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INTRODUCTION
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If the restriction were unreasonable, then it might be unconstitutional.
o Posner argues for cy pres approach to allow modification of conditions to testamentary gifts
o Restatement (Second) of Property: Donative Transfers
6.2 a restraint unreasonably limits the transferees opportunity to marry if a marriage permitted by the
restraint is not likely to occur.
Today, most courts apply a reasonableness test to restrictions to marry in wills, but some courts will hold the
restrictions invalid without consideration of their reasonableness.
o Incentive Trusts
Conditional gifts like in Shapira are today typically done as incentive trusts
People can leave their property in trust and the benefits can terminate if the beneficiary does or does not do
certain things.
This is useful motivation to encourage beneficiaries to be productive members of society
However, it can also backfire and does not account for changed circumstances
o Probate Courts
o Special courts that manage the commencement, administration, and winding up of an estate
o Purposes = (1) taking property titled in decedents name and getting it titled to the living; (2) protecting creditors;
(3) distributing property
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o Probate Property
Property titled in the name of the decedent
passes under will or through intestacy
o Non-Probate Property
Property that passes outside of probate under an instrument other than a will
property that is not titled in the name of the decedent
Examples
Joint tenancy property (both real and personal)
o Joint tenancy with right of survivorship
o Tenancy by the entireties
Life insurance (so long as there is a named beneficiary)
Pension funds/retirement funds
o (payable-on-death POD provisions)
Interests in trusts
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Regular bond = personal representative must go to bondsman for face value of the entire estate
(very expensive)
Many wills waive bonds and only minimal bonds are required
Possible liabilities
If the personal representative distributes property to beneficiaries and the decedent/estate has
tax liabilities, then the personal representative must pay the liabilities on the property already
distributed
o Two types of probate
Formal/supervised
Personal representative must file accounting with the court periodically and every penny has to
be recorded and balanced
Informal/unsupervised
Personal representatives is still required to be able to account to beneficiaries, but formal
accountings to the court are no longer required
Typically only happens when personal rep. is trusted family member etc
o Closing of the estate
Prof usually doesnt file a motion to close the estate but instead just lets it die
No expense to reopen the estate if an asset pops up down the road
o Challenging a will
Usually the same statute of limitations as making a claim against the estate as a creditor
o Probate is expensive
Some jurisdictions calculate fees as a percentage of the value of assets and some (and UPC) take the value
of the services rendered
Professional Responsibility
o Duties to Intended Beneficiaries
o In most states lawyer has fiduciary duty to intended beneficiaries
So under tort theory 3rd party beneficiaries can sue for malpractice
Under contract theory there must be privity of contract so 3 rd party benificiaries can sue under it for
malpractice
Simpson v. Calivas (pg. 58)
Facts Son sues fathers lawyer for drafting will incorrectly.
Father wanted to give wife life estate in the house, remainder to the son and all other property to the son
right away.
This was accurately reflected in lawyers notes.
The lawyer instead referred to the house as a homestead, and the court gave the wife a life estate in ALL
the property and son got nothing until she died (she was his stepmother).
HOLDING
Lawyer committed malpractice because the term homestead has a legal significance that a
layperson might not understand.
Probably would NOT be malpractice to write the wrong name of beneficiary, because the client
should catch that when reading will
The son has standing even though there was no privity, because
(1) he was an intended beneficiary and
(2) the injury was foreseeable
Fiduciary duty runs from drafting attorney to an intended beneficiary
The sons rights are derivative of his fathers reasonable expectations
o Malpractice suit goes to general jurisdiction court, NOT probate court
o About 10 states retain the no privity rule and do not allow intended beneficiaries to bring malpractice suits
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o Conflict of Interest
o Any time a couple walks into your office to do estate planning, there IS a conflict of interest
A v. B (pg. 64)
Facts Law firm represents husband and wife in estate planning and also represents other woman in
paternity suit against husband.
Issue Can the law firm disclose confidential facts about one client to another client?
HOLDING
Yes. Although firm owes duty of confidentiality to husband, it also owes duty to disclose
information to the wife in the course of estate planning, and the existence of a child out of
marriage is relevant to the estate planning.
Firm has discretion to disclose, but does not have a duty to disclose.
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Per Stirpes (by the stocks) right of representation (same thing) (pg 88) System treats each line of
descendents equally.
Per capita with representation Estate is divided equally to the first surviving generation:
Per capita at each generation UPC approach per capita at each generation. Combines 1&2 above
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Husband and wife die in plane crash. Wifes brain is intact and theres CO in her bloodstream.
Husbands brain is crushed and theres no CO in his bloodstream.
o Negative Disinheritance
o UPC
allows for negative disinheritance (UPC 2-101) and the barred heir is treated as if he disclaimed his
intestate share
o Common law
you cant disinherit someone by providing in your will that you dont want them to get anything unless
your will entirely disposes of all your property
If not, remainder passes through intestacy and heir will take under the intestacy statute
o Table of Consanguinity (p93)
o If someone has no surviving spouse, children, or parents, you would consult this chart (very rare)
o Try to find the person with the most common DNA with the deceased
o In drafting a will, you should go through relatives that have an actual relationship with the decedent and then to
charity to avoid disputes involving far-removed relatives
Transfers to Children
o Meaning of Children
Adoptive Children
Historically, adopted children were left out of intestacy statutes
Now, most states define adopted children to be the same as natural children
Four basic approaches
Adopted child inherits only from adoptive parents and their relatives
Adopted child inherits from both adoptive parents and genetic parents and their relatives
Adopted child inherits from adoptive parents and also from genetic parents and their relatives,
but only if the child is adopted by a stepparent (old UPC approach)
2008 UPC key determination = whether there was a parent-child relationship
(p101)
Hall v. Vallandingham (pg. 97)
Facts Husband died, wife remarried, and new husband adopted the children. First husbands
brother died and the children tried to inherit the distributive share their father would have
received.
HOLDING
o Children cannot inherit from natural fathers brother, because the children were
adopted by mothers second husband.
o This would give adopted children double inheritance.
Prof argues this is not a garden variety adoption
Under the old UPC, the children would take here, because they were adopted by their stepparent
Adult adoption
Most intestacy statutes draw no distinction between the adoption of a minor and the adoption of an adult
(in NY, you cannot adopt your lover)
This is utilized by people in atypical relationships (not married/ gay couples) to ensure inheritance
Can preempt will challenges by collateral kindred
Different from marriage, because you cannot get out of an adoption
Minary v. Citizens Fidelity Bank & Trust Co. (pg. 103)
Facts Woman left trust to her husband and three sons, and then to her then surviving heirs
according to the lawsthen in force in Kentucky.
Last alive son adopted his wife so that she could benefit from the trust as an heir of his mother.
HOLDING
o This is not allowed.
o The purpose of the adoption statute was NOT to allow the wife to inherit through her
husband against the testators intent.
Doris Duke
Doris fathers trusts were to go to Doris children but she didnt have any
At age 75, she adopted a young woman, but then they had a falling out
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Doris could not get out of the adoption and the woman got $65 million
Adult adoptions can be used as a type of special power of appointment by bringing the adoptee into the
class of remainder beneficiaries
Virtual adoption/equitable adoption/adoption by estoppel
Some people do not have the resources/sophistication to go through formal adoption requirements
Through virtual adoption, adoption paperwork is not properly completed but if certain conditions are
met, child will be entitled to share of adoptive parents probate estate.
ONeal v. Wilkes (pg. 109)
Facts Cook took in a girl that no one else wanted and raised her as his own. Never formally
adopted her, but referred to her as his daughter. Administrator of Cooks estate refused to
recognize her as his daughter.
HOLDING
o Not an adoption.
o Adoption is a statutory process and it was not satisfied here.
o No one had the legal authority to contract for the adoption.
Dissent We should look to the reality of the relationship through a moral and equitable
approach.
This doctrine has NOT been widely accepted, but some states allow it in unusual circumstances
Posthumous children
Children born after the death of the father are given rights to inheritance, with limitations
rebuttable presumption
o if the child is born within 280 days of the death of the husband, the child is treated as
being in existence as of the time of conception and therefore surviving the husband
o Anything more than 280 days burden falls upon the child to prove parentage
Uniform Parentage Act child born within 300 days of death of husband is presumptively the
child of the husband
Nonmarital children
At common law could not inherit from either parent
Now, all states permit inheritance from the mother
They should be able to inherit from both parents according to bloodlines
Very problematic because it can be very difficult to prove relation to decedent (DNA might be improving
this)
Reproductive technology and new forms of parentage
Hecht v. Superior Court (pg. 117)
Facts Boyfriend devised 15 vials of sperm to his girlfriend. His adult children wanted to
destroy the sperm.
HOLDING
o Court awarded the sperm to the girlfriend.
Woodward v. Commissioner of Social Security (pg. 118)
Facts Husband donated sperm when he got sick and then he died. Wife used sperm for
artificial insemination two years later and sought social security benefits for the children.
District Court certified questions of whether they were his children to the Massachusetts
Supreme Court.
HOLDING
o In some limited circumstances, posthumously conceived children can enjoy
inheritance rights.
o This is a case-by-case determination.
o Key question is whether or not the husband consented to
i. (1) the sperm being used to conceive children posthumously and
ii. (2) supporting such children.
Balance the interests of:
o The children (treated like all other children and not discriminated against due to
accident of their birth)
o The state (prompt and accurate administration of benefits)
o The reproductive rights of the decedent
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In re Martin B. (pg. 126)
Facts Martin granted a trust, and the trustee could distribute money to Martins issue during
his wifes life. James (Martins son) predeceased Martin, and James wife Nancy was artificially
inseminated by James sperm after James death.
Issue Do the children qualify as issue under the terms of the trust?
HOLDING
Yes. Look to grantors (Martins) intent.
Even though he probably didnt contemplate this, he intended to provide for his childrens
children.
o Surrogate motherhood and married couples/assisted reproduction and same-sex couples
There is a lot of confusion over the property rights involved in these cases and a lot of work to be done to
provide clarity
o Advancements
o Gifts given during lifetime are calculated in to total estate
o Parallel concept with wills (satisfaction)
o Common law
Any lifetime gift was presumed to be an advancement a prepayment of the childs share of the estate
o Many states
Lifetime gift is presumed NOT to be an advancement but is subject to rebuttal evidence that it was in fact
intended to be an advancement
o UPC and some states
Requires that the intention to make an advancement be made in writing signed by the grantor or grantee
OTHERWISE THERE IS NO ADVANCEMENT
o Guardianships, Conservatorships, Custodianship, and Trusts
o These are relevant when dealing with minor children or incompetent/incapacitated people
o Guardianships and conservatorships are expensive and time-consuming (must report to the court)
o Guardianships
Generally refers to taking care of the physical person
Also used to have a guardianship of the property
o Conservatorship
Replaced guardianship of the property
Now this refers to taking care of the property of the person
o Custodianship
Something like conservatorship person given property to manage on behalf of a minor
o Strategies to avoid guardianships/conservatorships
Create a trust
Power of attorney
o Uniform Transfers to Minors Act
You can create a custodial account for your minor child under this act
However, a trust is probably better because you can condition the use of the funds
Bars to Succession
o Homicide
o Majority Rule
Most states forbid slayers from inheriting from their victims
Most states treat the slayer as having predeceased the decedent
UPC provides that the slayer disclaimed the property (treated as having died immediately before
distribution)
o Minority Rules
Some states allow it, reasoning that there are other punishments
Other states have statutes, others rely on judicial decisions
Possible solutions in judicial decisions
o Legal title passes to slayer (court cant legislate)
o Legal title does not pass to slayer (b/c of equity)
o Legal title passes to slayer, but equity holds him to be a constructive trustee for the
heirs or next of kin of the decedent
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Court doesnt completely ignore intestacy statute if slayer is supposed to take
under it
Maintains constant chain of title
o Constructive trust = remedy
Persons name is attached to title of property, but person doesnt have any equitable rights in the
property court can force the person to turn it over to next of kin
In re Estate of Mahoney (pg. 145)
Facts Wife convicted of manslaughter of decedent. There was NO slayer statute that governed.
HOLDING
Court remands the case to determine whether it was voluntary or involuntary manslaughter.
If voluntary, constructive trust should be created.
o Most states do not allow people to opt out of the slayer statutes (if H thinks W is crazy and might kill him, but
doesnt want to hold it against her)
o Well-drafted instruments and the UPC also prevent slayers from getting non-probate property
o Chinese system takes into account not only homicide but also other forms of good/bad behavior
o Disclaimer
o Aka renunciation
o Definition = person that is entitled to inherit declines to accept the property
This is generally governed by state law
Generally the person disclaiming is treated as predeceasing
o Person might disclaim for federal tax purposes
If so, must comply with IRS Code 2518 (p153)
Cannot accept benefits and then reject them later
Must make disclaimer in accordance with formalities within 9 months after the interest passes
Drye v. United States ( pg. 155)
Facts Son of intestate mother disclaimed because he owed the IRS backtaxes and wanted the money to
go to his daughter.
