. Real property – (note JT on cars pg. 57) i. Cal – presumption of community property exists when a family residence is acquired by a husband wife in joint tenancy. What are advantages of having it CP: a. Advantages are you would have testamentary disposition over it. b. Tax benefits if it is in CP form. c. Useful in terms of dissolution – it basically operates as a severance. The presumption only operates for separation and dissolution purposes but not for death purposes. ii. Riddle v. Harmon a. F: Wife grant to herself and undivided half interest in the property to sever JT and make it TIC. H: It is OK for her to transfer it to herself in another form of ownership. iii. What is the proper procedure to sever JT in personal property? a. Man goes to bank w/draws all money from accounts, then sticks them in an account only in his name, and dies. H: this is OK to sever a JT, w/out knowledge and consent of the other person in real or personal property (wife didn't know). B. Safe Deposit Boxes – 1. In re estate of Wilson pg. 275: Wilson: JTRS on safety deposit box only gave wife the box not the money in it even though their was evidence intent was other wise to make JTRS on money inside. 2. In many jxd there is a presumption on joint bank accounts, but this presumption doesn't operate on safety deposit boxes. 3. Cal Civil Code section: any K between a bank and an individual giving ownership of safety deposit box is void. C. Other Accounts – not discussed. III. Contract Rights – 1. McCarthy v. Pieret pg. 279 a. F: Bond, mortgage and extension agreement, and she says in it that she wants the property to go ½ to bro and ½ to sister's kids. She dies and husband wants the property. Teach says case is wrongly decided. H: fails as a testamentary gift doesn't meet statute of wills. Ct is confusing gifts w/ K agreement. she amended the K so the rules were governed by K law so the bro and sister are 3rd party bennies and it vested in her life time so there is no need to invalidate the gift. 2. UPC- Ownership of Multiple Party Accounts During Lifetime pg. 281 – (b) during lifetime of all parties, an account belongs to the parties in proportion to the net contribution of each to the sums of deposit unless there is clear and convincing evidence of a different intent. As between parties married to each other, in the absence of proof otherwise, the net contribution of each is presumed to be an equal amount. (c) a beneficiary in an account having a POD designation has not right to sums on deposit during the lifetime of any party. 3. This includes: a. Joint accounts – payable to A and B. Ownership in JA's belongs to the parties in proportion to their contributions. Proof: go back through records. b. Trust accounts – not a trust exactly but bank accounts that use trust language. "A in trust for B." B has no right during their joint lifetimes. c. Payable on death accounts (POD) – "A, payable on death to B." No rights until death. B has no rights during their joint lifetimes. 4. If you have property in JT the will will not work a severance. Case: second marriage, husband wants to leave his half of property in JT with wife to son, you cannot effectuate a severance of a JT in a will. JT falls outside the probate estate. IV. Gifts – see example pg. 58 (Dr. to Mr. Baugh) – think this is for outright inter vivos gifts, a form of nonprobate transfer. 1. Requirements for a gift: a. Delivery – Property must be delivered to donee: different methods of delivery i. Actual or manual – actually passes ii. Constructive – provide a means for delivery ex. Key to box, passbook, agent of donee (donees must be aware of it) iii. Writing - b. Intent – the donor must have present intent to make a gratuitous transfer. 2. Analysis of a gift: a. Was there a delivery? i. Have to look at means of delivery ii. Constructive or written delivery? Impracticability Rule: Many cts say for delivery by writing or constructive delivery it must be impracticable to deliver it manually. (Ct doesn't just look at the chattel but the circumstances i.e. the woman jumping out the window) iii. Or was there manual delivery? b. Was there intent? V. Gifts causa mortis – gift made in contemplation of death. 1. Requirements – a. Gift of personal property b. Made in expectation of imminent death c. Donor must die of the peril d. Delivery 2. Requirements are stricter than for gifts. Why? Fraud – person is dying and you could just take it, he is dead who is going to contradict it. Not favored in the law. 3. Different from oral wills b/c: a. No witnesses necessary/req in oral wills b. Revoked upon recovery/oral will must be formally revoked c. Oral will must be in writing later d. Delivery/oral will post mortem delivery e. Unlimited value/ oral wills have a statutory ceiling. 4. Foster v. Reese – F: wife writes note to husband while in hospital that money is all over house and who it goes to. Husband finds note, gets items, she dies. Husband doesn't get gift; goodies pass under will. See pg. 59. 5. All states allow gifts to minors. This is made possible by UGMA and Cal is CUTMA. These acts allow gifts of securities etc to children. It lasts through period of minority, or extend it if you want. They way to do this is to title the property by making reference to the act i.e. a canned trust. a. Gift is generally irrevocable. b. Vests legal title in the minor. VI. Deeds – 1. Req's for deeds: c. Intent d. Delivery 2. Noble v. Tipton pg. 287 e. F: Noble wants to give Blackacre to his son Thomas. He has a deed giving it to his son but deed went to custodian, not Thomas. H: void for want of delivery. Intent but the father never gave anything to Thomas while he was alive. Custodian was agent and you cannot have an effective agency relationship that survives the death. 3. Tennant v. John Tennant pg. 289 a. F: woman executes a deed to give land to home when she dies, delivers it. Retains life estate and power to revoke. H: she conveyed something right then even though it was a future interest, in Noble he kept it for himself. Also there was no agency relation here.
Rule of thumb in analyzing trusts: Who is the settlor, who is the trustee, who is the beneficiary, what is the corpus?
Trusts - I. Introduction –. A. History – History of the "use" and development of law pg. 61. Trust developed as a devise to separate legal and equitable title. B. Definition – 1. Rst def: a trust is a fiduciary relationship w/ respect to property (involves a relationship involving a high standard of care) in which the trustee holds legal title to the trust property, subject to enforceable equitable rights and the beneficiaries. a. "Trust property" = corpus, res. 2. Cardinal feature of trust: the separation b/t legal title and beneficial enjoyment, if you do not have this you don't have a trust you have a condition called merger. C. (Essential) Parties – settlor, trustee, beneficiary. 1. Settlor/grantor/trustor/(testator)/(creator) – can have more than one grantor if they own property together. Usually like husband and wife. 2. Trustee (Tee) – has legal title. Can have co-trustees, no limit. May want co-trustees to avoid vesting power in too much power in one person. a. Problems of co-trustees: i. Logistics of getting them all together, ii. Trouble making decisions – this is a problem b/c usually there has to be unanimity. 3. Beneficiary/ies – can have more than one obviously. a. What if we have two co trustee's who turn out to be two beneficiaries, do we have merger? Usually cts say if you have multiple co-trustees and multiple bennies it is OK but usually run into problems if you have one trustee and one beneficiary who are same person (merger) b. Merger – if all legal becomes reunited in one person, merger occurs and the trust will cease to exist. 4. Creation of trust usually involves the creation of present interests into future interest. See power of appointment in EE pg. 167, distinguished from trust pg. 318. D. Reasons to Establish a Trust – 1. Avoid probate – expensive, delays. 2. Protection from creditors 3. Some irrevocable trusts can reduce taxes 4. Provide Property management: children or elderly considerations: Trust v. Guardianship: a. Guardian would have to ask permission from the ct; trustee doesn't. b. Trust is more flexible than a guardianship. Guardianship is more cumbersome, inflexible, costly and complicated by uncertainty. c. Trust can be personally tailored and guardianship can't 5. defraud spouse or creditors in many jxd II. Classification - A. Inter vivos v. Testamentary – 1. Testamentary trust – to have a valid testamentary trust you have to have a valid will; formed in a will, only has legal affect after the death of the settlor. Disadvantages: a. Doesn't avoid probate b. Easier to know intent if someone is alive, harder to challenge inter vivos. c. They depend on the validity of the will. No valid will no trust. 2. Inter vivos trust: trust created during settlor's lifetime. A non-ct trust, but a testamentary is a ct trust = it is brought into being by the probate ct whereas inter vivos trust may never meet up w/ the ct. Advantages: a. Degree of secrecy to them – only people who usually know of terms are you and trustee, and testamentary everyone will know cuz when probated = public record. b. Accounting – testamentary involves judicial approval of trustees accounts, so must be annual accounting which is time consuming and expensive but w/ inter vivos no requirement of accounting but you can specify that. B. Written v. Oral – 1. Written – trusts for real property must be written or violate SOF. 2. Oral – Oral trusts of personal property are fine but for real property violate SOF. C. Express v. Operation of Law - 1. Express Trust – one which someone intents to create. Usually created by trust instrument. Typically talk about private express trust created by a private individual. A trust created by express intent of the settlor. 2. Resulting Trust – (by operation of law) This is a remedy; a moment in time. It is not an ongoing fiduciary relationship as w/ private express. Can't say who is trustee, beneficiary b/c it is only a remedy.. These are equity talk for reversionary interests. Come into being when: a. Express trust fails – Ex. not in writing for real property, property will pass by resulting trust. i. Passes by resulting trust means a method or remedy that a ct would use to get to the right outcome, take the transaction apart and the property reverts to the grantor or grantors heirs. ii. See Semi-secret trust. (EE pg. 441). b. Express trust makes an incomplete disposition – trust terms don't specify what happens to everything. c. Purchase money resulting trust – One person pays consideration (money) and puts title in someone else's name can also be called a gift. If it is a relationship of legal strangers presumption then it is a purchase money resulting trust .. Purchase money v. Gift: i. May depend on the intent which it is ii. Based on the relationship b/t the parties e.g. grantor and grantee. If grantor and grantee are legal strangers law presumes a purchase money. The law presumes if it is a family member then it is a gift. iii. Situations the PMRT arises: 1. Don't like what your doing w/ the property 2. I die and my heirs see it they are going to wonder why the legal stranger owns it. Defense: a. It was an inter vivos gift. Come up w/ all the evidence you can that it is a gift. 3. Constructive Trust – (by operation of law) a remedy imposed by a ct to prevent unjust enrichment. a. Purpose: to prevent unjust enrichment: if party who has property was not meant to receive it. Benefit conferred = enrichment + unjust = legally cognizable wrong = duress, fraud, mistake, breach of K. Elements: i. Legally cognizable wrong (duress, fraud, breach of K, mistake) + ii. Enrichment. b. Three theories on which constructive trust can be made: (see EE 447 and see cases in special types of trusts section) i. Fraudulent conduct, duress or undue influence – if a person procures property this way. ii. Abuse of confidential relationships – such a relationship where person relies on other party to transaction to be fair and honest. iii. Unperformed promises made in contemplation of death – if one person induces the transfer of a property by promising the transferor to do something w/ the property at a later time and then reneges on the promise. c. Pope v. Garret: see pg. 64. I: should there be a constructive trust? If yes, on whose interests? H: YES, constructive trust is a device to prevent unjust enrichment, there was a legally cognizable wrong = duress + there was enrichment = all of the children benefited b/c of the wrong. Constructive trust is impressed on all the shares of all the children. D. Active v. Passive – see pg. 343 1. Passive – has no duties. If you have a passive trust the ct can sweep it aside and vest title in the hands of the beneficiaries. 2. Active – have to have an active trust to have a valid trust. The trustee has to have something to do to make it valid. a. Hooper v. Felgner pg. 344- not intelligible as far as I'm concerned. Have to have some active duties by the trustee in order to have a valid trust.
