final study guide Wills

Express trusts: Active vs Passive

1. The features that distinguish active trusts from passive trusts are the obligations of management and administration that active trusts impose on the trustee. a. Express trusts are active trusts. b. Implied trusts are passive trusts

miscellaneous

- Any transferable interest can go into a will property - any property - There is no age to when there can be a beneficiary for a trust - Legal title ; equitable title make up a trust - Co trustees: make decisions together

testamentary trust clause

. A trust is used to transfer ownership to another without giving the recipient full power over the property.

appointment of personal or property guardian for children

1. A parent has a statutory obligation to support children until they reach majority. 2. There are two types of guardianships: personal guardian and property guardian. d. The personal guardian and the property guardian may or may not be the same person. 3. Some states establish a statutory order of preference for the appointment of guardians. 4. A controversial and stressful situation arises when a single parent attempts to appoint a guardian for a child in a will and specifically excludes the appointment of the other natural parent; the surviving natural parent, without regard to marital status, has the right to custody of the child and to be the guardian, unless the parent is found to be unfit.

Private trusts

1. A private trust is created expressly either orally or in writing between a settlor and a trustee(s) who holds legal title to property for the financial benefit of a beneficiary. a. It is one of the most common types of trusts. b. The essential elements of an express private trust are as follows. (1) The settlor must intend to create a private trust. (2) A trustee must be named to administer the trust. (3) A beneficiary must be named to enforce the trust. (4) The settlor must transfer sufficiently identified property to the trust

testamentary trusts

1. A trust included in a will is called a testamentary trust. F. Creation of Trusts 1. It is possible to leave property in a testamentary trust for beneficiaries named by the testator-settlor to avoid additional estate taxes at the death of the beneficiary. 2. If the trust is properly planned and combined with a marital deduction, substantial tax savings to the estate of the decedent over the course of two generations can be realized. 3. Taxes can also be diminished using inter vivos trusts.

express trust - Intervivos Living trust vs testamentary

1. The most common types of express trusts are living trusts and testamentary trusts. 2. The criterion for whether a trust is living or testamentary will be the time the trust became effective. 3. Both types of trusts are often used to conserve property for the benefit of a surviving spouse and children or for the children of a single parent

power of attorney

1. Legal instrument where a principal designates another, the agent or attorney-in-fact, to have authority to make legal decisions for and otherwise act on behalf of the principal. a. May be limited in scope: Covering a few specific situations. b. May be general: Covering a broad, large variety of situations. c. Care should be taken in selecting the individual who will assume the responsibility. 2. When a principal is incapable of making decisions regarding property, financial, insurance, business, tax, health care, investment, inheritance, or other legal matters, the agent makes decisions for the principal. 3. Must be capable of entering into a valid contract to execute a power of attorney.

exordium Clause

1. The exordium clause identifies the maker of the will and declares the intention that the provisions in the document be followed after death he introductory clause should include the address, city, county, and state of its maker; any alias or other name by which the maker is known so that all property owned can be identified, located, and properly transferred or eventually distributed; and a statement of the maker's capacity and freedom from undue influence. The purpose of the exordium clause is to declare to the public the following: the identity of the testator, that the testator has the intent and capacity to create a will, that the document is the testator's last will, and the location of the testator's principal residence or domicile, which enables the personal representative to determine which state has the proper authority to tax the testator's property and which court has jurisdiction over the administration of the testator's estate.

testimony clause

1. This clause contains a statement by the testator that it has been freely signed and that a request has been made of the proper number of witnesses to do the same. 2. No state statute prescribes a form for the testimonium clause. 3. The use of a seal to indicate the identity of the testator or the substitution of L.S. (lieu of seal, in place of a seal) is disregarded by most will drafters The purpose of a testimonium clause is to declare that the testator has freely signed the will and that a request has been made of the proper number of witnesses to do the same.