HOLDING
You cannot disclaim when the IRS comes calling.
o Disclaiming to qualify for Medicaid
This area is in limbo whether you can disclaim or not
Troy v. Hart (pg. 156)
Facts Medicaid recipient appeared to be incapacitated, and his siblings got him to sign a
disclaimer without the knowledge of the power of attorney.
HOLDING
o Court held the disclaimer valid, but said the amount disclaimed had to be reported to
the Medicaid authorities and might be subject to an action by the state to recover the
funds.
o Basically have to disclose to Medicaid your wealth or potential wealth so if you disclaim
an inheritance that would disqualify you from Medicaid you still may not qualify b/c
Medicaid will take that into account
A. Mental Capacity
o The Test of Mental Capacity
Requirements to make a will
Requirements are very low
Testator must be an adult (most places 18 y.o.)
Testator must be sound mind:
Must be capable to:
o Know the nature and extent of his property
o Know the natural object of his bounty
Theres a natural category of people that we would expect the testator to want
to benefit (spouses, children, blood relatives)
o Know the disposition that he is making of that property
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o Relate these elements to another
o There is NO INTELLIGENCE requirement
These are simply general rules to allow people to express their intent to have a will
o Burdens of proof
Majority = presumption of competency (Wilson)
Person challenging will has to rebut the presumption
So once there is prima facie evidence of due execution of will party contesting it has burden of
proof
Minority = burden on proponent of will to show testamentary capacity (Washburn)
In re Estate of Washburn ( pg. 159)
Facts Decedent executes three wills.
Each will gives greater portion of estate to nurse caretaker
Principal beneficiary under second will challenged the third will and argued decedent lacked capacity to
make that will due to Alzheimers.
HOLDING
Court found that there is a presumption that everyone is competent
o This must be rebutted by person challenging the will
Burden shifted to caretaker to show Decedents capacity which she could not
Court held third will invalid because there was no showing of testamentary capacity
there was medical evidence of her Alzheimers and her statements conflicted with the contents
of the wills.
beneficiary of the third will was NOT a relative, so the court might have been a bit more
skeptical because of that.
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Protection of peoples interests
Assures testators intent is expressed
Protect them from unscrupulous 3rd parties
o Insane Delusions
o Insane delusion
False sense of reality to which person adheres despite all evidence to the contrary
o A person can have sufficient mental capacity generally to execute a will however, if he is suffering from an insane
delusion the will may fail for lack of testamentary capacity
the insane delusion MUST be related to or drive the will in some way
general insane delusions are not enough
HYPO
Woman goes around DC telling people that a man lives on moon and only eats blue cheese
She can do this for years and still write a perfectly valid will
Unless her will gives all or a substantial portion of her property to the man on the moon
o In that case the insane delusion drives the will
o This test is separate from the mental capacity test
Being strange or eccentric is not enough it has to be pretty much crazy
o Causation requirement
If the insane delusion does not affect the disposition, then the will is still valid
Most states require the delusion to have a material effect on the disposition
Some states require only a showing that the delusion might have affected the disposition
o Most common example
False (crazy) belief about a member of the testators family causes them to exclude them from the will
o Difference between insane delusion and a mistake
A simple mistake will NOT invalidate the will
In re Strittmater (pg. 169)
Facts Ladys will gave all her money to a womens organization that she worked with. Her cousins were
her only heirs at law and they challenged the will.
HOLDING
Her will was driven by insane delusions and is therefore invalid.
This decision was motivated by hostility toward womens movement. But prob just a social/
political decision in 47 by an old judge with views on feminists
o just a relic from the past
Breeden v. Stone (pg. 171)
Breeden left a handwritten will basically leaving everything to Sydeny Stone
Killed himself after writing will and prob being on a coke binge and killing someone a few days before in a
hit and run accident
His relative contested the will arguing insane delusions
He was moody
Scared of govt agents threatening him and his dogs safety
Was on a coke binge
HOLDING
Will was upheld
Basically his delusions went towards his own safety and the will had nothing to do with that so
the will is upheld
Delusions unrelated to will
The will in this case was a holographic will
A will that is written in handwriting of testator and is NOT witnesses in ordinary course of law
Half of states allow these
o Typically rural or southern jurisdictions
In re Honigmans Will (pg. 178)
Facts Couple lived in new York and made their fortune owning deli shops in NYC
Mr honingman had health problems and surgeries etc and became depressed
In depression Husband had insane delusions that wife was cheating on him and excluded her from his
will.
HOLDING
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Court denied probate of the will. Court placed burden on will proponents to show the insane
delusion did not affect the disposition.
o Dead Mans Statutes
o These statutes refuse to allow an interested party testify about oral statements made by the decedent
o Rationale = only person who knows what really happened is dead
o These still exist in a minority of states
Undue Influence
o Definition
o When the will of the person who becomes the testator is coerced into doing that which he or she
does not desire to do
o Restatement if the wrongdoer exerted such influence over the donor that it overcame the donors free will and
caused the donor to make a donative transfer that the donor would not otherwise have made
o Undue influence does not require a lack of mental capacity
But it is very common that the testator was vulnerable
Young
Old
Frail
Compromised capacity (ie low IQ)
o Scope
o Only the portions of the will that are affected by the undue influence will be held invalid and the rest of the will
will be upheld, if possible
o Burden Shifting
o In most jurisdictions, the person challenging the will must establish a prima facie case of undue
influence
o must show that:
There was a confidential relationship
If a person is in a confidential relationship with someone making a will, he should take
precautions in order to show that the will was fair and not the product of undue influence
Defendant received bulk of the estate
Testator was of weakened intellect
o Some jurisdictions allow showing one or more other suspicious circumstances
Restatement provides list of some suspicious circumstances (p185)
o If this is satisfied, the burden shifts to the proponent of the will to establish there was no undue influence
o Elements
o Evidence to prove undue influence will often be circumstantial and inferential
Restatement in the absence of direct evidence, circumstantial evidence is sufficient to raise a
presumption of undue influence if the contestant proves:
Susceptibility
o donor was susceptible to undue influence
Opportunity
o Alleged wrongdoer had opportunity to exert undue influence
Motive
o Wrongdoer had motive or disposition to exert undue influence
Causation
o There is a result appearing to be the effect of the undue influence
o Property was disposed of in a manner testator would not have otherwise done
Its likely that no neutral witnesses will be able to testify about the alleged influence
Estate of Lakatosh (pg. 182)
o Rose, Old lady lived alone, no visitors etc
o Roger Jacobs began visiting her once or twice a day
Begins helping her with stuff taking her around etc
o After a few months Roger suggests that Rose give Roger power of attorney
o Roger sent her to his counsin a lawyer to sign the power of attorney
o She also made a will giving Roger everything
o HOLDING
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Will was invalid.
Court looked to the three elements of the burden shifting test:
(1) there was a confidential relationship;
(2) person enjoying such relationship received bulk of the estate;
(3) decedents intellect was weakened.
Because all three of these were met, the burden shifted to the guy to show that there was no undue
influence and he could not do that.
In re Will of Moses (pg. 186)
o Woman married three times and all three husbands died.
o She then became involved with a younger man (Holland) who was an attorney
o 3 years before death she left all of her property to Holland
Holland had no knowledge of this will as Moses went to another lawyer
o Sister challenged the will as a product of undue influence.
o HOLDING
Court held the will invalid.
Although the woman had independent counsel, the attorney did not give adequate advice.
o Dissent The other attorney did exactly what he was supposed to. The woman knew how she wanted to dispose of
her property, and the other lawyer did that for her.
o Prof agrees with dissent and says there probably wasnt even a prima facie case of undue influence here.
He didnt even do anything to exert any influence and didnt even know about the will.
o This case points out that lawyers have to be very careful in entering into relationships with previous clients
(although Prof thinks this was misguided)
o Bequests to Lawyers Rule 1.8(c)
Lawyer shall not solicit any substantial gift from a client, including a testamentary gift, or prepare on
behalf of a client an instrument giving the lawyer or a person related to the lawyer any substantial gift
unless the lawyer or other recipient of the gift is related to the client
o Sexual Relationships and Undue Influence
o A sexual relationship used to be viewed as evidence that undue influence was more likely
o More recently, a sexual relationship has been viewed as evidence that the decedent would have wanted the person
to benefit (treated as natural object of bounty)
In re Kaufmanns Will (pg. 191)
o Wealthy man had committed relationship with a same-sex partner.
o He executed multiple wills that gave larger and larger portions of his estate to his partner.
o Family challenged the will.
o HOLDING
Undue influence.
The man was vulnerable to his strange sexual preferences.
o This is probably not still good law in New York, but probably would be in lots of jurisdictions.
o Avoiding Undue Influence Charges for Non-Traditional Relationships
Adult adoption
Not available in all states and cannot be undone if the parties have a falling out
Owning property jointly with right of survivorship
However, if the parties have a falling out, the only way the property can be severed is by going to the
court and bringing an action for partition (expensive and problematic)
Revocable inter vivos trust
More flexible can be changed without litigation
You can control your property during your life and then it is disposed of according to the trust at your
death
Lipper v. Weslow (pg. 193)
o Will contest
o Sophie Block had 3 kids
o One died and left two children
o Blocks will, written by her lawyer son, left out the dead son and thereby the grandkids leaving her estate entirely
to her two living children
o Block resented the grandkids and their mother (daughter-in-law)
Didnt come visit
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Didnt like her
Werent nice etc
o HOLDING
No undue influence.
Although there was a confidential relationship and the son benefitted disproportionately, the decedent
made her wishes clear and they were confirmed in statements to uninterested witnesses.
o Prof thinks the court should have taken a closer look at the suspicious circumstances (drafter got more than his
intestate share, lived next door with key to house, bore malice toward his brother, will was executed 22 days before
she died, lady was in bad health, witness was a maid probably paid by the drafter).
o The burden should have shifted here, but it didnt.
o In will Block explains why she did not like the kids
Normally, you dont want to have a specific justification for the reasons for excluding someone
If these go into the will, they can be challenged
Prof says that explanation is not a good idea b/c it sets yourself up to be contradicted
If she wanted to do something she had to do something short
I know XXX exist but I am intentionally leaving them out
Or write a memo to the file that person is being intentionally left out
o No contest clauses/in terrorem clauses
o definition
Provision in will that states if a beneficiary under the will sues contesting it the beneficiary loses whatever
he was entitled to under the will
o Baited no contest clause
Give the possible challenger a gift that they risk losing if they challenge the will
A no contest clause is useless if the person challenging will gets nothing or has very little to lose
o Most cases will enforce these UNLESS there is probable cause for the challenge
Some states will not enforce these under any circumstances
Prof puts these clauses in almost every will she does
Fraud
o Definition
o When the testator is deceived by a deliberate misrepresentation AND
o The misrepresentation causes testator to dispose of property in a way he would not have if misrepresentation was
not made
o Misrepresentation includes:
o (1) the intent to deceive the testator and
o (2) the purpose of influencing the testamentary disposition
o Two types of fraud
Fraud in the inducement
When the testator is misled about material facts which causes him to sign a will he would not normally
sign
Doesnt address the will per se but just important facts
Example an heir promises to convey property to a person that the testator wants the property to go to
so that the testator doesnt put that provision in the will and the heir had no intention of conveying the
property
Fraud in the execution
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When a person intentionally misrepresents the character or contents of the instrument signed by the
testator which does not in fact carry out the testators intent
Example putting a will in front of a person that is pretty much blind and telling them it is a deed and
having them sign it
o Scope
o Similarly to undue influence, only the portion of the will procured by fraud will be invalid and the
rest of the will will stand, if possible
o Fraudulently procured inheritance is invalid only if the testator would not have otherwise devised the property if
he knew the true facts
o Example
A man defrauds a woman into marrying him even though he was already married and they live happily
together for a year
Even though the marriage was a fraud, the woman leaving everything to the husband might not be a
result of the fraud, because she might have done that based upon their intimate relationship, and not
necessarily the legal characterization of their relationship
Puckett v. Krida (pg. 209)
o Live-in nurses convince a woman that her relatives were wasting her money and wanted to put her in a nursing
home, neither of which was true. The woman changed her will to benefit the nurses.
Holding Fraud in the inducement.
There is a distinction between fraud and undue influence
Duress
o Definition
o When undue influence becomes overtly coercive
o Restatement a donative transfer is procured by duress if the wrongdoer threatened to perform or did perform a
wrongful act that coerced the donor into making a donative transfer that the donor would not have otherwise
made
Latham v. Father Divine (pg. 210)
o Decedent made a will leaving everything to Father Divine.
o Nieces (not her heirs at law) talked to decedent and convinced her to draft a new will, naming them as
beneficiaries.
o Before decedent could sign the new will, she fell ill and died
o the nieces alleged that Father Divine killed her to prevent her from signing the new will.
o Lower Court threw out the complaint for failure to state a claim.
o HOLDING
Reversed and remanded. (Ps stated a case for relief)
If Father Divine killed the lady to keep her from changing her will, a constructive trust would be imposed
for the benefit of the beneficiaries under the second will.
