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Estates & Trusts Outline Spring 2011, Grauer I. Introduction a. What limits do we place on the will of the testator?

? i. Any bequest that precludes someone from ever getting married as it violates public policy. 1. Is a bequest severly violative of public policy? ii. Any bequest that requires a divorce as is against public policy; iii. If the bequest promotes criminal activity. 1. i.e. money contingent on abortion in 1880s; iv. Also, you cannot force people to waste their property; 1. Therefore, cannot bequest property and then, through the bequest, make the property useless with restrictions; b. Shapira v. Union National Bank (1974): A will left money to kids as long as they married Jewish women with Jewish parents; if they were not married within 7 years after the death of the testator, then the money would go to the State of Israel; converts dont count; i. ISSUE 1: Is this a violation of the fundamental right to marriage? No. 1. There is a constitutional right to marry. a. This will provision impinges the right to marry but not like Loving v. VA which would have put people in jail for marrying people of a different race. b. Instead, this was just about money. c. Here, the real issue is not whether there is a right to marry, but whether the testator is allowed to have placed this restriction; i. The right to receive under a will is not a natural right (like marriage would be) and is not protected by the US Constitution. 2. Maddox v. Maddox a. Requirement placed to inherit that daughter needed to marry a Quaker; b. In this case, the court rules that it was unfair restriction to attempt to find a Quaker given the times and where she lived;

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3. Here, the court is unwilling to follow Maddox because there are plenty of chances to meet Jews GET ON A PLANE! 4. The will is upheld on this issue. ii. ISSUE 2: Does this marriage requirement violate public policy? No. 1. The question to ask is whether this is a general or partial restraint? a. Partial restraints only impose reasonable restrictions and are valid as not violating public policy; 2. General Rule: the great weight of authority is that gifts conditioned upon the beneficiarys marrying with a particular religious class or faith are reasonable and not against public policy; a. Furthermore, the will gave a 7 year grace period and this makes the marriage clause even more reasonable because it allows for reflections and fulfillment of the condition without oppression; b. Finally, giving to Israel if the son doesnt marry shows the depth of the testators intent; i. Wants to help protect Jewish traditions. c. It is the duty of the Court to honor the testators intent. c. Evans v. Newton: i. Bequest the estate to be used as a park for Whites only; ii. The SC said this is not an acceptable bequest; iii. Especially here where done by a public official. d. Evans v. Addney: i. From the previous decision, do the heirs have the right to get the property back when the SC rules that the park must be integrated? Yes. e. TERMS: i. Testator a person who has written a will; ii. A person who dies with a duly executed will dies testate; iii. A person who dies with no will dies intestate; iv. Devisee (legatee) person who gets the testators property; v. Devise/Legacy/Bequest the clause directing the disposition of property; f. 3 Common Incentives Used in Trusts Created by the Testator: i. Conditions that encourage the beneficiaries to pursue an education; (Estates and Trusts Spring 11) 2

ii. Conditions that provide what might be termed as moral incentives 1. Incentives that reflect the settlors moral or religious outlook or promote a particular way of living; iii. Conditions designed to encourage the beneficiaries to have a productive career 1. Cant get the bequest unless you have a job making X dollars per year; 2. May be problematic if the beneficiary wants to be a school teacher or work for a charity g. Under English CL, real property passed by descent to the property owners heir. i. The Statute of Wills directed where property went; ii. No state has abolished inheritance; 1. Hodel v. Irving there is right to property a total abrogation of these rights cannot be upheld. h. Slayer Statutes i. Ford v. Ford (1986): P murdered her Mother and then sought the property left to her under her Mothers will; Maryland, the place of the murder/will, has no Slayer Statute to deal with this situation; BUT, there is a Slayer Rule one cannot profit by his/her own wrong, and on a broad ground of public policy of the CL which was perhaps not supported by a majority of courts, but the BASIC RULE decided was that a murderer, or his heirs or representatives through him, ordinarily may not profit by taking any portion of the estate of the one murdered; it was determined in criminal court that P committed the crime by reason of insanity; 1. ISSUE: Does the Slayer Rule apply when the murdered committed the act while insane? No. 2. RULE: a. For the Slayer Rule to apply, the murder must be both felonious and intentional. b. The trier of fact must decide on a preponderance of the evidence whether the manner of the decedents death was homicide, whether the homicide was a murder or manslaughter, and whether the claimant was the criminal agent i. If a manslaughter, need to determine if it was voluntary or not; c. Moreover, there must be intent

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i. The Slayer Rule is not applicable when the killer was not criminally responsible at the time he committed the homicide; ii. Therefore, a person with a mental disorder or who is mentally retarded and falls under the cognitive and volatile components of the criminal responsibility statutes does not act with unfettered will; 1. Must pass the criminal insanity test; iii. Minority: no Slayer Statutes at all. iv. Result: P can take under the will! ii. Most States have their own Slayer Statutes. iii. UPC 2-803 1. States that felonious and intentional killings means that you lose the benefits of the estate; 2. Can prove felonious and intentional if there is a criminal conviction or, if no criminal conviction, then through the preponderance of the evidence standard. iv. EXAMPLE: 1. Nicole Brown Simpson I leave all my property to OJ. a. Acquitted at criminal trial. b. Use the preponderance standard in the civil trial and found liable. v. For some States, even if there is a criminal trial and guilt, need to perform a civil trial under the preponderance (lesser) standard. 1. Why have this approach? a. Maybe the family wants to keep the money, but wants a criminal conviction of the person who committed the crime. i. Role of the Attorney i. Roles of the Estate Planner: 1. Litigator 2. Policymaker 3. Planner 4. Educator ii. Estate Planning: (Estates and Trusts Spring 11) 4

1. Typically represent more than 1 individual i.e. represent the family; 2. Can work for same-gender and unmarried couples as well; a. There may be unusual conflict though especially for same-sex where there may be standing issues; 3. Married Couples a. The fabled I love you, you love me Will. i. Grauer contends these never fail to be a bad idea. ii. There is the assumption that the spouse will use the money fairly and the give the proceeds to their kids. iii. Probably better to set up a trust to make sure your intent is actually effectuated. b. May have conflict of interest working with married couples like where the husband sneaked back into the office and wanted a secret will drawn up; i. Should talk about confidentially policies before talking about estate planning with the married couple; ii. Tell the husband in the situation that he needs new representation; iii. Write a letter from the very beginning as well indicating prices, services, and the disclosure policy (the policy may be complete disclosure or complete confidence of information just make it clear to the clients from the beginning!); iii. Hotz v. Minyard (1991): T and J are brother and sister; T was the head of one auto dealership and J was the head of another; both dealerships are owned by their father (Big Daddy); D, an attorney, prepared taxes for the father and for J (for the last 20 years); the mother, father, and T went to D to prepare the fathers will; initially, the will left T a dealership and everything else was divided; (important side note a beneficiary was present! Dont sign a will when a beneficiary is present at the signing, with the exception of a husband and wife that have a mutual trust and sign simultaneously!); father ended up getting a second (secret) will indicating that T would everything outright (sorry, J!); later J talked to D about her fathers will and D showed her the first (not the secret) will; J came away with the impression she would be taking something; D never indicated that that will had been revoked; father became incapacitated and J took over the dealership, but T weeded J out of the dealership and J sued D talked to J individually to settle, not Js attorneys BAD IDEA! Js attorneys should have acted on this; 1. What should D have done in this situation? (Estates and Trusts Spring 11) 5

a. Should have said that he could not talk to J she needed her own attorney and he could only talk to her attorney. 2. ISSUE: Did D violate his fiduciary duty to J by misrepresenting her fathers will? Maybe. a. Its a factual question as to whether there was a breach of duty when D showed the old, non-valid will to J; 3. RULE: a. A fiduciary duty exists when one has a special confidence in another so that the latter, in equity and good conscience, is bound to act in good faith; i. Attorney client privilege is a fiduciary one; ii. D will probably be liable because of the Attorney Client relationship and the duty that stems from it; 4. HERE Remand and go to trial because the Lower Court issued a Summary Judgment for D; 5. Remember, you can have a secret will. 6. What should D do if the father said, Dont tell J anything about the will,? a. Drop J as a client; b. Tell father I wont say anything, but if it comes up, I will say that she should talk to you and ask to see the current will. c. D should have thought about the consequences BEFORE he drafted the secret will! d. D could have established ground rules with the family in order to avoid the situation for example, NO SECRETS! iv. Barcelo v. Elliott (1996): 1. Whether an attorney who drafts a will or estate plans will be liable for malpractice because they did not get what they thought they were going to get the attorney messed up; 2. The only persons who can sue the attorney are those who hired the attorney for the contract; 3. Situations occur where a will is drafted for someone and the person does not receive something that they intend to receive a. Many jurisdictions allow the beneficiaries who are not in privity of contract to sue for malpractice: i. Lucas v. Hamm (CA) (Estates and Trusts Spring 11) 6

1. Beneficiaries did not get what they intended because of perpetuities problems; 2. Dont need privity to sue, but the standard of care to the community does not include understanding RAP; 4. In Ohio, the SC ruled that privity of contract is needed to sue for malpractice of will (the concurrences challenge this point); a. The administrator or executor of the will may sue, but not beneficiaries; v. Where there is a conflict between a husband and wife, it would be better for the attorney to no longer represent both or have one spouse be represented by another attorney. j. Probate and Non-Probate Transfers i. The probate process varies significantly across States. ii. If a person has no will, the closest relative will be the Personal Representative. 1. If there is a will, there will be a named Representative or Executor; iii. If you transfer property to a trust but retain a Life Interest/Estate in the property, the property will be taxed at death. iv. A Personal Representative gathers all of the assets at death; v. Gifts 1. If a gift is given before death through a transfer, then the act is complete. 2. An issue occurs when there are ambiguities with the testators actions. 3. Gruen v. Gruen (1986): Issue over a painting; the father sent a letter followed by 2 additional letters telling the son that he would get the painting; the father retained a life interest in the painting; there was no actual delivery; the letters sent did not meet testamentary formalities, therefore, no will was created; the painting was worth millions; a. ISSUE: Was an inter vivos gift given? Yes. b. RULE: i. To make a valid inter vivos gift, there must exist the intent on the part of the donor to make a present transfer, delivery of the gift, either actual or constructive to the donee, and acceptance by the donee. ii. INTENT (Estates and Trusts Spring 11) 7

1. Must intend to make an irrevocable present transfer or ownership. 2. Here, this was indicated with the letters; 3. D argued that the life interest showed lack of intent, but as long as the evidence established an intent to make a present and irrevocable transfer of title, there is a present transfer or some interest and the gift is effective immediately; iii. TRANSFER 1. There must be delivery of the gift. 2. The transfer must sufficiently divest the donor of domination and control over the property; a. This is a case-by-case analysis. 3. Here, the letters acted as constructive delivery. iv. ACCEPTANCE 1. This is assumed by law. 2. Here, shown by Ps statements and Ps retaining of the letters. v. Remember, if the son did not want the property, he could have disclaimed it. vi. Why did the father do this as opposed to creating a will? 1. He probably realized that the painting was increasing in value; 2. Probably decided to give the gift of the painting now and pay the gift tax liability when the painting is worth less, rather than paying estate tax when the painting is worth more; vii. Problem with Dads first letter it basically said, Lets commit tax fraud! 1. The letters should have said something like, Heres the gift! and the son acknowledged receipt of the gift, but asked the father to hold onto the painting for him while he was at school. 2. It would have been better for the son to have established a lease agreement with his dad. 4. Dont use Gifts Causa Mortis as an estate planning tool (Estates and Trusts Spring 11) 8

a. These are revocable if given near death and then recovery occurs; vi. Joint Interests with a Right to Survivorship 1. This property will stay outside of the probated estate; a. It will go to the named survivor. 2. How do we treat joint bank accounts? a. General Rule: the money in the bank account really belongs to the person who deposited it there; b. Courts generally enforce survivorship provisions in joint accounts assuming that the depositor did not revoke the survivorship provision in life and that the decedents estate does not introduce clear evidence that the now-deceased depositor established the joint account only for convenience; c. Ohio bars extrinsic evidence to show convenience why? Because anyone who wanted multiple parties needed them to sign the signature card and shows clear intent by the testator; d. From a gift standpoint: if I bought land and shared it with you, it would be a gift of of the property; i. If I put $1 million in the joint bank account, there is no gift to you unless/until/to the extent you withdrew the funds and I did not demand it back; 1. Why the accounts are viewed this way? because they are created for 1 of 3 reasons: a. Want to put the money in the account and give the other person the right to withdraw the money immediately; i. The signature card should indicate this; ii. You can still go after the person who just took out the money you put in; b. 2 people have agreed that signor #1 is the Depositor and wanted to avoid probate but the agreement says that signor #2 could take the money out until death; i. These are payable on death accounts (POD); c. One person did not want the other person to get the property when they died (they (Estates and Trusts Spring 11) 9

wanted it to go to probate), but that person wanted the other person to have access to the funds to, for example, put the money in appropriate accounts or to pay bills; 3. Lifetime gifts are not nearly as important in wealth transmission processes as other forms of non-probate transfers 4. When a joint tenant or tenant by the entirety dies, its a non-probate transfer a. Take by terms of the joint tenancy not by a separate will or intestacy 5. Franklin v. Anna National Bank (1986): W died; G was Ws sister; G and W had a joint bank account; signatures showed up on the card; joint tenants with right to survivorship; G never used the account; then F began to take care of W; W sent a letter to the bank asking for G to be taken off the account and F to be put on the account; Gs name was never taken off the account; TC ruled that G was the sole owner of the funds at Ws death; a. ISSUE: Was Ws intent for G to have the money in the account formed only for G to pay Ws bills and thus the money should go to F instead of G? Yes. b. RULE: i. The instrument, meaning the signature card, presumably speaks the full truth; 1. The burden must be established by clear and convincing evidence that a gift was not intended; 2. Evidence of lack of donative intent must relate back to the time of creation of the joint tenancy; 3. Can consider events occurring after creation of the joint account in determining whether the donor actually intended to transfer his interest in the account at his death to the surviving joint tenant; c. RATIONALE: i. No doubt here that W tried to take G off the account and put Fs name on the account; 1. Also, G never used the account personally; 2. The attempt to change the account showed that W believed that he solely had possession of the account; (Estates and Trusts Spring 11) 10

ii. Following the testators intent, the money goes back to the estate doesnt go to G; iii. So, the standard to override the signature card is that there needs to be clear and convincing evidence to go behind the terms of the agreement ; k. Non-Probate Revolution i. Can avoid probate through trusts and arguably through the education of children 1. Education, by paying for college and expensive private schools, allows for wealth to transfer because of the extended and enriched educational opportunities; ii. Fear that the probate system is costly, full of delays, and inadequate also it is public; iii. Tax consequences usually play little in avoiding probate because tax rules permeate many of the non-probate methods of estate planning; 1. For example, if you set up a gift and hold a life estate in the gift or if you sent up an irrevocable trust with you having the life estate it will be included in your estate tax; a. To avoid this, set up the trust and tell the bank that youd like it to distribute and require the bank to consult with you before it distributes. iv. In light of all of this, the probate system is still used! II. Intestate Succession a. Introduction i. Each intestate statute is the legislatures best guess as to how people would want their property passed to future generations; ii. The overall US approach is to follow the bright-line/sledgehammer approaches; iii. When do we use intestate statutes: 1. When there is no will. 2. When a will does not explain where all of ones property should go. 3. Where its impossible to discern where property was intended to go. a. Example 1: Decedent writes a will which provides I leave all of my real property to my brother Joe. Decedent dies with $20,000 in stocks and bonds. The will does not dispose of the (Estates and Trusts Spring 11) 11

stocks and bonds, because they are not real property. Hence, stocks and bonds will be distributed by intestate succession. b. Example 2: Decedent writes a will which provides, I leave $50,000 to my sister Alice, if she survives me. If she does not survive me, I direct that the property be distributed to her heirs (and not to her estate). Decedent has explicitly provided that if Alice does not survive decedent, the property should pass not to the beneficiaries of Alices will, but rather to her heirs. Hence, if Alice does not survive, the $50,000 will be distributed by intestate succession. i. Grauer would have the will say: to be distributed to the heirs and heirs shall be determined as if she had survived me and died that moment after I did; iv. Who Can Challenge the Will? 1. The only people able to contest are people who would be financially better off if the will was thrown out a. So this could be people who may take in intestacy or from an old/previous will; v. Descendants 1. Take to the exclusion of collaterals. a. Collaterals include siblings, nieces and nephews, and cousins pretty much any other relative not a direct lineal descendant; 2. As long as the descendant has children, grandkids, or great-grandkids, etc. virtually all intestate succession statutes preclude collateral from inheriting. vi. REMEMBER, only blood relatives will inherit, but before inheritance escheats to the state, step children may be able to recover.

vii. New-Biology Approach anyone in utero at the time you die counts as a descendant; 1. We dont know about frozen eggs/spermyet

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viii. Example Mass. Statute 1. The surviving spouse is entitled to: a. If leaving kindred and no issue, the spouse gets everything up to $200,000 and half of everything else. i. So, if the estate is worth $600,000, the spouse gets $400,000 and the kindred gets the other half; b. Laughing Heirs those so far removed that if they take anything at all, its funny. c. If there is issue, the surviving spouse gets and the kids get ; i. Need to set up a guardianship for the kids; ii. If the estate is small and the spouse wants to keep the money, may the spouse choose to do so? 1. In that case, only the issue would have a cause of action. They probably wouldnt sue as long as they dont hate you when they get older. (Estates and Trusts Spring 11) 13

iii. Majority of states have the to remaining spouse and to kids provision. ix. UPC Example 1. 2-102: Intestate share of spouse is the entire estate if all the decedents surviving descendants are descendants of the surviving spouse and there is no other descendant of the surviving spouse who survives the decedent a. So if all the kids come from the traditional relationship then everything goes to the surviving spouse 2. If there are no descendants, but the decedents parents survive, the spouse shares with the parents a. OH approach is different because the spouse takes all here 3. How to deal with blended families a. The spouse gets the first 150k and splits half of the rest if the spouse had descendants who are not from the decedent 4. 2-101(b) a. Authorizes a negative will; b. Outside the UPC, this does not exist; c. The negative will disinherits someone without saying who gets the property; d. The UPC says a decedent may limit the right of an individual if the individual survives the decedent; 5. 2-103 a. This is illustrative of many jurisdictions; b. The order of taking per intestate statute: i. Descendants by representation; ii. If no surviving descendants, then to parents iii. If no surviving descendant or parent, to the descendant of the deceased parent of either of them by representation (so this would be brother or sisters) iv. If no surviving descendant, parent, etc. then half goes to grandparents (half to paternal side and half to maternal side) 6. 2-105 (Estates and Trusts Spring 11) 14

a. If there is no taker under the statute, the estate escheats to the state b. This limits the extent of the statute; b. Share of the Surviving Spouse i. Estate of Goick (1996): divorce proceeding was not finalized; husband dies and the (ex)wife became the personal representative of the husbands estate; husband was committed to going to trial for the divorce; there was a settlement between the (ex)wife and the kids as to the distribution of the estate; MT was a UPC state so all the money should go to the (ex)wife, but settlement had 1/3 to wife and 2/3 to kids in trust; husbands other family members sue saying wife is not surviving spouse; wife created settlement in an attempt to avoid litigation; the MT statute provided that competent successors may alter their interest by agreement under the rules of intestacy (this is CL almost everywhere)this does not sound like following the decedents intent though 1. ISSUE 1: Do the appellants, the decedents mother, brother, and sister, have standing to appeal? The mother has standing to appeal to be the personal representative and thats it. a. So, a party lacks standing where there is no personal stake in the validity of the claim or agreement. i. The sisters, mothers, and brothers situation doesnt change because there was no opportunity, under intestacy, for them to recover any of the estate because decedent had descendants; b. For the mother to be a personal representative, decedent must like a spouse or heir who can serve. i. So there may be an issue as to whether (ex) wife is a spouse and this mother has standing; 2. ISSUE 2: Did the DC err when it granted SJ in (ex) wifes favor? No. a. For there to be a formal divorce, need a written order from the divorce court; b. An oral statement by the judge that they were divorced did not create a formal divorce. 3. ISSUE 3: Did the DC err when it appointed (ex) wife the personal representative? No. a. Why did the mother want to be the personal representative representative receives some payment from the estate to perform the duties and she was ticked at the (ex) wife;

