Wills & Trusts
True.
True or false? A well-drafted prenuptial agreement can be used to prevent a person from subsequently electing to take an elective share of his or her deceased spouse's will.
It will continue to be effective even if the grantor of the power of attorney becomes incapacitated. The normal common law rule is that a power of attorney becomes invalid upon the incapacity of the principal (as a protective measure because after incapacity a principal can no longer remove an agent). A durable power of attorney overcomes this normal rule by specifying that it will continue in effect even if the principal becomes incapacitated. Most estate planning powers will be durable because they are needed precisely when the principal becomes incapacitated, to help the principal manage their affairs.
If a power of attorney is "durable," that means that
A springing power of attorney. The quoted language creates a spring power of attorney, that becomes effective upon a future event, here a single physician certifying by written statement that the principal is incapable of effectively managing his or her financial affairs due to disability. Note that this language is not a model to be used. It can be greatly improved. The power likely is ALSO a durable power of attorney, but not because of the cited language. The cited language also does not make this power a health care power of attorney. Although it could be a health care power of attorney, that is unlikely because the effective date is tied to effective management of financial affairs, not effective ability to make health care decisions. There is no such thing as an alternate power of attorney.
A power of attorney contains the following language: "This power of attorney shall be effective only after any one licensed physician shall have signed and caused to be attached to this power of attorney his or her written statement indicating that I am incapable in his or her judgment of attending effectively to my financial affairs by reason of mental or physical disability." This language causes this power of attorney to be what type?
Donna will receive the house that Andy was living in when he died. A will speaks at death, not at execution. Thus, the court will ask what his primary residence is as of his death. This is a fact of independent significance. This language is not ambiguous, because at death, Andy has only one primary residence, the one he is living in at his death. (The language might be ambiguous if he had identified his prior residence by address, because then no property would clearly fit the description in the will.) The existence (or not) of a mortgage is irrelevant to who inherits the house.
Andy executes a will that leaves his "primary residence" to his niece, Donna, and gives the remainder of his estate to the American Red Cross. After executing the will, Andy moves to another city and buys a new house. Andy dies while living in his new house. What is the most likely result regarding Donna's bequest in the will?
No, the post-it note is not incorporated by reference because we do not know that the post-it note was in existence on the execution of the will. Nour's being a business partner is a fact of independent significance, and that would be important if the will gave the stock to "my business partner." But the post-in note itself is not a fact of independent significance. David's intent is not relevant unless there is a patent or latent ambiguity, which there isn't here. The stock will pass according to the residue clause or, if none, by intestacy.
David validly executed a will that said, in part, "I give my XYZ Corp. stock to the person I shall name on a post-it note attached to the stock certificates, which are stored in my safe." When David died, the stock certificates were found in the safe with a post-it note attached to them that said "Nour Bassara." Nour is David's business partner. Was the post-it note incorporated by reference into the will?
False. Most states specifically permit non-probate transfers as exceptions to the Statute of Wills formalities (see UPC section 6-101 for example). Even before statutes, courts often validated these transfers on a variety of theories, such as finding them to be valid lifetime gifts by finding a valid present interest or by finding that the transfers had an alternative formality analagous to the Statute of Wills formalities.
In most states, a non-probate transfer must meet all the execution formalities of the Statute of Wills in order to be effective to transfer property at death.
Spouses moving from a common law property state into a community property state are the most vulnerable. This is because the character of the property continues as separate property after the move. If the new community property state does not have an elective share statute that applies to the separate property and does not follow quasi community property principles, a spouse could end up with little to no community property and no elective share rights. Souses moving from a community property state into a common law property states retain the protection of community property, because the move does not change the character of the property. Couples living in community property states and long-married couples living in a UPC elective share common law property state have largely similar protections.
Probate law has long protected spouses from disinheritance. Elective share statutes are one form of protection; community property schemes are another. In what situation are the spouses LEAST protected?
While there is a general duty to diversify, here the special nature of the trust assets may make diversification imprudent. Uncle Phil likely could keep the family farm in the trust, but he will need to be careful to ensure that the farm is generating sufficient income to pay to the income beneficiaries (Sam and Rebecca). Modern trust law contains an explicit duty to diversify the investments of a trust. Even before there was an explicit duty, courts interpreted the duty of prudent investing as containing an implicit duty to diversify. Maintaining a trust where the only (or primary) asset is an illiquid family farm presumptively violates this duty to diversify. Nevertheless, the trustee has an overarching duty of prudent investing, and the special character or circumstances of the trust assets may actually make it NOT prudent to diversify. Here, the family farm has a special character that likely will allow Uncle Phil to decide to not sell the family farm in order to diversify the investments. See notes 3 and 4 on page 611. Uncle Phil likely is within his powers to keep the family farm, but he will have to ensure that he can adequately meet the needs of the income beneficiaries, and not violate the duty of impartiality as between the income and remainder beneficiaries. (Uncle Phil also likely would be acting within his powers if he decided to sell the family farm.)
Rebecca and Sam are siblings whose father just died. Their mother died 20 years ago. Their father left his entire estate in trust for the benefit of Rebecca and Sam during their lives, with the remainder to be paid to the descendants of Rebecca and Sam, per stirpes, upon the death of the survivor of them. Both Rebecca and Sam have children. The estate consists primarily of a family farm that has been in the family for 200 years. Uncle Phil (their father's brother) is named as the trustee. Rebecca wants to move with her family onto the farm and continue to operate it. Like most small farms, the farm has made money some years and lost money some years. But on average, the farm generates a reasonable profit. Sam wants no part of the family farm and wants Uncle Phil to sell the family farm and instead invest the trust assets in a well-diversified portfolio of stocks and bonds. Which is the most accurate statement?