Left from last time: E. Trust v. Other Legal Forms – 1. Agency – trust v. agency relation: i. Look to understanding of the parties, Ex. give you a hundred dollars and invest it for me, looks more like an agency relationship. ii. Agent is subject to the control of the principles so it may depend on how much discretion is given. The agent authority is limited by whatever grant of powers was given by the principle. The trustee has a broad range of powers that are implied or written. iii. Also depends on who holds title to the property; an agent does not hold title. iv. Was there anything said about liability – an agent incurs no personal liability if acting in the scope of his or her employment. A trustee is personally liable for acts as trustee. 2. Debt – Trust v. a debt – a req of an identifiable trust corpus. A trust also involved a duty to deal w/ a specific property, a debt merely involves and obligation to pay a sum of money. 3. Problems (McKee, McLaughlin) – see problems pg. 346 and pg. 66. a. Prob. 9a) Insurance policy for son. Corpus was not segregated, debtor creditor relation, no trust. McLaughlin. b. Prob. 9b) E health insurance as bookkeeping entry. Debtor/creditor relationship. Trad rule: the corpus has to be earmarked and segregated. (Earmarked is that is identified as trust property, and segregation is separation of the trust property). 4. Relationships that are a power i. Power of Attorney – authority to act in terms of lawsuits, allows them to manage property, collect rents etc. It is a written document – written authorization by one person called the principle to another who is called the attorney in fact. ii. vs. trust – a. PAT terminates on the death or incapacity of the principle, so it is really not good for estate planning b/c it doesn't survive the principle. b. It is limited in scope by authority in the written authorization.
Elements of a trust -
I. Intention to create trust –
1. The settlor has to manifest the intention to create a trust. Has to do so generally at a time when they own the property. Has to do so clearly and unambiguously. Basis of a private express trust.
a. Testator is vague – particular problem here is the precatory language problem = language that begs in a sense, I wish, I desire, I urge, hope, request. In this sense the testator is vague b/c they are not demanding that you are do it. Precatory language creates problem of intent.
i. Comford v. Cantrell pg. 353 – "absolute estate forever" but precatory language later in the will. The absolute language wins out to show testators intent.
ii. In cases of precatory language cts tend to say trusts are not created. England says that this is a trust. Any of those words explain what the testator would like to have happen but don't lay on the tee a mandatory legal obligation. Our ct's require more, the material is not saying precatory language can never create a trust, it can lead to a trust in some circs: What to look for where precatory language might allow trust to be imposed:
1. Relationship b/t the testator and the possible beneficiaries of the trust
2. Ages of the beneficiary
3. Health of the beneficiary
4. Look other aspects of the will – what else was given to trustee and Bennie, if nothing else was given to the benee this would tend to lead to trust result, if something else was given to the trustee this would intend to imply a trust result.
5. If the intended trustee is also named as the executor of the will – cts tend to say that an instruction to a fiduciary has special significance.
b. Problem pg. 353, 9c) Is this a trust? See pg. 67.
i. "request that" analysis for (a), (b)
ii. (c) a power of appointment,
iii. "bequest by A to B for life, remainder to such of B's issue as B shall appoint by deed or will." 1st case is a special power of appt = the class is limited,
iv. "bequest to B for life, remainder to such persons as B shall appoint by deed or will." 2nd in a general power of appt = he can give to who he wants. If B doesn't give under the trust: In the 2nd case it will be a resulting trust b/c it doesn't make a complete disposition of the trust property. In the first case it will go to all of B's issue
v. For power of appointment look for the language: "power to appoint", "shall appoint."
3. Doctrine of repugnancy – when one clause conflicts w/ another especially when first provision in larger then second provision (check this)
II. Trustee – maxim: a trust will not fail for want of a trustee. Have to have one but ct just appt's.
1. institutional trustee – more costly i.e. they take a lot of money. More management skills. (family member less costly).
2. If no trustee named, if they are deceased or incapacitated, the ct will appt one.
3. Co-trustees – joint tenancy, the other person b/c the remaining JT if one dies = the right of survivorship, but usually no successor appointed to replace him by the ct.
III. Beneficiary – (private express trusts not charitable trusts). Beneficiaries of a trust must be definite or capable of being ascertained w/in the RAP.
1. Don't want to vest too much control in dead hand – don't want to wait 100 years to see who gets Blackacre. You want property to go into use
2. Have to have beneficiaries who are able to compel the trustee to do the trustee's duty.
3. No requirement for charitable trusts (only for private express trusts) – we want to encourage charitable trusts, attorney general enforces charitable trusts.
4. Capacity issues:
a. Any particular age for bennies? 2 year old has capacity to take the benefit of the trust but doesn't have capacity to administer it.
b. Can also go to unborn children
5. All cases deal w/ issue of indefinite beneficiaries that can cause the trust to fail.
c. Nichols v. Allen - F: will says residue goes to whoever they want. H: This is too indefinite w/ regard to beneficiaries – "whoever they shall pick." The corpus passes by intestacy where this fails.
d. Rule: a vague trust fails if it is vague in terms of its denomination of beneficiaries. e. Morice v. Bishop – "give to whoever you think is worthy" is too vague. View: Ames argues treat a vague trust w/ indefinite beneficiaries as a power rather than invalidate it. f. Trust where beneficiaries are described as employee's, or family. This is a gray area, cts will go either way. Relatives – some cts don't consider this to be sufficiently definite class – still this is a gray area. g. Note: Normally if a gift in the will fails it passes into the residue, cts tend to treat resulting trusts as if they were reversionary interests.
IV. Specific Trust Property – a trust requires specific trust property i.e. have to have an identifiable trust corpus.
1. Trust can consist of any property. Trust property may consist of virtually any property interests, whether real or personal, tangible or intangible, legal or equitable. Can include things like patents and good will in business. It can even include non-transferable interests ex. A tort claim.
2. Expectancy Interest: See problem pg. 359 – 9d) Can't put expectancy interest in trust b/c you don't own it. Expectancy interest is a speculative interest = no specific trust property. But remainder interest is OK since it is vested.
3. "To A if living at M's death, otherwise to C" = it is a contingent remainder on survivorship. Cal says that you can put a contingent remainder in trust (majority rule).
4. Brainerd Case – I: What do we need for trust property. F: man puts future profits in stock for his children, he didn't have any children. IRS says no trust. Rule: you need to have property that you presently own in order to put it in trust; you can't put an expectancy interest in trust.
5. What does it mean to own certain kinds of property? Law is generous in what is recognizes as property. Future interest can be put in trust b/c it is presently vested possession. Split on contingent remainders b/c they don't have the same quality of present vestment – this may be too speculative (Cal allows this) 6. Property that can't be transferred can be held in trust by the settlor as the trustee.
V. Valid Trust Purpose – the purpose of the trust must not be illegal or against public policy.
1. Shapiro v. Union National Bank: only give money if married at death to Jewish girl w/ Jewish parents, if not hold for 7 years, if still not goes to Israel. I: Is this a valid trust purpose?
a. Contrary to public policy - policy as invalid restraint on marriage. Not all restraints on marriage are invalid –
i. Complete and total restraints: complete/total restraints on marriage (complete preclusion) are invalid as against public policy. However constraints that are partial are considered reasonable and are valid. (Partial=reasonable=valid).
1. Maddox v. Maddox administrators – F: girl told by father that she had to marry a Quaker. The 6 males who fit the bill, weren't marriageable: argument succeeded.
2. Snodgrass pg. 374 - Partial restraint. F: can't marry a catholic until you are 32. H: this partial restraint is considered reasonable and therefore valid.