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b. So why is the (ex) wife still a spouse when there was an oral agreement? i. Maybe the decedent really didnt want to go through with it at that point; ii. No proper documentation; iii. If there was a proper divorce settlement, there would be a property settlement agreement which includes provisions for dealing with estate planning. c. Result, the agreement is acceptable and the (ex) wife is the personal representative because did not go through. ii. Domestic Partnerships as an Alternative to Marriage 1. Ohio has a designated share statute a. Can go to the probate court and file a petition that designates someone as an heir; 2. Most jurisdictions do not allow taking for the domestic partner unless the jurisdiction allows same-sex marriages; a. This is because same-sex partners cannot be heirs. 3. To circumvent this, some partners will adopt the other partner; a. But does this circumvent public policy? b. Is this now incest between you and your child? 4. If the partner is adopted and can take in the estate, they need to worry about other family members who do not approve of the relationship and who may contest the will in court; a. In Ohio, if you designate someone as your heir, no one can contest. 5. Another problem with the adoption approach occurs if the couple splits it is difficult to de-adopt someone; a. In Ohio, after one year has passed, the heir can be dedesignated;

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c. The Share of Lineal Descendants

i. Example 1:

1. M will never take under any method because E is still alive and it is supposed that when E dies, M will receive the money; ii. 3 Systems of Taking: 1. Strict Per Stirpes Distribution/Traditional Representation Approach a. Property is distributed as if the death order occurred as it was expected to occur; b. In other words: A, B, C, and D all hypothetically survive X because they are from the younger generation, and hang onto their share of the money to give to their heirs; c. Start the division of money with any line that still has at least one living member in class d. Here, there are 4 lines: A, B, C, and D each with living members in it; i. But if B, H, and P were all dead, then divide by 3 because there are now only 3 lines; e. Result: divide into for each line and then distribute equally between the members of the line (remaining descendants);

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f. Some people are upset because descendants get different levels of distribution, especially when a grandchild could get less than a great-grandchild i. This system does not treat everyone the same; 2. Modern Per Stirpes Distribution/Old UPC Approach a. Start the division in the first line in which someone is alive; i. Then create as many lines as people are alive and people who are dead with survivors; ii. Therefore, N, O, Q, and U should all be treated the same and P doesnt receive dramatically as much money; b. So, the line we consider here is the grandchildren line because there is at least 1 grandchild of X alive; i. There are 8 grandchildren that are either alive or have living descendants; 1. If, for example, B, H, and P are all dead, then there would only be 7; ii. So, because there are 8, each of this line receives 1/8

c. Remember, if N and O were dead and there were N1, N2, and O1, each of these would receive a 1/24 share which is 1/3 of 1/8; i. If N was dead and survived by N1 and N2 and O was alive, O would receive 1/16 and N1 and N2 would receive 1/32 shares; 3. Per Capita Per Generation/New UPC Approach

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a. People thought that each person in each generation should be treated the same; b. Start with the generation that has at least 1 person alive (here, the grandchild generation) i. Look to see the # alive compared to the # passed away with living descendants; ii. Therefore, there are 5 alive and 3 with living descendants; iii. Divide the shares into 1/8 (5 living + 3 with descendants); iv. Look to the next line with living descendants 1. This is the great-grandchildren line 2. There are 5 alive and must equally share the remaining 3/8; 3. To figure out the amount, take 3/8 x 1/5 = 3/40

d. Adoption i. CL did not recognize adoption. ii. Therefore, adoption is a creature of statute; 1. At first, you could take under your biological and adoptive parents; 2. But, most jurisdictions have taken the position that once adopted, you are cut off from the biological family and you can only inherit from the adoptive family; iii. Estate of Donnelly (1972): John Sr. married Lilly begot Kathleen and John Jr.; John Jr. married Faith and they begot Jean L.; John died and Faith married Richard who adopted Jean L.; will of John Sr. left all to Lilly who was dead; this placed everything into intestacy; the plain language of the jurisdictions adoption statute would not allow Jean L. to recover anything in intestacy 1. ISSUE: Should Jean L be allowed to inherit? No. 2. RATIONALE:

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a. The strict language of the statute clearly cut off inheritance by Jean even though she still had the same mother. iv. UPC 2-114(b) 1. Broad statute 2. Adoption of the child by the spouse of either natural parent has no effect on the relationship between the child and the natural parent or the right of the child or descendant of the child to inherit from or through the other natural parent; 3. Ohio has a limitation on the statute adopted person is a stranger for all other purposes including inheritance; a. Exception: if a parent of a child dies without the relationship being previously terminated and the living parent remarries and the child is adopted by the new spouse, the childs rights to inherit are preserved; i. Therefore, Jean L would have been protected both by the UPC and Ohio; v. Estate of Brittin (1996): S married E; E had a child with W (previous marriage) and the child was 3 at the time of the marriage to S; S and E begat M; S adopts W when W is 46 and W already had his own 5 children; why was he adopted so late? Because E had passed away at this point and S wanted to make sure part of the estate would go to W; why not just write a will? Because M could contest the will and then W would get nothing; W died before S; S died and Ws kids want to claim part of the estate; 1. ISSUE: Are the natural children of an adult adoptee, descendants of the adopting parent for the purposes of inheritance? Yes. 2. RULE: a. IL statute says that for adult adoptions, the adoptee must reside in the home at any time for more than 2 years continuously preceding the commencement of an adoption proceeding or in the alternative that such persons are related to him within a degree set forth as a related child; i. W would be able to take under the statute because he was legally adopted; b. M argues that while W could collect, W is not inheriting her, but rather Ws children; i. But, since W is a child for purposes of inheritance, the children of W are included as well; c. Result: Ws children may inherit by the terms of the statute; (Estates and Trusts Spring 11) 20

vi. Suppose X leaves a generation skipping trust, so all the money would go to Xs grandchildren 1. Y, Xs son, is in a same-sex relationship and adopts his partner, Z; 2. Can Z inherit under the terms of the trust? a. No, because X was not the one to do the adopting; b. Both the UPC and Ohio take the position that although an adoptee is an heir, do not leave property to an adult adoptee (over the age of 18) unless the bequest specifically mentions that person; 3. Other Jurisdictions Watson Family: a. W creates a trust skipping generation; O adopts her same-sex partner, P; one year later they split and settle, but they do not disrupt the adoption; Ws trust was in CT, O went to ME to get the adoption annulled the court ruled that residency was necessary for annulment of the adoption and O was not a residency; b. CT does not have similar provisions as Ohio or the UPC therefore, P can collect under the trust; vii. CL: Stranger to the Adoption Rule 1. Could only inherit from the adoptive parent, not from others (i.e. adoptive grandparents, etc.) 2. This has been thrown out by the UPC you can inherit from and through your adopting parent e. Simultaneous Deaths i. Example: Decedent dies intestate survived by her husband and her sister, but no children. The husband dies 2 weeks after the decedent, survived by his brother. How will the decedents estate be distributed? 1. Under the UPC and most state statutes, decedents husband will succeed the entire estate. Then, after the husbands death, the husbands brother will take his entire estate. Decedents sister will take nothing. ii. Estate of Villwock (1987): R left his entire estate to J and then to D; J left everything to R and then to other relatives (but, not to D); accident occurs with both dying simultaneously and M argues that Rs property should go to her; D argues that J died first and therefore everything should be hers based on what doctors said/death certificates;

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1. ISSUE: Should D be able to recover the entire estate when the deaths occurred simultaneously? No, D is unable to recover because it was determined that R died first. 2. RATIONALE: a. Here, the death certificates were overturned because there was enough evidence to show (from the EMS reports) that R died before J; b. Therefore, the property passes through Js will. iii. Common Disaster Clauses (STAY AWAY FROM THESE) 1. They state that if the beneficiary and the testator die as the result of a common disaster, then property passes as if they died simultaneously; a. Grauer doesnt like to use these because if both are in a car accident, for example, and both are going to the hospital when the EMS gets in a car accident? Is this a common disaster? i. What if one was hurt much worse than the other in the 1 st accident which contributed to his death in the 2 nd? 1. Just leads to a lot of factual issues upon death. iv. Survivorship Clauses (use these instead of Common Disaster Clauses) 1. Dont want property to go through an estate when the beneficiary died very quickly; 2. This clause would say something like X must survive me by Y period of time traditionally 30 days; 3. UPC has a 120 hour survivorship requirement = 5 days; 4. Ohio has a 120 hour requirement for intestacy. 5. Dont make it too long, it might lead to beneficiaries living in a bubble; f. Disclaimer (Renunciation) i. At CL, an heir was not entitled to renounce or disclaim property inherited by intestate succession. Title vested in the heir automatically at the decedents death. 1. The presumption was that a gift was accepted because there is no good reason not to accept the gift. ii. The Doctrine of Disclaimer holds that property that is disclaimed will pass as if the person disclaiming died before the transfer occurred . 1. Needs to occur within 9 months after the date of death unless the party interested in disclaiming was under the age of 21 then have 9 months after hitting age 21; (Estates and Trusts Spring 11) 22

iii. Cannot disclaim in favor of someone else cant say, I disclaim for X or in favor of X. iv. EXAMPLES: 1. To wife, then kids wife disclaims, then goes to kids; 2. To wife, then Capital Law wife disclaims, then goes to Capital Law; 3. Leave $50,000 to the student who gets the top grade cant disclaim because we dont know who the person with the top grade is at this time; v. Estate of Baird: J brutally assaulted the guardian of his mom (who also happened to be his wife); spousal abuse occurred when he married the guardian; judgment for the guardian for $2.75 million; J is convicted; ( if someone has a judgment against you, that judgment is a lien on the property and personalty you own); in this case, if J inherits his mothers property, the lien will be placed on it and he will lose it to the guardian, but if J dies before the mother, Js kids would get the property without the lien; 1. ISSUE: Is an anticipatory disclaimer of an expectancy interest in an estate valid and effective? No. 2. RULE: a. You cannot disclaim an interest before the death of the party giving you that interest. b. Under CL, you could only disclaim through a will i. You could disclaim from wills because these were seen as gifts, intestacy was seen as an operation of the law and therefore, you could not renounce it; c. The disclaimer before death is not a disclaimer of an interest J had no interest in the property until the death would occur therefore no disclaimer; d. If J would wait to disclaim at death, the court probably would not accept the disclaimer on equity principals. vi. Some courts allow for the Relation Back Theory to permit disclaiming beneficiaries to avoid creditor claims. 1. If an estate beneficiary expects a disclaimer, the beneficiarys interest is treated as if the beneficiary never received the interest therefore it is outside the creditors interests; 2. But some courts state that where there is a disclaimer and there are creditors, no disclaimer can occur; a. Ohio states that a disclaimer to avoid an existing claim or a future claim one can anticipate is a fraudulent disclaimer; (Estates and Trusts Spring 11) 23

vii. Disclaimer has a powerful effect in cases where great amounts of money are involved. 1. Suppose that the grandmother and D both have loads of money and there are grandchildren with little money the D might disclaim the inheritance and allow it to pass to the grandchildren for tax purposes; viii. Cannot disclaim property and then use the disclaimer in an attempt to receive some benefit from the beneficiary who is now receiving that property this is not a disclaimer because they are still receiving the benefits of the property; ix. Where there is a beneficiary who would receive under intestacy and who passes away, his executor may choose to disclaim the previous interest if beneficial within the 90 day period of disclaimer; x. Can you assign an expectancy interest? 1. Scott: P married W; there was an agreement in the will that if a divorce occurred, W would disclaim any inheritance and W would take less child support; a. The court said that the expectancy interest of disclaimer is enforceable where valuable consideration is given here, taking less child support; 2. So, you can lock up an expectancy interest in some sort of future property when there is adequate/sufficient consideration given for that expectancy interest. g. Advancements i. EXAMPLE: 1. L goes to school and will spend $50,000 per year; 2. D goes to school and will spend $10,000 per year; a. The parents then need to spend $160,000 more on L than D to pay for schooling over 4 years; 3. Should D get an extra $160,000 at the time of the parents death? a. Many people feel that parents do their best while alive and no one is keeping track of how much is spent on the kids during the parents lives; b. Under the CL, there would have been a presumption that the $160,000 was an advancement; ii. At CL there was a rebuttable presumption that there would be advancement for large transactions like this

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1. This leads to litigation amongst heirs as to whether or not there were advancements; 2. Such transfers may be: a. A gift; b. An advancement; c. A loan; i. Treat large transactions like the example as a loan where the SoL on the collection of the loan have not expired and then the personal representative can decide to go after the person with the loan; iii. UPC/OH require a writing that there has been an advancement no presumption that an advancement occurred; 1. Property given during the lifetime of an individual is treated as an advancement only if: a. The decedent declared in a contemporaneous writing or the heir acknowledged in writing that the gift was an advancement, OR b. The writing indicates the gift should be taken into account for intestate succession; 2. Need to actually acknowledge the advancement in order to count; iv. EXAMPLES: 1. Advance $30,000 to A; estate is left with $90,000 and there are 3 heirs; a. Take $90,000+$30,000 = $120,000; 120/3 = $40,000 each, so 2 heirs get $40,000 and A gets $40,000-$30,000=$10,000; 2. What if A is advanced $50,000? a. Take $50,000+$90,000=$140,000 b. $140,000/3= $46.667K c. 2 take $46.667K and A gets nothing ($46.667-50K) A is not required to repay the estate the difference v. What if there is a will that says each child should receive the same? 1. This is called Satisfaction not advancement, but it works the exact same way; III. Protection of the Family (Estates and Trusts Spring 11) 25

a. Introduction to Elective Shares i. Where does this theory come from? 1. CL notion of dowry and curtesy; ii. Problem with Community Share Property as opposed to Elective Shares: 1. Hard to determine what is community property and what is personal property; 2. If you comingle assets, they can be transmuted into community property; 3. Most Eastern states use elective shares; b. Traditional Elective Share Statutes i. Elective share statutes allowed a surviving spouse to elect to take a fractional share of the decedents probate estate; ii. How could you disinherit the spouse? Set up a joint tenancy with rights of survivorship with someone else OR set up a trust where you have a life estate in the property and the trust is revocable and the wife is not a beneficiary; iii. Sullivan v. Burkin: decedent had an inter vivos trust (revocable) and retained the right to use the property for life; decedent was the trustee and the beneficiary; the benefit was to go to C; decedent and wife had split many years ago and the trust was just as old; 1. ISSUE 1: Is this a valid trust or is this just a will asking for the property to go to C and therefore allowing the wife to take her elective share? It is a valid trust. 2. RATIONALE: a. This had all the requirements for a trust; b. MA law stated that where property was put in a revocable trust like this, the property in the trust is not included as assets susceptible to elective share statutes; c. Therefore, the wife gets nothing because all the property was placed in the trust; 3. ISSUE 2: Should this always be the MA approach? No. a. New Rule: Allow assets to be included from the trust in elective share when the decedent who created the trust had actual control over those assets and could use those assets for his/her own benefit (this can be shown if the trustee had the power of appointment or revocation of the trust); (Estates and Trusts Spring 11) 26

b. Dont care about the intent of the settlor of the trust because he/she retained all control of the property; c. The court was unwilling to use this new rule in this case because it would have changed estate planning and frustrated the testator/decedent in this case beware future cases and trusts! iv. In Ohio, there was a decision like Sullivan that provided you could elect against the inter vivos trust. 1. But then the OH SC reversed; 2. Can now only get to the probate estate, not inter vivos gifts; c. Modern Elective Share Statutes i. Under the traditional approach (and OH), you can disinherit through the use of a non-probate account, aka a trust; ii. Some states take the Fraudulent Intent Approach 1. This means if a conveyance was made simply to defraud (or an intent to defeat a surviving spouses election power) the conveyance will not be upheld; 2. Warren v. Compton: a. In this case, fraud was found; b. But, it is clear from this type of statute that the parties are at the mercy of a judges decision on whether fraudulent intent existed; iii. NY and UPC have a bright-line test 1. The UPC augmented estate; 2. If you designate someone to have the property, the spouse can get part of the property as well; 3. UPC takes the approach that if the marriage lasted at least 15 years, the property is in a pot, a. If less than of the property is available in the pot when one spouse dies, the surviving spouse has a right to elect against the remaining that may be given to other parties; b. Shorter marriages are subject to smaller percentages depending on the length of the marriage; 4. What is included in the estate? a. Net probate estate;

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b. Lifetime transfers to 3rd parties where decedent retained an interest in the property; i. As long as there is an interest in property or enjoyment of property; c. Lifetime transfers to surviving spouse; d. Surviving spouses own property; e. Property owned, or owned in substance, by the decedent immediately before death that passed outside probate, including: i. Property decedent had where there was a presently exercisable general power of appointment; ii. Any fraction interest in joint tenancy or survivorship; iii. Property held in PODs or TODs (Payable on Death and Transferable on Death); iv. Proceeds of insurance if it was owned immediately before death/power of appointment (new UPC only); 1. So if you own the policy, the spouse can elect against it, even if the spouse is not a beneficiary for that policy; f. Transfers of property during marriage g. Property that passed during marriage and during 2 years after decedents death; i. This transfer after death must be for more than $10,000 to count as part of election or estate assets; 5. Remember, elective share is only available at death, not after divorce; iv. EXAMPLES: 1. Probate has $3 million, living trust (income to self, remainder to X, not to surviving spouse) has $3 million a. Under CL can elect for $1 million b. Under Traditional Approach - $1 million (1/3 of the $3 million the trust is protected); c. UPC augmented estate is $6 million New UPC: if marriage lasted at least 15 years, the amount would be $3 million; Old UPC: elective share is $2 million (1/3 of the augmented estate); (Estates and Trusts Spring 11) 28

2. Probate is $3 million; living trust is $3 million; transfer to spouse at death is $3 million; a. Traditional 1/3 of $3 million (probate) means spouse gets $1 million plus transfer so she really gets $4 million; b. OLD UPCaugmented estate is now 9m, she gets 3m from election; c. NEW UPCif marriage lasted 15 years, spouse gets 4.5m; 3. Probate $3 million, living trust $3 million, surviving spouse has $5 million; a. Traditional 1/3 of $3 million or $1 million; b. Old UPC - $11 million total gets 1/3 of it; c. New UPC were married for example: 15 years; total property is $11 million, spouse has $5 million already, of $11 million = $5.5 million; since the spouse has $5 million in property already, take $5.5 million-5 million=.5 million for the spouse for elective share; i. This means if you marry someone that has a lot of property and you die with substantially less in your name, the surviving spouse will probably not be able to use elective shares; d. Waiver of Elective Share Rights aka Prenups! i. This has a negative connotation in society and may not look so hot, especially in your first marriage; ii. The reason for the prenup is as much for divorce as it is for estate planning purposes can be used to protect children from a prior marriage; iii. Ohio only has prenup agreements no post-nup agreements; iv. Geddings v. Geddings: parties were married in 1979; W signed a document presented to her by her husband entitled, Waiver of Right to Elect and of Other Rights; the document said that both had wills, and both wanted the bulk of their estates to go to their kids from previous marriages and each disclaimed interest in the other spouses estate except as provided by will; W contends that she did not receive full disclosure of the document because she did not adequately know or understand Hs financial situation; 1. ISSUE: Can a prenup be thrown out if it lacked proper disclosure? Yes. 2. RULE: a. There is an affirmative duty imposed upon each party to disclose his or her financial status and this transcends what is normally required for a commercial transaction ; (Estates and Trusts Spring 11) 29

i. Each party has a duty to consider and evaluate the information received before signing the agreement; ii. So the parties must disclose information at the time the agreement was made about each partys assets; 3. RATIONALE: a. Here, there was a lack of disclosure, so the prenup is invalid; b. Grauer says to attach a schedule to the prenup so each party can see the assets and liabilities listed and attached the agreement that will be subject to the agreement; v. Is separate representation required for a prenup agreement? 1. You may not need your own representation, but if an attorney represents both parties in regards to the prenup, this is a big problem because there is no commonality of interest; 2. If couple comes to you saying that they want a prenup, remember: a. One probably wants the prenup more b. The one that doesnt want it probably doesnt understand what he/she is giving up; c. An offer on the table may not be so good and the party that may not want the prenup may be at a disadvantage without representation and knowing his/her rights; d. If you are doing the prenup, tell the parties straight up that you cannot represent both of them; vi. UPC 2-213 Waiver of Right to Elect of Other Rights 1. Requires fair disclosure of the material financial information; a. The standard is unconscionability in regards to disclosure; 2. If you waive your right to disclosure, and it is not unconscionable, disclosure is not required; 3. Basically, this is a gee, it is awkward to ask my future spouse how much they are worth and it may ruin our relationship type of statute; e. Homestead Allowance, Exempt Property, and Family Allowance i. Homestead Allowance: 1. The idea is to protect the homestead from creditors dont want the remaining family left out on the street; 2. UPC gives the family $15,000 Ohio has no such allowance; (Estates and Trusts Spring 11) 30

ii. Exempt Property: 1. The surviving spouse is entitlted to $10,000 in things like furniture, cars, furnishing, appliances, and personal effects in addition to the homestead allowance; a. If the spouse passed on, the right passes to the children; b. If there is no $10,000 in these forms of assets, the spouse may receive the remainder in any other form of asset; iii. The family allowance: 1. Helpful for the insolvent estate; 2. Normally, need to pay off all creditors and then make the distributions to the beneficiaries; a. If this is done in the opposite order, then the personal representative is personally liable; 3. But, the family allowance allows the court to order the personal representative to distribute money to the family for living expenses when the estate is in administration and this money need not be given back; 4. Better idea is to advise a client to put some money is the spouses name so that there is money to pay the mortgage or at least have money in a joint account; iv. Many people who are not married have wills. What happens when a person gets married, doesnt change the will, and dies leaving nothing to the spouse; 1. Some jurisdiction the will was revoked; 2. Ohio the old will is still in effect, but you can elect against the will; v. A conditional will can be written stating that the will will take effect upon the marriage; 1. This protects against runaway brides; f. The Community Property System i. Usually in the SW US states; ii. This system assumes that property acquired during the marriage is the product of joint efforts of the husband and wife; iii. Each has a share in the property; 1. This means that each spouse has a guaranteed interest but no right to the other interest;