False. Medicare (insurance for people over age 65 and the disabled who qualify) does not cover long-term care expenses, except for brief stays following certain covered medical treatments. Medicaid (insurance for some lower-income people) does cover long-term care expenses, but to qualify a person must spend down their assets and have very low income. If someone does not want to have to become poor to qualify for government-covered long-term care, then they must buy insurance, or save enough money to pay out of pocket, or have an alternate plan for obtaining long-term care services (i.e., a child who will commit to taking care of a needy parent).
The average person does not have to worry about buying insurance or saving money to pay for long-term expenses, because long-term care expenses are covered by Medicare.
$120,000 to Marta and $80,000 to Damian. This issue is whether the gift of $40,000 Damian is in satisfaction of Damian's inheritance. Under traditional principles, there is a presumption that significant gifts (especially of money) made to children after the execution of the will ARE in satisfaction of inheritances. Since this is a non-UPC state following traditional principles, the gift of the house is in satisfaction of Damian's inheritance. (The result is different in a UPC states, which provides that such gifts are NOT in satisfaction UNLESS there is a writing evidencing a contrary intention.) Do the hotchpot calculation. $200,000 probate estate + $40,000 gift = $240,000 / 2 = $120,000. Marta takes $120 and Damian takes $120,000 - $40,000 = $80,000.
Victor (a widower) had two grown children, Marta and Damian. He wrote a will that divided his estate equally between them if they were both alive. Marta was studious and hard working, and Victor never spent any money to help Marta after she turned 18. Damian ran up a lot of debt during a rough patch in his life. But Damian cleaned up his life, enrolled in school, and moved back in with his dad, Victor. To give Damian a fresh start, Victor gave Damian $40,000 to pay off his debts. Shortly thereafter, Victor died with a probate estate valued at $200,000, apart from his share of the house. How is the probate estate likely to be distributed if the state has not adopted the UPC but follows traditional common law principles?
No. A codicil is an amendment to a will. To be valid, it must meet the same requirements as will must.
A codicil is an amendment to a will. In order to be valid, does a codicil have to meet some, but not all, of the requirements that a will would have to meet in order to be valid? (Ignore doctrines like harmless error that might save a codicil from being invalid despite not meeting all of the technical requirements for effective execution.)
True. Some fiduciary duties cannot be eliminated or modified in the trust document or will, such as the duty of good faith, the duty to follow the terms and purposes of the trust or will, and the duty to administer the trust or will in the interests of the beneficiaries. Other fiduciary duties can be eliminated or modified, such as the duty of loyalty (i.e., permitting self-dealing) or the duty of prudent investing (i.e., allowing or requiring the trustee to hold certain assets in the trust regardless of the risk they entail).
A decedent or settlor can modify or eliminate some fiduciary duties with appropriate language in the will or trust, but some fiduciary duties cannot be modified or eliminated.
No. Because the daughter is both the trustee and a beneficiary, she is unable to make adjustments to the principal and income allocations pursuant to Section 104 of the Uniform Principal and Income Act. See 104(c)(7). This is one of the major drawbacks of the adjustment power. If the daughter were not also a beneficiary, the adjustment power would adequately address her concerns. Settlor should consider naming a third party trustee, naming a co-trustee that could make adjustments per Section 104(d), creating separate trusts for the children, or using a unitrust model.
A settlor wants to create a trust to pay the income to his four children during their lives, with the remainder to be distributed to his grandchildren. He wants to name his daughter as the trustee. The daughter is a successful investment professional who follows the modern portfolio theory of investing. The daughter is concerned about having flexibility regarding allocating receipts and disbursements between income and principal, because she does not want to be constrained in her investing with concerns about generating current income directly from the investments (for example in the form of dividends or rents). Is it accurate to say that, under Section 104 of the Uniform Principal and Income Act, the trustee's discretionary power to adjust allocations between principal and income should satisfy daughter's concerns with respect to the contemplated trust.
This is a general, testamentary power of appointment. This is a power of appointment. It is exercisable by James only in his last will and testament, so that makes it a testamentary power, and not an inter vivos power. Because there are no restrictions on who he can appoint to receive the property (i.e., he can appoint his own estate), it is a general power, and not a special power of appointment.
A trust contains the following language: "The income of this trust shall be used to support my son, James, during his lifetime. After the death of James, the trust corpus shall be paid as directed by James in his last will and testament. If James fails to provide direction in his last will and testament, then the trust corpus shall be paid to the heirs at law of James, as determined under the law of intestate succession." What kind of power of appointment is this?
Julio's creditors may attach the assets of the trust, despite the spendthrift provision. Julio has a general, inter vivos power of appointment, exercisable by Julio at any point and in favor of any person, including himself. While traditional rules would use the "relation back" theory to classify the property as not belonging to Julio until he actually exercises the power of appointment, modern law largely rejects the relation back theory and treats the donee of a presently exercisable general power of appointment (like the one here) as if the donee (Julio) were the settlor of a revocable trust. Because you cannot spendthrift your own revocable trust, the spendthrift provision will be ignored. Julio's creditors can attach his interest in the trust.
A trust contains the following language: "The income of this trust shall be used to support my son, Julio, during his lifetime. After the death of Julio, the trust corpus shall be paid outright to the descendants of Julio, per capita at each generation. However, at any point, Julio may terminate the trust early by delivering a notarized written statement to the trustee; if Julio terminates the trust early pursuant to this provision, the trust corpus shall be paid as directed by Julio in a notarized writing delivered to the trustee." The trust also contains a spendthrift provision. What type of power of appointment does Julio have? And, In a state that follows the Restatement (Third) of Trusts and has adopted the Uniform Trust Code, may Julio's creditors attach the assets of the trust?
No, because this is a discretionary trust. The creditors will not be able to compel a distribution from the trust to satisfy John's debts. This is because this is a discretionary trust, meaning that the trustee has absolute discretion to make or not make a distribution, unbound by any standard such as support or need. While a spendthrift clause would be helpful to prevent the creditors from attaching John's interest, such a clause is not required to prevent that in a purely discretionary trust.
