Wills & Trusts

i. When the first joint tenant dies, the property will not pass through probate. Title doesn’t pass; technically each joint tenant owned a complete interest in the property from the date the joint tenancy was set up.

b. Revocable Trust

i. A relatively recent development, it works because it is structured as a lifetime ownership arrangement, crucial notion, a lifetime transfer declaration that vests legal title in the hands of a trustee. When the original owner dies, the trustee already is the legal owner of the property. When it comes time to distribute to an heir or beneficiary, the trustee will distribute. Trustee generally operates outside of the probate system.

c. Life tenancy

i. Also avoids probate. This is the same as an irrevocable transfer up front.

C. Testamentary Freedom and Its Limitations

1. One of the rights in the bundle of sticks that comes with property is the right to transfer property to whomever you like.

2. Some property, however is non-transferable:

a. For example, licenses, lottery settlements, annuities, and social security.

3. Constitutional Limitations

a. Hodel v. Irving

i. Nice example of the Federal government intruding on the probate process.

ii. There are two quite different ways of looking at this taking:

iii. Scalia view, the notion of that if you take one stick out of the bundle, that in itself is a taking. If you confine your view to the one particular strand that has been completely eliminated, this is a taking that violates due process. The proper thing to do is offered to compensate you for such a right.

iv. Brenan’s notion, ownership is a bundle of rights and all Congress has done is to trim the bundle in a very minor respect.

4. Public Policy and the Dead Hand

a. Duration

b. Conditions

c. United States National Bank of Portland v. Snodgrass

i. Facts: The decedent, Mr. Rinehart, included a provision in his will that his daughter would receive the benefit of a trust provided, among other things, that she did not become a member of the Catholic faith or marry a man who was of Catholic faith.

ii. Issue: The daughter is challenging the terms of the will claiming that the Catholic requirement violates public policy.

iii. Rule: A condition designed to induce a legatee to marry (or not marry) a person of a particular religious faith is ordinarily valid, unless it imposes an unreasonable restriction on the legatee’s opportunity to marry.

iv. It is unreasonable to disrupt an existing marital relation.

v. Restatement (3d): a testamentary condition may be invalid if it is unreasonably intrusive into significant personal decisions or interests or imposes an unreasonable restraint on personal associations.

II. Intestate Succession

A. Introduction

1. Intestacy occurs when an individual dies owning property which is not effectively disposed of by will.

2. Blood relatives

a. Lineal descendants, or issue, include children, grandchildren, and so on.

b. Lineal ascendants, or ancestors, include parents, grandparents, and so on.

c. Collaterals are blood relatives who are neither issue nor ancestors, i.e. brothers, sisters, uncles, aunts, and nephews.

i. A person and all of his/her collateral are relatives are lineal descendants from a common ancestor.

d. Parentelic system: priority is given to nearer ancestors and their descendants (own issue>parent’s issue>grandparent’s issue)—who descendent from the less remote source

e. Parentelic anybody who is a close ancestor will take in preference to somebody who is a more remote ancestor. This holds for the first four subsections of 6402. 6402 (e) (stepchildren)

f. Gradual system: priority is given to relatives who are nearest in degree of consanguinity (degrees)

g. Gradual system is the next closest individual in degrees of relationship. It does become important to count degrees of relationship. Every blood relative will be either an ancestor or a collateral relative. Count up the number of generations you need to get to the closest common ancestor they have, then count down.

B. Intestacy Statutes

1. The general intestacy scheme:

2. §6401 and following:

a. The intestacy scheme is extremely formalistic. It is based strictly on family status and relationship.

b. Spouse takes 1/3 or ½ or all.

c. The balance gets distributed.

d. Personal property passes according to the law of the state where the decedent died domiciled. Except for real property located out of state, out of state real property is physically located in another state and is subjected to that state’s probate laws.

3. Surviving Spouse

a. CA being a community property state, the first place to begin is in classifying the property.

b. When it comes to an end, each item of community property gets split down the middle.

c. Probate code §100, at death of one spouse, every item is split down the middle, one half belongs to the decedents estate, the other half belongs to the surviving spouse.

d. What happens to the ½ interest that is left to the decedent’s estate? That is what PC §6401(a) deals with.

i. PC §6401

1. §6401 (a): is very simple-if 1 spouse dies intestate, all of the community property ends up in the hands of the surviving spouse, half under §100, and half under this statute.

2. §6401 (c): Deals with separate property. Focusing just on separate property. Doesn’t count as community property. Spouses share comes off the top, but it depends on who the other surviving family members are. Options will always be everything, ½ or 1/3, or all.

e. Common law marriage

i. CA does not recognize common law. If you don’t go through any kind of formal marriage ceremony, two people who agree to live together, this is no longer good enough to confer marital property rights. What we do have is two alternative regimes.

f. Putative spouse

i. Good faith marriage that turns out legally to be void.

ii. Somebody thinks they are divorced, but there is a flaw in the divorce and they get married to a second wife and two people claim the decedent’s estate. This is where CA case law steps in.

iii. Putative spouse and estoppel. §78 in code is estoppel. If one spouse has relied on a judgment of divorce.

g. Unmarried cohabitants

1. Standard explanation about unmarried cohabitants. Can set up a private version of community property, and their contract will be enforceable. Not against public policy to do this.

h. Same-sex couples

1. Other possibility, gay marriage question. CA law does not recognize gay marriage, but does recognize registered domestic partnerships. Domestic partners have the same rights as spouses. In the probate code, you will see a reference to a surviving spouse or registered domestic partner. Probate code has stuck in references to domestic partners to put them on par with spouses.