3. What would make this a total restraint? The more it reaches on the spectrum it is a total preclusion, if you limit the amount of people who can fit to almost none then it qualifies as preclusion.
ii. Partial restraints reasonable = reasonable = valid – see above.
iii. Inducement to divorce
1. Heller pg. 373- Rule: trust provisions which tend to induce divorce are invalid as contrary to public policy b. Constitutional argument: i. Freedom of association: right to associate w/ whomever he wants. Father has freedom not to give him the money. These amendments are meant to apply to state not private action. ii. Discriminatory:
1. 14th state can't prohibit who you can marry (Loving v. VA) but if father chooses to condition his inheritance on who he will marry – this is private not public discrimination. a. But see Shelly v. Kramer – SC says private discrimination is not OK but ct is not being asked to enforce the sons right not to marry, just to enforce the testator's intent. There is no right to inheritance. b. 1st – free exercise clause – you have a right to practice or not to practice your religion. 3. Idea of these cases: Whether dead hand control of property should influence the behavior of the living? Cts tend to fall on the side of testamentary freedom here and say that the testator can do what they want/
4. Total restraints aren’t good but partial restraints are OK as long as they do not unreasonably restrict a person's choice. Ct's tend to uphold as reasonable: marrying at a certain age, types of people to marry, age, time. a. In terrorem: is this merely a threat or did the testator put his money where his mouth is. i. Gift over: if there is a gift over then it is not in terrorem = the testator really believed it, but if it is only a threat the cts may invalidate it. 5. What if widow could share only if she remains unmarried? Valid? a. Can argue total restraint = she can't remarry, on the other hand could argue that she has some obligation to fidelity. Co ct says that this is valid. Ct is saying if the restriction pertains to her support the ct tends to say that is OK, it is not a restraint. b. Can you as a lawyer phrase the trust so you can make use of this support aspect? I give my daughter property in trust but in the event she divorces she can have the property outright. This evades the inducement to divorce. If you can phrase it to support dependants then it is going to be OK.
I. Creation of Trusts -
A. Methods –
B. Ex Parte Pye – pg. 533
1. F: Mawbray wants Dubost to purchase annuity for mistress Marie, does it in Mawbray's name cuz she's deranged but only after Mawbray died. Trust? Yes.
2. Methods of trust creation:
a. Transfer/delivery of res (corpus) or – settlor transfers legal title to another person as tee and imposes fiduciary duties on that person.
b. Declaration – (self-declaration)
i. Don't need a transfer - just need to say you are holding certain property
ii. Settlor is also the trustee – settlor declares himself to be trustee of specific property and then transfers some or all of that properties equitable title to one or more bennies.
3. Classic case that stands for the following two propositions:
a. Can create a trust by declaration
b. No consideration is needed to establish a trust.
4. Criticisms of the case:
a. Torturing an imperfect gift into a trust: M intended to give her the money, but w/ annuity you have the same problem. For gift you need delivery.
5. Hebrew University v. Nye pg. 539
a. F: scholar decided to give his collection to the university but doesn't quite complete it before she dies. H: constructive trust w/ symbolic delivery.
b. They use the Ex parte pye theory by torturing the gift again.
II. Transfer Requirement – what does this requirement mean? Delivery has to be complete and failure of trustee doesn't affect transfer.
1. Farmers' Loan – pg. 534
1. Bostwick creates a trust, 1.4m didn't make it into the trust and bank didn't deliver the rest b/c they weren't ready for delivery. It didn't make it in = no transfer.
2. In order to create a trust by a transfer, delivery has to be complete.
3. Letter says I authorize you to get any money coming to me, this has a future sense, ct says all that is needed is "due." You have to have a present interest in property, you have to own it to put it in trust, and she didn't own it. ct is saying that she owns it when it is transferred to her and it wasn't. She should have used "due me."
2. Wittmeier – pg. 537
1. F: Deeds property to church, but law says church can't take deed under law. H: the inability of the trustee to take doesn't invalidate the trust.
2. The transfer is not effectuated b/c the church can't take it, why doesn't not same as Farmers. The defect is different; problem here is who is tee; ct can just appoint . Farmer's problem was w/ the transferor itself.
III. Secret Trust –
1. Secret trust and semi secret trust: difference in remedy, definition.
a. Secret trust: will is silent as to the existence of a trust. Nothing in the will regarding a trust. Some other extrinsic evidence will suggest there is a trust.
b. Semi secret: The will includes the intention to create the trust but usually beneficiaries aren't named, trust isn't secret just bennies are.
c. Problems: Land can be an issue i.e. SOF. Proof: how do we prove trust is intended? Its terms? Its bennies?
c. Possible Remedies depend on Jxd:
i. Constructive trust: some cts say use this in both situations. prevents unjust enrichment + a legally cognizable wrong. Could be fraud or breach of K. This is the obvious remedy for this.
ii. Resulting trust: instead of giving to the beneficiary, other cts will undo the whole transaction. Cases that tend to say the resulting trust should be the remedy tend to fall under semi-secret. (see pg. 38, this outline)
a. Olliffee pg. 529: F: leaves to Reverend residue to distribute in his discretion as is best to carry out her wishes which she has expressed or may express to him. H: in a semi-secret trust situation we should apply a resulting trust. Cts reluctant to fill in terms.
Trust: Special Types -
I. Oral Trusts –
1. Involving land: two problems – SOF and Parole evidence:
A. Statue of frauds –
2. General Rule: trusts for land must be evidenced by a signed writing. Why?
a. problems of proof.
b. Makes it more definite transaction.
c. Exempts resulting and constructive trusts: those are judicially created trusts on the belief that the judiciary can solve any problems w/ respect to proof.
B. Parole Evidence Rule -
3. Introduction of outside evidence.
a. When you can't admit oral evidence – depends on the jxd.
1. when the instrument is very clear.
2. You can't have parole evidence for a writing that is intended to memorialize the agreement; you can't intro evidence that would vary the terms.
b. When you are allowed to intro parole evidence –
1. have to prove fraud, duress, undue influence or mistake. Any of these cases involving K or trust or other grounds for reformation or rescission.
c. SOF requires a writing, parole evidence requires proof.
4. Two common situations where problems arise:
C. Oral Trust for Grantor –Orella, Gregory
1. Pattern: Deed that says one thing and some oral evidence that later says something different.
1. Deed: O to X as grantee of Blackacre.
2. Oral evidence: O to X as trustee. (for O, X as bennies)
2. Restatement of Trusts: if you have it in trust for one person you can't use extrinsic evidence to show it was in trust for somebody different. If the instrument is some way ambiguous or silent then extrinsic evidence can be used to show that they were to hold the property in trust either for the transferor or third party or combo. See pg. 541
a. Gregory v. Bowlsby pg. 545 (check all cases from this day against case note cuz didn't read them b/f class)
i. F: Father requested kids deed him land to he could manage it for them. Father deeds part of the land away and violates the agreement. Deed absolute on its face, there was oral evidence: She says have to show these two steps:
1. Deed: Kids to Dad
2. Oral evidence: Kids to Dad as trustee – then to kids.
ii. Rule: Ct says if you can show fraud in the original transaction we will impose a constructive trust.
iii. Proof: have to show that in his mind he intended to defraud them and they relied on his promise to their detriment. Hard to prove subjective intent.
iv. Fraudulent intent has to be present at the time he made the promise, it is not enough to show he later repudiated his promise.
b. Orella v. Johnson pg. 549
ii. Fit it into pattern:
1. Deed: P's (husband and wife) convey to May as grantee
2. Oral Evidence: she was to convey it back to P's. P has May as trustee and the beneficiary of oral trust is Husband and wife.
iii. If can show intent to defraud or breach of confidential relationship can get constructive trust and put title in his name. Neither here.
iv. specific restitution – they undue the transaction and restore parties to the situation to where they were before. Breach of promise.
D. Oral Trust for 3rd party – see constructive trust pg. 38 this outline.
1. Jones v. Gachot pg. 550
a. What is different about this case than Gregory and Orella and why no constructive trust? there is a third party, this is an oral trust for a person other than the transferor and cts are particularly reluctant to cases of third parties to impose a constructive trust.
II. Revocable Trusts –
1. settlor retains certain powers such as: right to revoke, right to amend. If you have got the right to revoke you have the right to amend.
A. Validity – cts find validity on several grounds.
B. Osborn – pg. 77.
2. F: Osborn sets up a trust as a bank and reserved many rights BUT he gave the bank absolutely not discretion in investment and ct said this is a no-no. The trustee has to have some duties and when you don't you have to have merger. Osborn didn't let the bank do anything here. This is an agency relationship
C. Roberts – pg. 78 – retaining extensive rights doesn't necessarily preclude a trust. Rule: an inter vivos trust will not be declared invalid merely b/c the settlor reserved various rights and interests in the property. The settlor was working in a fiduciary capacity; he had statutory trust responsibilities, the bank in Osborn didn't.
III. Savings Bank Trusts (Totten or Tentative trusts) – see pg 562
a. Totten: X 25k to trustee X to beneficiary Y. Then 8k is taken out of trust this is OK b/c this is a partial revocation – if you have a savings bank trust this is considered a partial revocation as to the money.
2. Doctrine of Totten trusts: H: savings bank trusts are revocable trusts. In absence of any evidence of what was intended the deposit itself creates a tentative trust. It is called tentative meaning it is revocable in settlers lifetime unless settlor does something to revoke the gift.
3. Revocation Totten Trusts:
a. Withdrawal all or part – whatever is w/drawn is considered revoked, whatever remains is considered to go to Bennie.
b. Words or conduct that revoke the gift.
c. Beneficiary predeceases the depositor.
d. Depositor's will that leaves the property to someone else other than the Totten trust beneficiary. Totten trust in revoked by the depositors will making a specific disposition of totten trust to someone other than totten trust beneficiary
i. In re estate of Krycun Pg. 565 Teach thinks we don't know if she intended to revoke. But the ct says that this designation is not specific enough to revoke the Totten trust.
IV. Life Insurance Trusts –
1. Life insurance passes outside the estate. way for people to increase their assets for their dependants.
2. Problem: if you want to create them you have to do it carefully. See problem pg. 570 and pg. 579.
3. How you create a life insurance trust:
a. Usually name a beneficiary in the policy. Ex. say spouse and who the spouse is. This property would then pass free of trust.
b. if you want the money to go into trust you can:
i. Can make the life insurance policy beneficiary a trustee of last will and testament. Gives flexibility. Contemplates a valid will.
ii. Assign a life insurance policy to a trustee. Contemplates a trust agreement.