A trust has the following language: "The trustee shall pay to my son, John, as much of the income or principal as the trustee in its absolute discretion shall deem advisable." There is no spendthrift provision in the trust. John ran up some quite large gambling debts. May John's creditors attach John's interest in the trust and compel the trustees to make a distribution directly to the creditor to pay off John's debts?
A resulting trust. This is a resulting trust. By contrast, a constructive trust is a remedy where a court orders the owner of property to transfer that property to another person. A precatory trust is not a trust, but a trust-like gift coupled with prectatory language that may create a moral obligation, but not a legal obligation. A successive interest trust is simply a trust with successive legal interests, like a life estate followed by a remainder.
A trust that arises by operation of law to send trust property back to the settlor or the settlor's estate when an express trust fails is called
The court is likely to allow the modification because the medical breakthrough is an unanticipated circumstance and the modification will further the purpose of the trust, which is the support of the children. While not certain, this is a good candidate for a court to allow a modification in a UTC state using the equitable deviation doctrine, as modified by the UTC. The purpose of the trust is to provide for the comfort and support of the children. It is also clear by implication that the settlor wanted the trustee to be able to use all of the trust funds to care for the daughter's presumably higher needs. We can infer this because the settlor authorized unequal distributions and the trust was to terminate only upon the daughter's death. The medical breakthrough, while not completely unforeseeable, appears to be a circumstance not anticipated by the settlor. The proposed modification will further the purposes of the trust by continuing to provide for the (now largely equal) support needs of the children. It is not required under the UTC that the purpose be defeated without the modification.The cy pres doctrine applies only to charitable trusts and is used to change a trust's purpose, not as here, to modify the administrative or dispositive terms of the trust.
A trust was created by a father in his will to benefit his adult son and daughter. The daughter has a rare disease that prevents her from supporting herself. The trust instrument states, "Trustee shall use the trust property for the comfort and support of my children. The trustee may make unequal distributions to the children. This trust shall terminate upon the death of my daughter and the principal shall be distributed to my son outright, if he is living, but if he is not, then the principal shall be distributed to my heirs at law." Five years into the trust term, a medical breakthrough happens and the daughter's disease is 100% cured. Son and daughter petition the court to modify the trust by dividing it into two equal trusts, one for each of them for their lives with the remainder payable to their father's heirs at law. How is a court likely to rule in a state that has fully adopted the UTC?
The trustee must consider the beneficiary's other financial resources and may make a distribution only if those financial resources are insufficient to adequately provide for the beneficiary's comfort and support. The word "necessary" means that the trustee is required to consider a beneficiary's other financial resources. This is true even though the trust also grants the trustee absolute discretion. Such grants of discretion are not boundless where, as here, they are paired with language that provides standards ("necessary" and "comfort and support") for the distribution. The trustee must exercise his or her discretion within the bounds of the standards. A spendthrift clause is irrelevant to a distribution to the beneficiary him or herself for his or her comfort and support.
A trustee is deciding whether or not to make a distribution from a trust. Must the trustee consider the beneficiary's other financial resources if the trust has the following language: "The trustee may pay to any beneficiary amounts from income or principal to the extent the trustee, in his absolute discretion, deems such amounts to be necessary to adequately provide for such beneficiary's comfort and support."
$40,000 to Cassandra, $70,000 to Daphne, and $80,000 to Electra. You need to do a hotchpot calculation. Add the total advancements to the probate estate ($190,000 + $50,000 = $240,000). Divide that by the number of beneficiaries ($240,000 / 3 = $80,000). For each beneficiary, subtract the advancement from this figure. Cassandra = $80,000 - $40,000 = $40,000; Daphne = $80,000 - $10,000 = $70,000; Electra = $80,000 - $0 = $80,000.
Adam died intestate. He was survived by his three daughters, Cassandra, Daphne, and Electra. Adam's probate estate is valued at $190,000. During his lifetime, he advanced $40,000 to Cassandra and $10,000 to Daphne. These gifts were memorialized in a writing declaring the intention that the gifts be treated as advancements. How should Adam's probate estate be distributed in a UPC state?
The University of New Mexico School of Law will take 100% of Anika's estate. The gift to Dawinder lapses because he predeceased her and she did not name an alternative taker. The anti-lapse statute does not supply a substitute taker because it only applies to gifts to predeceased issue (Dawinder is Anika's husband, not her issue). Thus, this is a lapsed gift without a substitute taker under an anti-lapse statute. Because this is a lapse in the residue, there are only two possible places for the gift to go --- to the other residue taker (UNMSOL) or by intestacy. At common law, there could be no residue of a residue, and the lapsed gift would pass by intestacy. However, this state's statute (and the UPC and a majority of state's statutes) send the lapsed gift to the residuary beneficiaries.
Anika executes a will that gives "90% of my estate to my husband, Dawinder, and 10% of my estate to my alma mater, the University of New Mexico School of Law." Anika and Dawinder had two daughters, Chandra and Nadira. Dawinder predeceases Anika. Anika dies, survived only by her daughters. The state's anti-lapse statute applies to devises to a testator's predeceasing issue, names as substitute takers the issue of the predeceased beneficiary, and abolishes the no-residue-of-a-residue rule. Who takes Anika's estate?
Historically, non-marital children were not allowed to inherit from their biological fathers. This has changed in all states, but there still are hurdles to overcome. The UPC allows non-marital children to inherit from their biological fathers provided that the child has established paternity under state law. State laws vary on what is required to establish paternity, but it is difficult to do this after the death of the father. Testimony by the mother alone, after the death of the father, will not suffice.
Barry fathered a child out of wedlock when he was a teenager. The child, now grown, was raised by his mother, who never become involved in another relationship. Barry never had a relationship with the child and is not even listed on the birth certificate as the father. If Barry dies intestate in an UPC state, can the child inherit from Barry?