Duress, fraud, and undue influence also used to prevent person from signing new will
o If this is the case, a constructive trust can be imposed on behalf of the intended beneficiaries under the new will
o A constructive trust can be imposed on an heir who is innocent if other heirs unduly influence a person not to
make a will that would benefit someone else and die intestate instead
Reasoning = they wouldnt have benefitted at all under the will
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o Elements
o Reasonable expectancy of inheritance
o Intentional interference w/ expectancy through tortuous conduct
fraud, duress, undue influence, but NOT lack of mental incapacity
o Causation
Tortuous conduct caused the interference
o Damages: Not recovered against the estate, recovered against interferer.
Schilling v. Herrera (pg. 215)
o Nurse moves in with decedent
o convinced her to execute a will (probably undue influence).
o Decedent dies and nurse does not notify her brother (heir at law) and puts the will through probate.
o Brother brings an action for tortious interference with an expectancy.
o Lower Court dismissed his complaint.
o HOLDING
Reversed and remanded.
If the nurse did this, then he would be entitled to relief.
b/c fraud was not discovered until after probate had finished (and brother was not notified of death and
probate) he wasnt prevented from bringing suit b/c he hadnt exhausted all remedies
Anna Nicole Smith
o Decedents son was trying to get assets out of the probate stream so that she couldnt get to them
o She brought a tortious interference case and ultimately prevailed
A. Execution of Wills
o Attested Wills
o The functions of formalities
Ritual function = makes the testator aware of the severity of executing a will
Evidentiary function = increases the reliability of the proof presented to the court
Protective function = safeguards testator from undue influence, fraud, duress
Channeling function = easier for courts to determine testators wishes if all wishes are recorded in
standardized forms
o Basic formalities
In writing
Signature by testator
Attestation by witnesses
Pennsylvania doesnt require attestation
o Profs custom in execution
elements
In writing
Witnessed by at least two witnesses
Testator and witnesses are all in the same place at the same time observing each other sign the
will
Wise to follow the most conservative adherence to formalities so the will is upheld wherever it may be
challenged
Attestation clause
An attestation clause provides that the will was duly executed
These are not required in any state, but it gives rise to a presumption of due execution and its probably
malpractice if you dont include one
Wills execution can be upheld even if the witnesses predecease the decedent or cant remember the
execution
Affidavit of execution
This is a modern approach that allows the testator and witnesses to swear before a notary public that they
signed the will properly
Makes it very difficult to challenge the will on execution grounds
Two step self-proving will
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A separate affidavit is appended to the end of the will, and it contains an oath of the witnesses
(and often the testator) that the will was validly executed
One step self-proving will
Testator and witnesses sign only once and the affidavit language is folded into the attestation
clause
o Strict Compliance: Writing, Signature, and Attestation:
o Under the traditional rule, for a will to be admitted to probate, it must be in strict compliance with the formal
requirements of the applicable Wills Act
Elements
Will must be
(1) in writing;
(2) signed by testator;
(3) signed by at least two witnesses; and
(4) any additional requirements of the jurisdiction
o Formalities in execution serve a purpose and we dont want to enter the slippery slope of whether or not the
execution was adequate to convey the testators intent.
Need to balance the need for a clear rule to avoid litigation with fairness toward people without resources
and their right to dispose of their property as they want
In re Groffman (pg. 228)
Facts Testator acknowledged his signature to the two witnesses separately and neither witness saw the
other witness sign.
HOLDING
Will Invalid.
Procedure wins over substance.
The testator did not satisfy the requirements of the Wills Act.
Lawyer here screwed up
Stevens v. Casdorph( pg. 229)
Facts Testator signed a will at the bank, and then the bank manager took it to two tellers to sign as
witnesses.
HOLDING
Will Invalid.
Two problems:
o (1) witnesses were not present when testator signed and he didnt acknowledge his
signature or publish the will as his and
o (2) the testator was not present when the witnesses signed the will (line of sight rule).
Dissent This approach is too strict and we are supposed to focus on the intent of the testator.
Presence in will execution
Line of Sight Test
Most jurisdictions apply the line of sight test
Requirement that the witnesses sign in the presence of the testator is satisfied only if the
testator is capable of seeing the witnesses in the act of signing (does not actually have to see
them sign, only has to be able to see them sign)
Conscious Presence
Some jurisdictions apply the conscious presence test
Witness is in the presence of the testator if the testator, through sight, hearing, or general
consciousness of events comprehends that the witness is in the act of signing
UPC dispenses with presence requirement and provides two options
Signed by two people within a reasonable amount of time after witnessing signing of the will or
acknowledgement of the will
Acknowledged to a notary public
The meaning of signature
Signature by mark, with assistance, or by another
Preferable to have a full name signature, but a mark, cross, nickname, or abbreviation will
probably be sufficient
Typing up a will and typing the signature in a cursive font can be sufficient (Taylor v. Holt)
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Order of signature
Generally, testator should sign before witnesses
If everything happens in one transaction, the order is not critical
Subscription and addition after signature
Subscription = requirement that the testator sign at the end of the will
o This applies in a few states
Addition after signature
o If you handwrite something on a will
If written AFTER the testator signed will is probated and the handwritten
addition is ineffective because its an invalidly executed codicil
If written BEFORE the testator signed will might not be probated
Delayed attestation
NY requires witness to sign within 30 days
UPC requires reasonable time
Some cases say signature after the testators death is even ok
o The meaning of writing
Will doesnt have to be on paper only need a reasonably permanent record
oInterested witnesses and purging statutes
oInterested witness
witness that stands to benefit from the will
o Traditionally, a will would be invalid if any required witness was an interested witness
Parsons Case
Facts Lawyer got an interested witness to disclaim any interest under the will in an effort not
to have the will invalidated.
Holding Invalid. Witness must be disinterested at time of signing will.
o Purging statutes tried to remedy this by purging the benefits of the interested witness instead of throwing out the
entire will
Most states have purging statutes that purge only the benefit that the witness would receive under the
will that is in excess of what the witness would have received in intestacy
Estate of Morea (pg. 239)
Facts Son served as witness to a will that he benefitted from.
Holding Will is valid because son actually would have benefitted more under intestacy statute
and therefore had nothing to gain from the will.
o UPC and a minority of states do not require witnesses to be disinterested
Recommended method of executing a will pp. 242-245
o Safeguarding a will
o 3 possibilities as to where to keep a will
Testator keeps it and stores it somewhere
Law firm keeps the will at testators request
File the will with the probate court
o Problems w/ each
Testator could destroy, damage, misplace, scribble on the will or relatives could try to destroy it after
death
Law firm has burden of keeping will and periodically reminding testator it is in the firms possession
If the court has the will, it is difficult to change the will quickly
o Multiple originals = horrible idea
o Curing Defects in the Execution of Attested Wills
o Excusing execution defects by ad hoc exception
To avoid harsh results of strict compliance, some courts have occasionally excused or corrected an
obvious execution defect
Basically some courts will just correct will if obvious mistake (others wont)
In re Pavlinkos Estate (pg. 246)
Facts Husband and wife did not speak English and mistakenly signed each others wills
(mirror image wills). Wife dies and her will is not probated. Husband dies and they try to
probate his will.
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Holding Invalid. The court applied the 4 corners rule and held the will was a nullity and total
nonsense.
Dissent This is ridiculous. We should apply the 8 corners test and that would show us the
clear collective intent of the husband and wife.
In re Snide (pg. 250)
Facts Husband and wife mistakenly signed each others will.
Holding Will was upheld. Court allowed exception to strict compliance rule.
Dissent Majority misconstrues the case law, which weighs heavily in the direction of
invalidating the will.
This case was roundly criticized when it was decided
Which will would you apply for probate?
The will they signed contains incorrect provisions that dont make sense
The will that makes sense is not signed by the decedent
Curative Doctrines: Substantial Compliance and Harmless Error
Substantial Compliance
Rule
o court may deem a defectively executed will as being in accord with the statutory
formalities if the defective execution nonetheless, by clear and convincing evidence,
fulfills the purposes of those formalities
In re Will of Ranney (pg. 253)
o Facts Witnesses signed a two-step self-proving affidavit without having actually
signed the will beforehand as the affidavit said.
o Wife attacked the will for improper execution.
o HOLDING
Court applies the substantial compliance rule and remands to determine
whether purposes of the formalities were fulfilled.
o Prof is bothered by this case because a lawyer and two other people that work in a law
office get away with taking an oath that isnt true
o Prof also personally believes that most jurisdictions would not go this far with the
substantial compliance doctrine to uphold the will
Harmless Error (aka the dispensing power)
Rule
o court may excuse noncompliance with statutory formalities if there is clear and
convincing evidence that the decedent intended the document to be his will
UPC Harmless Error Rule
o Document is treated as if it had been executed in compliance with the wills statute if
the proponent of the document establishes by clear and convincing evidence that the
decedent intended the document or writing to constitute (i) the decedents will, (ii) a
partial or complete revocation of the will, (iii) an addition to or alteration of the will, or
(iv) a partial or complete revival of his formerly revoked will or of a formerly revoked
portion of the will
In re Estate of Hall (pg. 259)
o Facts Husband already had a will, and then went to make a joint will with his wife.
o They wanted the draft to serve as their joint will until the joint will was finalized
they signed it and it was notarized without witnesses.
o Wife applied the will for probate but the husbands daughter from a previous marriage
challenged it.
o HOLDING
Will is valid.
The husband intended the draft joint will to be his will.
It purported to revoke his original will and he ordered his wife to destroy his
original will.
o Montana had enacted the UPC Harmless Error Rule.
Comparing substantial compliance and harmless error
Lots of similarity, but a few differences
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Langbein was the architect of both and he came to prefer the harmless error rule because of its
focus upon the testators intent
o Notarized Wills
o UPC provides a will is valid if signed by two witnesses OR signed by a notary
Prof is skeptical because lots of times notaries sign things without having actually seen the person sign
the document
Prof doesnt know of any states that have adopted this yet
In re Will of Ferree (pg. 266)
Facts Guy wrote out his will on a will form and had it notarized, but not attested to by witnesses.
Holding
Will is invalid.
Having the will notarized did not satisfy the substantial compliance rule.
o A notary can serve as an attesting witness if he intends to sign as a witness rather than as a notary
You would still need another witness to satisfy the attestation requirement
o Holographic Wills
o Definition
A will written in the testators hand but not signed by witnesses
Could take the form of a letter, scribble on pad etc
Slightly over half the states recognized holographic wills
Mostly popular in west and south (rural jurisdictions)
UPC recognizes holographic wills
o Signature
In almost all states allowing holographic wills, the signature can be anywhere on the face of the document
However, if the signature is not at the end, there may be doubt as to whether the decedent intended his
name to be a signature
o Often times holographic wills are written in extreme circumstances close to death
Kimmels Estate (pg. 269)
Facts Father writes a letter to his sons that says if anything happens he wants his two sons to take his
property (specifically listed pieces of property).
HOLDING
Valid holographic will.
Court focused upon fathers intent.
Signing it Father was a valid signature, because thats how he signed all his letters.
Factors pointing toward holographic will
Phrase if anything happens followed by specific pieces of property
Told the sons to hold onto the letter because it might help them
Sent the letter to the intended beneficiaries
Factors pointing against holographic will
Doesnt seem to be contemplating death
Leaves out natural object of his bounty
Lack of clarity court was forced to speculate
Conditional Wills
Some wills are written to become operative if death from a particular event occurs
Most cases presume that the language of the condition does not mean that the will is to be probated only
if stated event happens but is instead a statement (inducement) for making the will (ie they are thinking
about death)
Eaton v. Brown (pg. 272)
Facts Lady wrote a holographic will stating that if she died on a journey, she wanted
everything to go to her adopted son.
She died after returning from the journey.
HOLDING
o SCOTUS upholds will.
o The conditional language was evidence of why she was motivated to make the will, but
wasnt intended to limit its effectiveness.
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At the time, the adopted son would not have taken under the intestacy statute, so this might
have motivated the Courts decision.
Pre-Printed Will Forms
Holographic will statutes vary in how they treat pre-printed will forms w/ handwriting and whether or
not it is a valid holographic will
First-generation statutes entirely written, signed, and dated in the handwriting of the
testator
o Traditionally, a will had to be completely handwritten to be a valid holographic will
o Ten states still require a holographic will to be entirely in the handwriting of the
testator and two of these require the same for the date
Second-generation statutes material provisions
o Required only the signature and the material provisions to be in the testators
handwriting
o A court could ignore the pre-printed text and uphold the will if looking at only the
written portions made sense as a holographic will
Third-generation material portions and extrinsic evidence
o The court may look to the pre-printed text to give context to the handwritten portions
as a holographic will
In re Johnson (not in book)
Facts Man used pre-printed form and wrote my estate to followed by a list of people and
fractions, as well as a church.