appointment of personal representative

1. To acquire the powers and authority of a personal representative, a person must be appointed or approved by the court. a. Generally, unless the person named in the will is unqualified, the court approves and appoints the person named by the testator. b. Personal representatives are fiduciaries and must be intelligent, organized, honest, and loyal to the devisees of the estate. c. Personal representatives must be able to perform all estate administration tasks. If the estate contains digital assets, verify that the personal representative is competent to handle them. If not, consider appointing a personal representative solely for digital assets. d. They must be capable of engaging in business transactions or making contracts. e. They cannot be minors, incompetent persons, felons, or persons who have or may have a conflict of interest, e.g., an attorney or paralegal who drafts a will and who influences a client to also name him/her as the personal representative.

attestation clause

1. Witnesses must state and sign a clause that they have attested the testator's signature. 2. While each state requires attestation and subscription by witnesses, none prescribes the words or form to be used to accomplish this

Public Trust (charitable)

2. A public or charitable trust is an express trust established for the purpose of accomplishing social benefit for the public or the community. a. The beneficiary does not always have to be the general public. b. The trust must be designated either for the benefit of the general public or a reasonably large, indefinite class of persons within the public who may be personally unknown to the settlor. c. In the majority of states, the true test for creation of a valid public trust is not the indefiniteness of the persons aided by the trust but rather the amount of social benefit that accrues to the public. d. The purpose of the charitable trust must not include profit-making by the settlor, trustee, or other persons. e. The essential elements of an express public or charitable trust are as follows. • The settlor must intend to create a public trust. • A trustee must be named to administer the trust. • Property must be transferred to the trust. • A charitable purpose must be expressly designated. • The general public must be benefited. • An indefinite class of persons must be named beneficiaries.

more on appointment of personal representatives

2. Statutes often list the powers granted a personal representative or trustee; however, the testator may want to list specific powers and duties to help the personal representative facilitate the administration of the estate. a. The testator must give the personal representative the power to sell property; otherwise, the probate court must grant such "license to sell." b. When the estate requires detailed handling, the testator should direct the personal representative's course of action by providing certain powers. 3. A contingent or alternate personal representative should always be named in the event the named personal representative is unable or unwilling to serve. 4. The personal representative is responsible for collecting and preserving the estate assets, paying all allowed debts, as well as estate expenses and taxes, and distributing the balance to devisees named in the will. 5. Once appointed by the court, the powers of the executor "relate back in time," meaning that although the executor does not have authority to handle the administration until qualified, the executory does possess limited authority to take such actions as preserving assets and rights of claim. 6. Formal qualification requires a hearing before a probate judge, registrar, or clerk of the court; an order signed by the judge; and issuance of documents called Letters Testamentary or Letters of Administration, which officially authorize the executor to commence administration. 7. The cost of selecting and utilizing fiduciaries and attorneys handling an estate is governed by state law. a. In some states, personal representatives are paid commissions according to a sliding scale based on the monetary value of the estate or trust. b. Formerly, state bar associations established minimum attorney fee schedules based on the size of the estate; however, the Supreme Court in Goldfarb v. Virginia State Bar, 421 U.S. 773, 95 S.Ct. 2004, 44 L.Ed.2d 572 (1975), ruled that this was prohibited by antitrust laws as a method of price fixing. c. Currently, the trend is to use "reasonable compensation" rather than estate size. d. Reasonable compensation is determined by custom and local practice, but the court makes the final decision and must approve fee payment

Personal Representative and duties

3. The personal representative is one type of a fiduciary. What does that mean? List other fiduciaries. A fiduciary has the duty to utilize the highest degree of care and integrity in handling the decedent's property for the benefit of the estate beneficiaries and devisees. Other fiduciaries are guardians for minors, conservators for incompetent persons, trustees. 4. What are the primary or general duties of a personal representative when administering a decedent's estate? The primary duties are • to discover, collect, and preserve all probate assets. • to notify creditors and see that they are paid. • to file all required federal and state income, gift, estate, or inheritance tax returns and pay all taxes due. • to distribute the remainder of the estate as required by the terms of the will or by law.