George should sue Sally for tortious interference with expectancy. A successful undue influence lawsuit will not result in George receiving anything. If the will is invalidated, the estate will pass by intestacy and George is just a friend. Similarly, a ruling that Barry lacks testamentary capacity will not result in George receiving anything. The second document could not be validated as being in "substantial compliance" with the Statute of Wills. It was never signed, dated, witnesses, etc.
Barry had a will that gave his estate to his niece, Sally. Barry decided to make a new will to give his entire estate to his long-time best friend, George. Barry wrote George a letter and told George that Barry was changing his will to give everything to George. Barry had the new will prepared by an attorney, but before he could have the will executed, Sally intervened and convinced her uncle to not execute the new will. Barry then died. Which of the following is George's best legal strategy?
Yes, if Bertha has clear and convincing evidence that she didn't intend to make a gift but intended the account to be a "convenience account" Questions regularly arise about these types of bank accounts. If adding Emily to the account was a gift, then Bertha cannot recover the money. Most states have statutes that create a presumption that adding someone to a bank account constitutes a completed gift. But that presumption can usually be overcome by clear and convincing evidence that no gift was intended. Here, what Bertha told Emily and the bank clerk indicates she did not intend a gift. If a court considers that clear and convincing evidence, then Bertha can recover the money.
Bertha is an older widow who is starting to need help managing her affairs. She adds her daughter, Emily, to her checking account as a joint tenant. Bertha and Emily discuss this beforehand, and Bertha tells Emily, "This way you have access to my money if you need to pay for something that I need, and you'll also get the money right away after I am gone." When Bertha and Emily go to the bank to change the signature card to add Emily to the account, Bertha repeats the same understanding to the bank clerk. One year later, Emily runs into some personal financial difficulties and withdraws $5,000 from the account to pay some bills. Over the course of the next several months, Emily withdraws most of the money in the account. Emily intended to pay the money back, but never did. Could Bertha win a suit against Emily to recover the amount in the account?
Shawna will receive $5,000 under the first will, Frank will receive the items specifically listed in the second document, and Jorge will receive the remainder of the estate. The second document did not expressly revoke the first document. Under the UPC, a second document is presumed to replace the first document if the second document makes a complete disposition of the estate. While it is possible that Carla was trying to give away her entire estate in the second document, but just forgot some assets, the second document is not a complete disposition and there is no direct evidence that Carla intended the second document to revoke the first document. Therefore the court will read them together, with the second document being a codicil, to the extent possible. Thus, the gift to Carla survives, because it is not directly inconsistent with the second document. The residuary gift also survives because it is not inconsistent.
Carla validly executed a will written by an attorney that gave "$5,000 to my good friend, Shawna" and that left the residue of the estate to Carla's brother, Jorge. One year later, Carla typed a new document titled "Will" that gave "All my stock, my car, and my house to my fiance, Frank." She took the document to a bank and it was validly executed, with witnesses and a notary. The second document did not reference any prior documents. Carla dies the following year, survived by Shawna (the friend), Frank (the fiance), Jorge (the brother) and Maria (her mother). In her estate is $100,000 worth of stock, $5,000 in a checking account, a Toyota Corolla worth $5,000 (no loan), a fully-paid-off house worth $100,000. Which is the most likely result in a UPC state?
$67,500. First, the separate property has not been reclassified to community property because the marital funds can be traced. In a reimbursement approach state, the marital contribution is treated like a loan, and Tanisha would take 100% of the house, but would have to reimburse the marital community (50% Damon and 50% Lashonda) for its contribution of $20,000 ($10,000 would go to Lashonda and $10,000 would go to Tanisha who inherited Damon's share of community property). In an ownership approach state, like in the question, the marital contribution is treated like an investment and the community shares in the increase in value. The marital community owns 50% of the house (or $45,000) because 50% of the purchase price was paid through marital funds. Damon's share of that community property is 50%, or $22,500. Thus, Tanisha inherits Damon's share of the community property ($45,000 / 2 = $22,500) PLUS the share of the house that remains Damon's separate property ($45,000). $445,000 + $22,500 = $67,500.
Damon and Lashonda are married and live in a community property state. Before he married Lashonda, Damon bought a home and paid $20,000 toward the purchase price. Over the first several years of the marriage, Damon finished the purchase by paying another $20,000 out of his earnings. Damon's will left all of his separate and community property to his daughter from a previous relationship, Tanisha. The house is now worth $90,000. What is Tanisha's share of the house in a state that uses the "community ownership" approach to determine ownership (rather than the "reimbursement" approach)?
The best approach for Ethel is per capita with representation. This will divide her estate only once at the level where there are survivors and then allow each share to pass vertically along each family line. Ethel's daughter's child will stand to inherit a much larger share of Ethel's estate than Ethel's son's children, but only because she has fewer siblings (or no one) to share it with.
Ethel has come to you for some estate planning advice. She is a widow and has two children, a son and a daughter. Her daughter is married and has a single child. Her son is also married and has twelve children. Ethel told you that she thinks it's ridiculous that her son had that many children and that, while she wants her family to inherit from her, she is worried that her son's children will take "more than their fair share." From follow up questions, you determine that she wants to treat her children equally, and she worries that her son's large family will diminish the share of the estate going to her daughter's family. Knowing that, which is the best representation device to use in Ethel's will:
- The contents of a savings account that was titled in the decedent's individual name. - Real property held as "tenants in common" on the death of the first tenant.
Examples of assets that generally pass through probate
A car that the decedent owned in his own name at death. A house that the surviving spouse owns as joint tenants with her sister. A checking account that passed via a payable-on-death designation from the decedent to someone other than the surviving spouse. A $50,000 irrevocable gift that the decedent made one year before his death (and while married) to the decedent's son. A home that passed via a joint tenancy deed from the decedent to the surviving spouse. All of these items are included in the augmented estate under the UPC's elective share statute.