HOLDING
Will Invalid.
Court looked only to the handwritten language and found no dispositive language or language
of testamentary intent.
Estate of Muder (pg. 276)
Facts Man used form with pre-printed text I give to and handwrote my wife followed by a
list of property.
HOLDING
Valid holographic will.
Court looked to the pre-printed language to find the testators testamentary intent.
This case was decided shortly after Johnson but didnt cite to it Prof thinks the court was
motivated by antipathy toward the church in Johnson and that these cases should have been
decided same way.
Revocation of Wills
o Revocation by Writing or Physical Act
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o A will is ambulatory it can be modified or revoked by the testator during his lifetime
o How to Revoke
All states permit wills to be revoked in one of two ways
1) Subsequent writing executed with testamentary formalities
2) A physical act, such as destroying, obliterating, or burning the will
o Oral declarations of revocation are insufficient in all states
o UPC
Revocation by physical act must be accompanied by intent to revoke
Allows someone other than testator to revoke by a physical act IF performed in the testators conscious
presence and by the testators direction
At common law you would have to do it yourself (could not delegate)
o Revocation by Inconsistency
If a subsequent will does not expressly revoke previous one but makes a complete disposition of the
property the previous will is revoke by inconsistency
However, if a subsequent will does not expressly revoke the prior will and does not make a complete
disposition of the former will, it is viewed as a codicil
o Handwriting on a will can give rise to a presumption of revocation
Prof had to get affidavits swearing that the handwritten marks were made BEFORE the testator and the
witnesses signed it to probate a will
o Revocation is only presumptive and subject to rebuttal
Revocation must be subject intent
So a tear on a will that was not made to revoke will should not revoke the will
But this is hard to prove
o Revocation by Presumption
If the will is known to be in the possession of the decedent, but cannot be found after her death, there is a
presumption of revocation
This presumption can be overcome in certain circumstances (if a disinherited heir had access to the
house, if the house burned down, etc.)
Harrison v. Bird (pg. 287)
Facts Decedent asked her attorney to destroy her will and he tore it into pieces in front of his secretary
and brought the pieces to her house in an envelope.
HOLDING
Will was revoked.
The attorney tearing it up was NOT revocation, but the fact that she was known to have the will and it
could not be found gave rise to a presumption of revocation.
Note: this probably would NOT have satisfied the conscious presence rule of the UPC unless the lady was
on the phone with the lawyer as he was tearing it up.
o Probate of Lost Wills
In states without a contrary statute, if the will is lost/destroyed without the consent of the testator or not
in compliance with the revocation statute, the will can be submitted to probate if the contents can be
proven
(for example, if there is a copy of the will somewhere)
Thompson v. Royall (pg. 290)
Facts Decedent wanted to revoke her will and codicil but the lawyer suggested she keep them for her
reference in case she wanted to make another will.
Lawyer wrote on the back of will that it was null and void and she signed it.
HOLDING
Will was probated.
She had the intent to revoke the will, but did not do an act of revocation.
The writing of the attorney on the back did not touch any of the language of the will as required
by the statute.
If holographic wills were permitted in this jurisdiction, she should have written the note herself and
signed it and it would have been revoked by holographic codicil.
If someone wants to revoke a will by writing cancelled there are two ways to accomplish it
Holographic codicil revocation
Act of revocation if the word cancelled is written across the text of the will
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o Partial revocation by physical act
Many states allow partial revocation by physical act but many do not
Reasoning for NOT allowing partial revocation by physical act
Revoking a gift to someone = someone else taking a gift, and making a gift can only be done
through a testamentary writing
Opportunity for fraud
o Dependent Relative Revocation and Revival (DRR)
o definition
if the testator purports to revoke his will upon a mistaken assumption of law or fact, the revocation is
ineffective if the testator would not have revoked his will had he known the truth
Reasoning = testator lacks true revocatory intent
Example = a testator destroys his will under the belief that a new will is valid, but in fact the new will is
invalid
o DRR can be applied to only a portion of a prior will
If a second will revokes an earlier will, but some of the second wills provisions fail, the revocation of the
earlier will is presumptively ineffective to the extent necessary to give effect to the dispositive provision in
the earlier will that the failed dispositive provision in the later will replaced
Limitations on DRR
Most courts say that DRR can only apply where:
There is an alternative plan of disposition that fails OR
Estate of Ausley (pg. 299)
Facts Lady revoked her will and had her lawyer draft a new will. The new
will was not executed because she wanted minor changes to be made from the
draft.
HOLDING
DRR was not applied.
Even though the attorney testified as to the new plan of disposition,
the testimony was not sufficient evidence of alternative plan
Campbell v. French (pg. 299)
Facts Person executed a codicil that read I revoke the legacy to Judy,
because Judy is dead and Judy was alive.
Holding DRR applied.
Where mistake is recited in the terms of the revoking instrument OR
Possibly Clear and convincing evidence
o Limited amount of extrinsic evidence allowed
LaCroix v. Senecal (pg.295)
Facts Lady executed a will and then executed a codicil where she revoked a provision of the will and
made minor changes.
The codicil was invalid because one of the witnesses was an interested witness.
HOLDING
Original will was not revoked.
If the testator would have known that the codicil would not have been upheld, she never would
have revoked her will.
Estate of Alburn (pg. 300)
Facts Lady executed one will, and then a second will (which revoked the first will) and then destroyed
the second will.
HODLING
Second will was not revoked.
There was evidence that the lady destroyed the second will believing that it would revive the first
will, but this wasnt allowed by statute.
The court held she would rather have the second will than the die intestate.
o Revival
o Fact pattern
Person executes will #1 and later executes will #2. Person later revokes will #2.
Does this revive will #1?
o Three approaches
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A few states/English common law
Will # 1 never revoked
Will #2 wouldnt revoke will #1 until the testators death, so the destruction of will #2 doesnt
even technically revive will #1, as it could not have been revoked until death.
Majority of states
Will #2 revokes will #1 upon execution, but upon revocation of will #2, will #1 is revived if the
testator so intends.
Minority
Will #2 revokes will #1 and will #1 cannot be revived unless re-executed with testamentary
formalities or republished by being referred to in a later duly executed testamentary writing
o UPC 2-509
(a) If a second will wholly revokes a first will and the second will is revoked by a revocatory act, the first
will is revived if it is evident from the circumstances of the revocation or from the testators
contemporary or subsequent declarations that the testator intended the first will to take effect as
executed
(b) If a second will partly revokes a first will and the second will is revoked by a revocatory act, the first
will is revived unless it is evident that the testator did NOT intend the revoked part to take effect as
executed
(c) If a second will revokes a first will wholly OR in part and the second will is revoked by a third will, the
first will is revived to the extent it appears from the terms of the third will that the testator intended the
previous will to take effect
o Revocation by Operation of Law: Change in Family Circumstances
Divorce
Most states have statutes that provide that a divorce revokes any provision in the decedents will for the
divorced spouse
In the other states, revocation occurs only if divorce is accompanied by a property settlement
These normally apply only to wills and not to life insurance policies, pensions, or other nonprobate
transfers
UPC applies to both probate and nonprobate transfers
Marriage
Pretermitted spouse is entitled to intestate share in most states chapter 7
Birth of Children
Pretermitted child is entitled to a share in the estate in most states chapter 7
COMPONENTS OF A WILL
o Integration of Wills
o Rule
all papers present at the time of execution intended to be part of the will are integrated into the will
o Problems can arise if pages arent properly fastened, there is no internal coherence in the will, fonts are different
on one page, each page isnt initialed by the testator
Estate of Rigsby (pg. 308)
Facts Two page holographic will and only one page was signed. The pages werent fastened, didnt refer
to each other, and conflicted with each other.
HOLDING
Only the first page was admitted as a holographic will.
The other page could have been a worksheet that was not intended to be a part of the will.
o Republication by Codicil
o Rule
a will is treated as re-executed/republished as of the date of the codicil, even if the codicil does not
expressly republish the will, unless inconsistent with testators intent
o Examples
Suppose a testator revokes a first will by executing a second will, and then executes a codicil to the first
will the first will is republished and the second will is revoked by implication (squeezed out)
If a will is witnessed by interested witnesses but the codicil is witnessed by disinterested witnesses, then
the original interested witnesses will not be purged of their gifts
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o In order to be republished, you must already have a validly executed will (different from incorporation by
reference, where a will can incorporate documents that have not been validly executed)
A properly executed codicil CANNOT cure improperly executed will
o Incorporation by Reference
o UPC 2-510
A writing in existence when a will is executed may be incorporated by reference if
the language of the will manifests this intent
describes the writing sufficiently to permit its identification
and writing in existence at time will executed
o Example
A will says the testator wants to give a dime to every name in the Manhattan phone book
This manifests an intent to incorporate AND sufficiently describes the writing
o Personal property UPC 2-513
Testator can incorporate a list to dispose of tangible personal property if the list is signed and describes
the items and devisees with reasonable certainty
Differences between 2-510 and 2-513
2-513 applies ONLY to tangible personal property
2-513 allows lists that are created after execution of the will and can be changed
2-513 has not been adopted very widely
Clark v. Greenhalge (pg. 310)
Facts Woman wrote a memorandum listing property and who should get it, then executed a will
incorporating that memorandum.
Then, woman wrote a notebook with more property and more devisees and executed a codicil to the will
So codicil republished the will
P was listed as getting the painting in the notebook.
HOLDING
P gets the painting through BOTH incorporation by reference and republication by codicil.
The will incorporated the notebook by reference to memorandum because they served the
same purpose.
The notebook was not in existence at the time the will was executed,
o But it was in existence at the time the codicil was executed and therefore republished
the will.
Simon v. Grayson ( pg. 315)
Facts Testator executed a will that left $4000 to his executors to be paid as directed in a letter.
Letter was dated AFTER the will but BEFORE a codicil that made minor changes.
HOLDING
Letter was incorporated by reference and it was in existence at the time the codicil republished
the will.
Johnson v. Johnson (pg. 317)
Facts Lawyer typed out a document that gave gifts to siblings, but did not execute it.
At the bottom, he wrote that he gave his brother $10 only.
HOLDING
Court holds this was a valid holographic codicil that republished the unexecuted will.
This is flat out wrong, because republication applies only to prior validly executed wills
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o Reasoning
its unlikely the testator is doing these things to alter the plan of disposition, but instead is doing them for
other reasons
o Extrinsic evidence can be admitted to show the intent of the testator in phrases like the contents of my house
and whether that would include a safe with stock certificates inside of it
V. CONSTRUCTION OF WILLS
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o Where the description in the will does not exactly fit any person or thing
Example = devise to Mr. and Mrs. X, presently residing at Y and they dont
live there
Extrinsic evidence IS admissible
Courts are blurring the lines between patent and latent ambiguities
o Allowing extrinsic evidence raises risk that well allow judges to re-write wills of dead people
Mahoney v. Grainger (pg. 336)
Facts Decedent wanted to devise her property to her cousins, but lawyer instead devises the property to
her heirs at law and her only heir at law was decedents aunt. Cousins challenged the will.
HOLDING
No extrinsic evidence admitted.
The language of the will was plain and it only has one possible meaning.
o Moving Toward Reformation: Correcting Mistakes Without the Power to Reform Wills
o Recent trend
admitting extrinsic evidence not merely to resolve latent, and more recently patent ambiguities, but also
to correct mistaken terms to conform to actual intent of the testator
Arnheiter v. Arnheiter (pg. 343)
Facts Decedent left her interest in the property at 304 Harrison Avenue to be sold and the proceeds
to be given to her nieces via trusts, but the lady actually had an interest in 317 Harrison Avenue instead.
HOLDING
Court does not insert the proper number, but instead simply deletes the improper number and
the property is adequately described by only the street name.
Estate of Gibbs ( pg. 344)
Facts Decedent messed up the middle initial and street address of his friend, and it accurately
described a man the decedent didnt even know.
HOLDING
Court completely ignores the middle initial and street address and gives the property to the
friend.
Lesson dont be too specific in your will because it can come back to bite you
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o Prof and Langbein are concerned about the effect of allowing extrinsic evidence and reformation on the incentives
for lawyers to perform good work
Fleming v. Morrison (pg. 356)
Facts Guy wanted to entice a woman into sleeping with him by leaving her his estate.
After his lawyer witnessed the will leaving his estate to her, guy said that it was fraud.