1. Questions that arise:
a. Validity – many early cases question if they are valid. P's argue that the trust is invalid b/c it was testamentary or revocable.
i. Testamentary: Could say they are testamentary b/c they pass money at death, they don't comply w/ statute of wills.
ii. Revocable: can revoke and this doesn't comply w/ statute of wills
iii. Unfunded: insurance trusts are unfunded. No money you can label.
1. Gurnett – gives you a look at cts initial difficulties of recognizing life insurance trusts.
b. Creation – they aren't as easy to create as a savings bank trust. Two common ways to create:
i. Name the beneficiary in the policy::. On the life insurance beneficiary line on the doc you can say: Bank of America as trustee for x and y or trustee of my last will and testament. Tee is beneficiary.
ii. Assign a policy to a trustee: contemplates a trust agreement: On life insurance policy on line for beneficiary say that it is payable to your estate and then there is a separate assignment of that to a trust. For the assignment somewhere there has to be something about that there is a trust and who is trustee etc, maybe in will.
iii. See Payvee problem pg. 570 and 80.
II. Policies Restricting Testation
A. Spouses (Newman) – use of inter vivos trust to defeat spouse's forced share protections i.e. take via intestate share or the elective share.
1. Dilemma – b/c the elective share guarantees a portion of the decedents estate, What if there is nothing in the estate at death? Over time cleaver testators realized that the way to defeat their spouses share was to take it out of the estate before they died. How could that do this?
a. Create a trust – this is superior to below.
b. Make gifts – problem w/ this,
i. Wife can recapture: that in community property states there are statutory protections, if they act in joint lifetimes they can recapture all of it, if she waits till after divorce or death she can reclaim half.
ii. If he gives it away as a gift he doesn't have it any more.
2. Newman v. Dore pg. 573 – Illusory Transfer Test
a. F: 1) will: spouse 1/3 of all property to trustee for wife, 3 days before his death he creates a 2) trust – takes everything out of his estate and puts it in a trust; this leaves her nothing to take from the estate.
b. Ct looks at validity of transfer. Ct says there are different methods for invalidating inter vivos trust that is based on fraud: two ways:
i. The intent test: Look at motive: was it to defraud? Problem is how do we get evidence for this.
ii. Illusory Transfer test: he retained so much power over the money that he really never transferred it over to the trust; it was a sham an illusory. How do we know it was an illusory transfer? (Guidelines for future cases) Factors:
1. Extent of his powers: income, power to revoke
2. Control of trustee (total)
3. Period before death – here he executed the trust 3 days b/f death, he did it so close to death and he keeps all these powers, which is evidence of his intent to deprive his wife of it.
4. Amount of the trust – here he took everything out, he completely depleted the estate.
3. Sullivan v. Burkin pg. 577– modern day solution to intent test and illusory transfer test: The Objective Test:
a. F: H creates inter vivos trust w/ all his assets and kept a lot of power, make himself trustee, reserved income, had power to revoke and general power of appt etc.
b. H: Objective test: if a decedents creates a trust like this by case law the surviving spouse has a right to those assets.
B. Creditors (Stat St. Bank) –
1. Creditor's rights – Certain types of trusts:
i. Reservation of life estate + general power of appt.
1. Life estate (income)
2. Power to invade
3. General power of appt
a. Creditor can reach this kind of trust – Rst 2nd of trusts.
b. If the settlor reserves not only a life interest but also a general power to appoint the reminder by deed or by will, his creditors can reach the principle of the trust as well as the income.
ii. Revocable trust – a creditor cannot force a settlor to revoke a trust for the creditors benefit. This is anomalous – b/c creditors rights depend on the form of the trust you have created.
2. State St. Bank: F: settlor puts all money into trust, borrows money from bank cuz like "cut of his jib", he dies. Creditors want money out of trust. Trad. Law says No to this. Rule: allow creditors to attach corpus b/c he had power to amend, revoke, benefit of assets, power over trust etc.
3. Trad rule: you can't force a settlor to exercise a power of revocation for a creditor 4. Modern trend: some statutes say we will allow creditors to do this in the settlor's lifetime. Problem: they didn't say what happens when the settlor is no longer alive. case says we are going to allow creditors to invade even after death. 5. Things to look for i.e. when State St. Bank rule would apply: a. Check the law – is there a statute, case law, what can we base this on?
b. When the estate is insufficient – the State street bank rule only kicks in when this exists. III. Pour Over Trusts – a clause in a will making a gift to an inter vivos trust . When a provision in a will pours over assets into a previously existing trust.
1. Canal v. Chapman pg. 597 –
a. F: Testator creates trust, 14yrs. later makes pour-over provision, later amends trust. Assumption is assets should go into previous trust, not trust as amended, but we don't want to give money to wrong person i.e. if she amended trust by changing bennies. H: The amend didn't affect the validity of pour-over. Had independent significance. b. Theories that can be used: i. Incorporation by reference –fails pre-existing doc rule. ii. Doctrine of Facts of independent significance – the trust had independent significance of will, act of amending trust had other meaning, trust created b/f will; this gets the assets into the trust as amended. 2. UPC §2-511 – validates pour over to subsequently amended trust and solves the problem above. See pg. 83. 3. Robins Case: Sequence: trust, will, then trust amend. Pour over assets do not create a testamentary trust that co-exists along w/ an inter vivos trust. H: If it is an inter vivos trust pour over assets don't change the character of the trust, it is one trust not two.
IV. Nature of Beni's Interests – 3 central issues: enforcement, transfer, creditors.
1. Bennie's Right to Enforce His/Her interest – The nature of Bennie's interests: a. If tee doesn’t distribute as he is expected to and as he was directed Bennie can compel the trustee to carry out the terms of the trust and act in accordance w/ certain fiduciary standards. The beneficiary has a property interest. b. Trustee's liability for certain acts: Tee is liable for payments to the wrong person even if he acted in good faith. No defense of mistake, tee is a fiduciary c. Discretionary powers of tee: nature of bennies rights depend on what was given to bennie in the instrument d. The nature of the beneficiaries rights depend on what was given to the beneficiary in the instrument. Type of trusts: i. Simple mandatory trust – the trustee has no discretion as to who to pay the income to. O to trustee to pay to A. ii. Mandatory spray or sprinkle trust – there is some discretion. Trustee has to distribute all income but has discretion as to who gets it and what amount. O to trustee to "any of O's children." Mandatory in that he has to give income but the amount is discretionary. iii. Discretionary accumulation trust: O transfers property to trustee and you can pay it or not (accumulate) according to trustees discretion. O to trustee then to A to pay or not (accumulate) O's children according to Tee's discretion. iv. Standard Of Discretion: Trust where money is transferred to trustee w/ a standard to measure the discretion. O to trustee to A for support, maintenance or education 1. Pure discretionary trust – it is entirely up to the tee. Good faith. 2. Discretionary w/ additional standard - ex. Support trust. Have to document what the beneficiaries support needs are. Reasonableness. i. Rowe v. Rowe pg. 608 – "according to tees own judgment and discretion." Standard w/ regard to discretionary trust: trustee has to exercise discretion vested to him reasonably. If there are qualifying adjectives as to his discretion, then standard is good faith. ii. Gatehouse pg. 612.F: trust to wife; remarries and remaindermen say she doesn't need it anymore. General rule: you are not supposed to take into account the beneficiaries other resources or means of support, the trust is an absolute gift. 2. Bennie's Right to Transfer His/Her Interest – (right to voluntarily assign his/her interest). As a beneficiary what can I do w/ my interest? a. Can transfer it – could sell my interest. If real property lease, mortgage, make a gift of it, devise it, bequeath it, subject it to another trust (unless life estate). b. Can Assign it: If I assign the assignee only gets the interest that I had. If I assign a life interest it is only for my life. (can't assign spendthrift) c. Can disclaim trust interest – may do it b/c it increases your taxes, there are liabilities against the property, for the benefit of third parties i.e. goes to my kids instead. 3. Amenability of Bennie's interest to His/Her Creditors – deals w/ the aspect of involuntary assignment.
a. The Spendthrift Trust Doctrine: Broadway Bank v. Adams pg. 634
i. Def: spendthrift trust is a trust that has a provision in it that tries to insulate the bennies interest from the bennies creditors. ii. Traditional rule: spendthrift trusts are allowed. iii. Policy reasons against: if you can prove it is intended to defraud creditors cts may invalidate this.. iv. Disadvantages to creditor of Spendthrift: 1. won't get all their money right away. 2. wants to attach corpus and collect all at one time, but have collect each time he gets payment; inefficient. 3. Likely one of many creditors so has get in line w/ others for $. v. Settlor's arguments for the spendthrift trust: 1. Settlor has testamentary freedom over his/her property 2. Motive is not to defraud creditors: effect is family protection. vi. Creditors arguments: anti spendthrift. 1. Makes it difficult for creditors to collect 2. Bennie gets to enjoy the property w/out the obligation to pay debts.
b. Spendthrift – Sligh v. First National pg. 643
i. F: tortfeasor has big judgments against him, he says sorry can't pay I only have trust w/ spendthrift. Traditional Rule: the creditor is out of luck. Rule: a tort creditor may recover damages from a spendthrift trust for injuries incurred as a result of trust bennies gross negligence or intentional torts. ii. Policy: distinction b/t the types of creditors: K creditors can check but tort creditors can't. Problems: creditors may not always be able to know that the person is a spendthrift; it may be an inter vivos trust or secret trust, which they cannot look at. K creditors have deep pocket. c. Todd v. Executors v. Todd pg. 651 – family member creditors. i. F: Wanted to attach discretionary trust unpaid alimony and child support. Traditional rule: Creditor's cannot reach a beneficiaries interest in a discretionary trust. d. Matthews v. Mathews pg. 654 – discretionary trust/family creditor i. F: creditor is family member, wants alimony and child support. Modern rule: PP deviating from the general rule; bennies support include child support. e. Rst 3rd pg. 640 i. Special classes of claimants: that the interests of the Bennie can be reached for child support, alimony, services or supplies for necessities, or protection of beneficiary interest in the trust. 1. Services or supplies: maybe hospital care. 2. Protection of bennies interest in the trust: Atty's fees. 3. So claimants can be wives, Atty's fees, and other institutions. ii. PP is more willing to allow family to attach trust than to let hospitals.