Examples of items included, partially or wholly, in the augmented estate under the UPC's elective share statute (select all that apply):
The correct answer is that Wilma will take Fred's estate, which will be combined with Wilma's estate and will be distributed to Shiela. This is because Wilma survived Fred by more than 120 hours. Thus, she inherits Fred's estate.
Fred and Wilma are a married couple. Neither has any descendants nor any living parents. Fred has a brother, Bob. Wilma has a sister, Sheila. Fred and Wilma were in a car accident. Fred died almost instantly. Wilma was taken to the hospital, but she died 10 days later. Both died intestate in a state that has adopted the UPC. Who takes Fred's estate?
Bruno is entitled to $100,000. Bruno is a pretermitted heir, because he was born after his parent executed a will. Under the UPC, Bruno is entitled to share in the gift made to his sister, Agatha. This is because George executed a will before Bruno's birth but after having other children, because that will provided a gift to the prior child, because it does not appear from the will that Bruno's omission was intentional, and because George did not provide for Bruno outside the will. Bruno will share ratably in Agatha's gift. The gift to Agatha was $200,000, so Bruno's share is $100,000. UPC 2-302(a)(2).
George is married to Helga and they live in a UPC state. Shortly after they had their first child, Agatha, George wrote a will that gave $200,000 to Agatha, with the remainder of the estate going to Helga. George felt it was important to give money directly to Agatha so that she would be able to pay for college. Three years after executing that will, George and Helga had another child, Bruno. George died the following year, without making any changes to his will. His estate is worth $800,000 and (for simplicity) assume he has no creditors. George also left nothing to Helga, Agatha, or Bruno outside of his probate estate. What, if anything, is Bruno entitled to receive from George's estate?
Yes. Her estate will be distributed as directed in her will, with Charles receiving nothing.
Gertrude is a widow with three grown sons and a very large estate. She was always partial to her oldest and youngest sons, but she never really liked the middle boy. She validly executed a will that gave her entire estate to the two preferred children, stating, "I am intentionally omitting my middle son, Charles." Can she do that?
Income to A for life, remainder at A's death to B. Only the trust that reads "Income to A for life, remainder at A's death to B" may be terminated early with the consent of all beneficiaries. It is a successive interest trust, and those trusts are not considered to have a material purpose under the Claflin doctrine. The trust that reads "Such income to A for life as is necessary for A's support, remainder at A's death to B" is a support trust, which is a material purpose under the Claflin doctrine. The trust that reads "Income to A for life, and upon A's death, income to B until he reaches the age of 35, and upon B reaching age 35, remainder to B" is a postponement of enjoyment trust and postponing enjoyment until a certain age is a material purpose under the Claflin doctrine. The trust that reads "Income to A for life, and upon A's death, income to B for life, remainder to B's descendants per stirpes" has a different problem. While it is a successive interest trust and could normally be terminated early under Claflin, some (or all) of the remainder beneficiaries (B's descendants) are not yet born and cannot consent. A court could appoint a guardian ad litem, but it is very unclear how terminating this trust early could ever be considered in the best interest of these unborn beneficiaries.
In a jurisdiction that follows the Claflin doctrine, which of the following trusts may be terminated if all living beneficiaries consent to early termination of the trust and if the settlor is dead (select all that apply): 1) "Income to A for life, remainder at A's death to B" 2) "Such income to A for life as is necessary for A's support, remainder at A's death to B" 3) "Income to A for life, and upon A's death, income to B until he reaches the age of 35, and upon B reaching age 35, remainder to B" 4) "Income to A for life, and upon A's death, income to B for life, remainder to B's descendants per stirpes"
No. Even if the court finds that the settler had general charitable intent, that is not sufficient to allow the court to modify the trust to allow it to be used to benefit another charitable purpose that is as close as possible to the original purpose. Traditional cy pres doctrine does not allow a modification in the trust's purpose just because the trust has become wasteful. This could be allowed in a UTC or Restatement jurisdiction, if all other requirements are met.
In a jurisdiction that follows the traditional cy pres doctrine rather than the UTC or the Third Restatement, if a court determines that a charitable trust has become wasteful because the amount of assets in the trust far exceeds the needs of the designated charitable purpose, may the court modify the trust under the cy pres doctrine?:
No, a trust must have at least one beneficiary who is not also the trustee.. This is not a valid trust attempt because of the merger doctrine. There must be at least one existing beneficiary (even in the remainder and even with a contingent interest) who is not the sole trustee. Here, Ingrid is the only trustee and the only beneficiary. A single person can serve in all three roles, as long as there is at least one other beneficiary. Because of the Statute of Frauds, a trust involving real estate must be in writing, and in some states must be recorded. However, even if this trust were recorded, it still would not be valid because of the merger doctrine.
Ingrid Manberg writes a document that say "I deed the Manberg family farm to myself as trustee to be held in trust for my benefit." Is this a valid trust?
The best argument is the will lacks testamentary intent, because the note indicates what John is planning to do in the future. There is no evidence that Wendy influenced John, or even that they are in contact with each other. There is no evidence that John lacked testamentary capacity. Courts will not substitute their judgment just because a bequest is unexpected. The will lacks witnesses, but is a valid holographic will under the UPC.
John (an unmarried man) handwrites the following on a piece of lined notebook paper: "I plan on giving my college sweetheart, Wendy, all my earthly belongings after my death. Life kept us apart from each other, but I will wait for her in the next life." The paper is signed and dated. John lives in a UPC state. At John's death, this paper is found tucked in the pages of his college yearbook, next to a picture of a woman named "Wendy Jones." John's daughter, Violet, asks for your advice about whether this is a valid will. Violet is John's daughter by a marriage to a woman (not Wendy) who died 10 years ago. Violet is John's only child, and they were quite close during life. Violet, however, has never heard of Wendy before and is upset. Which of the following is the best argument that the will is not valid?
Elvira is a full-blooded sister to David. Carter is a half-blooded brother to David. Most states treat half-blooded relations the same as full-blooded relations. Thus, Elvira and Carter are likely to equally share David's estate (1/2 each).