HOLDING
Court held will invalid b/c the testator lacked testamentary intent
Court admitted extrinsic evidence to show lack of intent even though the will was plain on its
face.
o Anti-Lapse Statutes
o Definition
Antilapse statutes DO NOT prevent a lapse,
they merely substitute other beneficiaries, usually descendants, for the beneficiary if other requirements
are met
o Typical antilapse statute provides that if a devisee is of a specific relationship to the testator and is survived by
descendants who survive the testator, the descendants are substituted for the predeceased devisee
o Antilapse statutes also apply if the devisee was dead when the will was executed or if he does not survive the
testator long enough to satisfy the will and is therefore treated as predeceased
o Theory
For certain predeceased devisees, the testator would prefer a substitute gift to go to the descendants of
the devisee rather than the gift lapsing
o Almost all states have some form of antilapse statute
o Limitation
Only applies if devisee bears a particular relationship to testator specified in the statute
Some would be limited to ONLY the descendants of the testator
Some are broader, and apply to the descendants of the testators parents or grandparents
UPC allows substitute gifts if the predeceased devisee is a grandparent or a lineal descendant of
a grandparent of the testator
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o Result = issue of the devisee share the gift (if they are all the same degree of kinship,
they take equally)
o Statutes change the common law and provide default rules that the devise will go to someone else unless the
testator intended otherwise
Contrary intent is sometimes hard to determine
Using words of survivorship such as if he survives me or my surviving children is sufficient
to express a contrary intent in most states, but this is NOT sufficient to preempt the antilapse
statute under the UPC or the case below
In Georgia, mere words of survivorship are sufficient to prevent the anti-lapse statute from
tolling
To be sure that contrary intent is express, a well-drafted will should say if she fails to survive me, then to
X
Ruotolo v. Tietjen (pg. 367)
Facts Testator left half of the residue of her estate to the stepdaughter if she survives me and the
stepdaughter predeceased the testator. The CT antilapse statute applied to stepchildren.
HOLDING
Antilapse statute was applied.
These words of survivorship were not sufficient evidence that the will provided for the
contingency of the devisee predeceasing the testator.
This was just boilerplate language and did not really reflect any intent of the testator that the
antilapse statute should not apply. Court reasons that the antilapse statute is remedial and
deserves a liberal construction.
This is the minority approach, and most states would have let the devise lapse
o Class Gifts
o Class gifts were treated differently from individual gifts at common law
If a class member predeceased the testator, the surviving members of the class divided the total gift,
including the deceased class members share
o Two basic factors to determine if theres a class gift
Group labels
Dynamic shares that will be different depending on the number of class members surviving the testator
o What is a class?
Determined by whether the testator was group-minded whether the testator uses a class label when
designating beneficiaries
Examples to Xs children or to my nieces and nephews
If you have a natural class and you describe the class by a group label AND each member individually by
name, it could still be a class gift if extrinsic evidence showed the intent of the testator to treat the class as
a group
UPC 13.1 and 13.2
If you describe a class only by a class label, a class gift is created
If you describe a class by using individual names without a class label, the disposition does NOT
create a class gift
If you describe a class with BOTH a class label AND individual names or the number of class
members, there is a presumption that it is not a class gift, but this can be rebutted with extrinsic
evidence of testators intent
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The lawyer could have avoided this by specifically providing that if a nephew didnt survive her, then to
that nephews issue
o Most states apply their antilapse statutes to class gifts to a single-generation class
Some states provide this by statute, but in other states, courts reason that the average testator would
intend the deceased class members share to go to his descendants rather than to the surviving members
of the class
Basically, class gifts dont really exist anymore
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If the property isnt there, you are entitled to cash if you can show the testator didnt intend
ademption
Some criticize this as spawning litigation, but the burden now rests on the party opposing
ademption
o Stock Splits
o If testator makes a will devising 100 shares of stock to A, and then the corporation splits its stock and 100 shares
becomes 300 shares
Old rule = look at the specific devise of 100 shares
This was mechanical
New rule = look at the economic total
A stock split is a change in form and not substance
Most states now use this approach
Devisee will get all 300 shares unless the testator intended otherwise
o Satisfaction
o When the testator makes a transfer to a devisee after executing the will
o This generally applies to general devises and not specific or residuary devises
Cross reference to advancements in intestate succession
So if a painting is given away after will is executed painting is treated as adeemed by extinction
o Common law
Gift is part of the will (gift is given in satisfaction of devise in the will)
o UPC
Parallel to the rule for advancements
Presumption that there is no satisfaction and intent of satisfaction would have to be shown in a writing
o Example
Testators will gives his son $50k and the residue of her estate to her daughter
After execution of the will, testator gives her son $30k
At common law, son only gets $20k at death
Under the UPC, the son would still get all $50k
o Exoneration of Liens
o Common law doctrine/some states exonerate liens
When a will makes a specific disposition of real or personal property that is subject to a mortgage to
secure a note on which the testator is personally liable, it is presumed, absent contrary language in the
will, that the testator wanted the debt, like other debts, to be paid out of the residuary estate
Basically, the beneficiary gets the property free of the mortgage
o Modern rule/UPC/majority of states
Mortgage follows the property
o Example
Ts will devises Blackacre to her daughter, A
At Ts death, Blackacre is subject to a mortgage that secures a note on which T was personally liable
Common law/minority of states A takes Blackacre free of the mortgage
Majority/UPC A takes Blackacre subject to the mortgage
o Abatement
o When the estate has insufficient assets to pay debts as well as devises
Some devises must be abated or reduced
Analogous to bankruptcy
o Common law
There was a typical order of abatement
Residuary devises reduced first
General devises reduced second
Specific and demonstrative devises are last to abate and reduced pro rata
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NONPROBATE TRANSFERS AND PLANNING FOR INCAPACITY
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trust gave Farkas a lot of control and could be revoked before his death.
Trial court considered these stocks to be testamentary and held them invalid because they were not
executed with the formalities of a will.
HOLDING
Valid trust.
Farkas conferred a present interest on Williams when he created the trust, so the interest was
not testamentary.
o Farkas showed intention to part w/ some incidents of ownership
o He couldnt use the stock same as if he fully owned it
o If Williams didnt get an interest then what was intended as a trust would have been
testamentary and valid b/c did meet will standards
Farkas did not retain such control over the trust to render the dispositions testamentary, even
though he had a ton of control.
Linthicum v. Rudi (pg. 403)
Facts Guy created revocable inter vivos trust and then amended the trust while his capacity was
questionable.
Beneficiaries wanted to challenge amendments to the trust.
HOLDING
No standing.
Beneficiaries have only contingent interests that have not yet vested, and they are subject to the
control of the settlor.
o Possibly could have challenged capacity
o Revocable Trusts
o The most will-like of all will substitutes
o Courts have applied to revocable trusts subsidiary rules from the law of wills, such as abatement and ademption
Discerning appropriateness of applying other subsidiary rules has been more challenging
The applicability of lapse rules and antilapse statutes has been the most controversial
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o Default rules and presumptions that run afoul of express provisions of the trust instrument generally do not get
adopted
o Life Insurance
o Term Insurance -
o Whole Life Insurance -
o Life insurance is a time-honored method of avoiding probate and getting assets into the hands of family members
quickly
Cook v. Equitable Life Assurance Society pg. (420)
Decedent designated his first wife as beneficiary on his life insurance policy.
Then divorced and remarried, but never changed designation.
However, he wrote a holographic will that purported to change the designation.
HOLDING
First wife is the beneficiary.
Decedent had plenty of time to properly change the beneficiary according to the terms of the
contract.
The insurance company needs certainty as to who to pay so that benefits can be distributed
quickly.
This is by far the majority rule.
o UPC takes the opposite approach it says that nonprobate transfers should be modifiable by the terms of the will.
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States cannot make laws that would require administrators to know 50 different state laws
before paying out benefits.
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Plan for incompetency someone is in place to take over if you become incompetent
Avoid ancillary jurisdiction for real property
Choice of law must be a nexus between the state and the property/settlor/trust
Convenience
Privacy trusts are not public documents
Avoiding will contests
o Cons
Uncertainty not large body of law on whether subsidiary law of wills will be applied
Creditors cannot benefit from short statute of limitations in probate
o Tax consequences are neither a pro nor a con, because a well drafted will and a well drafted trust can both achieve
the same tax objectives
o Pour-Over Wills
o definition
a will that contains an express clause giving some or all of the decedents probate property to the trustee
of the decedents inter vivos trust to hold and distribute pursuant to the terms of the trust
o There used to be a problem under incorporation by reference
The settlor would reference the trust in the will, but would then make changes to the trust afterward
the will would not incorporate the changes that werent yet in existence at the wills execution
Now, every state has provided an exception for revocable trusts so they can be amended after the will is
executed and the will incorporates the changes
Clymer v. Mayo pg. 445
Facts Lady created a revocable inter vivos trust and a pour-over will naming her husband as beneficiary
under the trust and naming the trustee of the trust as beneficiary under her will.
Lady then divorced her husband and died without changing her will.
HOLDING
Husbands interest was revoked by statute.
The statute only applies to wills, but the trust was incorporated by reference into the will.
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If agent dies power ends until successor is named
Powers of attorney = two edged sword
o Offers Flexibility but there is Risk of abuse
o Springing Power of Attorney
-Springs into effect upon some event; if it does not say that, it is in effect as soon as it is
signed.
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Elder Law
o Financial problems interaction of Medicaid and estate planning issues
Transferring assets to maintain Medicaid eligibility is a touchy subject, and there are different Medicaid
laws in each state
Euthanasia
o Oregon is the only state with a law that allows assisted suicide
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o it is more nuanced in lots of states
Once the amount of the elective share has been determined, the surviving spouse is charged with the
value of all other interests given her by the will
If those do not meet the elective share requirement, the difference must be made up either by
pro rata contributions from all other beneficiaries (majority/UPC) or from the residuary
Elective share has traditionally been easy to avoid because it only applied to the probate estate
Most states say that if spouse dies but before she can elect spouse share wife dies her estates does NOT
have right to elect share and husbands estate passes to devises
Not considered:
Length of marriage
Surviving spouses wealth
Inconsistencies with divorce law
Whether prop was acquired during marriage
Whether prop was acquired through inheritance
o Marital deduction and the dependency of women (pg 428)
Taxes lower in community property states b/c only Hs half of community property taxed at death, where
all taxed in separate property/common law states.
H gets an estate tax marital deduction for 50% of estate for property left in effect outright to W. No limit
to amount.
Inter-spousal transfers not taxed as long as at least life estate in property.
QTIP trust (Qualified terminable interest trust): required by marital deduction giving spouse support for
life. The QTIP trust is fundamentally at odds with the partnership theory of marriage.
o Must the surviving spouse accept a life estate?
When spouse does not take under the will, the elective share is charged what she is actually left under the
will + pro rata contributions by other beneficiaries or residuary estate.
UPC: a life estate renounced by spouse is not charged against her elective share.
o In states that allow same-sex marriage, it would be considered the same as a heterosexual marriage
o Avoiding Elective Share
Prenuptial agreement
Give property away
o Community Property hinges on what was earned during the marriage
What if there is co-mingling of community property and non-community property? Two theories:
Pro Rata percentage is community prop
Inception test when was the inception of title on the prop
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o Elective share statutes originally applied only to the decedents probate estate
o Not many states have resolved the question whether the elective share can be avoided through a revocable trust
Majority of states that have addressed this question have said that trusts CANNOT defeat the elective
share
o Massachusetts judicial decisions
Sullivan v. Burkin pg. 488
Facts Husband created a revocable inter vivos trust excluding his wife and grandson, and then
transfers all of his assets into it. Widow wants to include the trust assets in calculating her
elective share.
HOLDING
o Court allows the trust to defeat the elective share in this case, but announces the
opposite rule for the future.
o Court announced a uniform rule that if person creates inter vivos trust during marriage
over which he has sole general power of appointment that is treated as part of estate for
spouse election
Bongaards v. Millen pg. 492
Facts Wife was beneficiary of a trust created by her mother and had a general power of
appointment during her life. She appointed the trust remainder to her sister. Husband argued
that it should be included in her estate for purposes of calculating his elective share.
Holding No way. Trust was created by third party and not wife herself.
Illusory transfer test
The trust is valid, but the assets are nevertheless included in the probate estate for purposes of
calculating the elective share and some of the assets might have to go to the surviving spouse to satisfy
the elective share
Intent to defraud test
If the transfers of property into the trust were done for purposes of avoiding the elective share, the assets
will be included in the probate estate for purposes of calculating the elective share
Present donative intent test
Whether the settlor intended to make a present gift into the trust
Multifactor balancing test
This means that future results will be highly fact-dependent
Augmented Estate/ Statutory schemes
Statutes can attempt to list which assets will and will not be considered in calculating the elective share
augmented estate
1969 UPC
Includes 5 categories of property in the augmented estate
o Retained life estate
o Revocable trust
o Joint tenancy with someone other than surviving spouse
o Death bed transfers in excess of gift tax exclusion
o Property given to surviving spouse
UPC has been pretty much ignored and is impossible to implement
1990 UPC
Redesigned the elective share and augmented estate to be closer to a community property
system
The longer the marriage lasted, the higher percentage the surviving spouse got of all the marital
property
o Waiver
o The right to elect against the will can be waived
o Main requirements
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Full disclosure
Full comprehension of what is being waived
o UPC requirements (not adopted by all states)
Voluntary
Not unconscionable when it was drafted
Before execution, challenging party was provided fair and equitable disclosure; waived their right to
disclosure; or had adequate knowledge of the property of the decedent
Prenups
Prenups have to main purposes
What happens in case of divorce
What happens in case of death
Reece v. Elliott pg. 503
Facts Husband and wife signed prenup, and later wife challenged it because the values of the husbands
property were not listed on the appendix.