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iv. If one spouse earned a lot before marriage and has clearly separated accounts, the surviving spouse is dependent upon whatever the decedent chooses to give them; v. All property accumulated during the marriage is owned 50-50; vi. If you move from an elective share to a community property state, you start off with no property in the community share and therefore all property is separate; vii. If you move from a community property state to an elective share state, the surviving spouse can elect against all of the community property and everything in the estate; g. Protection of Children: Pretermitted Child Statutes i. Most states protect kids against unintentional disinheritance. ii. 2 categories of pretermitted child statutes: 1. Those which protect only children born after the execution of the testators will; 2. Those which protect all children who have been unintentionally disinherited; iii. Only Louisiana has a statute protecting against intentional child disinheritance; iv. Estate of Glomset: Wills of husband and wife were reciprocal unless their deaths were the result of a common disaster which would cause the property to go to the son; the will did not provide for situations in which the wife died first and then the husband died later; the will did not explicitly state that the daughter was to take; OK statute says that if a will omits a child, unless the omission is intentional, then such child must have the same share in the estate as if the decedent died intestate; 1. ISSUE: May extrinsic evidence be admitted in order to prove the intent of the testator? No. 2. RULE: a. Look to the four corners of the will where it is clear that there are no uncertainties, extrinsic evidence will not be admissible; 3. RATIONALE: a. Here, the daughter is able to recover of the estate based on intestacy rules; b. The son gets nothing because he was provided for under the will (if there was a common disaster) and therefore is unable to recover anything under the statute; (Estates and Trusts Spring 11) 32

v. Massachusetts-Type Statutes: 1. Permit the excluded child to inherit unless it appears that such omission was intentional; a. E.g. Glomset; 2. Except for Glomset (Oklahoma), extrinsic evidence is admissible; vi. Missouri-Type Statutes: 1. Permit all children not named or referenced to in the will to take a share of the deceased parents estate; a. Intent is irrelevant; 2. Every not named child/issue receives an intestate share of the estate; 3. Extrinsic evidence is not admissible; vii. UPC 2-302 1. If a testator fails to provide in his will for any child born or adopted after the execution of the will, the omitted after-born or after-adopted child receives a share; a. If there are no other living children, then the child gets the intestate share value; b. If pre-execution children are living when the will is executed, the child receives a reduced amount limited to devises made to testators then living children under the will, or basically the same types of interests the other kids received; 2. EXAMPLE: a. If will, A 20, B 40, W 200 and after executed child how much to that child? i. Shares with A and B, so some portion thereof; 3. Where a will states: do not intend to provide for any other relatives or persons whether claiming to be an heir of mine or not, after naming people who would receive under the will, no one (including future children) will be able to collect under the will tough noogies! IV. Wills a. Execution of the Will: i. Will Formalities 1. Look to the state of domicile to determine the rules of validity for a will; (Estates and Trusts Spring 11) 33

a. For example, Ohio requires 2 witnesses while Vermont requires 3 witnesses; 2. Texas Probate Court Rules typical: a. Can have a proxy sign the will for you but you must direct them to do it and it must be done in your presence; b. Requires 2 or more witnesses who sign in your presence; c. Allow holographic wills i. These are unattested wills. ii. A will that is in the handwriting of the testator (Texas requires that the will be entirely in their handwriting); iii. Ohio does not allow holographic wills; iv. A will should clearly state: I am leaving my property to ___. 3. UPC requisites for the will: a. In writing; b. Signed by the testator or in the testators name by some other individual in the testators conscious presence and by the testators direction, and i. Signature can show up anywhere on the will; ii. Proxy signatures allowed when done at the testators request and in the testators presence; c. Signed by at least 2 individuals, each of whom signed within a reasonable time after he/she witnesses either the signing of the will as described above or the testators acknowledgement of that signature or acknowledgement of the will; i. When are witnesses credible? 1. Under CL, you were not a credible witness if you were a beneficiary under the will; a. So, if 2 witnesses were required and 1 was a beneficiary, the will was thrown out; b. If there were 3 witnesses and 1 was a beneficiary and the state required only 2 witnesses, you were safe; c. Some states said that if the will had a small gratuity paid to those signing the will, the (Estates and Trusts Spring 11) 34

will had beneficiaries as witnesses, and therefore needed to be thrown out; 2. The Modern Approach a beneficiary may be a witness but is limited to a share that cannot exceed what that person would receive under intestacy; a. If that beneficiary/witness would receive more under the will, the amount is limited to what may be received under intestacy; b. EXAMPLE: if I have 3 children and each is entitled to 1/3 of the estate in intestacy, if I have 1 sign as a witness and the will leaves that child of the full estate, the child can actually only get 1/3, not the full 1/2; 3. Under both CL and the Modern Approach, we are only talking about beneficiaries, NOT the executor; a. While the executor does receive money, it is not through the will, it is through performing the function of the executor; b. Therefore, the executor can be a witness without penalty; 4. Attorney who drafts the will is a good witness to have a. So are other attorneys at the law office, law clerks, paralegals, etc. 4. Morris v. West: this is a contested will, the matter lies on the fact that the witnesses signed the will while NOT in the presence of the testator; the will was signed by the testator in the presence of the witnesses (law clerks, etc. at the law office); the clerks then took the will back to their desks, outside the senses of the testator, and signed the will there; this happened for both the will and the codicil; a. ISSUE: Is the will valid when the witnesses did not sign in the presence of the testator? No. b. RULE: i. The witnesses signatures must have occurred within the actual physical presence of the testator; 1. Therefore, even if the witnesses walked to their offices and were loud about signing it, it probably wouldnt have be enough;

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2. So, under this rule, testator must see the witness and the will being singed unless the witness was blind (special rules for this); c. RATIONALE: i. Since the will is invalid, it goes to probate for intestacy; 5. In re Demaris Estate: a. Conscious presence includes senses other than sight and admitted into probate a will even though the witness signed outside the testators eyesight; b. This was because the court reasoned that the conscious presence requirement was designed to protect against fraud; i. In this case, the testator was loud about the signing and testators family was conscious that the will was being signed at the time therefore, the will was valid; b. The Execution Ceremony i. The will must be PUBLISHED so print the document; ii. Pages need not be stapled, but do it anyway; 1. Have the notary initial each page to make sure everything is there; iii. Attorney follows a ceremony when the will is being signed: 1. Asks testator: Is this you will? a. Would you let _____, _____, and _____ be your witnesses? b. Please sign here and witnesses please sign here. iv. Why have such a formalistic ceremony? 1. If the will is contested, the best way to have it thrown out is if the formalities are not completed; 2. If you are the attorney and if you are asked, Were you present when the will was signed? you can respond by saying, If I supervise the execution of a will, I follow a script and never vary from the script. v. Attestation Clauses 1. Not required; 2. Create a rebuttable presumption that the execution requirements were followed; 3. Provides a secondary place for the testator to sign; 4. Usually boilerplate in nature; (Estates and Trusts Spring 11) 36

5. This clause allows a will to be probated even where witnesses have no clear memory of signing the will as long as the witnesses can ID their signatures and the genuineness of the testators signature is verified; 6. Should be included in every will! vi. Self-Proving Affidavit 1. For a long time in many jurisdictions, there was/is a requirement when a will was submitted for probate that there had to be a notarized, sworn statement stating that the signatures on the will are the testators and witnesses signatures and everything that should be included in the will was actually included; a. This resolved the problem of people forgetting what happened at a will signing 20 years earlier or if a witness cannot be found; b. Get this affidavit at the time the will is signed and attach it to the will; 2. This is useful because when a will goes to probate, youll need to find witnesses who signed the will so they can lay a foundation for the will by testifying that the signatures are theirs; a. The Self-Proving Affidavit will get a will into probate without having to bring the witnesses into court; 3. In Ohio, most attorneys dont include these with wills, because Ohio has no requirement for affidavits for the will to be probated; vii. Safe Guarding the Will 1. There is no good answer as to where the will should be stored; a. If you give the client, given them the original signed document; i. Law firm holds a copy ii. The problem with this approach is that people are dumb, and could lose the original or make changes to it; b. A good idea is for the lawyer to keep the will; c. Dont execute 2 duplicate originals because this leads to a host problems; c. Salvage Doctrines: Substantial Compliance and the UPCs Dispensing Power i. Estate of Hall: Couple has a joint will; Husband and Wife sign the will together; (lawyer is an idiot for having a joint will); there was an original will and then the couple signed a joint will the original was the Husbands from a prior marriage; the original will was torn up; the new joint will had no witnesses, the attorney signed it, the attorney said the will would be effective as soon as it was notarized; no self-proving affidavit in the will; testators did (Estates and Trusts Spring 11) 37

sign it; when the Husband died, the wife argued that his intent was to form a new will; the wife had a clear interest in the new will; also, remember the attorney wants the new will to be probated because if not, he faces malpractice; 1. ISSUE: Is the joint will admittable to probate? Yes. 2. RULE: a. The document may still be treated as if had been executed under the certain required circumstances if the proponent of the document established by clear and convincing evidence that the decedent intended the document to be the decedents will; i. In this case, Grauer is not convinced there is clear and convinced there is clear and convincing evidence; ii. But maybe the court has more facts indicated here; 3. RESULT: Probate the joint will; ii. As a result of Morris, many jurisdictions passed statutes saying that formal requirements need not be followed 100% in cases displaying clear and convincing evidence that the will was intended to be dispensed by the testator; 1. UPC 2-503 iii. In Ohio, probate court can accept a will that fails on formalities, but the proponent must prove: 1. The decedent prepared the document; 2. The decedent both signed and intended the document to be the will, and 3. 2 or more witnesses saw the decedent sign the document; d. What Constitutes a Will? i. Codicil 1. This is an amendment to a will; 2. Must be established/created with testamentary formalities; 3. Doctrine of Replication of Codicil a. If you execute a codicil to the will, the will now speaks as of the date of the codicil that means everything is updated/reaffirmed up to this new date; b. EXAMPLES:

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i. If a will was created in 1988 states: Leave X my home; and in 1989 you move to a new residence, the old will may not be upheld due to confusion over which property you were referring to; but if you sign a codicil in 1990, even if in regards to a different matter, the property clause will be updated because the will is not enforced as of the 1990 date; ii. If the will would fail for lack of # of witnesses, a properly executed codicil will correct the deficiencies; ii. Integration and Incorporation by Reference 1. Estate of Norton (1991): a. ISSUE: Were the first 6 pages incorporated by reference into the codicil? No. b. RULE: i. Doctrine of Integration: 1. As long as all the pages were present when the will was executed, we dont care if the pages are scattered all over the place. 2. As long as you can figure out a coherent whole, the will is valid nothing needs to be stapled to be integrated. 3. Elements: a. The paper, to be incorporated by reference, must be in existence at the time when the document incorporating them occurred; b. There must be reference to the document in terms so clear and distinct that from a perusal of the second will OR with the aid of parol or other proper testimony, full assurance is given that the identity of the extrinsic paper has been correctly ascertained; c. RATIONALE: i. Here, element 1 is met 1. The first document had his actual signature on it; 2. And the will existed prior to the existence of the codicil; ii. Element 2 fails (Estates and Trusts Spring 11) 39

1. No reference in the codicil of the prior will document; 2. Just saying last will and testament is not enough; 2. The Beale Example: a. B had his secretary go to the bar, at which point he tells the secretary what he wants in his will, and she writes it up; b. B takes the will of 14 pages with him to Moscow and before he left, he had the will witnessed by people at a party; c. Secretary receives 2 pages postmarked the same day with a desire to have the documents amended one child of B would be disinherited; d. The court ruled that you dont know if all the pages were there when the will was witnessed; i. Assumed that the typed document was his will because the changed were made after he signed the will; ii. BUT, the court used the doctrine of integration and integrated the new documents with changes mostly grammatical and the child was going to get disinherited anyway from the original will; 3. In re Bennet a. Will read: I leave the sum of $50,000 to be distributed in accordance with a letter to be included with the will; b. B died, found a will and letter saying give all the money to William Jennings Bryan; c. The letter was indicated to NOT have been written prior to the will, therefore the Doctrine of Incorporation by Reference CANNOT APPLY (fails element #1); 4. Clark v. Greenhalge: the decedent wrote a will in 1977; will says that the property will go as designated by memo left by decedent and known by G; in 1972, memo written with no reference to a painting; 1976, change to the memo; 1977, will was written; 1979, writes in notebook that the paintings were to go to Clark; 1980, codicil to 1977 will; decedent died; a. ISSUE: May the memo of the 1979 notebook be included by reference to the will as a result of the 1980 codicil? Yes. b. RULE: i. Even though it only changes small amounts of information, republishing the will through a codicil means (Estates and Trusts Spring 11) 40

that you change the wills publication date to the date of the execution of the codicil; 1. Therefore, treat the will, through the codicil, as being published in 1980 not 1977; 2. Court also states that notebook is a memo; a. The D here, as the executor, had already distributed property that was included in the notebook ya big hypocrite! the court said, give me a break c. RESULT: G gets the painting through reference; 5. UPC 2-510/513 a. Models CL that the referenced document must exist prior to the new referencing document and there must be an explicit reference to the document; iii. Facts of Independent Significance 1. The Doctrine of Independent Significance is necessary for flexibility wills; a. If you leave a will that says I leave the home that I own at this date of the will to X and then I sell home and buy a new one the will would not take into account the new property; b. Better to say: I leave the home I own at the time of my death to X. 2. UPC 2-512 a. A will may dispose of property by reference to act and events that have significance apart from their effect upon the disposition made by the will whether they occur before or after the execution of the will or before or after the testators death. The execution or revocation of another individuals will is such an event. 3. The Doctrine of Independent Significance is relevant in one of two kinds of cases: a. When the testators will makes reference to facts of events of independence significance to determine the beneficiaries of the will (as when testators will makes a devise to his older surviving sister); b. When testators will makes reference to facts or events of independent significance to determine the property that an

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ascertained beneficiary will receive (I leave any car I own at my death to my brother); 4. EXAMPLE: a. Will leaves all of the stocks and bonds found in my safe deposit box to the persons designated on the envelope in which those stocks and bonds are found; i. Like the Bryan situation and the testator still has control over where the assets will go, therefore invalid and not protected by this Doctrine; b. Set up trust and says money goes a certain way like giving money to Capital as long as Capital has a legal clinic; Capital would get no money if there is no legal clinic; i. This is acceptable; 5. Pinion: a trust was set up in which $1 million was transferred with income for life, and a remainder in X (1934); a. In 1935, a will is created which says that the residue of the estate should go to the Bank with it as a trustee to hold and administer through the terms of the trust; i. Why do this? Because the trust doesnt do through probate and therefore, there is more privacy; b. In 1955, testator wrote an amendment to the trust and leaves the amendment at the bank; c. Later in 1955, the testator executed a codicil to incorporate the amended trust; d. Later still in 1955, the bank signed the amendment to trust i. Argument that cannot incorporate the amended trust by reference because the bank failed to sign until after the execution of the codicil ii. MA SC rules people do these types of trusts all the time, so validate the action 1. Every state now has pour-over wills a. Will says I leave residue of estate to 5/3 bank during the lifetime of spouse, pay income to spouyse and principal needed for standing of living, ect; at death, income contines to children until youngest kid reaches 35, then principal to kids

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i. The wife can write that if husband does not survive me, I leave my estate to trust of husbands willvalid 6. In re Tiplers Will: the first will states Everything goes to my husband if he survives me; 2 days later, he she executed a codicil that said If my husband predeceases me, then my estate is distributed according to my husbands will; at this time, the husband had no will; a. ISSUE: Should the decedents will be upheld to distribute the property according to the husbands will where husband predeceased the decedent and the husband had no will when the codicil was created? ((y)) b. RATIONALE: Since the husbands will had the intention to distribute his estate not how to distribute the wifes estate there was non-testamentary significance behind the event and therefore the doctrine of independent significance can be used c. RULE: i. The Doctrine of Independent Significance is an escape mechanism from the strict requirements of incorporation by reference; ii. Look at intent here, the testator wants to disinherit her family and therefore uphold her intentions; iii. What about the fact that the codicil was scribbled on the back of the envelope? 1. The court was willing to accept the codicil because it was in handwriting and showed a clear intent that she didnt care who got her property as long as it went to whoever the husband wanted the property to go to; d. RESULT: Therefore, uphold the codicil; e. Construction Problems Created by the Time Gap between Will Execution and Death i. These problems occur when a contingency is not take care of in a will; ii. For example: if will says property to spouse if the spouse survives me; 1. What happens if the spouse predeceases you? The law must come up with the answer! iii. Abatement 1. General Bequests a. May be satisfied out of the general assets instead of a particular piece of property; (Estates and Trusts Spring 11) 43

b. These include monetary bequest; 2. Specific a. A gift by will of property that is particularly designated to be satisfied by the receipt of a particular piece of property to the beneficiary; i. EXAMPLE: 1. If will says, Sell my library to give the beneficiary $2,000; if the library is sold at $2,500, then the beneficiary only gets $2,000; if the library is sold at $1,500, then the beneficiary gets the $1,500 and the remaining will abate with general legacies and will be able to recover the difference if there is money left over in the estate; 3. In re Estate of Potter: the will says that decedent leaves her beach house to D and an equivalent amount to S, residue split between S and D; not enough money to equal the value of the property; a. ISSUE: Does D receive the property and then S gets money up to the value of the property first? Yes. i. The D does not need to sell the property in order to equal out the bequests; ii. Here, the D takes the property outright and the S gets the monetary bequest from the estate up to the value of the property; 1. If the estate does not have enough money in it to cover the value of the property, the S gets all of the money in the estate and is out of luck; b. How could the will have been drafter to make it equal? i. I leave my entire estate to my 2 children equally. ii. I leave my home to D provided that should my house by equal to or more than the value of my estate. c. RESULT: D gets the house because it is a specific bequest. 4. Order of Abatement a. This means that Specific Bequests have Top Priority, then General Bequests, and then Residue; i. Specific General Residue Outside of the Will (Specific Bequests get to take first!) 5. EXAMPLE: (Estates and Trusts Spring 11) 44

a. Terms of Will: i. I devise my boat to B. ii. I devise $30,000 to each of C, D, and E. iii. I devise $30,000 to F and I direct that my car be used to satisfy the bequest. iv. I devise the residue of estate to Penn University. b. At death, the estate consists of a boat worth, $10,000, a car worth $10,000, and $55,000 in cash. c. Distributed: i. B gets the boat outright; ii. F gets $10,000 from the cars sale; iii. C,D, and E get $15,000 iv. F gets $10,000 v. University gets nothing d. How to determine cash amounts: i. Take the total amount given by will here, $90,000 ($30,000 to each C, D, and E) plus leftover bequests from unfulfilled specific bequests (here, $20,000 because F was to get $30,000 from the sale of the car but only got $10,000); 1. The total in this case is $110,000; ii. Then, look at the amount of cash in the estate here, $55,000; iii. $55,000/$110,000 = so each will receive of the bequests they are due; 1. Therefore C,D,E get 15 and F gets an additional $10,000 6. Exoneration a. Some wills state that debts must be paid first DONT DO THIS! i. Jurisdictions believe this is redundant because the executor already has an obligation to pay the debts of the estate; ii. This clause could cause problems because this is a bequest to creditors so if a creditor failed to bring a (Estates and Trusts Spring 11) 45

claim in the first place as would be normally required for the executor to pay (so there are normal time periods all creditors of the estate are required to come forward and get paid) if you fail to do so, you will not be paid by the estate; BUT, now with the clause, creditors can still come forward later and expect to be paid; b. Exoneration of Mortgage i. CL: if you devise property to someone when encumbered by a mortgage, the devisee was entitled to have the mortgage paid off by the executor out of the assets of the residue; ii. Modern Approach/UPC/OH: the mortgage will not be paid, even if there is a provision on the payment of debts need to have a very specific clause that says the mortgage would be paid; c. Anti-Apportionment Statute i. Unless the will provides otherwise, each devises is responsible for his pro-rata share of the taxes; 1. The personal representative will reduce the amount received based on tax liability; ii. This Anti-Apportionment clause may indicate that the taxes are paid by the residue of the estate be careful because this may eat up the entire residue! 1. If doing this, need to really know how many assets there are in probate and how much it is going to cost; 2. Need to calculate and think about it; iii. Another problem: even if planned, assets values can change; iv. Ademption 1. 2 Doctrines of Ademption: a. Ademption by Extinction i. Only applies to specific bequests; ii. This specific devisee is entitled to nothing if the specifically devised property is not in the testators estate at testators death; iii. McGee v. McGee: issue over the purchase of flower bonds (low interest rate bonds issued by federal government but (Estates and Trusts Spring 11) 46

could be used to pay off estate taxes); flower bonds were purchases by his son, not the decedent (the purchase occurred before the decedent passed); the decedent had a durable POA for financial matters when he was incapacitated; the decedents will stated first that $20,000 was to go to a friend and any stocks and other monies were to go to his grandchildren; the son withdrew approximately $50,000 and bought $30,000 worth of flower bonds 1. ISSUE: Were the bequests of any monies to the decedents grandchildren adempted by extinction? Yes. 2. RULE/TEST: a. Is the gift a Specific Bequest? i. If yes, was it found in the estate at the time of death? If yes, they get the bequest. 3. RATIONALE: a. Here, the monies are out of the accounts and therefore, no monies for the Specific Bequest to the children, and therefore, there is nothing for the children and the bequest is adeemed by extinction; i. Should have, when looking at intent, written the will so that it was in a % not a specific amount given to the friend in that way, the children would still be able to get something; b. Therefore, the money goes to the friend. iv. Old UPC/CL 1. Is there a Specific Bequest? 2. If yes, is the devise in the estate? 3. If yes, get property, if no, out of luck. v. Remember: 1. If any balance of the purchase price is still owing from a sale, the beneficiary is entitled to it at the testators death;