June was married to Johnny and they had a child, Carter. Johnny died. June remarried Bobby and they had two children, David and Elvira. Bobby and June died. David died intestate, leaving no surviving spouse or descendants, survived only by Carter and Elvira. Briefly discuss who is likely to inherit David's estate.
Gladys should argue that there was no intent to create a trust and that Lilly intended to give Gladys an outright gift. The language about taking care of the family is merely precatory and does not create a legal obligation. While it is unlikely that this language creates a trust, the children have a reasonable argument in favor of a trust. Gladys' best argument is that the phrase, "who I know will take good care of my family" is merely precatory, indicating a wish but not a legal obligation. Indeed there is no instruction or direction here. If these words were directed to Gladys as a "trustee" rather than a sister, then these words might create a trust. The merger doctrine has no application here because that applies when the trustee and the beneficiaries are the same person. While there has not yet been physical delivery of the property in the form of a deed or a transfer, writing a validly executed will substitutes for physical delivery here. Otherwise, there could be no such thing as a testamentary trust.
Lilly's will contained these words, "I give my entire estate to my sister, Gladys, who I know will take good care of my family." Lilly died survived only by Gladys and Lilly's two grown children. The children have argued that this language creates a trust with Gladys as the trustee and the children as beneficiaries. What is Gladys' best legal argument?
The correct answer is Mark's estate escheats to the state. Under the UPC, intestate succession only goes as far as grandparents and descendants of grandparents. Phil is a descendant of Mark's great-grandparent. Julie does not take under intestate succession because she is a sister-in-law not related by blood.
Mark died intestate in a state that has adopted the UPC. Mark was not married, and his only living relatives are (1) Phil, who is the grandchild of Mark's grandfather's brother (making Phil Mark's second cousin), and (2) Julie, who is the widow of Mark's brother. Who takes Mark's estate?
John can have the sale nullified, because Mary has breached her fiduciary duty of loyalty. As the administrator of the estate, Mary is a fiduciary. Under the duty of loyalty, she is prohibited from engaging in any self-dealing transaction (like selling herself the house from the estate). Under the "no further inquiry rule," this prohibits applies even if the transaction is perfectly reasonable and fair to the estate and even if the transaction actually saves the estate money. It is a prophylatic rule designed to broadly prohibit self dealing. Despite the prohibition on self-dealing, Mary could cause the estate to sell her the house if the deal were fair (which it appears to be) and if (1) John consented after full disclosure of all material facts or (2) the court approved the sale or (3) the will explicitly allowed such self-dealing.
Mary is the administrator of her father's (Frank) estate, who died without a will. Mary and her brother, John, are the only intestate heirs. Frank owned a home outright at his death. Mary knows that her brother, John, could not afford to buy the house and probably would not be interested anyway since John lives in another state. Rather than list the house on the market, and pay a relator's commission, Mary has the house appraised and buys the house herself for the appraised value. She did not discuss this with John beforehand, because she knew that he would be fine with the sale. Has Mary breached any fiduciary duties? If so, which and what is John's remedy?
No. The real estate will pass to Pablo's brother automatically outside of the probate estate by virtue of the joint tenancy.
Pablo owned a piece of real estate in Colorado with his brother as joint tenants with right of survivorship. They inherited the real estate many years ago from their father. Pablo recently died, survived by his brother. Because Pablo did not have a valid will, will the Colorado real estate pass in accordance with the Colorado law of intestate succession?
No. The correct answer is that Joaquin can inherit from Marcos, but Marcos cannot inherit from Joaquin. The UPC handles stepparent adoptions by allowing a full parent-child relationship (with inheritance in both directions) with the adoptive stepparent as well as the genetic parent who is married to the adoptive stepparent. With respect to the other genetic parent, the child can inherit from the parent (and the parent's family), but the parent (and the parent's family) cannot inherit from the child.
Paola and Marcos were married and had a son, Joaquin. Paola and Macros divorced, and Paola later remarried Alejandro. Alejandro adopted Joaquin with Marcos's consent. May Marcos and Joaquin inhereit from each other under the UPC intestate succession statutes?
Rosa will inherit all of David's estate because she is David's only descendant. Zach is David's stepchild. Such relationships of affinity generally carry no inheritance rights. The UPC sometimes allows stepchildren to inherit, but only if no other living heirs are discovered, as a final step before escheat.
Paula is married to David. Paula and David have one child together, Rosa. Paula also has a child from a former relationship, Zach. Paula and David married when Zach was three. David never adopted Zach, and their state does not recognize equitable adoptions. Zach and Rosa are now grown, but Zach grew up living with his mother, David, and Rosa and spending every other weekend with his dad. Paula died last year and her entire estate went to David through a valid will. If David dies intestate, who will inherit David's estate?
The American Red Cross In all states, will provisions in favor of a spouse are revoked upon divorce. Under the UPC, those provisions are read as if the spouse had disclaimed. The UPC's disclaimer rules say that the disclaimed interest passes as if the former spouse had predeceased. That means that Quincy's estate will pass to the American Red Cross.
Quincy and Renee are married. Quincy writes a will that says "I give my entire estate to my wife, Renee, if she survives me. If she does not survive me, then I give my entire estate to the American Red Cross." Quincy and Renee divorce and Quincy dies in a UPC state. Who takes Quincy's estate?
No. Restrictions on marriage do generally raise public policy concerns, but only if they extend past the death of the testator. Rita is free to disinherit Olivia for any reason Rita wishes, whether that violates public policy or not.
Rita has ten children. The youngest daughter is Olivia and the youngest son is Oscar who is two years younger than Olivia. Rita wants to leave her entire estate in equal shares to all her children outright and free of trust. Despite this general desire, Rita also believes that it is Olivia's duty, as the youngest daughter, to remain unmarrried and to care for Rita through old age. Rita has told Olivia that if she (Olivia) gets married during Rita's lifetime, she (Olivia) will not inherit a penny of her anticipated outright bequest from Rita. Rita's will matches this intent, including Olivia only if she is unmarried on the date of Rita's death. Is this restriction on marriage is likely to be overturned by a court because it violates public policy?