Totten Trust

A Totten trust, also called a payable- or pay-on-death (POD) account, is a savings account in which money is deposited in the depositor's name as trustee for another person named as beneficiary. a. Such deposits permit the depositor-trustee to withdraw money while alive and allow any remaining balance to be transferred to the beneficiary after the depositor's death. b. If the beneficiary dies before the depositor, the trust terminates, and the money belongs to the depositor, not the beneficiary's estate. c. Some courts hold that the depositor may revoke the trust by withdrawing the entire fund or changing the form of the account. d. The requirements for the creation and distribution of funds in such trusts vary from state to state. e. The money in a Totten trust is a nonprobate asset.

implied - constructive trusts

A constructive trust is a creation of the court and is established for the purpose of rectifying a serious wrong such as fraud, duress, unconscionable conduct, or preventing unjust enrichment of the wrongdoer. a. When someone acquires title by unlawful or unfair means or by breach of duty as trustee, the court will construct a trust for the benefit of the person rightfully entitled to the property.

revocable trust

A revocable living trust is a trust that the settlor has a right or power to revoke or change at any time prior to death. 1. This power must be expressly stated or reserved by the settlor in the trust instrument; otherwise trusts are generally irrevocable. 2. Property held in a revocable living trust becomes a nonprobate asset and is not subject to probate or creditors' claims; however, it is included in the decedent's gross estate and is subject to federal estate tax. J. An irrevocable living trust cannot be revoked or changed by the settlor; property in an irrevocable living trust is not subject to probate or federal estate tax.

spendthrift Trust

A spendthrift trust is created to provide a fund for the maintenance of a beneficiary while safeguarding the fund against the beneficiary's own extravagance or inexperience in spending money. a. Only a certain portion of the total amount of the funds is given to the spendthrift beneficiary at any one time. b. The trust provides that the beneficiary cannot assign to anyone the right to receive future payments of income or principal from the trust. c. The settlor declares that creditors of the spendthrift cannot reach the trust benefits by obtaining a court order awarding them to the creditors. d. The protection of the spendthrift trust ends once the beneficiary actually receives the distribution of the trust income. e. Some states allow creditors to reach the beneficiary's interest despite the spendthrift clause if they have supplied "necessities" to the beneficiary.

sprinkling trust

A sprinkling trust gives the trustee the authority and power to accumulate or distribute the income of the trust or the principal, or both, among the beneficiaries in varying amounts. a. Advantages to a sprinkling trust are as follows. • The trustee has the opportunity to change distributions to meet the needs of the beneficiaries. • The trust funds are more difficult for creditors of the beneficiaries to reach since the trustee alone decides how much to give each beneficiary. • Such trusts may help to reduce estate taxes. b. A disadvantage is that if the trust is intended to qualify for the marital deduction on the decedent's estate tax return, the surviving spouse must receive all the income during the spouse's lifetime. c. The settlor must select a trustee known to be reliable, experienced, and reasonable

Trust instrument

A trust instrument is any written instrument that creates a trust, such as a will, trust agreement, or declaration of trust. 1. A trust included in a will is called a testamentary trust. 2. A trust agreement is a written agreement or contract between the settlor and trustee(s) that creates the trust and is signed by them. 3. A declaration of trust is a document that creates a trust in which the settlor is also the trustee; the document declares the creation of a trust in which the settlor names herself/himself as trustee and retains the legal title but transfers the equitable title to another person as beneficiary. When the property being transferred is real estate, the method of transfer is often a deed of trust or a trust transfer deed.

holographic will

A will written entirely by the testator with his own hand.