Modification and Termination of Trusts – 4 different issues: 1. Settlor's power to terminate or modify –If trust is revocable change can be made but once a trust is made irrevocable trust it is hard to change – usually mistake, fraud, duress will allow it. Trust that are irrevocable or silent often cause insurmountable problems. a. Power of Modification or termination of settlor: i. Depends on what the instrument says i.e. if that power that settlor give in the trust. If it is not they are out of luck; ii. Depends on state law b. Trust that is silent: If the instrument is silent it is presumed to be irrevocable. i. Cal: presumption is that it is revocable. well-drafted trust won't be silent. c. Grounds for reformation: usual grounds of fraud, duress or mistake. i. UTC pg. 666 a ct may reform the terms of a trust even if unambiguous to conform to settlers intention if failure conform was due to mistake of fact or law, whether in expression or inducement d. General rule: creditor cannot force the settlor to revoke the trust for the creditors benefit. e. Right to Amend: Power to revoke generally includes the right to amend. f. Methods of revocation of a Trust: i. Signing and delivering document to trustee. ii. If settlor reserves a power to revoke in a particular manner, he can revoke only in that manner. Cts don't always stick w/ this i.e. oral revocation was ok in Barnette pg. 666. iii. Oral statements usually aren't sufficient for revocation but in certain situations i.e. reduced to writing soon after or made to atty or fiduciary they may be more reliable. iv. General rule: will cannot revoke inter vivos trust. These are different things. v. UTC pg. 667 1. unless the terms of the trust expressly provide for that the trust is revocable the settlor may revoke or amend the trust. 2. oral statement coupled w/ w/drawl of property may demonstrate necessary intent for revocation. 3. §602 Community Property: the trust may be revoked by either spouse acting alone but may only be amended by joint action of both spouses. 2. Trustee's power to modify or terminate – a. Depends on: i. The instrument – power to terminate or modify depends on what is expressly or impliedly given in the instrument i.e. the terms of the trust. Power is to be exercised as fiduciary and w/ intent of settlor in mind. Usually not given but if there is power to invade principle it is implied allowed. 1. If not expressly given the power to terminate but is given the power to invade principle it would presumably permit termination by distribution of all the principle if reasonably required to carry out settlor's purpose. ii. State law 3. Beneficiary/ Beneficiaries' power to modify or terminate – a. Claflin Doctrine: Beneficiaries can compel modification/or termination of the trust if: (American rule on trust termination). i. All of the beneficiaries consent and; ii. All the beneficiaries are competent and; iii. If modification/termination would not defeat a material purpose of settlor i.e. no longer a material purpose for the trust b. Inter vivos trust: OK if settlor and bennie want to change it. c. All the beneficiaries have to be around and consenting, this means all the beneficiaries have to be legally competent. Under the traditional rule unborn or incompetent beneficiaries preclude modification or termination. d. Split b/t US and England – US looks at what the settlor wants to do, want to protect Bennie from their improvidence so can't modify or terminate. 2. In re Lewis' Estate pg. 673 - all possible beneficiaries have to be consenting. a. trust for income to wife for life, w/ remainder to descendants of settlor. Petitioners are widow and only living child. H: The ct will not terminate. There may be benniificaries who you can't get consent from for termination i.e. until widow and child die, there is possibility of issue who can take therefore we don't know who the ultimate beneficiaries are. Potential unborn bennies can't consent to termination. 3. Levy v. Crocker Bank pg. 674 - all possible beneficiaries have to be consenting a. F: P is tee and beneficiary; income for life. On his death corpus is to be distributed on power of appt, i.e. he can give it to whom he wants. P says not enough money so he wants to terminate. P argues that Claflin doctrine applies to him b/c he is the sole beneficiary – he is competent and consenting b. H: Can't terminate. He is not the only beneficiary; there is the possibility that he might not execute the power of appt. (if it was an inter vivos power of apt it would have been ok) 4. Hatch v. Riggs National pg. 675 – Claflin but sympathetic to modification. a. F: Settlor and Bennie Hatch to trustee, Power of appt for life; but not enough money. Rule: Appoint a guardian at litem for the unborn beneficiaries. This eliminates the problem of consent from all and capacity. b. guardian at litem is seen as a fiduciary, they have to get something for those who they represent. Possible jxd solutions: i. Cal and Wisc. – represented by a guardian at litem appointed by the ct. Guardian may rely on general family benefit accruing for living members of the beneficiary problem. All we need is family benefit, this is giving something up. ii. virtual representation: living members of the class can represent the unborn. 5. Bennet v. Tower Grove pg. 683 – a. Rule: a trust may be terminated pursuant to a request of all bennies unless continuance is necessary in order to carry out material purpose of trust. Material purpose here was management, didn't want wife and daughter to be free to get rid of corpus e.g. termination defeats. Ct says that the material purpose will not be inferred it has to be explicit. 4. Judicial power to Modify or Terminate – 1. Matter of Pulitzer pg. 689 – emergency doctrine. a. Can sell stock against specific provision not to, this is an emergency, to not allow sale would destroy the corpus. Material purpose could not have been more explicit however allowed under emergency. Policy: waste 2. Stanton and Mayo – Flip sides of same issue. Pg. 693, 696. a. F: trusts that limit the investment power of trustee to invest in bonds. b. H: Stanton – ct refused to modify. Rat: these circs were anticipated i.e. they were known to the settlor, there is not emergency. c. H: Mayo – modification OK. Rat: something more than extraordinary risk is required. Just takes a more lenient view w/ the change of economic circs. 3. Colonial Trust case: a. F:. Settlor says he wants to keep his property small. H: can modify to make property more productive. Ct looks to PP consideration as opposed to what settlor would have wanted i.e. PP against waste. 4. VanDusen pg. 702 – General Rule a. Testator dies and gives residue of her estate in trust to two daughter's income equally until one dies then the entire income to the survivor. Ct will not modify. Rat: if the beneficiaries can come in any time to change the trust, it makes modification rules meaningless. b. This is a strict approach to deviation from distributive provisions. IN the previous cases we weren’t looking at distributive provisions but discretionary provisions (Pulitzer, Colonial, Stanton and Mayo were discretionary). c. Hatch is fallowed but not by every jxd. Hatch is the modern view but Van Dusen represents the general rule. 2. UTC on 707 – broadens cts ability to modify the trust. Can modify or terminate if it would further the settlors interests in creating the trust, they have b/c legally or impossible to fulfill, can modify administrative, or it would be impractical or wasteful. Upon termination has to be distributed in accordance w/ sellers purposes.
Charitable Trusts – CT's I. Historical Background – 1. Def – trust for a charitable purpose. Establishes a fiduciary relationship w/ respect to property arising out of settlers intention to create it. Can be created inter vivos or testamentary. 2. Maxim – charitable trusts are favorites of the law. (used to be opposite) 3. Statute of charitable uses – allowed the leaving of money to charitable trusts. Says that charitable trusts are allowed and are allowed for certain purposes, it lists these purposes. 4. 1819 first charitable trust cases: CT's are allowed despite the lack of a statute.