Lindsey takes Scott's estate. The correct answer is that Lindsey will take Scott's estate. Daria is not a surviving spouse, because they are not married. The state has no laws recognizing domestic partnerships. Daria is not a putative spouse because she did not have a good faith belief that she was married. Thus, Daria will not inherit from Scott. Scott's parents will not inherit because Scott left a child.
Scott and Daria have lived together in a committed relationship for 20 years. They are not married because they think marriage is a tool of the patriarchy. They have one child, Lindsey, who is 3 months old. Scott's and Daria's parents are also alive. Scott died unexpectedly in a car accident. He died intestate in a state that has adopted the UPC and that follows the putative spouse doctrine. Their state has no laws giving legal status to domestic partnerships. Who takes Scott's estate, worth approximately $1 million?
Yes. You cannot defeat creditors by self-settling a trust for your own benefit. The trust form will be ignored for purposes of the settlor's own creditors, in a revocable, inter vivos trust. (Note that other trusts can defeat the claims of creditors. We will discuss these other situations.)
Stan transferred all of his assets into a revocable, inter vivos trust, naming himself as trustee and sole beneficiary. In addition to the right to revoke the trust, Stan retained the right to all income from the trust and had the right to distribute any portion of the principal of the trust to himself or those he might designate. Five years after creating the trust, his business started having difficulty, and he had personal liability on all the business debts. Can his creditors collect the amounts due to them from the the trust assets?
No, Terry's disclaimer is not effective. Acceptance of an interest precludes a later disclaimer. Depositing the check means that Terry can no longer disclaim.
Terry was named as recipient of a pecuniary bequest of $100,000 in the will of her aunt. The aunt's estate sent Terry a check for $100,000, and Terry deposited the check in her bank account. The next day, Terry signed a paper stating that she was irrevocably disclaiming the bequest and delivered it to the estate along with a check reimbursing the estate for the full $100,000. Did Terry effectively disclaim her interest?
Look down, up, down, up, down. The correct order, after the surviving spouse, is descendants by representation, parents, descendants of parents by representation, grandparents, and descendants of grandparents by representation. The UPC then looks to certain stepchildren before escheating to the state.
Under the UPC, an intestate estate is distributed according to the parentelic principal. Generally speaking, after providing for the surviving spouse, if any, the parentelic principal looks for surviving heirs in the following order: (put the categories of heirs in the correct order, starting with the first category to take after the surviving spouse)
Valid only if it restrains both voluntary and involuntary alienation of a beneficiary's trust interest. Spendthrift clauses are valid in most jurisdictions and under the UTC, but only if they equally restrain both voluntary and involuntary alienation. In other words, you cannot draft a trust that permits a beneficiary to voluntarily sell their beneficial interest but that not does permit a creditor of the beneficiary to attach the interest.
Under the UTC and in most states, a spendthrift provision in a trust is which of the following
Victoria's estate will pass by intestacy (assuming no prior will that could be revived). If Victoria lacked mental capacity to execute the will, the entire will fails (not just particular provisions). Thus, the estate will pass by intestacy, assuming there are no prior wills that could be revived.
Victoria, age 95, executed a will that gave half of her estate to her great-niece, Jessica, and half of her estate to her only daughter, Rose. Rose challenged the will, presenting convincing evidence that Victoria lacked the mental capacity to execute a will. Assuming that the court finds that Victoria was not competent to execute the will, which is the most accurate statement?
The correct answer is that Carla takes 1/3 and that Francis, Gilberto, and Horatio each take 2/9 (or 1/3 of 2/3). The estate is divided at the grandchildren level, which is the first level where we find survivors. Carla takes 1/3 because she survives. Dino's and Eva's shares are recombined and then divided per capita among the survivors at the next generation. Thus, Francis, Gilberto, and Horatio each take 1/3 of 2/3, or 2/9.
Vito, a widower, dies intestate in a state that has adopted the UPC's intestacy statute, which uses per capita at each generation to determine representation of multiple generations. He had two children, Anthony and Barbara. Anthony and Barbara both predeceased Vito. Anthony had a child, Carla. Barbara had two children, Dino and Eva. Both Dino and Eva predeceased Vito. Dino had two children, Francis and Gilberto. Eva had one child, Horatio. How is Vito's estate to be distributed?
The correct answer is that Carla takes 1/3, Francis and Gilberto take 1/6 (or 1/2 of 1/3), and Horatio takes 1/3. The estate is divided at the grandchildren level, which is the first level where we find survivors. Carla takes 1/3 because she survives. Eva's 1/3 share is passed directly to her surviving descendants, here Horatio. Dino's 1/3 share is passed to his surviving descendants, here Francis and Gilberto.
Vito, a widower, dies intestate in a state that is still using the UPC's intestacy statute from prior to 1990, which uses the system commonly called per capita with representation to determine representation of multiple generations. Vito had two children, Anthony and Barbara. Anthony and Barbara both predeceased Vito. Anthony had a child, Carla. Barbara had two children, Dino and Eva. Both Dino and Eva predeceased Vito. Dino had two children, Francis and Gilberto. Eva had one child, Horatio. How is Vito's estate to be distributed?
1) There may only be one beneficiary of each account, meaning the custodian cannot use assets from one beneficiary's account to benefit a different beneficiary. 2) An account terminates at the age of majority (typically age 18) and is distributed outright to the beneficiary at that age. All states have a Uniform Transfers to Minors Act (UTMA) or a Uniform Gifts to Minors Act (UGMA). While the custodian does act as a fiduciary, the accounts do not involve any court oversight or reporting requirements. They are very easy to set up. The downsides are the limit of only one beneficiary per account, meaning the custodian cannot pool assets to address the varying needs of the children as a group (like families do). Also, the accounts terminate at the age of majority (typically though not always 18) and the assets are paid outright to the beneficiary at that time, which most grantors view as too early for a person to have responsibility for handling money.