Requirements for the Creation of a Valid Will

A. A will is a legally enforceable, written declaration of a person's intended distribution of property after death. 1. Because a will is ambulatory or subject to change, it is revocable during the testator's lifetime. 2. A will is operative only upon death. 3. Statutes and case law establish the procedure that must be followed to execute a valid will. a. All states require the preparation and execution of wills to comply with certain formalities in order to prevent fraud and uncertainty. b. Commonly, the following are required for a properly executed will. (1) The maker must have testamentary intent and capacity. (2) The will must satisfy certain formal requirements. (3) The will must be written, signed, and dated. (4) The will must be witnessed by at least two persons.

trust types

A. All trusts are either express or implied.

Express Active Trust

An express private active trust must give oral or written affirmative powers and duties to a trustee to perform discretionary acts of management or administration for the benefit of named beneficiaries.

Inter vivos (living trust)

An inter vivos trust allows the settlor to see how well the trust operates while he/she is still alive.

Distribution of the Estate

An intestate's estate is distributed by one of two statutory methods: per capita distribution or per stirpes distribution.

ancillary probate administrator

Ancillary probate administration becomes necessary when, if at death, the decedent owns any real property in a state other than the domiciliary state. Separate or secondary court proceedings, including admitting the will to probate, must be undertaken because the court in the county of the decedent's domicile has no jurisdiction over real property located in a "foreign state." 2. Ancillary administration also protects creditors in the foreign state by providing notice of the probate proceedings. 3. When ancillary administration is required, the property is administered under the laws of the state where it is located. 4. An ancillary administrator/administratrix may be appointed in a variety of ways. a. The testator or the court of the state of domicile may appoint someone. b. Some states allow the personal representative of the domiciliary state to administer the ancillary proceedings. c. States often require the ancillary administrator to be a resident of that state. (1) This increases the expense of estate administration. (2) Some states made an exception for nonresident family members to serve as ancillary administrators. (3) The court must safeguard the rights of creditors of the decedent in weighing the decision whether to approve an out-of-state ancillary administrator. (4) The UPC gives the domiciliary personal representative priority in being appointed ancillary administrator.

testamentary intent

B. The maker of the will must have testamentary intent; that is, the testator must establish that the written document operates as the last will. 1. The will is valid only if the maker possesses the required animus testandi, the intention to make a will with the express purpose of disposing of property upon death—but not before. 2. Intent is revealed from the form, general language, and particular words used in the will. 3. Many courts look at the surrounding circumstances in determining testamentary intent. 4. The absence of the ceremonial declaration "this is my last will" often creates doubts about intent; however, such words are not a requirement. 5. With the exception of "statutory" wills, writing one's own will or using printed will forms to avoid the expense of an attorney may result in the creation of a document that fails to satisfy the statutory requirements regardless of the intent of the maker.

in rem jurisdiction

Court jurisdiction over a defendant's property. The decedent's domicile aids the court in establishing in rem jurisdiction over the estate's probate assets. (1) When two or more states are involved in the probate of a will, the state in which the testator was domiciled will collect the greater share of the state inheritance or estate taxes. (2) Tax liability may vary noticeably, depending on which state is the place of domicile and in which state the estate assets are located.

Exhibit 12.3: page 417 understand that and you will be good

Creation of Valid or invalid trusts Settlor/ trustee or cotrustee/beneficiary: peter rachel chris pter peter and rachel chris peter rachel ; peterh and chris peter; peter; chris peter; peter and rachel; peter and chris peter ; peter; peter and chris etc... Invalid Trust Combinations Peter peter peter peter rachel rachel

Passive Trust

For a passive trust, the trustee has no responsibilities or discretionary duties to perform. a. The mere holding of the trust property for the beneficiary with no obligations or powers to administer the trust indicates that the trust is passive. b. Passive trusts result from the failure of the settlor to create an active trust, either accidentally or deliberately.

implied trusts

Implied trusts are created not by the settlor's express terms but by the presumed intent of the settlor or by a decree of the court.