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a. If I sold property that was bequeathed to you for $300,000 for 3 years, and I die after 1 year, you are entitled to the remaining $600,000 that is to be paid in the 2 remaining $300,000 installment payments; 2. Amount of a Condemnations Awards a. If you are bequeathed a home that the city has condemned and is willing to pay for, but hasnt actually paid for yet, the devisee gets the remaining amount due; 3. Amount of Unpaid Insurance from Fire or Casualty vi. New UPC 1. Look at intent; 2. Get all the old UPC provisions; 3. PLUS, get real/tangible personal property owned at death that the testator acquired as a replacement for the specific personal property a. So, if a bequeathed a Honda Accord, but it was traded in to get a Toyota Camry and then the testator died, the beneficiary gets the Toyota; 4. But, then there is the issue of what is replacement property unless Ademption was clearly intended by the decedent; a. Usually, the beneficiary gets the value of the devised property unless Ademption was clearly intended by the decedent; b. So, look to the intent, the value of the specifically devised property to the extent that the devised property is not clearly replaced and then give the value of the devise; 5. Problem trying to effectuate the testators intent; the Old UPC had a clear bright-line test where the New UPC is more subjective; vii. Securities 1. Securities tent to be in the residue of the estate.

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2. What happened if the security splits and instead of having 4 securities, now you have 8? a. Courts used to say that dividends never went with the bequests, but the splits did; 3. UPC says if you bequest stock and the number of shares changes, by the action of the company, then the devisee gets: a. Securities of the same organization acquired by reason of the actions initiated by the organization; b. Securities of another organization as acquired through merger, consolidation, etc. b. Ademption by Satisfaction i. Counterpart of probate advancements; ii. Situation where a will devises property to a particular beneficiary and during the testators lifetime, the testator has given property to the same beneficiary, should the bequest be satisfied? 1. If Specific Bequest, and the specific property is given, then the beneficiary is entitled to nothing at death because the specific property has been transferred; 2. If General Bequest, the transfer is not satisfied by Ademption unless the testator states in the will or another writing that the gift is supposed to satisfy the will v. Lapse 1. Lapse occurs when one of the beneficiaries changes; a. Any good will should indicate what would happen if the beneficiary dies before the testator; 2. CL Doctrine a. If the beneficiary dies before the testator, then the gift fails; b. If it is a pre-residuary bequest, then the bequest will be put into the residue; 3. What if the residue goes to more than 1 person, but the other devisee dies? a. Then the remaining/surviving devisee is the only one to take; (Estates and Trusts Spring 11) 49

b. But, every jurisdiction said What if the person that predeceased had issue? i. The Anti-Lapse Statute 1. Applies when a bequest is made to a blood relative and the blood relative dies before the testator and leaves issue; a. The bequest then goes directly to the issue NOT to the estate of the initial devisee; b. So, if Uncle bequests $10,000 to me and I have children and there is no clause indicating would happen to the bequest if I predeceased my Uncle, the money would go DIRECTLY to my issue; 4. EXAMPLE: a. Bequest: I leave $90,000 to my children A, B, and C with the residue going to my spouse. i. Suppose A dies and leaves 1 child. ii. Under CL, As $30,000 would go to the residue thus, the spouse; iii. Under an Anti-Lapse, money goes to As child. b. What if bequest said: $90,000 to be shared by children; i. Under CL, the class gift doesnt lapse unless EVERYONE in the class predeceased you; 1. Therefore, B and C share the $90,000; ii. Most Anti-Lapse Statutes still apply to class gifts, therefore, As child would still get $30,000; 5. Estate of Rehwinkel: will left residue to estate to those listed and living at the time of the decedents death; the niece, named in the will, passed away first and nieces son claimed under anti-lapse statute; a. ISSUE: Does the Anti-Lapse statute apply? No. b. RULE: i. The Anti-Lapse Statutes apply unless there is a contrary intent; c. RATIONALE: i. Here, all lines of relatives got something and the predeceaseds issue were left something as well; (Estates and Trusts Spring 11) 50

ii. Because the decedent used the language, living at the time of decedents death, the intent of the testator overrides the Anti-Lapse Statute; 1. The decedent could have said: if they predecease me, then to their issue. 2. Therefore, precluded and the Anti-Lapse statue does not apply. 6. Old UPC if you leave something to someone who predeceases you, it lapses to their issue; 7. New UPC if the will only has words of survivorship, the Anti-Lapse statute still applies; a. Need even more explicit language in the will to override the Anti-Lapse; 8. Majority Rule words of survivorship override Anti-Lapse statutes; a. The New UPC requires something more; 9. Estate of Ulrikson: B has an estate and 2 children M and R; Bs 2 nieces were to get $1,000 each; M has a children, M1 and M2; the will says the residue goes to M and R if one predeceases me, then the rest to the other; both predecease B; a. ISSUE: Should the Anti-Lapse statute apply? Yes. b. The court ruled that words of survivorship are effective only if there are survivors. Since there are no survivors in this case, the Anti-Lapse statute is effective. i. This is to preserve the intent of the decedent because the decedent clearly wanted the property to go to either M or R; c. RESULT: M1 and M2 get the residue. 10.New UPC doesnt like this result! a. If the will creates alternative devices, such as those in Ulrikson, the gift is superseded by the alternate devise only if the expressly designated devise is entitled to take under the will; b. Since R is dead and would be the alternative devisee, the AntiLapse applies; f. Construction Problems i. Testators Circumstances and Behavior

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1. Estate of Gibbs: a will left money to R who cant remember anything about the testator other than he might have given her a ride in his taxis that one time; R is thrilled because hes winning big!; RS who works at the testators shop, did not receive notice that he was to take; RS and R have the same name; other people at the shop were included in the will; attorney had written the wrong address for the right name; a. ISSUE: Should the will be amended to provide for RS? Yes. b. RULE: i. There needs to be ambiguity before extrinsic evidence can be introduced to explain the meaning of the will; 2 Kinds: 1. Latent a. This is latent ambiguity; b. Usually 2 kinds of latent ambiguities: i. 2 or more persons fit the wills description; ii. No person or thing exactly matches the description; 2. Patent a. Obvious from the face of the will that someone is wrong with the will; b. Usually the courts dont allow extrinsic evidence here; c. RATIONALE: i. Here, the court says that there is NO ambiguity in this case. 1. Since there is no ambiguity, dont use extrinsic evidence; 2. BUT, the court strikes the middle initial and street address because there was an obvious mistake so then RS is able to take under the will; a. That is because by striking this information, there is NOW ambiguity! b. Then allow extrinsic evidence in order to give the money to RS;

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2. Knupp v. DC: testator leave residue of estate to those named in Article 8; article 8 fails to name anyone; this is clearly a patent ambiguity; attorney comes to court with notes saying that testator wanted the money to go to Knupp; a. ISSUE: Should the extrinsic evidence from the attorney be allowed in as evidence? No. b. RULE: i. You cannot use extrinsic evidence to add to the will. 1. There is a concern of fraud; 2. And, if allowed to add to the will, the testamentary formalities would be circumvented; c. RESULT: Knupp cannot recover and probably sues the attormeywhomp..whomp 3. Britt v. Upchurch: a will left a residence to a beneficiary; the residence consisted of 2 parcels that were divided for tax purposes; the residence sat primarily on one parcel and there was a garden, etc. on the other parcel; the attorney wanted to introduce evidence about the intent of the testator when devising the property; a. ISSUE: Should both parcels be included in the residence bequest? Yes. b. RULE: i. The court would not allow evidence from an attorney if that evidence was something that the attorney remembered the decedent saying about his intentions for the will; 1. This is because, this sort of evidence would defeat the purpose of the testamentary functions of a will; ii. Statements by testators are admissible if they show something about the testators state of mind; 1. So, in this case, bring in evidence to show how the residence was used did the use include both parcels? a. Here, the decedent did not divide up the property; instead, the property was clearly used together as one residence; c. RESULT: the residence included both parcels; ii. Correcting Mistakes (Estates and Trusts Spring 11) 53

1. Gifford v. Dyer: several small bequests of small sums of money and leaves residue to brother-in-law and nephews; G is not mentions in the will and is decedents only kid; decedent may have thought that G was missing or dead because he was gone for a long period of time a. ISSUE: Should G be included in the will? No. b. RATIONALE: i. The attorney testified that D would not have been included even if he were alive; ii. If the decedent made the mistake that she believed her son was dead, that mistake must indicate what they son would get if he were alive; iii. Under CL, G would not get something even if it was a mistake; c. RESULT: the son is out of luck, he should have had a better relationship with his mom; 2. UPC Pre-determinative Heir Statute covers those after-born or adopted children; a. If at the time of death you fail to provide for a child, the child is entitled to share in the estate if it is an after-born child i. After-born means being born after creation of the will; g. Revocation i. Remember, if the attorney is holding the original will none of the following actions performed by the testator will actually revoke the will; ii. How can you revoke: 1. Physical act only if original is in your possession; 2. Subsequent instrument writing VOID is not enough unless it is the original; a. Will b. Other testamentary instrument; 3. Operation of Law i.e. divorce; iii. UPC need to revoke through subsequent will revoke the previous will; 1. Negative will only in UPC; a. Wills that state the testator doesnt want a person to receive anything; (Estates and Trusts Spring 11) 54

2. Can do a physical act to revoke a. The act can be done by a proxy who was in the presence of the testator; b. Under UPC you can revoke a clause of the will; h. Revocation by Physical Act i. First Interstate Bank of OR v. Henson-Hammer: testators original will was not found among his personal possession when he died; decedent had the intent to keep the money in his bloodline; he told his daughter where the will was supposedly located; daughter was unable to find the will; 1. ISSUE: Was the will revoked because it could not be found? No. 2. RULE: a. General Presumption: if the will was in the testators personal possession , and the will cannot be found upon death, then there is presumed revocation; i. Stronger presumption if the testator was the ONLY ONE with access to the will; 3. RATIONALE: a. Here, there is a weaker presumption because the daughter had access to the will and the will left her less money than if the estate went through intestacy; b. The court does not take the position that testator tore up an d destroyed the will it seems the court, based on the presumption, is suspicious that the daughter was involved in some foul play involving the will; c. Therefore, uphold the will send it through probate; ii. In OH when a will is lost or destroyed before or after death, probate shall admit the will if: 1. The proponent of the will can establish that the will was executed with testamentary formalities at the time of the execution; 2. No person opposing the admission establishes with a preponderance of the evidence that the will was revoked iii. In a case where the presumption is overcome (and you admit the will), how do you know the content? 1. Use a photo copy, statements of the attorneys, attorneys copy iv. Duplicate Copies 1. DONT DO THIS (Estates and Trusts Spring 11) 55

2. If one of them is in the testators possession and the other is not, we treat the destruction of one as the destruction of both; a. So the intent to destroy counts for both v. Can You Cancel a Will at Home? 1. NY Cardozo opinion: a. Woman had a will that was witnessed; she asked the attorney to destroy the will, but she died before the will was destroyed; b. If he had ripped the will up in time, revocation would have occurred as long as he was in the physical presence of the testator; c. Because the letter did not say: I have revoked the will, please destroy, and the will was not actually destroyed before her death, no revocation occurred; vi. Partial Revocation: 1. Most states allow partial revocation by physical act. i. Revocation by Subsequent Written Instrument i. Whenever you draft a will, the first clause should indicate that you revoke any previous wills; ii. Wolfes Will: there 2 wills; one will said it was bequeathing property to L; the 2nd will said that it was bequeathing property to brothers and sisters, but the will did not say that it was revoking the previous will; the 1 st will said it was bequeathing all effects to L; the issue concerned the meaning of effects and if it was included in the 2nd will; 1. ISSUE: Was there a revocation of the first will because effects covers real property and would have been revoked because real property was covered in the second will? No. 2. RULE: a. Generally, effects cover personal property and NOT real property; i. Because of this definition, both wills could operate simultaneously; ii. The court does not favor Revocation by Implication; 3. RESULT: L gets personal property and the siblings get real property; iii. Could we admit a statement from a brother that said before the testator died, he wrote a new will to give everything to his siblings? (Estates and Trusts Spring 11) 56

1. Not admissible because this is a statement of the testators intent circumvents the testamentary requirements of the will; 2. You could argue that the 1st will was written under duress; iv. Revocation by Codicil 1. Not used often anymore because of computers and the ease of changing documents; j. Revocation by Operation of Law i. Situations like divorce; ii. Old UPC: 1. If a couple divorced AFTER the will was created, and the marriage was annulled, the divorce revoked anything in the will that would do to exspouse unless there was an exception in the will; 2. Property that was supposed to go to an ex-spouse was distributed as if the ex-spouse died first; 3. Separation is not a divorce! iii. New UPC: 1. Applies to any governing instrument i.e. to trusts, wills, designation of beneficiaries under insurance; 2. Unless express terms, cut out ex-spouse; 3. Limits on the UPC a. ERISA employment retirement act; i. Under a qualified plan, you must get retirement benefits as a joint and survivor annuity with spouse unless spouse waives the right; ii. SC ruled that UPC is trumped by ERISA unless the wife consents to have the right taken awayERISA protects spouse; k. Revival and Dependent Relative Revocation i. Someone writes a will in 1999, a second will in 2005 revoking the 1999 will, and 2007 will destroying the 2005 will and now there is no will to enforce! 1. Should the 1999 will be used? a. Generally no, although the courts split on it; 2. CL a. CL courts and Ecclesiastical courts took a different approach; (Estates and Trusts Spring 11) 57

i. CL said go back to the 1999 will; EC said that the 1999 will is dead and cannot be re-established unless reexecuted; ii. CL said that the will was never revoked because wills dont speak until death occurs; iii. EC took the Economic Efficiency Approach 1. Can revoke a will be expressly revoking; 2. Can revoke by an instrument executed with testamentary formalities; a. This results in immediate revocation; ii. New UPC 1. The Mild Ecclesiastical Approach a. 2-509 b. If a subsequent will, that wholly revoked a previous will, is revoked by a revocative act, the previous will (1 st will) is fully revoked unless it is revived; i. Revival can occur if the testator declare that he wanted the 1st will to take effect; ii. Look to testators intent; iii. Many jurisdictions follow the traditional EC Approach; iii. Problem 1. I leave F $10,000; residue to X. 2. Properly executed will, but the testator crossed out $10,000 and writes in $15,000. 3. The beneficiary cannot get $15,000 UNLESS there is proper testamentary formality; a. Really, this is a revocation of the bequest; b. You could use the Doctrine of Dependent Revocation and therefore preserve the gift of at least $10,000 to F; i. This being that there was revocation so long as the gift was increased to $15,000 since increasing the amount made clear the testator intended to keep the gift in the will; 4. What if the testator crossed out the $10,000 and inserted $1? (Estates and Trusts Spring 11) 58

a. Cant get the $1 or $10,000 because it is clear that the testator wanted to disinherit F. iv. Carter v. First United Methodist Church of Albany : 1963 will was signed with testamentary formalities and folded together with scratch paper that looked like writings and notes for a new will; the notes were not signed with testamentary formalities; the 1963 will had clauses crossed out in pencil 1. ISSUE: Did the testator revoke the old will through the pencil marks and notes attached? No. 2. RATIONALE: a. Based on the circumstances, it looks like the testator was planning on writing a new will not just a plan to revoke the current will; 3. RULE: a. The Doctrine of Presumed Intention Conditional Revocation i. The mere fact that the testator intended to make a new will, or made one that failed to take effect, will not alone, in every case, prevent a cancellation or obliteration of a will from operating as a revocation; 1. So this Doctrine doesnt always work; ii. If it is clear that the cancellation and the making of the new will were parts of one scheme, and the revocation of the old will was so related to the making of the new as to be dependent on it, the old will, though cancelled, should be given effect, if its contents can be ascertained in any legal way iii. But if the old will is once revoked (e.g. if the will is totally destroyed by fire) the fact that the testator intended to make a new will or made one which cannot take effect counts for nothing 4. RESULT: Here, probably no revocation of the 1st will because the 2nd will (through testators notes) had not taken effect; l. Limits on the Power to Revoke: Joint Wills and Will Contracts i. EXAMPLE: if you have a contract with a spouse that they will leave all their property to you on the condition that you leave your property to their sister; if you leave all of you property to a brother? 1. Probate the 2nd will to brother and then the sister will have to sue the estate on a breach of contract claim;

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ii. Garrett v. Reid: Ps were the children of husband and Ds were the children of wife; wills were I love you wills; there was no explicit written contract but there was implicit agreement; after the death of the surviving spouse, the estate was to be split into 7ths (one for each child), but the evil stepmothers will actually got rid of her late husbands children and their issue; 1. ISSUE: Could the wife revoke her will? Yes. a. Is there a breach of contract action? Yes. 2. RULE: a. Wills are freely revocable, but that doesnt protect against breach of contract claims. i. This situation would have been easier to deal with if the agreement had been in writing; 3. RESULT: a. The court decided that the old will (i.e. the original I love you wills) were valid; i. The court creates a constructive trust to give the husbands children their shares; 4. How could the wills have been drafted to avoid litigation? a. Put the monies into a trust dont use contracts! b. Limit the amount of principal given to the spouse yet again, use trusts! iii. Shrimp v. Huff: husband leaves his estate to his wife; he created a contract with his wife that everything should go to his children; the wife remarried a gold-digger and complies with the will/contract; gold-digger wants an elective share; 1. ISSUE: May the gold-digger get his elective share against the wifes will to the children? Yes. 2. RATIONALE: a. The gold-digger is not prevented from using his collective share rights; i. SHOULD SET UP A TRUST! b. What about augmented estate? Only affects trusts that the current spouse sets up; i. Therefore, if H had set up a trust for W and the kids, then a gold-digger would have gotten nothing! V. Contesting the Will (Estates and Trusts Spring 11) 60

a. Testamentary Capacity i. Barnes v. Marshall: testator rants and raves that he is the Messiah, but he is really just a flasher; his daughter wore skirts shorter than he liked and therefore, he cut her from his will; 1. ISSUE: Did the testator have the requisite level of capacity to execute a will? No. 2. RESULT: Throw out the will because he lacked capacity. ii. Many standards of testamentary capacity are quite low but you need to consider what is happening in the will; 1. Therefore, if you disinherit your child, it is more likely you are lacking testamentary capacity; iii. Wilson v. Lane: testator was incapacitated because she called fire dept randomly, had trouble dressing, always thought the house was flooding; testimony that she was under Alzheimers; 16 of the 17 beneficiaries were blood relatives (not really unnatural); 1. ISSUE: Did testator lack testamentary capacity? No. 2. RULE: a. The Standard: The mind may be debilitated, the memory enfeebled, the understanding weak, the character may be peculiar and eccentric, and he may even want capacity to transact many of the business affairs of life; still it is sufficient if he understands the nature of the business in which he is engaged and when making a will, has a recollection of the property he means to dispose of, the object or objects of his bounty, and how he wishes to dispose of his property. i. If you know you are making a will, what you own, and who you want the property to go to, then you have capacity. 3. RESULT: Clearly she had capacity in this case. iv. Remember, if you are normally lacking testamentary capacity, but have lucid moments and thats when you create your will, your will will be acceptable; 1. May want to video tape the execution of the will; a. This may be risky if the lucid moment ends in the middle of the taping/formalities; v. Strittmater (something like that anyway): 1. The testator hated all men; he will bequeathed all property to the National Womens party; 2. The will was overturned even though she was probably closer to people of the party than her own family; 3. Today, the will would probably not be overturned; vi. Standing to Contest a Will (Estates and Trusts Spring 11) 61