HOLDING
Prenup upheld.
Wife had independent counsel and an adequate opportunity to investigate the value of the property
listed.
o Some states require independent counsel or an informed waiver of the right to independent counsel
o Prof recommends executing prenup way before marriage
Removes element of coercion
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o Pretermitted child statutes protect a child unintentionally left out of the will by either giving him his intestate share or
shares equal to other children that were provided for
some only protect children born or adopted after execution of will
other protect children alive at time of wills execution
Gray v. Gray pg. 528
Facts Guy had two kids from a previous marriage and left everything to his second wife in his will. Second
wife later gave birth to a son.
HOLDING
Pretermitted child statute did not apply because of a convoluted exception under these
circumstances.
Azcunce v. Estate of Azcunce pg. 532
Facts Guy drafted will naming his children as beneficiaries and then had another child.
After the birth of this child he executed a codicil to the will so the will was republished
HOLDING
Child was not pretermitted, because codicil republished will after her birth.
In this state pretermitted statutes only apply to children born after publication of the will and she
was alive when will was republished
Kidwell v. Rhew pg. 536
Facts Decedent created a trust and named her daughter as successor trustee, but never executed a will so
died intestate
Court-appointed sister to administrator estate; attempted to include trust assets in the probate estate, arguing
the pretermitted statute should apply to dispositions made by will substitute.
HOLDING
Pretermitted heir statute does not apply to trusts, only to wills.
There is less protection for children that are excluded than there is for spouses that are excluded
(trend is to not allow the trust to defeat the elective share for spouses)
A. Introduction
o Background
o In England, trusts go back to the Middle Ages
Concept spread from institutional purposes into the private arena gradually
o Trusts can carry a lot of different labels
However, a trust can very seldom be adequately described by a single label
Most trusts have several components incorporated into a single instrument
Two exceptions where labels are definitive
o Revocable vs. irrevocable
o Inter vivos vs. testamentary
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Other labels can be misleading and refer to characteristics that overlap
o Definitions
o Trust
Arrangement whereby trustee manages property as a fiduciary for beneficiaries
To create a trust, must have three things:
Trust property
Beneficiaries
Intent to create a trust
Most trusts are testamentary
Oral Trusts:
Acceptable
Unless its an oral trust to land:
o Barred by Statute of Frauds:
o Settlor
Party who creates the trust
o Trustee
Party to whom settlor transfers the trust property
Holds legal title to trust property and manages property for duration of trust
Three duties:
Investment
Administration
Distribution
o Beneficiaries
Parties who hold equitable interest in the trust
Trustee owes beneficiaries fiduciary duties
o Corpus
Trust property
o Inter vivos trust
Trust created while settlor is alive
o Testamentary trust
Trust created when settler dies (created or funded by will)
o Bifurcation
Trustee holds legal title to trust property
Beneficiaries hold equitable title
o Parties to a Trust
o Three main players in a trust
Settlor/grantor/donor/decedent
Person who creates the trust
Beneficiaries
Person or persons who benefit from the trust
Can be income beneficiaries OR remainder beneficiaries
Trustee(s)
Person or persons that manage the trust property/hold legal title to the property
H devises property to W in trust to pay income to W for life and then on Ws death, the property
passes to Hs children
A trust will NOT be invalid for failure to designate a trustee, so long as the intent to create a
trust is expressed (trustee can be appointed by court)
o One person can play all three roles and wear all three hats (cannot be sole beneficiary)
Examples
Farkas Case
O executes a trust declaring herself trustee of Whiteacre with the income from Whiteacre to
herself for life, and then upon her death, to pass to A
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A trustee MUST agree to serve as trustee
o Law of trusts is NOT the same as the law of wills
There is some overlap because some trusts are testamentary and the law of inter vivos trusts is less
developed so some subsidiary law of wills might be integrated
Creation of a Trust
o Intent to Create a Trust
o Introduction
Settlor doesnt have to use the word trust or name or refer to a trustee
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Example = transfer of property to an individual to hold for the use and benefit of another
person manifests an intention to create a trust
Trusts can be formed by oral representation
When there is a clear intent to form a trust, courts will look to function over form
Lux v. Lux pg. 557
Decedent devised property to her grandchildren in her will.
Will provided that the property shall be maintained for the benefit of the grandchildren and shall not
be sold until the youngest of the grandchildren reached 21 years old.
Will did not mention the word trust nor designate a trustee.
HOLDING
Court held that decedent had the intent to create a trust.
Even imprecise language can lead to the formation of a trust.
Here, the executor would be named as trustee (Prof doesnt think this would be the absolute rule
everywhere, but it was in this case).
Jimenez v. Lee pg. 558
Two gifts made to daughter (one from grandmother, one from fathers client) for purpose of her
education - $1,500 total.
Father (lawyer) cashed in the gifts and bought closely held stock as custodian for daughter, without
keeping an accounting.
HOLDING
Court held oral trust was formed.
o Word trust was not used but it is enough if the transfer of property is made with the
intent to vest the beneficial ownership in a third party
Father violated duties by taking stock as custodian (fewer duties than a trustee), being
imprudent by not diversifying, and not keeping a proper accounting.
Many trust instruments will waive the requirement for a formal accounting, but this was not the
case here.
o Precatory Language
o Definition
unclear language that expresses aspirations or recommendations
o Often times, this language is used intentionally to express a desire to give trustees more latitude and flexibility in
administering the trust
However, it MIGHT make an unenforceable moral obligation instead of a trust
This is particularly a problem in testamentary trusts
o Example of precatory language that does NOT give rise to a trust
I wish, but do not legally require, that C permit D to live on the land
o Intent of settlor must be found by construing the language of the instrument in light of all the
circumstances
This leads to uncertainty and a lot of litigation
o Distinguish trusts from equitable charges
If a settlor gives property subject to the payment of a sum of money to a third person, the testator has
created an equitable charge and NOT a trust (creates a security interest, NOT a fiduciary relationship)
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Second Holding Inter vivos gift with constructive delivery. Delivery was completed constructively and
so the gift was completed during life.
Oral declaration Must intend to create trust and take on trust duties
o Necessity of Trust Property
o Introduction
Property can be anything (contingent remainders, leasehold interests, choses in action, royalties,
insurance policies, even a single penny)
Unthank v. Rippstein pg. 569
Facts Guy wrote a letter to a lady promising to give her $200/month for 5 years.
Guy died, and lady first tried to probate this as a holographic codicil (rejected)
She then argued it was a trust.
HOLDING
No trust because there was no property in the trust.
Lady argued his estate was the property, but because he was still alive when he wrote the letter,
he didnt have an estate.
This was merely a promise to make a gift.
Brainard v. Commissioner pg. 572
Facts Guy tried to trade stocks and put the profits in trust for his wife, mother, and young children (for
tax purposes)
He declared a trust of the expected profits for the wife and kids
HOLDING
No trust because there was no property in the trust.
Trust could not have arisen until the profits were earned, so declaring the trust one year earlier
did NOT create a trust.
Guy didnt commit the stocks to the trust for a defined amount of time (Clifford trusts required
property to be committed to trust for 10 years + one day before reverting back to settlor).
There is an important distinction between saying I give the profits to A in trust vs. I give the profits
from my 1000 shares of Apple Corp. to A in trust
Identifying that the settlor already has the shares
Assignment of UNEARNED FUTURE INCOME not sufficient = corpus
Speelman v. Pascal pg. 572
Facts Pascal assigned to Speelman a share of his profits to be derived from the musical and movie
based on Pygmalion (at the time, he had two years left on license agreement).
HOLDING
Valid assignment.
Even though there were no profits at the time the letter was written, there was still property in
the expectance of profits to be derived from the license agreement (PROP NOT TO BE
ACQUIRED IN FUTURE)
Note: This was NOT a trust, but whoever held the profits for Speelman presumably had fiduciary duties
to her.
o Distinguishing Brainard and Speelman
An expectation or hope of receiving property in the future is NOT sufficient property to create a trust
However, a person may assign future earnings from a present contract
Reasoning = future yield from an existing property right can be transferred even though property to be
acquired in the future cannot be
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HOLDING
No valid trust.
Although there was intent and property, there were no ascertainable beneficiaries because
friends is not an ascertainable standard.
In re Seawrights Estate pg. 582
Facts Guy gave his dog to lady and directed executor to place $1000 in a bank and distribute 75
cents/day to the lady to care for the dog.
Two issues Was this a valid trust? Did it violate the Rule Against Perpetuities?
HOLDING
Valid trust because even though nobody could enforce it, the trustee agreed to honor her
obligations (can be called honorary trust or not). No violation of the RAP, because the trust
property would be exhausted according to the distributions well within the allowed timed
period.
If this was honorary trust that couldnt be enforced, how did this case even come about?
Somebody failed to file an accounting over the estate and a tax collector raised a question about
the value of the dog
Trusts for Pets
If youre unsure that your jurisdiction will uphold honorary trusts, the safest thing to do is give your pet
to someone you trust and leave them X amount of dollars
Trusts for specific pet generally dont qualify as charitable trusts because charitable trusts may not have
private inurement (benefit) (assets cannot be distributed to particular individuals)
One option = create your own charitable organization to take care of animals and then give your
animals to that organization
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HOLDING
o Trust is invalid.
o Semi-secret trusts are not valid and extrinsic evidence is not permitted to show the
purpose of the trust.
o If the trust would have been totally secret (no allusion to a trust at all), extrinsic
evidence would have been allowed and the trust may have been upheld (this distinction
makes no sense).
Prof thinks maybe the real reason this case came out this way was that Wells died shortly after
lady did and the mission had burnt down.
Distinction between secret and semi-secret trust is still recognized in most states, but rejected in others
Restatement = constructive trust should be imposed for BOTH secret and semi-secret trusts
Oral inter vivos trusts of land
Oral agreements relating to land are generally forbidden by statute of frauds
Hieble v. Hieble pg. 596
Facts Woman had cancer and titled her property to children with retained life estate, with oral
side agreement that the kids would give it back if she survived. She survived, but her son
refused to convey the property back to the mother.
HOLDING
o Constructive trust was imposed because the son was unjustly enriched and there was a
confidential relationship.
o The son had to convey the property back to the mother.
Pappas v. Pappas pg. 596
Facts Man planned to divorce his wife and gave land to the son to hold until after the divorce
was over.
After the divorce, guy tries to get the property back and the son refuses.
HOLDING
o Court refused to give relief to the father because of his unclean hands (only conveyed
the property to defraud the divorce court).
Key seems to be equitable principles and whether or not you have clean hands in seeking an equitable
remedy
People transfer property at their own risk
Foreign Countries have trusts, but USA is the origination of trusts, so this is where most exist
Taxation of Trust Revokable trusts are different. A trust is treated as an individual (gains, losses, etc) and taxed accordingly. However,
a trustee can elect to pass through in the income to the beneficiaries.
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o Trustee had mandatory duty to pay Cappy income at least quarterly and also had discretion to distribute principal
for Cappys comfortable support and maintenance (trustee had duty to check up on Cappy and make sure he was
comfortable).
o There was an exculpatory clause provided that trustee could not be held personally liable except for willful neglect
or default.
o Farr (1) helped Cappy take out a mortgage on his house; (2) required Cappy to make written requests for extra
money from trust; (3) executed deal where Cappy deeded house to Sally (step-daughter) and retained a life estate.
o Cappys second wife brought suit alleging Farr breached his duties.
o HOLDING
Breach of fiduciary duty by Farr.
Cant order Sallys husband to give the house back, so remedy = constructive trust over amount that
Cappy should have been paid from the trust to maintain comfortable support and maintenance.
Court upheld exculpatory clause and held Farr couldnt be held personally liable (put burden on Cappys
wife to show bad faith or undue influence by Farr in drafting the clause).