What are the disadvantages of using UTMA and UGMA accounts to make gifts to minors (select all that apply):
The primary purpose of an elective share statute is to protect surviving spouses from being disinherited. It has nothing to do with the testator's likely intent, which is why a testator cannot defeat an elective share by exhibiting a contrary intent. This should be contrasted with a statute protecting an omitted spouse (a person who becomes a spouse after the will is executed), which is based on the likely intent of the testator. While the elective share statute may preference longer marriages, that is not the primary purpose of the statute. And it has nothing to do with birth rates.
What is the primary purpose of an elective share statute?
Nigel will receive the ring and Harvard will receive the remainder of the estate ($498,000). Joan will receive nothing. Because William's will gives away more than he has in his estate, the gifts need to be abated. The order of abatement is (1) residue, (2) general gifts, (3) specific and demonstrative gifts together. Here, there is $500,000 in the estate, but the will gives away $1,002,000. The $502,000 shortfall will come first from the residue (wiping it out), and then from the general gift to Harvard (which will be reduced), but the specific gift of the ring will be protected.
William's validly-executed will reads "I give my wedding ring to my son, Nigel. I give $1 million to my alma mater, Harvard. I give the rest of my estate to my long-time girlfriend, Joan." William just died with a probate estate worth $5 million (the wedding ring is worth $2,000). He owns nothing that would pass outside of probate. However, all that is left after paying William's creditors is $500,000. Who gets what?
No, Sally is not entitled to anything under the will Most states follow the identity theory, meaning that a specific bequest will fail (be adeemed by extinction) if the identified asset is not in the estate at death. There are some common exceptions, but they are not implicated by these facts. The UPC flips ademption on its head and presumes no ademption unless the testator intended otherwise.
William's will read, in part, "I give all my stock in XYZ Corp. to Sally." At the time of the will execution, William owned 100 shares of XYZ stock and each share was worth $10 ($1,000 total value). One year later, William died. At the time of his death, he did not own any XYZ stock because he had sold it and used the cash to pay his rent, but each share was trading at $15. Is Sally entitled to $1,000 from the estate if William died in a non-UPC state that follows the identity theory?
The American Red Cross Rocky would take under the anti-lapse statute, but Wilma clearly indicated a contrary intention. By using words of survivorship and a gift over, even in a UPC state, a court will consider that her will clearly directs what should happen to the gift if Pebbles predeceases, and that clear direction will defeat the anti-lapse statute. The American Red Cross will take under the will.
Wilma writes a will that reads, in part, "I give the Flintstone family beach house in Malibu to my daughter, Pebbles, if she survives me. If she does not survive me, then I give the Flintstone family beach house in Malibu to the American Red Cross. I give the residue of my estate to my husband, Fred." Pebbles dies before Wilma, leaving a son, Rocky. Wilma dies survived by Rocky and Fred. Wilma owned the Malibu house 100% in her own name as separate property, and Fred is receiving enough other assets that an elective share does not make sense for him. Who takes the Malibu beach house in a UPC state?
Yes, the grandchildren likely can recover the lost trust funds from Xavier, despite his delegation of investment responsibility to the bank, because Xavier failed to monitor the bank. A trustee can delegate investment decisions if the trustee exercises prudence in selecting the delegee, defining the scope of the delegation, and in monitoring the delegee's actions. If there is a valid delegation, the trustee is relieved of liability for the actions of the delegee. Here, Xavier appears to have entered into a valid delegation, but it is clear that Xavier is not adequately monitoring the delegee's actions. Therefore, Xavier will retain liability. (Contrast a delegation with the situation where the trustee is merely obtaining investment advice but not actually delegating investment decisions. In that situation, the trustee does retains liability.)
Xavier is the trustee of a small trust fund that his mother (Lucila) created to help pay for her grandchildren's education. Xavier knows nothing about investing, however. Xavier hires the trust department of a local bank to manage the trust's assets. He signed a document that stated that he "was delegating investment responsibility" to the bank. Xavier was relieved that someone was taking care of things, and put the trust out of his mind. Xavier received quarterly statements from the bank, showing the trust's investments and income, but Xavier just threw those statements, unopened, into a desk drawer. The year before the first grandchild was due to start college, news broke that the bank had invested 100% of the trust assets in a ponzi scheme, which had collapsed. The trust money was gone, the bank was declaring bankruptcy, and several bank employees were facing criminal indictments. May the grandchildren recover the trust funds from Xavier? If so, why?
Link should be able to take the estate under the old will due to the doctrine of dependent relative revocation. The best argument for Link is that Zelda's revocation of Will 1 was dependent upon Will 2 being valid. Thus, under dependent relative revocation, Will 1 was revived (or never actually revoked) because the condition of Will 2 being valid failed. Under harmless error, Link needs clear and convincing evidence of Zelda's intent, which is lacking here since she was alone and never spoke to anyone about her plans. All we have is inferences, which is insufficient. The UPC does not follow the substantial compliance rule. But even if it did, this will execution is not close enough to pass muster.
Zelda validly executed a will about 10 years ago giving her estate to her partner, Link. Zelda decided that she should update her will, so she wrote a new will herself using a computer program. The second will was substantially the same as the first, giving the bulk of the estate to Link, but adding a few specific bequests to family members. Pleased with herself, Zelda printed the new will and filed it in her desk, neglecting to sign it or to have it witnessed and notarized. Zelda then drew a big X through the text on each page of the old will and wrote the word "revoked" at the end. She was alone when she wrote the new will and revoked the old will, and she did not say anything to anyone about it. Zelda recently died, and found among her papers was an original of the new will and the revoked original of the old will. Which is Link's best argument to be able to inherit from Zelda in a UPC state?