II. Nature of Charitable Trusts - (compared to private express trust)
1. Similarities to private express trusts: a. CT can be created the same ways (5): by will, by contract, by power of appointment, by inter vivos transfer, by declaration. b. Both have to have 1) clear intention, 2) specific trust property, and there is a fiduciary relationship on trustee = fiduciary obligations to beneficiary. c. not so worried here about enforcement b/c of the role of the atty general. 2. Differences: a. Sum: CT are not subject to rule req definite beneficiaries, CT req indefinite bennies b/c if you are definite the more likely it is to be invalidated. CT not subject to the RAP, PET – policy to limit dead hand control but we favor charities. a. Freshour's Estate pg. 710 – i. Usual Sequence: try to create an charitable trust, heirs want it so argue it is a private express trust (i.e. fails b/c bennies aren't specific). ii. Rules: 1. a charitable trust has to have indefinite beneficiaries – atty gen. will enforce. 2. the RAP doesn't apply to charitable trusts 3. trust has to be for some recognized charitable purpose. 3. Hieght v. US pg. 712 – who says whether something is Charitable or not? trust for "benevolent purposes." Problem – a charitable trust has to be for charitable purposes. a. Gen rule: 1) a trust has to be exclusively charitable (can be for a period of time), 2) what the IRS says is a charitable purpose is influential but not dispositive. III. Charitable Purposes – No fixed standard to determine a charitable purpose, RST says it is charitable if it accomplishes a charitable purpose, charitable interest and social benefit. A. Religious – 1. Religious purposes: building churches, ministers salaries OK. 2. Trusts for someone's soul: some cts say these are honorary trusts, it is up to someone's honor to continue it. 3. Certain number of adherents: Rst – group to be benefited must be sufficiently large or indefinite so that the community is interested in the enforcement of the trust. This view isn't very helpful. Ct just has to determine it benefits adherents. a. Case where there was no adherents to the religious view. Joanna Case. B. Poverty – 1. can benefit poor of a local or group. 2. settlor can describe the method of giving. 3. bennies don't have to be destitute just lacking in some regard. C. Education – 1. for libraries, for scholarships, to pay salaries, for research. a. HYPO: fruit and veg vendor dies w/ provision for money for kids for education to be given just b/f holidays. Ct second guesses purpose, just b/c someone indicates that there is a charitable purpose, the ct can second-guess this. Result: the trust fails, money goes to heirs. 2. Problem pg. 171 15(a). Did Bernard Shaw have a charitable purpose? D. Political-. 1. Can't create a trust to benefit a particular political party. 2. Many of these were for women's rights and to prevent slavery. E. To Change Law – 1. Jackson v. Philips pg. 716: H: the trusts to benefit slaves OK but trust not OK to change suffrage. Rule: CT to change the law are not allowed. Rule no longer – 2 Modern Rule: CT to change the law are valid so long as the method is legitimate. F. Honorary – not a true trust; tee is on his honor to carry out the settlor's wishes. 1. Trusts to say masses for someone's soul 2. Trusts for care of graver 3. Trusts for care of animals – Trust to get "shrimp for my cat every week." IV. Constitutional Limitations on Charitable Trusts - A. Race – race based restrictions will be removed where ct finds state action. 1. Evans v. Newton pg. 719 a. F: Senator left to Macon City a park for whites only. I: is this a valid trust? b. H: This is a public donation, this creates a potential problem of state action and violates the 14th. c. In order to invalidate a trust here we need to find some state action. The state action is that the city was responsible for maintaining the park, there was also city trustees. d. Anytime you have a public official as your trustee you have state action. e. Two options b/c trust is invalid: i. Revert to heirs – this is what happens here. ii. Apply the Cy Pres doctrine – can we somehow change this to allow it? Cannot apply this here b/c one of its req's is that the settlor has to have a general charitable purpose. His purpose here was very specific and was bound up in the unconstitutional provision. B. Gender – different view by cts. Gender based cases almost always validated. 2. Matter of Estate of Wilson pg. 725 - a. Trust for "young men" who were certified by school super. Other to young men who were selected by Board Of Ed and principle. H: no state action. b. Criticism: certification v. selection. Selection involves much more discretion, this seems to involve state action. But the ct wants to say that it is OK to have these kinds of trusts. c. Teach thinks rule is significant state action. 3. Ebitz Case: trust for men only. H: when the settlors said the trust was only for young men, the ct said the term men was ambiguous. (?) So construe the term men to mean men and women. Limited presidential value. a. Cts continue to recognize gender based charitable trusts. i. Pros: we wouldn't have some of these colleges. ii. Con: teach's idea. The money goes back to the 1700's, leaving it to young male students b/c colleges were usually only for men. Things have changed. Equality of opportunity is good V. Cy Pres Doctrine – modification doctrine in CT's. 1. Charitable trust modification doctrine = So Near. 2. Judicial Cy pres – allows charitable trusts to be modified when: (Rst) a. General charitable intent: general intention to devote property to a charitable use. b. Original trust purpose has to become impossible, impracticable or illegal. i. Impossible v. Impracticable 1. Impossible cannot do something 2. Impracticable – very burdensome to do. 3. Famous cases are those to help people w/ tuberculosis. Once TB was irradiated what to do w/ money. Ask ct to do Cy pres doctrine. 4. Barrel Buck Trust: F: donated stock for needy in Marine. Wanted to give money to other counties, ct says no. The more specific you are the more difficult it is to find a general charitable intent (prong one of Cy Pres doctrine) VI. Enforcement – 1. Have to find out if there is a CT and how the money is being spent 2. Uniform act: a. Requires registration of any charitable trust w/ the atty general b. Submit accounting/reports annually it to the state Atty general 3. Problems w/ above: a. State AG can't oversee every charitable trust, has limited resources. b. Prosecutorial discretion: enforcing charitable trusts probably low on the totem pole. c. State AG is a political office subject to political pressures.
Fiduciary Administration- 1. Do the funeral arrangements etc. 2. Probate: a. Informal – faster. Could be more subject to contest. No requirement of notice. Speedier, less costly, can be more subject to challenge. b. Formal – more expensive and will take longer. Critical difference is there is a requirement of notice here. I. Appoint personal Representation- executor or administrator 3. If we do formal probate: a. Make sure person appointed has letters testamentary or letters of administration = gives them power to act. 1. Letters testamentary – when a person died testate. 2. Letters of admin – intestate estate, have to show that you have priority under the statute, i.e. Wife, child. 3. Special administrator: when there are some special needs i.e. the administrator dies. 4. Those appointed have to give bond – the bond insures that the executor or administrator will not steal from the estate. Often a superfluous requirement. b. W/ letters testamentary you go to banks so you can get the persons statement c. Also have to get death certificate along w/ letters testamentary to get bank to give up info. II. Inventory + Collect Assets – so you go the bank for these w/ you papers in hand. 4. Often Banks freeze assets on death but if you have proper papers you can get it. 5. After you get the assets you put them all together and figure out what is what. 6. If you have land get it appraised for its value. 7. Showing location and value of the real and personal property. 8. Rep has to go and collect all accounts and give a receipt and a release to all institutions. a. Sometimes they may refuse to pay and the rep can bring a suit to compel payment. III. Manage Assets During Administration – 9. Make sure nothing bad happens to the assets. 10. Primary duty of personal rep is to conserve the assets. IV. Receive + Pay Creditors Claims – 1. Summary procedures – usually for small estates. Usually statutory amount. Cal is under 100k excluding real property. Summary procedures mean it is fast. Summary procedures in Cal that allow for community property to be dispensed quickly. 2. Universal succession – allows the heirs to take responsibility for taxes and debts. See pg. 765. Apply to registrar who can give heirs full power of ownership over assets as long as they agree to pay taxes debts and etc. Essentially step into the shoes of the testator. Permits the heirs of an intestate or residuary devisees of a testator to accept the estate assets w/out administration by assuming responsibility for discharging those obligations that normally would be discharged by the personal rep.
a. Has not been widely adopted: Why? i. It eliminates the need for probate lawyers and judges, so they don't want to eliminate themselves out of a job. 3. Administration Jxd: (check this against book pg. 795) a. Domiciliary admin – takes place where the decedent was domiciled. Law of movables. b. Ancillary admin – takes place outside the state of domicile. c. General rule: assets should be administered in each state where they are found at the time. d. Domicile: permanent residence where you have intent to remain. i. Hypo: live in SF but husband works in NY. If he lives in NY w/ intent to be domiciled in SF then that is his home. e. The law of the situs applies to succession of real property – law of immovables. This means law of where the real property is. f. Where is the estate administered and which law governs? Are these the same? i. Where the assets are administered means what state ct will handle it, when you say what state law governs means who gets what. Ex. Cal is community property, NY isn't so how do I get my husbands condo there? 4. Noticing Creditors Claims: a. Mullane pg. 785: H: Due Process requires adequate notice w/ regard to having your property taken. i. Notice has to be reasonably calculated to apprise people of the pendancy of the action. ii. Significance of the case: Question left is does Mullane apply to creditors claims? iii. We have very short nonclaim statutes – if you don't claim you are out of luck. Usually 2-4 months. They are so short b/c we want to get everything settled and get the money into the hands of creditors. Nonclaim periods start running when the letters testamentary are granted.
b. Tulsa Creditors pg. 786 –
i. F: wife publishes notice in newspaper. Nonclaim period is 2 months. . ii. H: She didn't give them adequate notice. She should have given them notice that died. Violates due process: if you know whom the creditor is you have to notice them by mail. iii. H: Mullane notice applies to creditors. If you know who the creditors are you have to notice them by mail or it is a violation of due process.
c. Estate of Thompson pg. 793 –
i. Search for creditors has to be reasonably diligent but not extensive. 5. Note on appointing administrators – Fiduciary administration generally. a. Competing Petitioners: Ried v. Ried: F: minor died in a car accident. Both parents requested letters of administration. Statute: competing petitions go to men. H: SC stated there is not rationale basis to differentiate petitioners on the basis of gender. Given the rule: considerations may look to:
i. Look to who had custody – they would know where assets are. ii. Who has had background in finance etc? b. Probate: you do not have to probate a will.. i. Why avoid probate 1. Less expensive, faster ii. Advantages to probate the estate: 1. Starts the statutory period of nonclaim – avoid creditors coming in later 2. 3rd parties won't deal w/ you. Probate serves a title clearing function so that 3rd parties will deal w/ you. Hard to sell something people don't see as yours.
6. Proving the will – proving that this doc is the last will of the decedent
a. Challenging wills: i. Attestation clause: some may claim that something wasn't right at attestation. See problem. If you have attestation clauses it establishes a prima facia case that the will was duly executed. In attestation clause you are swearing that the testator is of sound mind, they are not operating under duress, fraud etc., and that all witnesses were there. b. Contest: Who can contest a will? i. Parties in interest: person is permitted to contest a will if an only if that person has a direct and pecuniary interest in the estate = that person would be economically benefited by setting aside the will. 1. Pretermitted heirs can't contest (check b/c think they get the same anyway?). 2. Creditors can't contest, they get same amount regardless. ii. Anti contest clauses: 1. Cts don’t like these provisions b/c they are very harsh. They are rules of forfeiture i.e. you contest you loose your share. So some cts say there is a PC rule – if you have PC you can contest your share. c. Settlement agreements are perfectly permissible. Can agree to settle w/out probate: limitations on settlement agreement. i. If trust involved cannot approve ii. If you have a contesting creditor iii. If a party in interest whose rights would be prejudiced by it.