Exculpatory clauses
Prof and UTC/Restatement take the position that the burden should have been on Farr (drafter/trustee)
to show the exculpatory clause was fair and the settlor gave informed consent to the clause
o Also, there was a conflict of interest here, because Farr represented BOTH Cappy and Sally and always made
decisions in Sallys favor
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Hybrid trust
Its discretionary support trust (not really a distinct category)
Courts have tended to treat these as pure discretionary trusts
o UTC and Restatement get rid of any distinction between pure discretionary and support trusts
All trusts where trustee has any amount of discretion are treated the same
UTC 504
If the trustee has violated a standard for distribution or abused discretion over distribution,
child support and alimony creditors can force a distribution by the trustee, but only to the
amount that the trustee would distribute under the standards of the trust
This is also the law in a lot of states
o Protective Trusts
o If settlor wants the beneficiary to have a mandatory right to distribution, but also wants the asset-protection
features of a discretionary trust, might try a protective trust
o The trustee normally has mandatory duty to distribute to beneficiary, but if judgment creditors of the beneficiary
attach to the interest, then the distribution becomes discretionary
o Prof thinks this is too good to be true, and might not survive when it is more fully litigated
o Spendthrift Trusts
o Beneficiary of a spendthrift trust cannot voluntarily alienate/transfer her interest, nor can her
creditors reach her interest in the trust
Beneficiary cannot assign interest in future payments, can only spend the money as it is distributed
incrementally
These protect the money only as long as its IN the trust
Once any money hits the pocket of the beneficiary, then the beneficiary can spend it and
creditors can attach it [if they can find it]
o Purpose = protect beneficiaries from their own vices and bad decisions
o Spendthrift clauses are enforceable in most jurisdictions
o Trustee has no obligation to give $$ to creditors, etc.
o Must specify the trust is spendthrift in GA
o Exceptions where creditors CAN get to trust property in spendthrift trusts
Tort Creditors
Scheffel v. Krueger pg. 616
o Mother of abused child brought lawsuit against the guy that abused the child and got
civil damages.
o D had an interest in an irrevocable spendthrift trust that gave right to distributions of
income quarterly, but he could not invade the principal until he turned 50.
o Mother wanted to claim against the trust principal.
o HOLDING
Court upholds spendthrift provision and holds P cannot claim against the
trust.
Court denies making tort creditor exception to spendthrift provision.
P must collect on the judgment incrementally as the income is paid out.
This is probably the majority view NO exception for tort creditors
Child Support and Alimony Creditors
Shelley v. Shelley pg. 618
o 2 ex-wives (each with 2 children) try to satisfy child support claims against trust set up
for father that gave him the right to income, but limited his right to distribution of the
principal to himself or his children in case of emergency.
o Wife 2 also tried to satisfy claim for alimony.
o HOLDING
Child support can be paid out of the principal of the trust, because the trust
itself names guys children as beneficiaries in times of emergency (father
abandoning = emergency).
Wife 2 cannot satisfy claim for alimony out of the principal.
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oAlthough support of children is probably the most important public policy argument to
establish an exception to a spendthrift clause, it was not necessary in this case.
Restatement and UTC make clear that public policy carves out exceptions to spendthrift
provisions for:
o Spouse/children with a court order for support or maintenance
o Judgment creditor who has provided services for protection for the beneficiarys
interest in the trust
o Claim of the United States (tax collectors)
People that provide necessaries to beneficiaries
This is uncertain
o Language of the spendthrift clause might try to limit exceptions
The spendthrift provisions in some trusts specifically says that the trust property is protected from ex-
spouses
This might affect the courts analysis
However, under UTC 503, this provision would be invalid no matter what
o Modification
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A change in circumstance causes court to change trust so that it reflects what court
believes would have been settlors intent
o Introduction
o If the settlor and ALL the beneficiaries consent, an irrevocable trust may be modified or
terminated (even if the trust contains a spendthrift clause)
However, lots of trusts are testamentary, which means the settlor cannot consent to modification or
termination
If a trusts purpose is illegal or impossible it will likely be terminated by law
o Modifying a testamentary trust is basically just as difficult as modifying a will
Very difficult, with just a few limited ways to change the trust
Claflin Doctrine
A testator has a right to dispose of his own property with such restrictions and limitations as he sees fit,
and his intentions ought to be carried out, unless they contravene the law or public policy
Modification and termination can ONLY be allowed if it its NOT contrary to material purpose of the
settlor
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Reformation and Modification to Achieve Tax Objective
Important and recent development
Courts are fairly indulgent to change trusts to accommodate changes in the tax law to permit the trustees
to achieve objectives of trust more fully
This is positive tax law is unpredictable, and can be retroactive
Trust Protectors
Settlor can name someone as trustee and someone else or multiple other people as trust protectors
Trust protectors have the right to fire the trustee and appoint a new one without bringing suit against the
trustee
This is especially useful if an institutional trustee is being used (more likely to be uncooperative
and bureaucratic)
This gives the protector great leverage over the trustee
Requirements of replacing the trustee depend upon the trust instrument
Trust protector can retain general oversight role while not having to micromanage details
Prof thinks this device is quite useful
Lots of law in this area remains to be developed
To what extent is protector a fiduciary subject to oversight? we dont know
o Trustee Removal
Traditional rule
cannot remove trustee except for cause
Even if all beneficiaries agreed, trustee could not be removed
Well-drafted trust
give someone power to remove (beneficiaries OR trust protector)
Statutes
might provide for removal under certain circumstances (such as UTC, etc.)
o UTC 706 allows removal slightly more easily than traditional for cause requirement:
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Possible reasons for removal under the UTC
Breach of trust (same as traditional for-cause rule)
Lack of cooperation among co-trustees (not quite for-cause, but pretty high bar)
Unfitness, unwillingness, failure to administer effectively (sounds like for-cause)
Substantial change of circumstances
Requested by all beneficiaries, betters the interests of beneficiaries, suitable replacement trustee
is available
This is slightly easier than for cause removal, but still pretty difficult
o Hypothetical
Man fled Germany having lost everything in the Holocaust
Became very successful in NY and had millions when he died
Did a lot of business with a bank that was taken over by Deusche Bank after his death
He named this institution his trustee BEFORE the acquisition
Family members wanted to remove the trustee because of relationship to Nazi regime
Trustee had been performing satisfactorily
Prospects for removal?
Under the traditional for cause rule, theyd have no chance
Probably NOT a substantial change of circumstances that militates against their interests under
the trust under the UTC
Options
Approach the trustee and ask for resignation as trustee
Take it to the media even if its a losing proposition, the media would pick up on a case like
this
Davis v. U.S. Bank National Assn pg. 660
Settlor appointed bank as trustee of the trust.
Trust made grandchild an income beneficiary for life, and at his death, principal distributed to
grandchilds children.
Grandchild wanted to switch trustees because the fees were too high and the requested successor trustee
was situated closer and knew the familys situation better.
HOLDING
Court allows removal of trustee under states version of UTC:
o (1) removal was requested by all beneficiaries (grandchild virtually represented his
daughter),
o (2) removal served best interests of all beneficiaries (lower fees meant higher
distributions),
o (3) removal wasnt inconsistent with a material purpose of trust,
o (4) suitable successor trustee was available and willing to serve.
NOTE
Probably more difficult to meet best interests standard and possibly material purpose if the
trustee is an individual that was hand-picked by the settlor rather than an institution.
NOTE: In most jurisdictions, fiduciary fee schedules are set out in statutes, but most institutions require
waivers to these and impose their own schedules.
Successor Trustees
They are held to their own fiduciary standards
NOT responsible for wrongful behavior of prior trustee unless they violate their own obligation to
mitigate it or correct it
Virtual Representation
What if you have all of the beneficiaries agreeing that the trustee should be changed or another
modification ought to happen, but you have a generation-skipping trust thats supposed to vest in the
next generation
Its impossible to have all the beneficiaries request removal/modification unborn people are
beneficiaries
UTC 304
Unless otherwise represented, a minor, incapacitated, or unborn individual, or a person whose
identity or location is unknown and not reasonably ascertainable, may be represented by and
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bound by another having a substantially identical interest with respect to the particular question
or dispute, but only to the extent there is no conflict of interest between the representative and
the person represented
This expands virtual representation in two ways
o Allows for representation not only in judicial proceedings, but also in obtaining
consent of the beneficiaries without judicial involvement
o Allows a parent to represent a minor or unborn child, even if the parent does not have
a similar personal interest, so long as there is no conflict of interest with respect to the
particular question or dispute
A. Introduction
o Reason for Fiduciary Obligation
o Trustee lacks direct personal/financial interest in the trust property
Beneficiary is probably unable to directly monitor and oversee everything the trustee does
o Threat of fiduciary litigation is the primary check on the agency costs of trust
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If a fiduciary is self-dealing, there is no further inquiry into good faith or fairness
Only two defenses
o (1) Settlor authorized the transaction in the trust instrument OR
o (2) Beneficiaries consented after full disclosure
The fiduciary is automatically in violation of his duty of loyalty if neither of these defenses are
met, regardless of whether the transaction was fair and in good faith
o A trustee must have UNDIVIDED LOYALTY. Purchasing prop from the estate violates
the duty of loyalty (SEE BELOW)
Fiduciary can try to get advance judicial approval of a transaction
Hartman v. Hartle pg. 675
Lady appoints two sons-in-law to serve as executors of her estate and directs them to sell the
property and divide the proceeds equally among her children.
Executors sold the property to one of the ladys sons, who bought it on behalf of his sister
(daughter of lady and wife of executor).
This amount was divided equally among the children.
Sister sold it for profit and kept the difference.
Different daughter brought suit for violation of fiduciary duty.
HOLDING
o Executor violated the duty of loyalty because he was self-dealing (enriching his own
family at the expense of the other beneficiaries).
o Daughter was ordered to split the profits from the resale of the house among all
beneficiaries.
Its possible that there has been a little bit of retreat from the no further inquiry rule
Statutes in most states allow a corporate trustee to deposit the trust assets with its own banking
department and to invest the trust assets in a common trust fund or in a mutual fund that it
operates
Trustee can give herself reasonable compensation out of the trust funds
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Appreciation Damages
Artwork is likely to increase in value acutely at the artists death and then gradually over a long period of
time
Where do you cut off appreciation damages?
Court cut off the appreciation damages at the end of the trial
In another situation, appreciation damages might be less appropriate
If the violation isnt to such a big magnitude
If the market is uncertain and could go up or down
o Co-Trustees
o Under traditional law, if there is more than one trustee, the trustees must act as a group with
unanimity, unless the trust instrument provides otherwise
Because co-trustees act jointly, a co-trustee is liable for the wrongful acts of another co-trustee to which
she has consented or enabled through negligent inaction
o Traditional rule of unanimity is on the way out
UTC = majority can act
Duty of Prudence
o Introduction
o Duty of prudence mostly relates to investment decisions made by the trustee
o Classic approach = prudent man rule
o Fiduciary has limited options for investments (must be absolutely protective of principal even if that means lower
income)
Many older legal list statutes provided a short list of acceptable investments
o Problems with this approach
Hindsight bias (didnt know at the time it would be a bad investment)
Each investment was evaluated in isolation
o Diversification
o Diversification is a very important element of the duty of prudence
o Duty to diversify is a LEGAL standard
Lawyers cannot advise as to what to buy when you sell off the majority stock, can only say that it is NOT
legally prudent to have all your eggs in one basket
In re Estate of Janes pg. 702
Testator left his property (which consisted of 71% Kodak stock) in three trusts.
Trustee sold off some of the stock to pay expenses, but not very much.
Price of the stock continued to fall and the trustee continued to hold the stock. Beneficiaries brought suit.
HOLDING
Trustee violated the duty of prudence by not diversifying.
It should have sold the stock within 3 months after the settlor died.
The trust contained too much Kodak stock to meet the standard of diversification.
Liability of the trustee = value of capital lost plus interest.
o Diversification is more difficult to accomplish if trust property contains illiquid assets
If there is one piece of real estate, there is probably more latitude in how quickly the trustee has to
diversify, but still probably want to get it on the market quickly
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Special circumstances where diversification might not be required
If there is language in the trust instrument that authorizes the trustee to hold on to particular assets,
then the trustee still probably has a duty to diversify
However, it may justify a slower reallocation of the trust portfolio
If there is language in the trust instrument that ORDERS the trustee to hold on to particular assets, then
that changes the analysis
However, if this is clearly a stupid thing to do, the trustee probably has a duty to seek
modification of the trust
Wood v. U.S. Bank, N.A. pg. 712
Estate consisted entirely of financial stock and more than 80% was Firstar stock.
Trust authorized the retention of the Firstar stock.
Stock prices plummeted and beneficiary brought suit.
HOLDING
Trustee violated prudent investor rule by not diversifying.
Retention language only negated the prohibition on self-dealing, and didnt negate the duty to
diversify.
o Trustee Insurance
o Bonds are available to cover a trustees possible liability
If the instrument waives it, you might not have to pay anything, but you might still have to buy a minimal
bond that will cover taxes and administrative costs
o Trustees of complicated and large trusts should probably get a bond
o Social Investing
o Trustee cannot sacrifice higher returns or other interests of the beneficiary to pursue social
objectives
o Delegation
o Under traditional law, trustees could NOT delegate matters that the trustee could reasonably be required to
perform
o General rule now
trustee can delegate anything if the trust instrument doesnt prohibit it, but trustee is still subject to a
duty of care, skill, and caution in selecting, instructing, or monitoring the agent trustee can still be
held liable if he delegates to someone dishonest, or doesnt pay attention after delegation
o UPIA trustee has to use reasonable care in delegating a function
o Delegated vs. Directive Trusts
Delegated trusts = responsibilities of trusteeship are divided by the trustee
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Directed trusts = trust instrument provides that the trustee must follow the direction of a third party
(considerable overlap with idea of trust protectors)
Trust Protector =
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o instrument and the settlor can determine the percentage of the trust property to be
paid out
This allows trustee to maximize returns regardless of what form the returns take
Can include rolling average values so payments dont jump up and down sharply
In re Matter of Heller pg. 731
Guy set up a trust with his wife as income beneficiary and others as remainder beneficiaries.