1. To have standing, you must be either an intestate heir or someone else who would take more under a previous will; 2. Creditors: a. 2 sets of creditors: i. Of the estate no standing because they get paid before the beneficiaries get paid; ii. Of people with standing to contest the will 1. If the debts are unsecured no standing; 2. If the debts are those of judgment creditors, many courts (the majority) will permit them standing to contest; vii. Insane Delusion Rule 1. Dougherty v. Rubenstein: testator drafted a will in 1990; in 1997, he went to the hospital; after the visit, the testator experienced a stroke and dementia and the testator was put into a kind of boarding home when there, there was no private room, no access to phone, unsanitary environment; evidence points both ways on whether the testator suffered from dementia; a. ISSUE: Should the disinheritance be overruled because the testator was suffering from an insane delusion? No. b. RATIONALE: i. Based on the series of events that the testator went through at the home, and the sons unwillingness to let his father out of the home, there was good reason to disinherit the son; ii. Grauer thinks this is an insane delusion 1. Occurs when a normal person has capacity, BUT suffers momentarily from an insane delusion and this delusion affects the will these are not upheld in a will; 2. Grauer believes that the fathers feelings were manifestations of his experience at the home and they were projected on his son the disinheritance should not be upheld; 2. Insane Delusions may occur in situations where: a. A man really believes that a child is not his even when DNA shows it is; b. You receive a birthday card from a person of the opposite sex and your spouse believe you are cheating; viii. Is There a Duty to the Client to Determine whether they Should Reasonably be able to Create a Will? (Estates and Trusts Spring 11) 62

1. Gonsalves v. Superior Court: D is hospitalized and needs a will; wants to leave everything to the people who are taking care of him in the hospital; there are other family members in the picture; attorney talked to the doctor, interviewed the client, and had a video tape done to explain why the client was acting as she was; a. ISSUE: Is there a duty of the attorney to determine whether the client has testamentary capacity? Yes. b. RULE: i. There is a duty to determine capacity so long as the attorney takes reasonable steps to determine whether there is capacity; 1. If the attorney takes reasonable steps, there is no liability; 2. Only need to use best judgment dont need to bring in experts; 3. If there was a strict duty, attorneys wouldnt want to do wills. b. Undue Influence i. Defined as mental, moral, or physical exertion which has destroyed the free agency of the testator by preventing the testator from following the dictate of his own mind and will and accepting instead the domination and influence of another. ii. Haynes v. First National Bank of NJ: D begat Betty and Dorcas; Betty begat 2 children and Dorcas begat 4 children; D was worth $8 million; Betty lived with D for some time and when Betty died, D moved in with Dorcas; D alienated herself from Bettys hippie children; Mr. Dorcas spoke with his attorney about how to change Ds estate and will to favor them; Mr. Dorcas first wanted Ds attorney to change the will (he refused) and then took D to his attorney; a new will was drawn up and everything would go to Dorcas except $10,000 to each of Bettys children; the will included a Contest Clause that indicated if the boys contested the will, they would receive no money; 1. ISSUE: Has there been undue influence? Maybe. 2. RULE: a. Ordinarily, the burden of proof is on the contestant to show that the will is invalid. i. The burden can shift to disprove undue influence when: 1. There is a confidential relationship between the proponent of the will and the testator; a. Here, there was both a mother-daughter relationship and a mother living with her daughter; 2. Suspicious circumstances (Estates and Trusts Spring 11) 63

a. Will was originally 50-50; 3. RATIONALE: a. LC said that the standard for disproving undue influence is by a preponderance of the evidence; i. Ruled that D was a tough cookie and not unduly influenced; b. Why include such a Interrorum Clause (will contest clause)? i. Way too low considering the amount of money at stake! ii. Willing to lose $10,000 since each could get about $2 million if they win; c. Current court changed the standard of proof i. Change from a preponderance to clear and convincing evidence to disprove undue influence; 1. Worried about undue influence because D already had her own attorney and the new attorney had loyalty to Dorcas; d. The court does not discipline Mr. Dorcas attorney because there are no rules that say you cant do what he did; i. BUT, the discipline occurs with the higher standard of proof required; 4. RESULT: Remand the case although many courts refuse to use this higher standard of proof to discount undue influence; 5. If you were Dorcas attorney, tell her you cannot draft the will because of the potential undue influence issue instead, give advice to Dorcas about what they would want included in the will; iii. Will of Moses: attorney hooks up with the 20+ year his senior Mrs. M; Mrs. M went to another attorney to get her will done and apparently there was no undue influence; the will creating attorney never asked about the relationship with the younger attorney, if Mrs. M had any issue, if there was a previous will, or any other contingencies; will writing attorney just write the will as she wants it; 1. ISSUE: Was there undue influence with the new will leaving everything to the young attorney? Yes. 2. RATIONALE: a. The court did not look at whether Mrs. M could resist the attorney (or had the capacity to resist) this would have been the majority approach; i. Instead, they looked at whether there was improper behavior by the beneficiary; 1. Here, Mrs. M was in ill-health, alcoholic, and huge age difference; (Estates and Trusts Spring 11) 64

2. Looked bad for the profession; 3. The will creating attorney was a quasi-partner of the younger attorney; 4. The old will of Mrs. M had given everything to her sister, now her family received nothing; b. Courts are reluctant to let an attorney take when the will drafting was so closely related to the attorneys practice better to have the testator receive outside advice; c. Remember, courts are usually reluctant to uphold a new will when the old will kept the estate in the bloodline and the new will takes money out of the bloodline without good proof of the disinheritance; iv. Remember, some courts look at whether the testators free will was broken down and some courts focus on the beneficiarys behavior and the behaviors effect on the testator. 1. Easier to look at the actions of the beneficiary than to determine whether the testators will was broken; c. Fraud i. Fraud which causes testator to execute a will consists of statements which are false, which are known to be false by the party who makes them, which are material, which are made with the intention of deceiving the testator, which deceive testator, and which cause testator to act in reliance upon such statement; ii. Remember, this is hard to prove and doesnt come up too often with wills; iii. Roblin Estate: 2 kids: R and C; father thinks C is a disappointment; mother dies leaving C 12k and R $61 and diamond ring; R tells father that C got everything; father disinherits C; 1. The court says that this is hyperbole and is only concerned with death time transfers when in reality, mother had given life-time transfers that equaled out the bequests; 2. Since the courts only concerned was death estates, hyperbole is not enough to induce fraud claims; iv. Fraud may exist as a form of non-disclosure this occurs when there is a duty to speak and there has been an omission; 1. Rood dont worry, Ill tell mom you didnt steal the jewelry. a. Fraud occurs when mom has not been told when you said you would tell; d. Tortious Interference with Inheritance i. Peralta v. Peralta: complaint brought to District Court, not Probate; P lived with mother; Mother gave brother and sister inter vivos gifts; she transferred her assets to the brother and sister to the extent she did not transfer, she put (Estates and Trusts Spring 11) 65

in non-probate form; disinherited sister brings an action to the District court because there is not thing there to probate; 1. ISSUE: Is the District Court the appropriate court to bring the action where there is nothing to probate and there is undue influence? Yes. 2. RULE: a. In situations in which the estate has been depleted so that there could be no remedy in probate, proceedings in a civil action is appropriate; i. Look to see if probate court could provide an adequate remedy if not, the action can be brought in DC; b. What is necessary to bring the cause of action in the DC: i. Expectancy Interest 1. Reasonable certainty that the plaintiff could have received something if there had been no interference; ii. Intentional Interference by Some Other Beneficiary iii. Tortious actions must occur as a result of the interference 1. Claim is established by the preponderance of the evidence standard; 2. Could be fraudulent action or undue influence, for example; 3. RESULT: Claim is acceptable. 4. If mom rewrote her will and gave everything to the 2 siblings, could the action be brought in a DC? a. No, because if you throw out the will, the disinherited would still recover through intestacy; e. Preparing for the Contest: the Lawyers Role i. No-Contest Clauses 1. In-terrorem Clauses 2. Exist to stop future litigation; 3. States that if a beneficiary should challenge the will, that person will be deprived of all benefits under the will and that money should go to the residue of the estate (or maybe elsewhere); 4. Many courts say that this clause will not be enforced if the action brought against the will is brought in good faith and with probable cause; 5. Need to balance the probability of success against the value of the bequest before determining whether to bring suit; (Estates and Trusts Spring 11) 66

6. Useful for protecting against unlawful lawsuits; 7. See page 468 for some scope issues a. The scope of no-contest clauses is limited to the bequest itself not to other potential claims of the will, i.e. if the beneficiary is a creditor, RAP issues, elective share, will construction (as to its language), and qualifications of the executor; f. Special Problems for Homosexual and Transgender Testators i. Probably should put the money in non-testate form; 1. For Example: put the money in an inter vivos trust with the remainder to the partner; a. Harder to challenge than wills because wills are challenged on competency; b. Inter vivos revocable wills that have existed for a long time and have not been revoked indicate that a person did not lack capacity because they continuously decided not to revoke; 2. Could have the partner take with a life estate and the remainder then to a charitable organization so that it looks bad if other people challenge the trust/will; ii. Remember, since same-sex couple cannot marry, there is no unlimited gift transfers for tax purposes so that limits this avenue of estate planning; iii. Benefits for same-sex couples: 1. Provision in IRC that does not allow you to take a loss deduction for the sale of long-term assets to a related party; VI. Trusts a. Introduction i. Terms: 1. Trustor/Settlor/Grantor a. Person who establishes the trust; 2. Trustee a. In charge of distributing the assets of the trust and holding the assets according to the terms of the trust 3. Beneficiaries a. Take under the trust 4. Testamentary Trust a. Terms of the trust are found in a will b. Remember, you lose privacy of the trust since the will will be probated and thus accessible to the public; (Estates and Trusts Spring 11) 67

5. Pour Over Trust a. Inter vivos trust b. Terms in the will pour assets into the inter vivos trust 6. Inter Vivos Trust a. Created during your lifetime b. It may not be funded with a great deal at first ii. Uniform Trust Code c. 2000 1. Enacted in Ohio and Ohio also has the Ohio Trust Code b. Creation of Trusts i. Trust Requisites 1. Trustee has legal title; a. This power usually includes the right to buy and sell property with trust assets/money; b. Remember, you can draft a trust and give whatever powers you want to the trustee; c. Trustee must act in good faith and in conformity with the trust; 2. Beneficiaries have standing to enforce trusts; a. Settlors do not but if a revocable trust, settlor can always change the terms; b. Remember, settlor CAN be the beneficiary; 3. Trusts do not necessarily fail for lack of a Trustee; a. Must have a trustee with initially created; i. But a court will appoint a new trustee if there is no current trustee and no provision as to who should step into the trustees shoes; b. Trust may fail where the named trustee has special knowledge and no longer wants to be the trustee so no new trustee would be able to act with said special knowledge; i. Example: Shapira Jewish girl marrying case brother had special knowledge about what the father expected in a Jewish girl if the brother stepped down as trustee, then the trust would fail for lack of special knowledge; 4. Legal v. Beneficial Title a. Trustee has legal title over the assets of the trust; i. Trustee has a duty to care for those assets;

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b. Beneficiaries have beneficial title over the assets because they are the one who will benefit from those assets in the future; 5. Merger Doctrine a. There must be separation of legal and equitable title so that someone exists to enforce the trust; b. So, a trust will merge when one person is both the trustee and the beneficiary for the trust; i. The trust immediately ceases and that person has the assets of the trust free of trust requirements; c. Can stop merger doctrine by having a named 2 nd trustee like a bank or add another beneficiary to the trust; d. Example: The trust sets M and W as trustee and beneficiaries; i. If M dies, then W takes under the trust; 6. Banks can be useful trustees if you are willing to have the banks receive a fee for their services; a. Example: if you dont want to deal with investing money, you can have the bank act as a trustee and invest for you; b. Could have a clause that says that the bank cannot act unless the settlor or other trustee signs off on it; 7. Active v. Passive Trust a. Under CL and the Statute of Uses, a trust cannot be passive the trustee must have duties to perform; b. The only time there may be passivity is when the trustee holds title to property and actually holds the physical property; 8. Ohio requirements for a trust: a. Settlor has capacity to create trust b. Settlor intends to create a trust c. Trust has a definite bene or is: i. Charitable trust ii. Trust for animal 1. Trust for non-chariable purpose where trustee has discretion d. Trustee must have duties to perform e. The same person is not the sole trustee and bene (merger) 9. Moss v. Axford: will gave the attorney the power to distribute to the most worthy of the property; attorney determined that the most worthy was X because X took care of decedent before decedents death; the article of the will said that the money should go to the (Estates and Trusts Spring 11) 69

person who best took care of decedent and attorney was the sole judge of this a. ISSUE: was there a definite beneficiary for the creation of the trust where the money went? Yes. b. RULE: i. Look at the amount of power of discretion the attorney has; ii. The will establishes a means to determine who the beneficiary is; 1. The attorney needed to use a good faith effort to pick the best caregiver 2. Attorney could not go outside of the caregiver category c. RATIONALE: Here, uphold the trust because there is an ascertainable and workable standard in the will that allows for the determination of a beneficiary; 10.How could the trust have been written to avoid litigation? a. To the best caregiver that my attorney finds appropriate. If none can be found, then to Y. 11.Under the UTC, you dont need a definite beneficiary, you just need a beneficiary that is ascertainable within 21 years. 12.Friends Trusts a. Fails as indefinite because the word friends unlike relations, has no accepted statutory or other controlling limitations it is not precise; 13.Pets a. Trust may be created to provide for an animal during its life; i. It terminates at the end of the pets life; b. A person who is the trustee must enforce the trust; c. Property may only be used for this purpose to the extent the court determines that the property far exceeds the value of the treatment of the animal, may go to other beneficiaries/intestacy; 14.Trust Property a. Ohio departs from everywhere else because you can have a pour over trust that is created and lacks property until the will is effective; b. CL property must be in the trust for the trust to be valid; i. Brainard v. Commish: (Estates and Trusts Spring 11) 70

1. Set up a trust so that profits of stock savings were for the children and wife; 2. Really, he was just trying to avoid paying higher taxes; 3. He tried to assign profits and the court ruled that there was no property in said trust even though you do have a property interest in futures earnings of stock; 4. Court sought to prevent tax avoidance; ii. Speelman v. Pascal: 1. Right to Pygmalion as long as it became a play; 2. He assigned the right to his secretary for future profits; 3. The estate argues that there is no property interest, but the court rules that there was a future property/profit interest; 4. Difference in the cases tax avoidance v. sexual favors (Grauer probably meant gender); ii. Trust Formation: Capacity, Intent, and Formalities 1. Similar if not exactly the same as will formation; 2. Precatory language issues a. If a trust states: It is my desireit will not be enforced always say do it. b. These are words of request of entreaty and they create doubt as to whether an absolute gift of trust is intended; 3. Spicer v. Wright: holographic will named sister as executor; will stated to my sister to be disposed of as already agreed between us; original husbands estate of decedent challenged will because the trust had ambiguous language and was void and no named bene for the trust; here, this was a late life marriage where everyone hated the husbands family and the estate already got of property under VA law; a. ISSUE: Was there intent to form a trust? No. b. RULE: i. Intent is evidenced by a clear intent to form a legal obligation (of the trust); c. RATIONALE: i. There was a clause naming the sister as executor; 1. Precatory words are prima facie construed to create a trust when they are directed to an executor but NO trust is created by precatory (Estates and Trusts Spring 11) 71

language directed to a legatee unless there is a particular disposition of the property; ii. Here, although there was a clause making the sister an executor, the precatory language was included in the section indicated the sister as a legatee, NOT as the executor; iii. Therefore, no trust created and the sister is able to take without a trust; 4. General Rule: if you direct precatory language at a beneficiary, they will take the property through fee simple without any trust agreement; 5. Levin v. Fisch: Will requested that the kid benes should give money to their Aunt every year out of the millions they would inherit they would inherit from dividends and rent the accumulated; kids argue this is not part of the trust; Aunt is not in good health, but the kids dont want to give up the money; will/trust indicates the kids dont need to pay if Aunt remarries or Aunt dies but the language about payment starts it is my desire; a. ISSUE: Does this precatory language invalidate this provision of the will? No. b. RATIONALE: i. Here, we know who the beneficiary is because the will trust is incredibly specific. ii. If no trust was created, the children could sell the property so no rents and dividends would accumulate and therefore, the aunt would receive nothing; iii. If there was a trust created, the trustee could protect the interests of the Aunt unless one of provisions are met i.e. marriage or death ending the trust; iv. Important: here, there were specifics on how much the Aunt was to get, where it would come from, and that the Aunt was a direct beneficiary; v. Result: Uphold the will and create a trust; 6. Examples: a. I bequeath $10,000 to my accountant who is instructed as to my charitable wishes. i. This is not a bequest/gift to the accountant rather a trust should be formed with the charitable intentions as limitations on the trust; ii. Not specific, but it is going to the accountant so you need to create a trust not family/special relationship; b. I bequeath $10,000 to my brother who is instructed as to my charitable wishes. (Estates and Trusts Spring 11) 72

i. Outright gift/bequest; 1. How could this be enforced? ii. The opinion of the testator may be that he doesnt like charities; c. I bequeath $10,000 to bother but ask for part to go to my cousin. i. Not specific and therefore, bequest/gift in fee simple. d. I bequeath $10,000 to my brother with $50 per month to cousin. i. Specific and therefore, there is a trust created. iii. Trust Formalities 1. Goodman v. Goodman: decedent owned a bar and died; the property was to go to his children (but no formal trust was created) and the property was sold off by the decedents mother; 1 child went to his grandmother and wanted his proceeds from the sale, but she refused to give them; there was testimony showing that the decedents ex-wife though the children were to be beneficiaries; a. ISSUE: Was a trust for the children created even though it wasnt actually in writing? Yes. b. RULE: i. Trusts do not need testamentary formalities they dont even need to be in writing; ii. Oral trusts may only be established with clear and convincing evidence 1. Here, evidence showed that the grandmother knew that a trust was supposed to be formed for the children and other testimony confirmed it; c. RESULT: Remand (reverse SJ) jury decides if there is enough information; 2. While Oral Trusts are acceptable PUT IT IN WRITING! a. A few states, i.e. FL and NY, require that the will be in writing; 3. Delivery of Trust Assets a. If transferring property to a trust, you need to deliver the property to the trustee for it to be effectuated; b. If the settlor is the trustee, it isnt necessary to actual title of the property; 4. If a Trust fails a. For example, there is no named beneficiary or RAP problem; (Estates and Trusts Spring 11) 73

b. Property goes back to the settlor and the settors estate goes to next in line; c. Using Trusts as an Estate Planning Tool i. Revocable Inter Vivos Trust 1. A powerful estate planning tool; 2. When established, it shows clear intent because the testator has not revoked it over a period of time; 3. The testator retains control and power over assets with the power to revoke; 4. Benefits: a. Avoid probate; b. Can have someone manage and account for your assets; c. Can have another trustee step in when you are unable to manage the assets i.e. incapacitated; 5. Problems may occur if the trustee is the only named trustee and he/she becomes incapacitated and the trust states only the trustee can determine whether he/she is incapacitated; a. Probably should create co-trustee where if the testator becomes incapacitated, the co-trustee can manage the account; ii. Revocation 1. Under CL, a trust is irrevocable unless clearly stated that it is revocable; 2. Statutes have changed this so that trusts are naturally revocable unless the terms are such that the trust is deemed irrevocable; 3. If the trustee is NOT the settlor, it makes sense to include a clause that indicates there must be a signed writing in order for the trustee to revoke the trust; a. Trustees should have a clear indicator that their duties as trustee have ended; b. If the settlor is the only trustee, you may not need this provision it makes sense to have a provision worded: The settlor at any time may revoke provided that if there is a trustee other than the settlor, the revocation must come from a signed written statement. iii. Clymer v. Mayo: decedents trust was initially unfunded; inter vivos trust was created as pour over; the future assets of the trust were to be funded by a life insurance policy for decedents then husband; decedent and H separate and H waived his rights to pretty much all decedents property; decedent died without revoking old trust; 1. ISSUE: Was the pour over trust valid? Yes. (Estates and Trusts Spring 11) 74

a. Here, the controlling statute states: regardless of the existence, size, or character, of the trust funded; i. Therefore, the court determined that the trust was valid; b. Based on the state, pour over trusts with no property in it was valid; iv. Heaps v. Heaps: revocable living trust with spouses acting as co-trustees; if one spouse died then the trust becomes irrevocable; the property of the spouses was put into the trust via quitclaim deed but this deed was never recorded; before either spouse died, the couple sold the property receiving a note and deed of trust which they took as joint tenants; wife died; after wife died, H remarries and puts sale of house property into a different trust; H dies and NW (new wife) wants the money from the new trust; old trust required that they revoke with a writing; 1. ISSUE: Are proceeds from the house sale still in trust as of the wifes death? Yes. a. Was the old trust revoked? No. 2. RATIONALE: a. H and W failed to revoke the trust at any point during their lives together; they never wrote a letter indicating revocation, therefore, the trust was never revoked; i. The proceeds from the house sale should be in the old trust and therefore, the new wife has no access to the money the money should be distributed according to that trust agreement; v. Is it a good idea to always put money/property into a trust? 1. Depends on the assets and the amount 2. Depends on the age of the settlor (if young, may accumulate a large amount of fees by the trustee) a. Old people with a lot may want to create an inter vivos trust 3. Easier to plan for incapacity 4. Privateunless there is court proceeding (whereas wills are not private) 5. Also helps minimize will challenges 6. Great for managing property d. Building Flexibility in Estate Plans: Support and Discretionary Trust i. Discretionary 1. Settlor will impose no mandatory obligation on the trustee; 2. The trustee has discretion to pay income/principal for the benefit of one or more described beneficiaries; (Estates and Trusts Spring 11) 75