Implied Trusts

Implied trusts are passive trusts imposed on property by the courts when trust intent is lacking. Implied trusts are created by operation of law. Types: 1. resulting 2. constructive

no contest clause in terrorem caluses

In anticipation that an omitted family member or disgruntled heir may contest the will, to avoid costly litigation the testator may attempt to prevent a will contest by including in the will a "no contest" or in terrorem clause stating that if a beneficiary or heir disputes the validity of the will, objects to the probate of the will, or challenges the dispositions, that contestant forfeits all benefits of the will. 1. Some states hold in terrorem clauses unenforceable. 2. Some states strictly enforce the in terrorem clause. 3. Some disregard the clause if the contestant had "probable cause" to commence the will contest.

Where to Keep the Will

NOT IN SAFEDEPOSIT BOX!

difference between a property guardian and a conservator

Often the terms are used interchangeably; however, a property guardian is appointed to hold and manage the property of a minor or incompetent person, whereas a conservator holds and manages the property of an incompetent person.

per capita

Per capita means equal to each person or "by the heads," and it is a method of dividing an intestate estate by giving an equal share to a number of persons all of whom are related to the decedent in the same degree of kinship. - PER PERSON-

Per Stirpes

Per stirpes distribution means taking by right of representation; it is the method of dividing an intestate estate where a class or group of heirs takes the share to which their deceased parent would have been entitled had the parent lived. Per stirpes distribution means taking by right of representation; it is the method of dividing an intestate estate where a class or group of heirs takes the share to which their deceased parent would have been entitled had the parent lived.

implied resulting trusts

Resulting trusts are created because of inferred or presumed intent of a property owner, generally in three types of situations. a. The purchase-money resulting trust. When one person's money has paid for land or personal property, but the legal title is conveyed to another person, the law presumes that a purchase-money resulting trust has been created for the benefit of the person who paid the money. b. The failed trust. When a settlor creates an express private trust gratuitously and the trust fails or is declared void for any reason except that it has an illegal objective, a resulting trust arises for the benefit of the settlor or his/her successors. c. The excessive endowment trust. When the property of a private express trust exceeds what is needed for the purpose intended by the settlor, or some part of the trust property remains after the trust has ended, the court may establish a resulting trust for the benefit of the settlor or his/her successors

Testamentary Trust

Testamentary trusts are probated; living trusts are not probated. Trust created by a will becomes active after death.

Cy-Pres Doctrine

The doctrine of cy-pres means that where a testator or settlor makes a gift to charity or for a charitable purpose and it subsequently becomes impossible or impractical to apply the gift to that particular charity, the court may order the gift applied to another charity "as near as possible" to the one designated by the settlor, and no contrary intent by the settlor is apparent. a. The doctrine is only applied to public charitable trusts. b. The rationale is to continue the operation of charitable trusts so as not to terminate public benefits. c. For the doctrine to apply, the settlor's intent must be broad and general and not restricted to one specific objective or to one particular method of accomplishing the purpose of the trust

Rule Against Perpetuities

The rule places a term (time limitation) on how long a private, noncharitable trust may exist. 2. An interest in property must take effect no later than 21 years, plus the period of gestation, after some life or lives in being at the time of the creation of the interest. 3. Charitable trusts have an unlimited duration.

How are personal representatives appointed (authorized to act)? In general, what are the powers granted to them?

To acquire the powers and authority of a personal representative, a person must be appointed by a court. The court approves and appoints the person named in the will unless the person is unqualified. Generally, the powers granted are to collect and preserve the estate assets, pay all allowed debts of the decedent as well as estate expenses and taxes, and distribute the balance to devisees named in the will.