Trust provided that wife receive the greater of $40k/year or the total income of the trust each year.
State statute provided an optional unitrust provision.
Trustees converted the trust into a unitrust under the statute, which sharply reduced wifes distributions.
She argued that one of the trustees was also a remainder beneficiary and there was a conflict of interest.
HOLDING
Court upholds use of unitrust provision.
Trustee in question was NOT the only remainder beneficiary, so this was not per se invalid.
Guy probably didnt expect that the income would reach this high of a level and probably would
have wanted unitrust provision to apply in this case.
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Trustee shall notify qualified beneficiaries of any change in trustees compensation (in advance)
Fletcher v. Fletcher pg. 739
Lady created a trust that was to be separated into three separate trusts upon her death for her son and his
two children.
After the lady died, the son sought access to a schedule of assets that were transferred to one of the other
trusts, but the trustees only gave him the part of the instrument relating to his trust and claimed the lady
wanted to keep things private.
HOLDING
Court held that the beneficiary was entitled to see the entire instrument, including the
additional schedule of assets.
He was the equitable owner of trust property and trustee had duty to inform him with the entire
trust instrument.
Secret wills?
Can a settlor create a secret will by using a revocable trust?
Fletcher implicitly holds NO and that trustee has duty to provide a copy of the trust to beneficiaries AND
heirs of the settlor that request it
Secret trusts?
Settlor might want to conceal the existence of a trust from a beneficiary to prevent beneficiary from being
lazy
Traditional law = settlor may not completely eliminate the trustees duty to inform
UTC provides that beneficiary can be kept in the dark until age 25, but lots of states allow an older age or
even indefinitely if there is a trust protector to whom information must be given and who has standing to
bring a suit
o Duty to Account
o Trustee has a duty to account on a regular basis for his actions as trustee so his performance can
be assessed
Liability Safe Harbor
The law protects trustee from liability to the beneficiary for breach of trust if
the facts underlying the claim are fairly disclosed in an accounting filed with the court,
notice of the accounting is served on the beneficiary, and
the beneficiary does not object to the accounting
o Always have a duty to account
Lots of times people want to waive the obligation to account to a court (so expensive and labor-intensive)
this does NOT mean theres no obligation to account to beneficiaries (trustees ALWAYS have this
obligation, even to remainder beneficiaries Jacob v. Davis pg. 749)
National Academy of Sciences v. Cambridge Trust Co. pg. 745
Guy created trust with his wife as income beneficiary and NAS as remainder beneficiary on her death.
However, guy conditioned wife receiving income on her staying unmarried.
Wife re-married, but concealed this from the trustee.
Trustee filed annual accountings that accounted for every penny in the trust.
After her death, NAS found wife had been improperly paid and brought suit against the trustee.
HOLDING
Trustee breached duty because it should have investigated whether she was re-married or not.
Even though trustee did formal accountings, its duty was not satisfied, because it did not
discover underlying facts material to the trust.
What could the trustee have done?
Look through marriage records (probably nearly impossible)
Requested wifes tax returns to see if she was filing jointly
A. Introduction
o Charitable trusts are governed by the same rules as private trusts with a few exceptions:
o Charitable trust must be for the benefit of a charitable purpose
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not an ascertainable beneficiary
o Charitable trusts are exempt from Rule Against Perpetuities
more easily modified under cy pres
o State Attorney General, NOT ascertainable beneficiary, is the principal party with standing to
enforce a charitable trust
o Cy pres defined
o If a settlors charitable purpose becomes illegal, impossible, or impracticable, the court may direct
the application of the trust property to another charitable purpose that approximates the settlors
intention
If its not impossible or impracticable to carry out settlors wishes, cy pres doesnt apply and no
modification is allowed
If cy pres applies, you are supposed to modify the trust to come as close as possible to the intent of the
settler
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Court allowed modification of the trust.
Court reasoned that ladys intent was a general intent to benefit the village, even though she explicitly
focused upon the hospital aspect.
o Prof doesnt buy this case because administration building is NOT as close as possible to settlors intent (also
thinks village knew the hospital was being built and planned this all along).
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The Buck Trust pg. 765
o Woman lived in very wealthy county and left charitable trust for a foundation that served her county and 4 others.
o She restricted use of the trust to her own county.
o Foundation requested modification after the trust property increased dramatically so it could spend the money in
the poorer surrounding counties.
o HOLDING
Court denied this argument and rejected modification.
Inefficiency or ineffectiveness is NOT the same as impossibility or impracticability.
Lady had such a broad range of charitable purposes that it would never be impossible to spend it all, even
in the limited geographic area.
o Remedy Court took the funds from the foundation and created another foundation exclusively for the ladys
county. Court created a panel of trustees to oversee the new foundation.
o Discriminatory Trusts
o Often times settlors might want to discriminate in how the charitable trust is used
Must balance between the benefits of a private charitable trust and public policy
Podberesky v. Kirwin pg. 775
4th Circuit holds that state university scholarships for blacks were invalid under Equal Protection Clause
unless justifiable to remedy present effects of past discrimination
Grutter v. Bollinger pg. 775
SCOTUS upholds race-conscious admissions of Michigan law school because of the compelling state
interest in achieving diversity
o This area of the law is emerging and not well-settled (decided on a case-by-case basis)
o Problems with AG being the only person with standing to enforce charitable trusts
o Charitable trust enforcement is not politically rewarding, so no real incentive to police them
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o Lack of resources
o This is a huge problem because there are huge taxpayer interests and tax dollars at stake
We dont have an effective way to police this people committing the funds have lost control in most
cases
Carl J. Herzog Foundation, Inc. v. University of Bridgeport pg. 776
o Facts School closed its nursing school and added trust funds specifically designated
for nursing to general fund. Herzog Foundation brought suit.
o HOLDING
i. Court held the donor of the gift had no standing to challenge to enforce the terms
of the gift.
Only effective way to enforce charitable trusts = IRS threatens to cut off tax exemption (IRS cant spend
too much time on this)
Other possible solutions
Trust protectors
o Probably have to be a panel, but its possible
Drafting the instrument to keep someone from the family involved
o More than 20 states, along with the UPC and the Restatement, allow the settlor of a charitable trust to maintain a
proceeding to enforce the trust
A. Introduction
o Terminology
o Power of Appointment Gives the person who holds the power the ability to distribute the trust property.
Through a power of appointment, the settlor is able to postpone and delegate decisions about who should receive
trust property.
This is a way to delegate disposition to someone who has more information and is better able to dispose
of the property/money/etc
Typically, its difficult to modify a trust. Having a Donee with special powers of appointment eliminates
the need to modify b/c disposition is flexible.
o Donor
person that creates the power of appointment in someone else
o Donee
person that holds the power
o Objects Of The Power/Permissible Appointees
persons in whose favor power can be exercised (these exist as a result of the mere creation of the power)
o Appointee
person to whom property is appointed (ONLY if the power is exercised)
Object becomes an appointee once the donee has exercised the power
o Appointive Property
property subject to the power permitted to be appointed
o Takers in Default
designation of who gets the appointive property if the donee fails to exercise the power (any well-drafted
POA will include this, but its not mandatory)
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Complete freedom to appoint prop to yourself. If you can appoint to yourself, you have auto
general power.
Examples
T devises property to X in trust to distribute the income and principal to such of the creditors of
A as A shall appoint by deed.
T devises property to X in trust to pay the income to A for life, or until such time as A appoints,
and to distribute the principal to such person or persons as A shall appoint. (A can appoint to
anyone, including himself and his creditors).
o Special/Limited Power of Appointment
Any power of appointment thats not a general power of appointment
If you have any restriction, you have a special power
o Difference between these two is also understood in terms of tax consequences
Property subject to general power = taxable
Property subject to special power = not taxable
o 2041- Tax
o Powers of appointment are intertwined with and driven by tax concepts
o 2041 provides that general powers of appointment are taxable to the donees estate, even if they are unexercised
o Background Zachary Smith Reynolds
He was the heir to two large fortunes, and he inherited them when he was rather young
Both were in the form of trusts that included general powers of appointment that he could exercise by
will
He died before he was old enough to have a will, so the property was not taxable at his death under the
tax law of the time
Congress changed the tax law so that property subject to a general powers of appointment by the
decedent was taxable as property of the decedent even if unexercised
o Five and five rule
You can give someone a general POA over as much as 5% or $5k (whichever is greater) each year without
causing the entire principal to be taxable in that persons estate
o Flexibility
o Its impossible to predict changing circumstances, so giving a power of appointment allows the donee to make the
decision in the future
o Because POAs are aimed at flexibility, its unlikely they can be neatly categorized or reduced to a formulaic
definition (must read the language carefully)
o Relation-Back Doctrine
o Does the property belong to the donor or the donee?
Historical perception
Donee acts in place of donor, as though donee is agent of donor, so the property relates back as
though belonging to the donor
o Appointee was deemed to receive the property directly from the donor
This doctrine still logically applies to special POAs
Donees power is limited to classes of people donor has identified
However, its no longer applied consistently to general POAs
o Can a creditor of the donee with a general POA claim against the appointive property?
Yes. If its presently exercisable, the only thing preventing the donee from becoming the owner is
manifesting intention to exercise (with formalities possibly required)
Irwin Union Bank & Trust Co. v. Long pg. 806
Ex-wife wants to pursue trust property of Laura Long to satisfy a civil judgment in their divorce
decree. The trust established by Laura Long gave the ex-husband a right to withdraw 4% of the
trust principal each year.
HOLDING
o Because the husband has not exercised the right, the property is not his yet and the
court cannot force him to exercise his right.
General POA is very close to having outright ownership, but its not the same
This is the majority rule
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Restatement and minority of states DO allow creditors of donees with general POAs to claim against the
appointive property.
o Tax Considerations/Advantages/Disadvantages
o Holder of general POA is treated as owner of the property for estate tax purposes
Income from the appointive property is taxable to the donee
If the donee exercised the power during life, the resulting transfer of the appointive property is subject to
gift taxation as if the donee had personally made a gift of that property
If the donee dies without exercising the power, his estate is subject to taxation on the property
o Holder of special POA is NOT treated as owner for tax purposes
Donor can give property to A to hold in trust for A as life beneficiary and then give A special power of
appointment and As estate will not be taxed on the property
Credit shelter trust
Avoid giving spouse general POA so property wont be taxed in spouses estate
Spouse creates credit shelter trust and gives spouse: (1) income rights, (2) the right to invade
principal for ascertainable standards, and (3) special POA
By giving the spouse a special POA, this allows her to make this appointment based upon
circumstances that have arisen in the interim (between the deaths of the spouses)
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Release of a Power of Appointment
o A donee may NOT contract to exercise a POA at a later time if it is not presently exercisable (many
POAs can only be exercised by will testamentary POAs)
Siedel v. Werner pg. 827
o Ex-husband had a general POA over trust created by his grandparents.
o In divorce separation agreement, ex-husband agreed to write a will that exercised POA in favor of his two children
with ex-wife (takers in default would have been those two kids PLUS his two kids from a prior marriage).
o Ex-husband then made a will exercising the POA for his third wife.
o HOLDING
Contract was NOT enforceable.
Ex-husband could not contract his POA here b/c it was a testamentary POA (exercised by his will)
Cant contract a POA that is not presently exercisable
This could not be characterized as a release either.
o Donee can release a POA at any time, even if he can only exercise it under his will
o This release is treated as an exercise at the time its made, so it creates gift tax liability
Wait-and-See Doctrine Lets just wait and see if there is a problem with RAP. To avoid calculations, trust can last 90 years max;
everything must have vested by then.
Many states want to abolish RAP because there are a lot of wealthy people that create dynasty trusts and banks want that trust business.
Taxes:
I. Estate Tax:
a. The difference between an estate tax and an inheritance tax is who pays.
b. Paid by estate
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d. Gross Estate: (includes)
i. Non-probate property
iv. Etc
b. Some states (very few not GA) have this; no federal inheritance taxes
a. Cant avoid estate taxes by giving away your property during your lifetime.
b. There are limits to what any individual can give away during his/her lifetime without incurring taxes
i. Annual Exclusion any person can give any other person a certain amount every year without incurring any
taxes. (Currently, that amount is $13,000.)
ii. No limit to the number of $13,000 gifts that a person can receive.
iii. No limit to the number of $13,000 gifts that a person can give.
iv. EXCEPTIONS:
1. Must file gift tax return to alert IRS that youre using your death credit during your lifetime.
b. Format
1. Rule
3. Conclusion
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ii.
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