3. The beneficiary has NO RIGHT to the property unless the trustee actually distributes it therefore, creditors have no access to this type of trust fund; ii. Support 1. Trustee has the power to pay income for the support of the beneficiary; 2. May be: support and education, maintenance, of the beneficiarys lifestyle; 3. Trustee has an obligation to pay the beneficiary amounts necessary for support; a. The trustees obligation (duty) is to ascertain what the beneficiary needs for support and then pay that amount; 4. The trustee must use good judgment must look at all the circumstances surrounding the distribution and must remember that there may be other beneficiaries who deserve part of the assets of the trusts for support; 5. This is a trust in which the trustee is to distribute income/principal as is deemed appropriate for support; a. If a beneficiary only has a right to assets for support, the only liabilities creditors can get at from the trust is for the beneficiarys support; iii. Hybrid Discretionary and Support Trusts can (and do) exist. iv. Wells v. Sanford: provision in will that where mother is still alive, devise to S as trustee to hold for mother for as long as she lives; trustee is authorized to provide such sums necessary for the support and maintenance of mom for as long as she lives; necessary means that other assets must be used before trust assets; trustee is bene as well; trustee (S) is supposed to pay for bills of mom when she cant pay; there is clearly a conflict of interest; 1. ISSUE: Does sums necessary mean that the trust funds should only be used to help mom as a last resort when she has no other funds available? No. 2. RULE: a. Necessary does not equal last resort; i. The trust could have been set up in such a way as to only give funds as a last resort and wasnt must be explicit if this is what you want to do; b. The intent behind, as is necessary to support should be read to mean something regardless of the beneficiarys assets; i. But that does not mean that a trustee should not take into account the availability of the beneficiary to support himself;

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3. Remember, if it is necessary for support, then the trustee has a duty to give some trust property; 4. RESULT: Injunctive relief so that the mother can get some trust property; v. Incentive Trusts 1. Can set up trusts that require certain benchmarks be met by beneficiaries before those beneficiaries can take under the trust; a. E.g. beneficiary must have a job making $100,000 a year before he can take; vi. Standard of Living 1. If this is part of a support trust, the standard is living is determined by the standard of living to which the beneficiary is accustomed to at the death of the settlor; vii. Marsmand v. Nasca: W died and was survived by Cappy (her husband) and daughter (D); her will established a trust stating that 1/3 of the residue and net income of the trust was to go to C and if it was deemed necessary, and based on the trustees sole discretion, the trustee may apply the principal of the trust for the support and maintenance for C; C ran out of money and the drafting attorney was the trustee; when C had no money, the attorney distributed $300 as a principal support payment remember, in this case based on language, the trustee had a duty to investigate the financial situation of C; C wanted to sell his house to D and hold a life estate interest in the property the trustee could have said there was trust property available to help him out; 1. ISSUE: Is there a duty owed by the trustee to investigate the beneficiarys financial records when the beneficiary is allowed to access principal for his support when he is broke? Yes. 2. RATIONALE: a. The lower court wanted to take the house back and give the house to Cs new wife i. The D did nothing wrong in this case (clean hands!) and D made it clear that when C died, the new wife would be ousted; b. But, D cannot keep all the remainder interests in the trust because C should have been authorized to access those funds; i. The attorney as trustee violated his fiduciary duties; c. The trust had an exculpatory clause stating the trustee was not liable except for willful neglect and default; i. Lower court was willing to hold the attorney liable and NOT enforce the exculpatory clause; d. This court enforces the clause

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i. States that the exculpatory clause is effective unless breaches of the trust are committed in bad faith or intentionally or with reckless indifference to the interests of the beneficiaries; 1. Court says that the decedent wanted the clause included; 2. The court stated that there was no evidence that the insertion of the clause was an abuse of the attorneys fiduciary duty with decedent at the time of the drawing of the will therefore, the clause is acceptable; ii. Grauer indicates that there was a breach of fiduciary duty with the decedent because there was a confidential relationship with the settlor to act in good faith as trustee for the trust; 1. But the court ignores this special relationship; 2. Special issue because the attorney that drafts the will/exculpatory clause is also the trustee some sort of breach of duty; e. RESULT: Cs estate is entitled to assets from the trust because of the failure to receive the assets during his life; the attorney as a trustee is not personally liable because the exculpatory clause is enforced; viii. Spray Trusts 1. Trustee has discretion to pay the income to one or more named beneficiaries as the needs appear; 2. Dont know what beneficiaries will need when the settlor creates the trust, and therefore give the trustee flexibility when paying out assets of the trust; e. Protecting Beneficiaries from Creditors: Spendthrift Trusts i. Normally, a beneficiary of a trust may assign his future interest in the trust so that when the benefits of the trust are due, the assignee gets those benefits; 1. BUT, if the trust was income to A for support, cannot assign interest or principal of the interest; 2. Support trusts provide protection against the beneficiary himself; ii. Distribution of Income v. Principal 1. Income interest, dividends, rent, etc. that the underlying property produces; 2. Principal a. The actual property placed into the trust; b. Remember, if a trustee sells assets of the trust at a profit, the capital gain is taxed to the trust; (Estates and Trusts Spring 11) 78

iii. Cesser Provision 1. If you have a lien against a trust, then your interest in the trust terminates thus protecting the trust assets from creditors because you no longer have access to the funds; 2. Some trusts with Cesser Provisions indicate that if the lien is paid off, then you may access the trust funds again; iv. Wilcox v. Gentry: P had a judgment against the D for charges of fraud there was over $50,000 in damages; D was unable to pay off the judgment; D had a Discretionary Trust without any spendthrift provision; P wanted to garnish the trust to receive payments for the judgment; 1. ISSUE: May P garnish the trust so that when payments are made to D from the trust P would receive those distributions? Yes. 2. RULE: a. R2d i. Unless there is a valid restraint on the alienation of the trust agreement, if the trustee pays to or applies for the beneficiary any part of the income or principal with, knowledge of the transfer or after he has been served with process in a proceeding by a creditor to reach it, he is liable to such a transferee or creditor; b. What good does this lawsuit do? i. D will now never receive distributions from the trustee the trustee has discretion and therefore will chose not to distribute; c. The Trustee now has a duty to make payments directly to the P; d. This result occurs because there is no spendthrift clause; i. How could a spendthrift clause exist in a trust? 1. The interest of my trust beneficiary, whether in trust income or trust principal, shall not be capable of assignment, anticipation, or seizure by legal process. ii. Creditors want to get the money directly from the trustee NOT from the beneficiary at this point; v. Example: 1. Suppose there is a support trust a. Hospital states: Pay me because the beneficiary has a right to the money because it is for his support; i. Traditional rule: the lien holder stands in the shows of the beneficiary and can get a distribution for medical care so long as there is not a spendthrift provision;

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ii. UTC Approach: prohibits creditors from asserting that the trustees has abused its discretion in failing to make a particular distribution even though the beneficiary would be entitled to make the claim against the trustee; 1. OH Exception: this does not apply if a claim by the state of Ohio for a visit to a state institution if no spendthrift provision; vi. Spendthrift Trusts 1. Designed to prevent voluntary assignments and to prevent the beneficiarys creditor from garnishing the beneficiarys trust interest; 2. Permit the trust settlor to insulate trust assets for purposes other than support or education; 3. Trustee is permitted to give trust assets/payments to the beneficiary without paying creditors; 4. Duty of creditors to look at the trust language and make sure that there is no spendthrift provisions in the trust; 5. Scheffle v. Kruger: D sexually assaulted a minor and broadcast it on the internet; D had a spendthrift trust and P had a judgment against D P wants to collect against the trust; a. ISSUE: Does P have a right to collect against the trust? No. b. RULE: i. Local statutes clearly state the exception of collection against spendthrift trusts DO NOT include tort claims; 1. Therefore, the spendthrift creation statutes will indicate specific exceptions of collection against spendthrift provisions; c. Public Policy: i. P makes a Public Policy argument that is repudiated 1. If there was a fraudulent transfer, it may overrule the spendthrift trust, BUT that didnt happen here; 2. If the trust is a self-settled non-special interest trust, the spendthrift provision will be overruled; a. This prevents people from putting money in a trust for themselves and preventing creditors from reaching it; ii. The court indicates that if the spendthrift provision policies were judicially created (so, not statutorily) then the policy exceptions for tortfeasors may apply not an issue here because there is a statute in place; 6. EXAMPLES:

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a. If B has access to income of a trust each year and P has a judgment of $8,000 against B and the trust states: i. The Trustee shall pay to B the entire net income of the Trust at least annually. 1. P can garnish the Trust and will receive judgment amount because the income is not discretionary/for support/spendthrift; ii. The Trustee shall pay to B so much of the income of the trust as the Trustee deems necessary for Bs education and support. 1. P cannot garnish the income; 2. This is a support trust and not a support claim; iii. The Trustee shall pay to B so much of the income of the trust as the Trustee deems appropriate in the Trustees absolute discretion. 1. The income CAN be garnished; 2. This is Discretionary the Trustee probably will not distribute anything; b. If each of these examples had a spendthrift provision, the Trustee could distribute income without any attachment; c. As soon as B gets the money, P should then go after it! 7. Bacardi v. White: P was married to D; D agreed to pay alimony of $2,000 per month, but then did not pay; D had a trust with a spendthrift provision and P wanted to garnish the income and get the actual distributions of the trust; D has the right to the income of the trust; a. ISSUE: Should P be able to receive the alimony payments form the judgment against D when D receives income from a trust with a spendthrift provision? Yes. b. RULE: i. Public Policy of alimony and child support is greater than the spendthrift clause 1. Limitations: the P can only garnish the trust if it is a LAST RESORT D has no other assets to pay off the judgment; 2. But remember that public policy supports the payment of alimony/child support; ii. The trust could be set up so that P could receive nothing if there was a spendthrift clause and it was Discretionary; iii. FYI great many jurisdictions follow this decision;

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1. R3d Approach to the exceptions of the Spendthrift Provisions a. Support of a child, spouse, or former spouse OR i. UTC only has this exception; ii. OH says only child and spouse (no exspouse); b. Services or supplies provided for necessities or for the protection of the beneficiarys interests in the trust; 8. Remember, you as Settlor and Beneficiary, cannot shield your assets with a Spendthrift Trust this is called a Self-Settled Trust; vii. Cook Island Trust Act 1. Here and in a few other jurisdictions, Self-Settled Spendthrift Trusts are acceptable; 2. It doesnt matter if the trusts purpose was to defraud/evade creditors; 3. The Cook Islands courts will not recognize foreign judgments that are inconsistent with the statute; 4. Remember, you can indicate in the trust which law governs the trust and you should place the trust assets with a Trustee in that state; 5. FTC v. Affordable Media, LLC: this case concerns a telemarketing Ponzi scheme created by the Ds; the FTC filed a complaint; Ds put their money into a Cook Island irrevocable trust; the court ordered the Ds to pay the money anyway; the Ds were unable to access the funds of the trust because the trust became inaccessible when an event of duress occurred e.g. a lawsuit like this; the court then placed the Ds in contempt; a. ISSUE: Should the Ds be exempt from contempt charges because there is an impossibility of action in this case i.e. the money will never be released from the trust)? No. b. RULE: i. Contempt of Court occurs where: 1. The moving party has the burden of showing by clear and convincing evidence that the contemnors violated specific and definite orders of the court; 2. The burden then shifts to the contemnors to demonstrate why they were unable to comply; ii. Impossibility of Performance a defense against contempt: 1. Was there impossibility? a. Ds were able to pay back the trust; (Estates and Trusts Spring 11) 82

b. Ds ordered the trust to close because of the adverse event; c. Ds were the protectors of the trust; i. Protectors are 3rd parties with the ability to access a trust and move assets; ii. Sometimes given negative powers veto powers; iii. Here, Ds powers were to declare new Trustees and determine IF there was an event of duress; 2. The court is unwilling to say there is impossibility of performance when the Ds were the parties that set into motion the events that caused there to be impossibility in the first place! 3. This is really the only power courts have in order to fight foreign self-settled trusts; 6. Some states allow for Self-Settled Trusts.

f. Planning for Incapacity and the Costs of Institutional Care i. Dealing with Medicaid 1. In regards to Medicaid planning, any transfers made within 5 years of the need for Medicaid will count towards the assets owned when applying for Medicaid; 2. This section really deals with the middle class that are worth only a few hundred thousand dollars; ii. Congress passed the Medicaid Qualifying Trust Statute 1. Provided that to the extent a Trustee could, under any circumstances, make a payment to you, the maximum amount they could ever make to you should count against them; iii. Cohen v. Commissioner: 1. If money is placed in a trust to avoid being used for Medical expenses, if you have a right to that money, so does Medicaid; iv. Comins: 1. The Trust indicates that if the spouse becomes institutionalized, the money goes to the un-institutionalized spouse the court rules that since they had access to the money prior to institutionalization, the maximum amount payable by the trustee is available for Medicaid the net income of the trust; v. Kokoska: 1. The Trust was set up after a medical malpractice suit set up by a conservator because the beneficiary is mentally handicapped; (Estates and Trusts Spring 11) 83

2. The money of the trust was to pay for her care therefore, the money is counted by Medicaid; 3. This might have been different if the trust was to pay for her children; vi. What if you set up a trust supposing you qualified for Medicaid under the $5,000 per income, but you have $120,000 in stock? 1. Suppose you are getting 3% yield on the stock = $4,000 2. You would qualify because the maximum amount you pay is $5,000 and only interest counts for the stock, not the principal; vii. OH has authorized the use of a Supplemental Trust 1. Limited in the amount of money that can be placed in this trust; 2. The assets of this trust are shielded from Medicare/Medicaid and can be used to supplement the needs of the person receiving the aid; a. The trust must provide that upon death, the trust assets will be paid to the state to reimburse for institutionalization up to the amount the state has already paid; b. Must be set up for a person under the age of 65; viii. You could make the trust completely discretionary not for support for health and therefore, if you were institutionalized, the trust assets would not be available; 1. On the other hand, some states will look past Discretionary Trusts with a clear intent to deceive the government as here; 2. In that case, you may want to set up many different trusts so that some money is available for Medicare/Medicaid; g. Trust Modification and Termination by Settlor i. At CL, trusts were irrevocable unless there was a provision making it irrevocable; ii. Under the Ohio Trust Code (and most states), trusts are naturally revocable; iii. CT General Life Insurance Co. v. First National Bank of Minneapolis : 1. ISSUE: Was the trust revoked by the 2nd will? No. 2. RATIONALE: a. There was no successful revocation because while the will was in writing, it was not delivered to the trustee; i. Pertains to the in writing and delivery requirements; b. Also, they needed to revoke the will prior to his death upon death, the trust becomes irrevocable remember that a will only operates upon the testators death; 3. RULE: (Estates and Trusts Spring 11) 84

a. General Rule: where a Settlor reserves the power to revoke a trust by a transaction inter vivos, as for example by notice to the trustee, he CANNOT revoke through a will; 4. Remember, most trusts establish how it may be revoked you MUST FOLLOW ITS INSTRUCTIONS! iv. Barnette: 1. Funded the revocable trust with shares of the decedents closely held business; he was the issuer of the stocks; upon the divorce of his 1 st wife, he went to get a new will; he indicated that he revoked the trust but did not have written notice; 2. Here, the court said that delivery is conclusive because he was the Trustee oral statement may be enough look to the circumstances; v. Who is Required to have Written Notification? 1. Trustee 2. If Settlor is the Trustee, you probably will not need to show notification; 3. Dont accept the position of Trustee unless a provision for written notification is provided! h. Modification or Termination by Consent i. When can the beneficiaries terminate the trust? ii. Adams v. Link: 1. ISSUE: Should the agreement to end the trust be accepted by the court? No. 2. RATIONALE: a. The purpose of the trust is defeated because the intent was an income stream to heirs and F lump sum defeats that purpose; b. Grauer says that F could have assigned rights and gotten a lump sum anyway; 3. RULE: a. Conditions that Lead to Early Termination i. That all the parties in interest unify in seeking termination; ii. The every reasonably ultimate purpose of the trusts creation and existence has been accomplished; iii. That no fair and lawful restriction imposed by the testator will be nullified or disturbed by such a result; b. The court disagrees with the 2nd prong and therefore the trust continues; iii. American National Bank of Cheyenne v. Miller : (Estates and Trusts Spring 11) 85

1. ISSUE: Can the trust be revoked through this settlement plan? Yes. 2. RATIONALE: a. The purpose of the trust has been satisfied the purposes were: i. Cover education; ii. Wait until the children were at least 35 to get the money they were old enough now; iii. Husband no longer wants his portion; 1. He has a right to revoke his interest; 3. RESULT: Revoke the trust; iv. How seriously should we look at the material purpose requirement of the trust? 1. Not readily inferred when looking at a trust; 2. Spendthrift clauses indicate a level of purpose; a. UTC Approach up to the state to decide; b. OH Spendthrift Clause MAY be indicative of material purpose may be the cause of many Settlors putting in the clause as a policy, not as a purpose; v. As a Settlor who wants to protect against early termination of a trust, clearly indicate, in the trust, what your intentions are for the trust! 1. Remember, all material purposes must be met before the trust can be terminated early! 2. The only exception is where all the beneficiaries and settlors agree to early termination; a. You need to make sure that the settlement agreement adequately protects everyones interests who are beneficiaries in the trust; i. Modification or Termination without the Consent of all Beneficiaries i. Pernoe: money was put into an irrevocable living trust you dont normally want to do this; remember, you owe tax NOW as opposed to deferring until later; the trust said the income went to the beneficiary for life and then income to D for life with the remainder to a grandson; the settlor wanted to revoke because the settlor thought that the trust was revocable thats what the attorney said! 1. Just because you dont read the language, it doesnt mean you can change the terms of the trust; 2. The only time that you could get a revocation an instance in which the attorney clearly, with documentation to prove it, indicated that you were setting up a revocable trust; ii. Basic Rule: (Estates and Trusts Spring 11) 86