Venue

Venue is the particular place where a court having jurisdiction may hear and decide a case and is not a term interchangeable with jurisdiction. 1. Jurisdiction is abstract, meaning the power or authority of a court to act; venue is concrete, meaning the physical place of a trial and is the territorial jurisdiction of a court within a particular county. 2. After the jurisdiction of a court is determined, the question of venue arises. a. Venue corresponds to the decedent's domicile or to the decedent's residence at death. (1) Proper venue for a resident decedent is usually in the county in which the decedent was domiciled at the time of death. (2) Proper venue for out-of-state residents is generally the county in which the nonresident left real property.

witnesses

Witnesses are not required to read the will or even to be told its contents, but they must be made aware what they are signing is the testator's will. Witnesses must perform two duties: attest and subscribe the will. 2. The will must be signed in the maker's presence by two or three competent witnesses in most states

undue influence

a will might be disallowed because of both fraud and undue influence ; the court may infer undue influence if the testator ignores blood relatives and names, as beneficiary a non relative who is in constant close contact with the testator and thus in a position to impose undue influence. - undue influence must still be proven...

personal guardian

a. A personal guardian should be named in the will to properly care for the testator's minor or incompetent children if the other parent is deceased or unable to care for them; otherwise the court must determine custody and/or guardianship of the person.

express trusts

a. Express trusts fall into the following subcategories. (1) Private or public (charitable) trusts (2) Active or passive trusts (3) Inter vivos or living trusts b. The most common types of express trusts are testamentary and living trusts.

Types of power of attorney

a. Nondurable: Starts when signed by the principal and lasts until a specified event occurs, e.g., the principal becomes mentally incapacitated, dies, or revokes the document. b. Durable: Starts when signed by the principal and continues even if he/she becomes mentally incapacitated. It lasts until the principal dies or revokes the document. c. Springing: This is tied to specified situations (typically the principal's incapacitation). When the anticipated event occurs, the authority of the attorney-in-fact to act is triggered and lasts until the principal dies, cancels the instrument, or the power expires upon the occurrence of a stated event or specified date being reached. 5. There are risks associated with powers of attorney since the agent may not act in the "best interest" of the principal. An agent could be dishonest and engage in self-dealing. 6. To avoid such risks, the document may provide for information to be transmitted to a trusted third party who would oversee the agent's activities and have authority to intervene if suspicions of mismanagement or dishonesty arise.

nuncupative will

an oral will a. Oral wills generally can pass only personal property. b. If a nuncupative will is reduced to a writing by the still living testator or by disinterested witnesses who can attest to the decedent's oral declaration within a statutory period after it was spoken, it may be probated in some states.

property guardian

b. A property guardian or conservator to manage property left to minor or incompetent children should be appointed by the testator; otherwise the court will. c. The property guardian should be empowered to hold, accumulate, and manage the funds and property under a trust for the duration of their minority or incapacity.

Testamentary capacity

is required... 1. A testator must be of majority age, usually 18, and sane. a. In some states, a member of the armed forces or a married person can make a valid will even if under the age of majority. b. Sanity is the "soundness of mind" that enables a person to have sufficient mental capacity to create a valid will. 2. To be of sound mind and have testamentary capacity, the following test must be met. • The testator must remember and be aware of the persons who are the "natural objects of his or her bounty"—usually family members but also persons for whom the testator has affection. Testamentary capacity is needed only at the time of the making and executing of the will. d. Even a person of low-level intelligence or suffering from mental illness or senility can have testamentary capacity.

Domicile and residence

location of the testator's principal residence or domicile, which enables the personal representative to determine which state has the proper authority to tax the testator's property and which court has jurisdiction over the administration of the testator's estate. Domicile and residence are often confused but are distinct and separate terms. a. Domicile is the legal home, the fixed permanent place of dwelling. b. Residence is a temporary place of dwelling. c. Domicile determines venue. d. Evidence of domicile is where one lives, banks, goes to church, registers his/her car, pays taxes, and votes. e. If uncertainty does arise as to a decedent's domicile, then probate proceedings are usually conducted in the county where the assets of the decedent's estate are located.