V. Distributing Remaining Assets – didn't discuss.
Fiduciary Office – 1. Personal Representatives and Fiduciaries a. Personal representative – Administrator or executor. i. Powers come from the ct and b/c they are O's of the ct they have to be appointed. Requires filing of petition and requesting letters testamentary or letters of administration. ii. Who can petition/serve? Determined by state law. Usually means people w/ status, there is an order of priority: spouses, descendents, estate bennies, and creditors. Usually these can nominate someone else. Ex. if spouse doesn't want to serve she can nominate someone and that nominee will take the spouse's priority. Disinheritance may cause you to lose nomination iii. Most states require them to post a bond, so they won't loot the estate. Promising the ct that they won't steal from themselves so it is unnecessary really so most wills allow them to waive the bond. b. Fiduciary – executor, administrator and a trustee. i. Appt of trustees – ct only needs to be involved for appt for testamentary tees. They have to petition. For inter vivos trust no need for ct involvement, just need the settlor to choose. Unsuitable tee will continue to act as such until removed. ii. Selection of tee –who is better to serve here. Qualification, Appointment and Removal of Fiduciaries. 1. appt of trustees: a. Banks: more resources, better at it, colder.. b. Relatives: know you better, less conservative c. Can appt both as co-trustees: Problems: i. Have to have unanimity, usually most conservative is going to win out. If you have 3 tee's however you could have majority rule. ii. If 2 both trustees have to be involved in the decision, one cannot delegate to the other, this violates one's fiduciary duty. 2. Qualification: Pg. 815 UPC priority of Qualification: a. Priority of appointment of personal representative: 1) person w/ priority in probated will, 2) SS who is devisee, 3) other devisees, 4) other heirs, 5) after 45 days; Creditors 3. Pg. 822 Rst – Acceptance or Renunciation of Tee – designated tee may accept teeship by either words or conduct, a designated tee who does not accept may decline it. a. Reasons for declining: may strain family relations, may be a conflict, it is a hassle. 4. Resignation – Rst pg. 823 a. A tee who has accepted the trust can properly resign: i. in accordance w/ the terms of the trust ii. w/ the consent of bennies; or iii. upon terms approved by a proper ct. b. Is it easier to say no to trust right than resign later: Many trusts don't say anything about resigning, getting consent of bennies may not be easy, stuck w/ ct approval it; if the ct doesn't like your reasons then you have to continue. 5. Removal: a Estate of Biechner pg. 825 – Removal Case F: tee doesn't get along w/ bennie = stepmother. H: Animosity is not a ground for removal. b. McDonald v. O'Donnell pg. 826 – Removal case a. F: mother asks to have tee removed. Tee has failed to pay her sufficient funds and is antagonistic. H: In a discretionary situation animosity can allow for removal of tee even w/out misconduct. c. Compare: one is a fiduciary and one is a personal representative. In the first case – Biechner there is removal of an executor, in McDonald there is removal of a trustee, the distinction rests on that fact. A tee has an ongoing relationship w/ bennie of the trust, this is likely to defeat the true purpose of the trust. An executor doesn't have a long-term relationship, they just have certain duties to fulfill that don't really depend on the relationship b/t the executor and the beneficiaries.. b. RST Removal of Trustee pg. 828 i. A tee may be removed: a. in accordance w/ the terms of the trust; or b. for cause by proper ct. ii. Grounds for Removal pg. 828 a. lack of capacity, unfitness, pattern of indifference, substance abuse, want of skill, unable to give bond etc. 7. Co-trustees – it co trustee dies the ct is not required to appoint a new one. I. Compensation (and indemnification pg. 830)- 2. If no compensation is specified some people do it for free. Can elect to be executor for free. Reasons: sympathy, can be seen as increasing your own share if you are a bennie. Statutory guidelines govern compensation. See pg. 832 – Cal a. Cal Probate code – based on a percentage of the estate. Provisions for Atty's for estate is similar to percentage for executor. i. 4% of first 15k ii. 3% of next 85k iii. 2% of next 900k etc. b. Can you collect double fee's if you are an executor or estate atty? i. Estate of Davis pg. 836 – F: double collection case. H: this wasn't a reasonable fee. Most import factor was time spent and complexity. 1. Cal – statutory percentage based on value of the estate. 2. Other states – reasonable fees. ii. the idea of reasonable fee's is based on idea to get away from fixed percentage. Ct in Davis says that there was nothing inherently difficult in settling the estate. 3. Right to Compensation – Ephron Case a. F: Challenges Atty's fees on two grounds: 1) statutory fee system violates anti trust laws – restraint on trade and 2) statutory fee system denies due process – didn't have their day in ct to challenge the fee and denies them their property w/out a hearing. H: not undue restraint on trade, it is an exception. 4. Indemnification a. See pg. 843 – Issue of Indemnification: b. General rule on indemnification: Tee is entitled to indemnification if the expenses are incurred in good faith to the extend the estate is enriched. c. Bad faith? Tee is out the money w/ the possibility of other sanctions; ex. removal. II. Standard of Care – a. What is the standard of care by which we measure the acts of fiduciaries: a. Required to act w/ Reasonable care and skill b. And Prudently c. Objective standard b. Two views w/ regard to trust assets: UPC and Rst: a. UPC: Tee shall observe standards that would be observed by a prudent person w/ regard to the property of another. b. Rst – lower standard. UPC requires more in dealing w/ the property of another. Rst deals w/ their own property. (check) c. Exception: if tee has superior knowledge. III. General Fiduciary Duties - A. Duty of Loyalty – 1. Obligation to beneficiaries: You cannot self-deal = can't act in a manner w/ the trust assets that benefits you personally. 2. Comes under Conflict of interest – duty of loyalty and self dealing a. City Bank Farmer Trust v. Cannon pg. 859 i. Breach of duty of loyalty, but there is a defense: Estoppel. She approved purchase and insisted the shares be retained in the merger. ii. Rule: tee breaches his duty of loyalty whenever he has an interest on both sides of the transaction which involves a trust, but approval by the settlor of such actions operates as an effective estoppel against any objections raised by the settlor or bennies. iii. Cannon v. Tracy: 1. Estoppel defense works in Cannon b/c the settlor approved. She is estopped. 2. In Tracey someone had to stand up to the beneficiaries interest so tee's are not estopped. 3. We have to look at whether or not it is informed consent by Cannon, as to her understanding of stocks and that this was a breach of the duty of loyalty. b. Tracey pg. 851 – i. Trust co, one of the tee's sells mortgages to the trust estate. H: A tee may never sell its own property to the trust, it is immaterial whether it was fair or in good faith. Didn't matter if they were a good deal. ii. Remedies for self dealing: 1. bennie can compel tee to repay the difference b/t the value of land now and what purchase price was or 2. set it aside the transaction and get your money back + interest. iii. Good faith is not a defense in self-dealing. Other tee's are not estopped from challenging this b/c the suit is on behalf of the beneficiaries. c. Rothko – lots of facts here, see pg. 107. i. A rule: The no further inquiry rule (applies in conflict/self dealing situations) – a breach of trust is complete and all inquiry stops whenever a trustee fails to terminate a relationship in conflict w/ his duties as trustee. Creates a presumption that the transaction is unfair. (another case). ii. Measure of damages: usually appreciation damages are not charged, it is usually restitutionary damages. iii. Point in Rothko will: left residue to the foundation. In NY there was a provision dealing w/ contesting gifts to charity. Can only contest if spouse or issue can take if gift is invalidated. This can be countered by a catch 22 clause or negative bequest clause: way to make sure your dependants can't challenge, provide that if it fails the bequest goes to someone else not the family. iv. Undue influence: 1. Involves cases where you see draftsmen is a beneficiary: two situations: Scrivener Beneficiary problem a. often a presumption of undo influence and loss of gift. b. grounds for disbarment. It is often up to the draftsperson to prove that the decedent knew this was a conflict. B. Duty Not to Delegate – 1. Duty not to delegate discretionary acts: duty on the part of the trustee not to delegate certain functions. Don't have to do everything. They can delegate ministerial acts. Acts that cannot be delegated are discretionary acts. It is then critical to know what is ministerial or discretionary. a. Discretionary – an allocation of income and corpus, discretionary payments etc. b. Ministerial – filling out paperwork. C. Duty to Identify and Segregate 1. Duty to identify – duty to earmark, trust property has to be identified in such way as to show it is held in trust. 2. Duty to segregate - duty to keep trust assets separate from trustee's assets, duty not to co-mingle. a. Miller v. Pender pg. 892 i. D segregated the trust assets but he didn't earmark them so that was the breach. Took title in his own name. ii. Rst relaxed strict liability rule: a tee is liable for failure to earmark only for a loss directly flowing from the breach. (Rule the ct adopts). 1. If George took title in his own name and securities dropped b/c the market was bad the economy cause that lose so he isn't liable. 2. If he co-mingled and then he was in debt, funds weren’t earmarked and ct could take = loss flowing from the breach. 3. Here ct says loss b/c of market conditions so he is not liable. iii. Strict rule says tee is liable regardless but ct rejects this.
D. Duty to Take Control and Account -
1. Duty to render an accounting:
a. Wood v. Honeyman: Ct says the settlor can eliminate the responsibility to render accounts to the bennies, but cannot eliminate the responsibility to account to a ct. Can't insulate a tee from ct supervision.
Construction Problems in Estate Distribution -
I. Classification – Different ways you can classify bequests and devises.
1. Specific – a gift of a particular thing or a parcel of land. Something that can be identified w/ reasonable certainty and accuracy. "Gold pocket watch."
2. General - one that is payable out of the general estate rather than requiring payment from particular assets.
3. Demonstrative – a gift that typically and amount of money. Payable primarily from a particular source. Hybrid general legacy payable from a particular source, usually gift of money. If source isn't sufficient it is taken from the general assets of the estate.