1. If the settlor wants to revoke the trust a. If the trust is irrevocable: you can revoke it yourself as the settlor ONLY IF the person who drafts it made a MISTAKE in the drafting; i. You cannot revoke if you were under a mistaken belief in what the law provided; b. If the trust is revocable: the settlor may revoke at his or her will if the instructions for revocation built into the trust; c. If the settlor is the sole beneficiary, they can revoke whenever, even if it is an irrevocable trust; 2. The Trustee of a Discretionary Trust can terminate the trust, but you might worry that another beneficiary might sue as a result of their rights not being protected; 3. If all beneficiaries agree and there are no material purposes left to the trust, the trust may be terminated. 4. If the trustee improperly ends the trust and distributes its content to the beneficiaries, the beneficiaries are estopped from suing the trustee for breach of duty. j. Charitable Trusts i. You CANNOT create a charitable trust for your estate or issues benefits; ii. The jurisdiction and duration are limited by RAP; 1. Where does RAP apply? a. If the remainder goes to a private party and then to a charity or vice versa; b. It doesnt apply if the remainder goes to a charity then to another charity; iii. Tend to end with endowment funds; 1. You only spend the interest, NOT the principal; iv. Usually, charitable trusts are used for smaller gifts if a great deal of money is involved, set up a tax exempt corporation; v. Charitable Purposes 1. Shenandoah Valley National Bank of Winchester v. Taylor : a trust was created and the beneficiaries were established to be 1 st-3rd graders; the money was to be used by them for their education; the money was given directly to them just before Christmas and Easter; the donors family contested the trust; a. ISSUE: Is this a charitable trust with a charitable purpose? No. b. RATIONALE:

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i. The money was not really for the childrens education because the trustee had no control over HOW the money would be spent and the money went directly to the children, NOT the school; ii. This is really just a benevolent trust; 2. Charitable trusts CANNOT be established for political parties but they can be established for social movements; 3. Who enforces charitable trusts? The Attorney General. 4. Can a settlor enforce the trust agreement (charitable trust)? a. They CAN have standing, especially if there is valid claim, but the AG has not followed through the his enforcement duties; 5. UTC and OH a. The settlor may maintain an action to enforce a trust; b. A charitable trust may be formed to relieve poverty, give education, for health, or other benefits to the community; c. If no charitable purpose is indicated the court can create one; 6. If the purpose of the trust no longer exists, find a new cause Cy Pres; vi. The Cy Pres Doctrine 1. Was the donors intent limited to a particular charitable purpose or did the donor have a more broad charitable purpose? a. If broad, modify the trust to use the assets in a manner as close as possible to the intention, in order to best effectuate the donors intent; b. If there is a specific intent, the trust property will return to the estate if the charitable purpose no longer exists; 2. Cranshaw: a. A person left a trust to Marymount to use for nursing students; the college closed and the estate wanted the money back; b. A nearby college could use the funds for nursing purposes; c. This is a general intent to help nursing students therefore, the money went to the other nursing school; 3. The Ohio UTC gets rid of the examination of the Settlors intent a. Include in the document what will happen if the charitable trust would end; b. If the charitable trust is unlawful or impossible to achieve, the court can use Cy Pres to give it another purpose; 4. Wilson: (Estates and Trusts Spring 11) 88

a. A trust established a scholarship at all-boys high-schools; the standards for achieving the scholarship differed between schools one school awarded it to the top 5 students and another awarded to those without the financial means to afford college; b. The claim was that there was gender discrimination i. The trusts were upheld because donors can do what they want with THEIR money; ii. The court recognized that there was discrimination BUT if it had been invalidated, then there could not have been minority trusts; VII. Powers of Appointment a. Definitions: i. Presently Exercisable/Inter-Vivos = can exercise the power during ones lifetime; ii. Testamentary = can only exercise the appointment rights through a testamentary instrument, i.e. a will; iii. Donor = a person who creates the power of appointment; iv. Donee = a person who receives the power of appointment; v. Appointees/Objects of Power/Class of Permissible Appointees = the people to whom the donee appoints the property, or the class of people able to receive the gift; vi. Taker in Default = a person who takes if the holder of the power does not exercise it; vii. General Power = property can be appointed to self, estate, creditors, or creditors of the estate, i.e. ANYONE! 1. It is as if the appointment power is property in your estate, whether or not you actually exercise the power; 2. if you dont exercise the power, it goes to the takers in default; 3. It is NOT a general power IF there is a support element to the transfer! a. Income to my wife for life, but she can demand as much as she wants from the principal. This is a general appointment that is presently exercisable. b. Income to my wife for life with the right to demand from the principal for support. This is a non-general power. viii. Non-General/Special Power Limited Power of Appointment to a Special Class 1. This must be an ascertainable limitation 2. EX: among my descendents

(Estates and Trusts Spring 11) 89

a. If you are able to exclude from the class, it is an Exclusive/Exclusionary Power; b. RULE: The power is Exclusionary UNLESS the trust/will says otherwise. b. Parties to a Power of Appointment i. The power of appointment enables the donee of the power, acting in a nonfiduciary capacity, to designate recipients of beneficial ownership interests in the appointive property; ii. There is a Series of Questions to Ask: 1. Does D have a power of appointment at all? a. If D is not a trustee and the trustee has pure discretion, D has no power of appointment. b. If D is a trustee or can direct trustee payments, D has a power of appointment. 2. If F has a power, is it general? a. Yes, if exercisable in favor of self, estate, creditors, or creditors of the estate. b. Unless the power is limited by an ascertainable standard related to health, education, support, or maintenance. c. Creation and Exercise i. Estate of Hamilton: the Decedent gave his wife a General Testamentary Power of Appointment she could appoint to whomever she wanted to; in order to exercise it, the power and will of Decedent needed to be specifically referenced in her will because it is a testamentary power; in the will, the wife fails to make a specific reference to the LAST will of the Decedent she got the power right, but thats about it; 1. ISSUE: Should the power of appointment be enforced when the reference to the power is incorrect? No. 2. RULE: a. Just as for the revocation of wills, the power of appointment must be evoked in the way in which the power calls for it to be; i. If a rule is made for who is to exercise the power, you MUST follow that method; 3. RESULT: Since the wife failed to follow the prescribed instructions, the appointment failed. ii. In practice, always ask to SEE the power of appointment in the Decedents will in order to ensure that you property exercise it. 1. For specific powers, state where (to the will and the article within the will) you were given the power and state specifically if you exercise it or not. (Estates and Trusts Spring 11) 90

iii. If you fail to indicate a specific reference as to whether or not you are exercising the power 1. If it is a general power, creditors may access the assets; 2. If it is a specific power, creditors may NOT access the assets; iv. Will of Block: a mother gave money to Bjr and the right to distribute funds to A and J as he saw fit; 1 year after the mothers death, Bjr left a will leaving 35% to twins A and J, and 30% to a 3rd child, but made no reference to the power of appointment; 1. ISSUE: Has the power of appointment been properly exercised? In this case, yes, but for CL and OH, no. 2. GENERAL RULE: a. You are required to actually mention or specifically reference the power before it will be exercised. i. Bjr probably had the will drafted in Ohio where it would not have been exercised. b. The court here follows NY law because that is where the power was created i. This is the Minority view: Donee must show that there was a clear intent NOT to exercise the power of appointment. c. Bjr should have included a clause indicating that there was no interest in exercising the power. v. Well drafter powers will indicate takers in default 1. If there are no named takers in default: a. General Power: the property returns to the donors estate; b. Non-General Power + the class of appointees/objects is sufficiently narrow to ID them give the property equally to the objects; i. This is close to the donors intent. c. Non-General Power + difficult to ID the class/objects return the property to the donor or estate; vi. What do you need to exercise the power? 1. Hamilton: a. If the power requires that you specifically refer to the power to exercise it, you must do what the donor asks; b. Because the donee is the agent of the donor; 2. Block: a. Look to the law of the jurisdiction in which the donor created the power to determine whether exercise occurred; (Estates and Trusts Spring 11) 91

3. Majority Rule: a. A Power of Appointment is exercised if there is a reference to it where there is no specific requirement that you refer to the grant of the power; vii. What if you dont exercise the power? 1. If there are takers in default, they take. 2. If there are no takers in default a. General Power: then the property goes to the estate; b. Non-General Power: then to a class if capable of identification; d. Scope of the Power: i. Capture Doctrine 1. This occurs when they exercise the power; 2. It applies only to general powers and attempts at exercising that fail because they violate the RAP; a. So, if it is a general power and it appears you were combining estate assets with your own and the exercise is invalid, THEN the property goes to the donees estate; 3. If granting the power, you can grant it to avoid Capture; a. If the donee fails to exercise the power or an exercise is invalid, the property goes to ii. Examples: 1. You can create a trust from the power of appointment; 2. The beneficiaries have the right, upon receiving their property, to use the property as they choose a. But, there CANNOT be a contract between a beneficiary and a donee to use a power as if it is testamentary; iii. Exercising a Power by Creating Another Trust 1. You can create a further trust so long as the trust beneficiaries are all objects of the power or within the permissible class; 2. This is where there may be perpetuities problems; a. OH you can eliminate the perpetuities problem if trust says it doesnt apply remember, cant write out the exercise of a nongeneral power of appointment; iv. Exercising a Power by Creating Another Power 1. If you have a general power, then you can appoint another power without difficulty; 2. Special powers are limited limitation is based on what the power is; (Estates and Trusts Spring 11) 92

a. Example: M, by a will, creates a trust and gives her son, O, a testamentary power to appoint the principal among Ms descendants i. Can O dispose of the trust corpus by creating a trust for the benefit of his sister for life and giving S a general testamentary power? 1. He can give the general power. ii. Can O, in his will, give his wife, a power to appoint the trust property among Os children? 1. O could have appointed to his kids, since M trusted O to make the decision, M would trust O to delegate the power so long as the power is limited to Ms delegated class; v. Exceeding the Powers Scope 1. Will of Carroll: a trust was created with income to W and residue to the children, E and R; in order to get more money (the amount to Es husband was limited), E came to an agreement with her cousin that the cousin would get $250,000 so long as the cousin would give $100,000 back to Es husband (who was not included in the bequest; a. ISSUE: Is this contract, which goes against the powers of the trust, valid? No. b. RATIONALE: i. This is clearly a fraud on the power; ii. The court struck the entire exercise saying that it did not know what would have gone to the cousin if there was no agreement; iii. How do we know there was an agreement? 1. There was a letter that stated that this would occur drafted by Es attorney! iv. If there was no agreement, but the cousin WANTED to give the husband money out of the goodness of his heart, that is acceptable. 1. BUT, there CANNOT be an agreement to that effect; 2. The attorney should have made this clear to E and the cousin; 2. If you exercise a power beyond the scope of the power originally intended and blend it with your assets, make the distribution of your assets and distribute the appointive assets to the objects and your assets make up the difference; a. See Block since there was a combination of assets 3 kids and 35%, 35%, 30% (Estates and Trusts Spring 11) 93

i. Use the appointive assets first to fulfill the 35%s and only the estate assets could be used for the 30% vi. Contracts to Appoint and Release 1. It is acceptable to contract to exercise general, presently exercisable powers of appointment; 2. A contract to exercise a testamentary (or otherwise not presently exercisable powers of appointment) is NOT enforceable it is VOID, BUT exercise in accordance with a void contract is valid; 3. Release of Powers of Appointment a. Can be a partial release b. Can release the power to appoint to anyone other than to you, which means that you are the only one I can appoint now; c. Can change a general power to a non-general power i. The IRS says that if you release a general power, it is as if you exercised it and gave the money away so, youre hit with a gift tax; d. Can disclaim the power of appointment must be done within 9 months after it was granted to you; e. Right of Creditors i. Policy should the donee have access to the money from a general power of appointment? Yes! ii. CL/Majority View 1. If you have a general power of appointment and you exercise it, creditors can grab the property over which you have the power; a. The rationale is that it is as if you gave the power to yourself and then exercised the right to give it to another immediately afterward b. Relation Back Theory 2. If you dont exercise it, and it goes to the takers in default, then the creditors are out of luck; iii. Example: if H has a general power and he would like 75% to go to S and the rest to go to D; BUT if he exercises, the power goes to creditor; 1. If no exercise, both take as takers in default; 2. So, do a conditional provision! a. I am not exercising if insolvent; b. If I am NOT insolvent, I exercise 7675%-25%; VIII. Classification and Construction of Future Interests a. Classification of Future Interests (Estates and Trusts Spring 11) 94

i. Who Holds the Future Interest? 1. If grantor a. Possibility of Reverter: i. To J so long as he never serves booze if a condition occurs, then the interest goes back to you; ii. Creates a determinable interest; b. Right of Entry/Reentry/Power of Termination: i. Subject to a condition subsequent; c. Reversion: i. The Garbage Can of everything else; ii. Can occur when the trust gives a life estate and then a reversion back to the estate; iii. If it reverts back to the estate, you need to open the estate and figure out where it is supposed to go; iv. If the grantor realizes that he created a reversion, he can give that reversion away later, BUT it will come back to the estate before going away again; v. RAP doesnt apply to reversion; 2. If a 3rd Person a. Remainder: i. An interest that immediately follows the prior interest you created and is created within the same document/grant; ii. Kinds of Remainders: 1. Vested/Indefeasibly Vested: a. It is yours no matter what happens to you; b. You do not need to survive vests at interest and not in possession; 2. Vested Remainders Subject to Open/Partial Divestment: a. Because you are part of a class that is given the interest and the class can still increase in size; b. To Js children and J has 2 children, BUT J is alive and could have more children; if a new child is born, it would be part of the class; c. RAP applies here; 3. Vested Subject to Complete Divestment: (Estates and Trusts Spring 11) 95

a. Safe from RAP issues; b. They vest in a particular person and are subject to a condition subsequent; i. IF the condition is given AFTER the gift; 4. Contingent Remainders: a. Requirements: i. Held by an unascertainable person; ii. If the person is ascertainable, then this is a condition precedent; iii. Example: if the gift itself contains a condition necessary in order to take, it is contingent; b. Executory Interest: i. Another Garbage Can; ii. If it isnt a remainder, it is an executory interest; iii. Occurs in 2 Situations: 1. Where the interest diverts something that is already vested a remainder may not cut short a vested remainder; a. D for life, remainder to D, but if D fails to survive, then to N. i. Ns interest is a shifting executory interest. 2. Where the remainder fails to immediately follow the present interest in time; a. To D for life and then 1 year after death, to C. i. Cs interest is a springing executory interest; ii. For the 1 year, the interest returns to the estate; ii. Remember read children to mean children and NOT issue. b. Construction of Future Interests: Gifts to Individuals i. Lapse and Anti-Lapse 1. In order to take under a will, you need to survive the testator, otherwise the bequest will lapse; Anti-Lapse Statutes apply if there are issue; (Estates and Trusts Spring 11) 96

2. One reason for lapse is that wills do not create legal interests until the testator is dead if you dont survive the testator, there was no legal interest in the first place, because there was no vested interest when the will was executed; ii. Future Interests 1. Once a trust is created, a future interest is also created; 2. We do not imply a condition of survivorship beyond the creation of the interest; iii. Uchtorff v. Hanson: the will contained a great deal of language during the life of the mother, she received income when in the event of the death of the wife after my death without renunciation of remarriage if this occurs so long as the son survives indefeasibly vested interest in trust; if he doesnt survive, to C and children; the son survived the father, but not the mother; the will doesnt indicate what happens in this situation; AC ruled that it was ambiguous; 1. ISSUE: Is there an implied condition of survivorship beyond the creation of the future interest? No. 2. RATIONALE: a. Historically, there has been a preference for early vesting. i. Why? 1. If vested, you dont need to worry about RAP problems, and under the CL, you could not transfer interests with contingent remainders; 2. Vested remainders are not capable of being destroyed; b. CL you shouldnt imply a requirement of survivorship; c. Why did the children have an argument here, then? i. The Iowa Statute 1. Shift from CL; 2. Future interest are NOT contingent, so you must survive unless the will clearly states/indicates otherwise; 3. RULE: a. We follow the CL; b. Many modern statutes reverse the CL; iv. Matter of Kroos: a trust was created stating: upon the death of W, I give all residue and remainder of my estate to my children; in the event that the children die before W, if the children have descendants, then they take; here, a daughter, F, died without descendants and before the death of W; 1. ISSUE: Was Fs interest vested? Yes. (Estates and Trusts Spring 11) 97

2. RATIONALE: a. For there to be divestment, you must fail to survive AND leave issue i. F only did one of these things and therefore, there was no divestment; ii. The interest vested because she survived the testator; b. How SHOULD the will be worded? i. What happens if she dies without descendants? ii. Dont leave any contingencies open! v. See problems on pp. 819. c. Construction of Class Gifts i. Class Gifts occur when you want flexibility and you want to take into account that certain groups may increase in size, especially when in childbearing years! ii. Issues that need to be dealt with 1. How long can the class increase in size? 2. When can it decrease in size? Is there an implied condition to survive? iii. To my grandchildren 1. People born into the class are not required to survive the class, unless that is what the interest requires; iv. In re Evans Estate: there was $50,000 in a trust; income was to accumulate until each grandchild reached the age of 21; at 21, each grandchild was to get his/her share of the income; at age 30, each grandchild was to get their share of the corpus; at the time the testator died, there were 6 more grandchildren, 3 of which were born after the death of the testator, but before the first reached age 30; more children could have been born; 1. ISSUE: When did the class close? It includes all grandchildren born before the first grandchild reached the age of 30; 2. RATIONALE: a. Once a grandchild is in the class, their interest has vested it is not contingent on reaching age 30 (the wording of the interest); b. The class is determined until the distribution of the principal i. If this were not the case and the first child reached 30 it would be impossible to create equal distributions of the principal; c. Distributions of income do NOT close the class

(Estates and Trusts Spring 11) 98

i. So, if there are 7 grandchildren, each gets 1/7 share of the income; if another is born, then each gets 1/8 at the next distribution; v. Clobberies Case 1. For something to be paid when you reach a certain age, it is deemed to be vested as opposed to IF someone reaches a particular age; a. If you have a right to income, up until the time of distribution of principal, you have a vested interest as a rule of construction; vi. If one of the children in Evans died before anyone reached the age of 30, that income and principal would be distributed to that childs estate; vii. If there is a clear intent for a class to close early, that intent controls; viii. See problems on pp. 827. d. Decrease in Class Membership: Survivorship i. If a will states: the principal should be divided among my children 1. Who gets the principal? a. 3 Choices: i. Children MEANS children and there is no survivorship requirement; 1. This is the Majority View; ii. Children means children through a survivorship requirement; iii. Children means issue; ii. Usry v. Farr: a will states: to L for life and then to the children who survive L for life; on the death of the last surviving child, the remainder should go to my grandchildren; here, W married and they had N, J, and one other child; J (married E); J died BUT had children; the other child had H who produced great grandchildren for the testator (BUT H died before N the last surviving child); N was the last to die; Js children are arguing that because H did not survive L or at least until distribution, he lost his remainder interest and his children do not take; 1. ISSUE: Should an implied condition of survivorship exist that would require H to survive for the interest to vest? No. 2. RATIONALE: a. It is unclear what the intent of the language and trust is; b. Majority view would say we should not imply a condition of survivorship; c. Just because there is a survivorship requirement for one person does not extend the requirement to every person in the will; iii. Class Gifts of Income (Estates and Trusts Spring 11) 99

1. Dewire v. Hayeles: Tsr begat Tjr begat T3, P and D all before the testators death and then additional children were born after the testators death (T3 begat J); the will indicated that income should go to W for life, and then income to Tjr and his children for life with total distribution 21 years after the death of the last of Tsrs grandchildren; this presented a RAP problem; a. ISSUE: Can J recover/receive trust income? Yes. b. RULE: i. Generally, in the absence of a contrary intent expressed IN THE WILL or controlling statute stating otherwise, members of a class are joint tenants with rights of survivorship; 1. Under this rule, T3s income would be distributed among the remaining 5 until the last one is dead UNLESS there is contrary intent; 2. Here, there was contrary intent because the testator did not indicate what would happen when the 21 years were over; a. Dont want a reversion; b. So, probably this is distributed to each descendent c. Since this is what would happen when the last died, well assume that this is what happens when the first one died; c. RESULT: J gets T3s trust income; 2. This case makes it clear that when it is possible, always include peoples names! To do so helps with RAP problems. IX. The Rule Against Perpetuities a. Policy Behind the Rule i. No interest is good unless it must vest, if at all, not later than 21 years after some life in being at the creation of the interest. 1. You can ignore the 21 years section UNLESS there is a contingency or UNLESS the interest vests outside the reaching of the age of 21; ii. The rule, but itself, does not limit the duration of a trust; 1. It limits the time period that interests are allowed to be contingent; iii. Interests subject to the rule 1. Vested Remainders Subject to Open (or Subject to a Partial Defeasance); a. If a class could increase/decrease beyond the perpetuities period, the gift of the entire class fails even for those of the class who are alive; (Estates and Trusts Spring 11) 100

b. Exception: if you can break the class into separate shares, then the share who are alive are protected; 2. Contingent Remainders 3. Executory Interests b. The Rules Operation i. Strategy: 1. Look at the interest; 2. See if there is anyone not alive at the creation who could be born AFTER the creation of the interest, whose existence would DEFER vesting; 3. If existing, you have to assume that the person who would be born after the interest was created could then survive a nuclear holocaust that would kill everyone else; ii. How to choose a measuring life: 1. The interest you are testing must vest or fail within 21 years of the measuring life; 2. The measuring life must be a person alive at the time the interest was created; iii. Example: income to H for life, then to Hs youngest child for life and then at the death of Hs youngest child, the principal to Ts youngest grandchild; 1. Hs interest vests immediately; 2. Hs child vest at the husbands death life in being; 3. The youngest child may not be a life in being; 4. The youngest grandchild? a. The class ends at the death of Ts youngest child the lives in being are all of Ts children because the interest was created at Ts death; iv. Example: 1. Income to H for life, then to Hs youngest child, then to Ts youngest grandchild then living; 2. Hs child could outlive any living contingent remainder not a life in being and therefore not valid; v. Example: residue to the children who reach age 25 1. All lives in being at death; vi. Example: residue to grandchildren who reach age 25 1. This violates RAP because more grandchildren could be born after the testators death and the class does not close until they all reach the age of 25; (Estates and Trusts Spring 11) 101

vii. Example: residue to grandchildren and there is only one grandchild and no children; 1. Valid. viii. Example: residue to grandchildren who reach the age of 21 1. No RAP problems because the class closes when the 1 st child reaches age 21! 2. If born after Ts death, it will vest 21 years after the childs death who was a life in being; ix. Example: residue to grandchildren who reach 25 years and one grandchild is already 26; 1. No RAP problems because the class is closed no one can join the class when one reaches 25; x. Remember, interests begin to run at their creation can be inter vivos or testamentary; c. Recurring Problems i. Cook v. Horn: 1. Perpetuities problems dont begin to run until the property has become irrevocable; ii. Fertile Octogenarian 1. The law holds that a person can have children no matter what age so, a person can have children until they die, regardless of age; iii. Unborn Widow 1. See note 4 on pp. 889; 2. Income to D for life, income to Ds widower for life; a. Valid because there is not implied condition of survivorship; 3. Income to H for life, then income to widow for life, then remainder to Hs then living children; a. The widow may not be born when the testator died this would cause a RAP problem for the children; b. To get around this, use the spouses name! Indicate that income to widow for life so long as the widow was living at the testators death. iv. Slothful Executor 1. What if the litigation goes on for a long time and the estate is unable to be distributed? a. This may violate RAP; b. Remember, if payable at a future date, it is a vested interest; (Estates and Trusts Spring 11) 102

c. But if the interest states: those in office when the estate is distributed it may violate RAP d. Charitable Trusts i. The duration of the charitable trust is not limited by RAP; 1. The Rule is applicable when: a. The charitable interest is followed with a non-charitable interest that may not vest then there is a RAP violation; b. A non-charitable interest follows a charitable interest that may not vest; e. Consequences of Invalidity i. If invalid, then only that section/interest is invalid; ii. The interest then goes back to the settlor/estate and then goes through intestacy or residue based on the will; 1. If it is already in the residue, it goes through intestacy; iii. Exception: Infectious Invalidity 1. If sending the interest back to the estate of the settlor and sending it through intestacy would upset the entire estate plan, then throw out everything in the will; f. Class Gifts i. Remember, the class MUST CLOSE before the perpetuities period; ii. Exceptions: 1. Specific Sum Exception a. If $30,000 is to go to As children born before or after death who reach the age of 25; i. This is clearly invalid because A could have more children born who dont reach the age of 25; ii. BUT, if you said $10,000 to each child before or after my death 1. It is valid for each child who reaches 25; 2. It is invalid for those born after the testators death; 2. Separate Shares or the Subclass Rule a. To A for life, then the trust should be divided into as many shares as A has issue (or deceased children with issue) and each line gets income from his/her share, on the death of each child of A to his living issue; b. These trust interests protect the interests of the then living children and invalidate potential new childrens interest (born after the testators death); (Estates and Trusts Spring 11) 103

i. If another child is born after death, it may cause infectious invalidity; otherwise, there is no problem; ii. Could also just name the then living children and there would be no problem; g. Powers of Appointment i. Questions to Ask: 1. Is the power valid? a. If a non-general (inter vivos or testamentary) OR a general testamentary power, then the power is invalid if it can be exercised beyond the perpetuities period; i. Example: the trustee is to pay income to D for Ds life, and at her death, the trustee may distribute each year as he deems appropriate; at his death, it goes to the Girl Scouts; 1. Vested remainder in the Girl Scouts; 2. The Trust has a non-general power because it is discretionary; 3. A trustee can serve as a life in being BUT if it is a corporate trustee, his is NOT a life in being here, the children after Ds death may not have been lives in being; ii. Example: an irrevocable inter vivos trust states: income to the settlor and at the settlors death, the income should be divided into as many shares as she has children; the settlor also gives the power to the trustee to pay income as needed to children born after the settlors death; 1. If the trust was revocable, this would be ok; 2. But, here, an irrevocable trusts time period being at the creation of the trust, not the settlors death; b. Generally a presently exercisable power that power is going to be valid so long as it becomes exercisable within the perpetuities period; i. Can be exercisable outside the perpetuities period; ii. BUT, must be able to be exercised within the perpetuities period; iii. Example: an inter vivos trust says, to A for life, then to As children for their lives, on death of child to that person he appoints. 1. The powers are invalid because this is a testamentary general power and the children may not be lives in being; (Estates and Trusts Spring 11) 104

iv. Example: to A for life, then to As children for their lives, and then on each child attaining age 21, as he appoints; 1. This is a presently exercisable and general power; it can be exercised within the time period therefore, it is valid; 2. Is the Exercise of the Power Valid? a. Look at the time period the power runs i. If the trust is irrevocable, the trust period begins with the creation of the trust; ii. If the trust is irrevocable, then the period runs whenever the trust is irrevocable; b. Non-General Powers: i. The time period runs at the creation of the power; ii. Why? 1. Because the donee is the agent of the donor, the donee cannot make the property his own; c. Presently Exercisable General Powers: i. The time period begins at the exercise of the power; d. General Testamentary Power: i. Treat the power as a non-general power start running the perpetuities period at the creation of the power; e. Remember, if the holder of the power exercises the right and gives the property outright, there will be NO RAP problem; ii. The Second Look Doctrine 1. This is NOT Wait and See. 2. This only applies to the exercise of a NON-GENERAL POWER and perhaps a general testamentary power; 3. Suppose: income to T for life, remainder as T appoints by will. a. This is valid because T is a life in being. b. T writes: income to my children until the last child dies, then the principal should go to the then living grandchildren. i. The time period begins when M (the original testator) created the power; ii. Read it as if it says: to T for life, then to Ts children until the last dies, then the remainder to the living grandchildren. iii. If there was no Second Look Doctrine, no interest under the appointment would be valid; (Estates and Trusts Spring 11) 105

1. There is no way to know what T will do with the power; iv. Under the Second Look Doctrine, take a second look at the time of Ts exercise to see who are actually lives in being when M created the power; v. So, suppose that at Ms death, T had children, X and Y; 1. Ts children WERE lives in being and the exercise is valid; vi. Suppose at Ms death, T has children X and Y, and then later had Z 1. This is a RAP violation; vii. Suppose T later has Z, but Z died BEFORE Ts death; 1. The vested interest is fine because Z did not survive the lives in being; 4. Industrial National Bank of Rhode Island v. Barrett : H created a trust: income to W for life, remainder as W appoints by will with the power to appoint to her estate; during Ws life, there was a right to withdraw from the corpus amount for comfort and support; W, by will, appointed: income to granddaughter 1 and granddaughter 2 for their lives, and on the death of each, each share of the income should go to their issue; at Ws death, there are 6 issue alive (great-grandchildren) that were not alive when H died and therefore, are not lives in being; a. ISSUE: Is this a general testimonial power? Yes, because there was an ascertainable support standard. i. Should we run perpetuities at the exercise of Ws power? Yes. b. RATIONALE: i. A problem would arise if this was a testamentary power the power would run at the creation of the trust power NOT at the exercise of the power by W; ii. Here, the attorney rolled the dice on whether this was a general or non-general power; 1. Since comfort usually means non-support trust = a general power; iii. No court before said that a general testamentary power ran with the exercise of the power this is a minority approach now; 1. The rationale is that for a millisecond, the property is back in the stream of commerce; X. Estate and Trust Administration a. Estate Administration i. Remember, probate the estate where the testator is domiciled (Estates and Trusts Spring 11) 106

ii. Might have ancillary probateallows you to represent in that state as well as domicile state iii. Removal of executors/trustees 1. Executor a. Winds things up and transfers assets to the benes 2. Trustee a. On-going administrative function 3. Courts are not as likely to discipline executors for making mistakes with investments while the estate is in probate a. Today though, more likely that executor may be liable than in years past 4. Courts are more likely to remove a trustee because removing an executor delays the distribution of the estate 5. To remove, bene needs to have just cause (a breach a fiduciary duty probably) 6. UTC expands the grounds for removal (OH doesnt have this provision): a. If qualified benes request (unanimously) the court should remove if it serves the interests of all the benes and serves interest of the trust b. If trustee is an individual, the court is to or might take into account that a material purpose of the trust was to have this individual as trustee iv. Creditors claims against decedent 1. Most states had a provision like Pope where an executor was required to place notice that there was a death a. Also back then, if you sent a bill to decedent (not to executor), executor was not obligated to pay the bill 2. Tulsa Professional Collection Services, Inc v. Pope : Decedent was at the hospital for 6 months where he eventually passed away; OK has a statute that required bill filing within 2 months of probate; the P missed the deadline (filed a few years later); D, as executor, followed the statute and only filed notice in the newspaper a. ISSUE: Was the notice valid? Maybe. b. RULE: i. Following Mullane, if a creditor is known or reasonably knowable, need to send direct notice ii. If the creditor was unknowable, newspaper notice is enough c. RATIONALE: i. Hospital probably did not file because there was a provision in the OK statute that said that a decedents estate was required to pay for the last medical expenses no matter what 1. OK SC ruled that this does not relieve the hospital from filing notice ii. So probably need to send direct notice to visa and other known debts 3. Ohio rule a. Doesnt require notice b. Probate is self-executing and therefore no state issue and thus no Mullane c. Notice shortened to 30 days, but probate is self-executing v. Fiduciary Duties 1. Attorneys, trustees, and executors get paid compensation 2. Attorneys a. Tend to get paid a % of the estate (Estates and Trusts Spring 11) 107

b. NOW, get paid a set fee c. Remember: have plenty of time sheets describing when you worked for the estate 3. Matter of Warhol: Executor was a business partner; the executor hired the quintessential litigator that is not a probate attorney; Warhol did silk screens and easily copied; what is the estate's biggest assets?--lots of intellectual property (Elvis--there wasnt a known right to publicity in a deceased person; when Elvis died, people wanted to sell Elvis--estate sued for a right t publicity in his name, likeness, and work; this established a descendible right to publicity in name/assets); 1st job-collect assets and protect them--if people are stealing the assets, need to litigate to protect them; valued the estate at about 100m, but it was discovered to be worth more so drop fee from 2.5% to 2%; there is no further drop if it became at much more valuable---ended up being worth 500m a. ISSUE: May the attorneys % fee schedule be enforced? No. b. RATIONALE: i. Can be used, at least, to determine the value of the fees ii. This is because a % fee does not necessarily bear an indication as to the work done for the estate iii. The problem was that the executorial fees, for the executor/trustee, were given to the attorney which should not happeneven though doing that work, not going to get paid for it from the estate iv. Dont want to dually pay the executor v. Have time sheets! b. Duty of Loyalty i. Prohibition against self-dealing ii. No further inquiry rule: 1. Bars fiduciaries from entering transactions with the estate/trusts they have a fiduciary relationship with unless there is a prior court approval of the action 2. Concern/rationalefear that the estate/trust could have gotten a better price 3. A beneficiary can void the deal for whatever reason if no court approval 4. This applies even if the property is at public auction iii. Matter of Kinzler: P begat G (married B), L, and Beatrice (who begat J, J, and E); B drafted Ps will because P asking him to; the estate is divided with 1/3 going outright to G and L and the other 1/3 put into a trust for Beatrice with remainder to kids and trustees being B and L; B is executor of the will and hires himself as attorneypays himself legal fees up front; sold Ps home and gave the proceeds to G and a note to the trust 1. ISSUE: was there a breach of the fiduciary duty of loyalty? Yes. 2. RULE: a. No further inquiry rule i. The home sale can be voided because the house was an asset (sold to L) and an asset of Beatrices trust sold without prior approval b. Further, the assets were not fairly divided---G got cash when trust got the noteshould have split this and c. Moreover, attorney cannot pay fees up frontneed to wait until after completing work because otherwise there is no motivation to do a good job with the work d. Good idea, if family is crazy, to not do their wills (Estates and Trusts Spring 11) 108

iv. Matter of Estate of Rothko: court applied the No Further Inquiry Rule when there was no insider purchases; R died and left his estate to a charitable organization; NY has a statute that says if you leave your entire estate to charity, your children get an elective share; the executors set up 2 sale contracts and sold about 100 paintings for $1.8 million when the probably should have been sold for about $6 million they sold the paintings to their own companies; one executor is the director of the corporation; one was a painter who wanted to sell his paintings through the corporation and recently had, after Rs death, one of his paintings purchased; the final executor had no conflict of interest but signed off on all of the transactions 1. ISSUE: Is there a violation of the No Further Inquiry Rule? Yes. 2. RATIONALE: a. The court filed an injunction to NOT SELL the paintings, but the executor did anyway; Lloyd, one of the executors, fudged his books in an attempt to make it look like the paintings were from his own collection; b. It is a conflict of interest where R previously where R previously had a deal with the consignment agency that stated the consigners would only get 10% of the sale proceeds new contract was formed giving them 50%; c. It seems like the executors were giving away the assets; d. The executor that signed off on everything went to his attorney who told him there was nothing to worry about; i. BUT, selling the paintings was a business, NOT a legal decision and therefore, there was no malpractice nor personal liability for the executor; ii. The executor should have just gone to the probate court and told them what was happening; iii. Requirement: the executor needs to act like a prudent person; e. Damages i. Normally, a person gets damages for selling items of an estate too cheaply; 1. Real value what you sold it for = damages; ii. Here, get the appreciation damages when the sold paintings after the injunction not to sell; 1. That means, damages are based on the value of the items at the time of trial f. This is a breach of trust case and that damages that result from it; g. There is a duty to retain and do what is best for the trust act like a prudent investor; c. Duty of Care: (Estates and Trusts Spring 11) 109

i. Allard v. Pacific National Bank: the 1 asset in a trust is a property in Seattle; the trustee wanted to sell, but there is a right of first refusal in the lessee; the trustee went to the buyer who said it would buy for $140,000; the trustee said it would take nothing less than $200,000 at which point the buyer agreed; the bank/trustee did not test the market value of the property outside the banks in-house appraisers; they did not put the property on the market; the beneficiaries were not given an opportunity to place an offer; 1. ISSUE: Is the trustee liable for breach of the duty of care for failure to disclosing the transaction? Yes. 2. RULE: a. Normally, there is no duty to disclose the transaction UNLESS the trust requires notification or the beneficiaries approval; b. Here, there was a duty to disclose because the property was the only asset in the trust; c. There is a general duty to keep beneficiaries informed as to what is happening with the trust; i. Trustee is required to inform them if there is a non-routine transaction; d. The Prudent Person Standard (to determine if there is a breach of duty): i. Exercise the judgment and care under the circumstances then prevailing which prudent men exercise in the management of their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income as well as the probable safety of their capital; e. The trust cannot have an exculpatory clause that says, I direct my executor/trustee shall not be liable for any loss caused by their conduct. i. Also remember, the UTC says that if you sell services indicating a higher ability/standard than the prudent person, you are held to that higher standard! 1. If you are the attorney, make sure to put it in the trust language/contract; ii. Shriners Hospital for Crippled Children v. Gardiner : Mj was the trustee of a trust; the trust provided income to MJ and then to the grandchildren with the remainder to P; MJ was not educated and let her son, C, make the investment decisions; C embezzled the money and P sued MJ as the trustee; MJ knew nothing of investments and sought Cs advice; 1. ISSUE: Is MJ liable for the lost money when she delegated her investment powers? Yes. 2. RATIONALE: a. The court indicates that MJ, as sole trustee, must decide whether or not the investment advice was acceptable she had a duty to (Estates and Trusts Spring 11) 110

investigate and guarantee that the results of the investment advice were good and sound; i. Used the prudent man standard; b. Problem: the trustee is supposed to seek advice if ignorant on investing, BUT cannot rely on the advice?! c. This is the traditional approach. iii. UTC and Uniform Prudent Investor Act Modern Approach/Modern Portfolio Approach, too: 1. A trustee may delegate investment and financial functions of a trust that a prudent person with comparable skills would delegate in similar situations. 2. A trustee may delegate duties that a prudent trustee could properly delegate trustee should show reasonable skill; a. Establish the delegated scope of agency and powers; b. Review the agents actions and monitor performance; c. A trustee who complies with this will not be liable for the actions of the agent; iv. Duty to Diversify: 1. Traditional Rule cannot put all your eggs in one basket! a. Prudent Person Standard: i. All that can be required of a trustee to invest is that he shall conduct himself faithfully and exercise a sound discretion. He is to observe how men of prudence, discretion, and intelligence manage their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income, as well as the probable safety of the capital to be invested. 2. Modern Portfolio Approach a. No longer are stocks considered risky investments; b. Emphasizes that any asset, if bought at the right price, and if properly placed in a portfolio, with an understanding of diversification and risk, can be a wise investment; c. Investors should reduce risk by holding many different investments rather than by assuming that each investment is safe. d. Nothing is too risky as long as it can be balanced out. v. In re Estate of James: this decision occurred when NY was using the prudent person standard; it uses a great deal of prudent investor language; here, the testator died holding 71% of his assets in Kodak stock; the trustees held onto the stock as the price of Kodak stock fell substantially; (Estates and Trusts Spring 11) 111

1. ISSUE: Was there a duty for the trustees to diversify the trust portfolio? Yes. 2. RATIONALE: a. When the portfolio has 71% of one stock and no clause in the trust indicating that it was to remain that way, there is a duty to IMMEDIATELY diversify! i. Remember, dont want to dump all of the stock immediately, but rather do it over time because there may be a market impact if you sell huge block of stock at once; ii. Most banks have a policy that 1 stock should only constitute 10% of a portfolio. b. Executor v. Trustee: i. Argument that executors should not have the duty to diversify; ii. The court rejected this when the executor is in officer for a long period of time; c. Damages: i. Damages are based on the price the stock was worth when the lawsuit was brought minus the value of the stock when it was sold, plus interest; ii. Wanted to get appreciation damages (like Rothko), but they were unavailable because that case dealt with selfdealing and faithless transfers; vi. Within a reasonable time, a trustee should review the trust assets and determine whether to buy or sell assets; vii. Remember, investments are difficult; you may need to hire someone to do it! viii. Anti-Netting Rule: 1. If you breach a fiduciary duty with investments in 1 area, we wont let you balance it with good investments in another area; ix. Remember, just because you might not want to invest in a certain area, it does not mean that the trust should not invest in that area; 1. If you hate tobacco companies, the trust should still be able to invest there if you are the trustee your personal preferences should not come in the way of the trust; 2. We are trying to protect the settlors interest a. Remember, if the trust explicitly states: Dont trade in tobacco products! then you are not allowed to. d. Changing Conditions and Administrative Flexibility Deviation:

(Estates and Trusts Spring 11) 112

i. Stanton v. Wells Fargo Bank and Union Trust Co. : a trust was set up by the settlor during the Great Depression with assets well over $1 million; the trust indicated that if the stocks currently in the trust were sold, the proceeds could only be used to invest in AA bonds; all the beneficiaries wanted to invest in stocks to make more money because the trust is not keeping up with inflation; 1. ISSUE: Does the court have the power to change the conditions of the trusts to invest in stocks through the Doctrine of Changed Conditions? No. 2. RULE: a. There must be an emergency that undermines the purpose of the trust/the court needs to act in order to prevent the trust from failing for the court to change the conditions of the trust; 3. RATIONALE: a. Here, no such emergency existed. The trust was still making money and was worth more than it was when it was founded and therefore, the court stated that it will preserve the settlors intent and not change the terms of the trust (moreover, it was apparent that the settlor knew what he was doing especially since he was successful during the Great Depression).

(Estates and Trusts Spring 11) 113

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