4. Residuary – residue. Property remaining after all above are satisfied.
5. See examples of classification pg. 436, answers pg. 109
6. Purpose of classification:
a. Important for ademption
b. Important for satisfaction
II. Ademption – refers to a failure of a specific gift b/c the property is not in the estate at death. Asset could have been sold, given away, consumed, stolen or destroyed.
1. Comes into play when there is a change in regard to a particular asset that occurs after the will was executed. What does the bennie get?
2. Situation: Certain property bequeathed or devised in the will and we find that the asset isn't there in estate at death.
3. Famous ademption cases are sunken ships. Jewelry left in will to kids but went down w/ the ship. What to do.
4. General Rule: Applies to specific gifts: If it is a specific gift then the specific gift is adeemed which means that the Bennie gets nothing. Doesn't apply to general or demonstrative legacies.
5. Different theories:
a. Identity theory – majority approach. If the exact item testator meant to give is not in estate; gift adeems and bennie gets nothing. Whether the thing given is the thing missing. Are they identical? If it is not the same thing the gift is gone. Intent is irrelevant.
b. Intent theory – minority. Try to preserve gifts somehow. Problem: sometimes it is hard to figure out what the intent is. Ex. Want Carol to have my camera, but I give it to someone else and get a diff camera, Intent?
6. Ademption is a Harsh doctrine – If gift isn't there its gone. Escape devises to remedy harshness of rule.
a. Resort to intent theory
b. Use construction – construe the legacy as something other than specific.
c. Time of death construction: ex. If I give Carol the car I now own, it is a Toyota, when I die w/ a Volvo, the ct will say give the Volvo. Won't help if there is no care at death or if the item is so unique.
d. Change in form rule: the ademption doctrine can be avoided if there has been a mere change in form. If change is one in form but not substance ademption would not occur.
i. Mandal's estate pg. 444 –
1. Stock was just a change in form, it was not adeemed, Bennie gets the gift. Rule: If the changes in form were not substantial then it does not cause ademption
ii. First national Bank v. Perkins
1. Mere change in form or substantial change in form?
2. What was given v. what was in estate at death.
3. What was given: all stock in standard oil.
4. What is in estate: has debentures.
5. Was the gift adeemed? YES, b/c the change in form was substantial, no longer had preferred stock she had debentures. These are different.
7. Rst and UPC– see pg. 441. Look up.
a. (a) Rule of specifically devised property – if it is in the estate at death OK, if not see examples. "If specifically devised property is in the estate at death, the devise is entitled to it."
b. (b)Any proceeds remain for recovery or damage to loss of property can go to the person. "If specifically devised property is not in the estate at death, entitled to proceeds remaining unpaid at death."
c. (c) Subject to (b) if SD property is not in the estate at death it fails unless that would be inconsistent w/ testor's intent.
d. Stock splits are treated the same way; Bennie gets those shares of the stock splits. Cash dividend that flows from stock the legatee doesn't get the cash; it is not that same thing as a tangible security.
III. Satisfaction - the failure of a testamentary gift b/c the testator has already transferred the property to the Bennie b/t the time of will execution and the time of death.
1. Sequence of testators acts that brings satisfaction into play:
a. Testator has a will that bequeaths certain property that is then the subject of an inter vivos gift to the beneficiary and then the testator dies.
b. Have an inter vivos gift of something that was specifically bequeathed or devised in the will.
2. If the testator is a parent of the Bennie there is a rebuttable presumption of satisfaction. That law presumes the inter vivos gift was supposed to extinguish the testamentary gift. Similar to the intestacy doctrine of advancement.
3. Applies to general pecuniary gifts not specific bequests. If it specific it is ademption.
4. Satisfaction also depends on intent. It can be hard to figure out.
5. Some states require a writing. Compare to advancement.
6. UPC requires a writing. (UPC reverses CL presumption). Compare to advancement.
7. Wolf Case pg. 447:
a. F: Will that 3 sons will share estate equally. Father deeded 1/3 to 2 sons, 3rd son asked if he wanted land now, he said no. 2 sons want the others share.
b. Ct looks at intent, the deeded portion of the land satisfied 2 of the son's gift, but the 3rd son gets that gift.
8. Pg. 446 middle paragraph. "By the prevailing view the doctrine of satisfaction…" This means 3 things:
a. Suppose the father in Wolf had given the son money i.e. the value of the land. Land is so special that money given is not considered the same thing. A testamentary gift of land cannot be extinguished by an inter vivos gift of money.
b. Gives Whiteacre instead of the 1/3 of Blackacre: an inter vivos gift of another piece of real property will not extinguish testamentary gift of the real property.
c. If he gives his son inter vivos exactly what he said he would then the satisfaction doctrine would apply (Wolf case).
IV. Abatement –
1. Def: When an estate w/ insufficient assets to pay debts or legacies.
2. When estate is insufficient some bequests have to be reduced to make up shortfall.
3. Problems in a number of situations:
a. Debts or creditors claims.
b. Taxes – may eat up estate so can't give as much.
d. Pretermitted heir, pretermitted spouses or election by spouses
e. Expenses of administration – Atty's fees, probate fees.
4. Classification scheme important for abatement b/c various states and UPC provide for orders of abatement. Pg. 450
5. UPC order of abatement: exhaust the category b/f you move on to the next.
a. Intestate property – property not disposed of by will
b. Residuary property -
c. General devises
d. Specific devises
6. Ex. 4k to sister, residue to Hastings. Pg. 110
7. Testators will: If the testator in a will provides for a different order of abatement in will that is fallowed first.
8. Modern approach - UPC and Cal: pro rata (proportional) abatement. This is what UPC does when we talk about election of surviving spouse – UPC uses pro rata abatement in this situation. W/ regard to pretermitted heirs Cal does pro rata abatement – this is the trend now. See chapter 3. UPC does not due pro rata w/ pretermitted children.
9. General rule: Ex. Residue divided 3 ways. If we are abating the residue w/ in a class it is abated pro rata.
V. Lapse – pg. 457
1. Situation: I bequeath 10k to sister; at time of my death she predeceases me leaving two children surviving.
2. Refers to situation where beneficiary has predeceased the testator leaving issue surviving
3. CL – the gift fails b/c of the lapse doctrine. If beneficiary predeceases the testator the gift lapses = it fails.
4. Modern: Anti-lapse statutes: in some cases the gift does not fail. Provides substitute bennies for the lapsed gift. Exceptions spelled out in statutes but they aren't all the same. How do we know if gift is going to lapse or not?
a. They vary in terms of the relationship of the decedent and the predeceased beneficiary. What relationships are covered? Pg. 458-9. Depends on jxd.
b. UPC – generous: lapse prevented in cases where the devisee is certain relative = any decedent who is related through a grandparent.
c. Cal – broader – the gift will be saved if the Bennie is any kindred of the decedent or the decedents spouse. So if I leave it to my sister in law cal will cover that too.
d. Most restrictive statutes: apply only to the testator's children. So sister's kids would be out of luck, your sister is not your child. The relevant relationship is b/t the decedent and the dead beneficiary.
5. What happens to a lapsed gift: if it is specific or general it falls into the residue and if it is general it becomes intestate.
6. Lapse gift v. void gift – these are distinct
a. Lapse – gift to Bennie that predeceases testator, it lapses. Usually beneficiary is alive at time of execution but predeceases.
b. Void – dead at time the gift was given. Could have a situation where the beneficiary is dead when the will is executed. This comes up in class gifs i.e. I give money to my sisters kids.
c. How do anti-lapse statutes apply to lapse gifts as apposed to void gift.
i. Anti-lapse often doesn't deal w/ void gifts. So a number of jxd where statutes have to construed to see if it applies to void gift.
ii. Cal – anti-lapse statute does permit issue to take in void as well as lapse situation. Teach thinks this is the right rule.
VI. Class Gifts -
1. When we designate persons as a class or group it is called a class gift. Ex. "to children" or "issue", "gifts to nephews and nieces."
2. Some cases are unclear as to whether there is a class.
3. In Re Murphy pg. 463:
a. Issues: How do we know if gift is to a class? Does it make a difference if it is to a class or not?
b. Identifying class gift: Look to testator's intent and definiteness.
d. Rule: When both a class and individuals are mentioned that is a gift to individuals and not a gift to classes.
e. Result: if it was a class then it would be divided but here it has to pass intestate b/c he named them individually.
4. In doubtful cases the ct looks at certain factors: was the testator group minded, if there is a possibility of fluctuation in number of takers it has to be a class, look to the intention – what would the testator have wanted.
5. The application of the lapse doctrine and anti-lapse doctrine to class gifts.
a. Geanoli v. Gabaccia pg. 471
i. Looking at lapse and void gifts in class gift contexts.
ii. Lapse situation: Have a will to my sisters children = class gift. One is predeceased leaving issue surviving. Many anti-lapse statutes don't clarify if they apply in class gifts. Faced w/ this uncertainty cts are divided.
iii. Majority: anti-lapse statues apply to class gifts (UPC view as well). Most cts would save the gift for his children.
iv. Minority: anti-lapse statutes don't apply. The gift then it is split among the class. Class gifts go to other class members.
v. Void situation: This is the case. Do anti-lapse statutes apply to void class gifts? H: YES. UPC says YES.
vi. Cal – NO, not in this case. The anti-lapse statute applies to lapse class gifts but not void class gifts, goes to the rest of the class not the kids.
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One of the most common arguments between family members is who has the right to make the decedent's funeral arrangements. If your client wants his executor (personal representative) to be responsible, then consider adding the following language into their will.
My executor shall have the power to employ and make the necessary arrangements for the proper disposition of my final remains in accordance with any written statement by me or, if none, at my Executor’s sole discretion except that it is my desire that I be cremated.