4. Simultaneous Death

a. A transfer by intestate succession occurs at death, and only persons then in existence can participate in the decedent’s estate.

b. In CA there are 2 statutes dealing with this:

c. §6403 (120 hour rule) applies only to intestacy.

d. §220 (simultaneous death) rule applies to everything else.

e. §220 -- 2 conditions:

i. devaluation of property depends on order of death

ii. can’t tell who died first

f. The operative rule is this: the property of each person shall be administered and distributed as if that person had survived the other. Statute creates a presumption, a burden of proof for the heir to show. The wife or her relatives of showing that the wife survived him by at least a moment.

g. Community property

i. When either spouse dies, each item of community property is split down the middle. (Presumption, the spouse dies first…) 6401 will not operate here, because each spouse is deemed predeceased as to the other spouses share. As to the estate of the husband, we treat the wife as predeceased. As to the estate of the wife, we treat the husband as predeceased. What they are essentially doing is splitting the difference.

h. §6403: 120 hour survival

i. 120 hour rule applies only to intestacy.

ii. §220 rule applies to everything else.

5. Representation Among Descendants

a. §6402 gives us a rundown in categorical order.

i. Parentelic anybody who is a close ancestor will take in preference to somebody who is a more remote ancestor. This holds for the first four subsections of 6402.

ii. 6402 (e) butts in and says, if there are no blood relatives, next people to take are issue of a predeceased spouse, we are talking about step children.

iii. Good example to an exception to the general rule that step children don’t inherit.

iv. Subsection (f) is next of kin. Next of kin is not really defined anywhere, this is where degrees of relation come into play.

v. Assuming that there are actually no blood relatives, in CA the statute goes one step further, a predeceased spouse, parents or descendants of predeceased spouses. Before the state escheats. Very few escheats in California.

b. If a decedent dies survived by any issue, those issue will be entitled to a share of the intestate estate.

c. See chart on page 54.

d. Per stirpes

i. The estate is divided into equal shares, with one share allocated to each living child of the decedent and one to each predeceased child who has descendants living at the decedent’s death.

ii. The initial division of shares occurs at the level of decedent’s children, regardless of whether or not any of them survive the decedent.

iii. CA probate code §240-is a traffic directional signal, it gets incorporated by reference in the operative conditions of 6402.

iv. Look down; which generation has a living member in it?

v. “In the same manner” gives a lot of people a lot of problems. What does the same manner mean in the statutory sense? Treat the deceased person as if they were the decedent of whose estate we are dividing.

e. Per capita

i. Here, the initial division into equal shares occurs at the nearest generation of descendants which has a member living at the decedent’s death.

f. CA/UPC do tend to equalize shares of takers. The big difference between per stirpes and per capita will be whether we are dividing equally among the grandchildren or are making each grand child take a pro-rata share.

6. Ancestors and Collaterals

a. In re Wendel’s Will

b. Wendell Case—could in theory still come up in California—UPC, secret liaisons, murky relationships, etc… There is no formal rule of evidence that describes a mandatory set of proofs.

C. Children

1. Adopted Children

a. §6450 defines the parent-child relationship.

b. §6451-Effect of Adoption

i. What does it have to say about effective adoption? Completely non-uniform. The statute basically provides a general rule, that once the child is adopted, it severs the relationship with the natural parents.

ii. Still preserved if two requirements are met:

1. The natural parent and adoptive child must have lived together as parent and child.

2. The adoption must be either by the spouse of either natural parent (different result in Donnelly case) or the adoption takes place after the death of either natural parent.

iii. §6451(b)-major restriction on natural parents to inherit from child, except for the case of a step-parent adoption. Inheritance rights work in favor of the child, but generally not in favor of the parents.

c. Adoption results in a kind of transplant

d. Legally, along with the adoption comes inheritance rights. In the case of a clean adoption, it is quite clear, all of the connections with the original or biological parents are severed.

e. In most cases an adopted child is transplanted and is treated as the child of the adopting parents, rather than the natural parents in terms of intestate succession.

f. In the case of a stepparent adoption, many statutes preserve the child’s right to inherit from one or both of the natural parents.

g. In Re Estates of Donnelly

i. May an adopted child inherit from her natural grandparents?

ii. No. The legislature intended to remove an adopted child from his natural bloodline for purposes of intestate succession. The chain of inheritance was broken by respondent’s adoption.

iii. Dissent: Hale uses a more strict interpretation of the statute and limits the applicable statute to prohibiting succession from the natural parents, not grandparents. Furthermore, Hale also uses a public policy argument, claiming that such an interpretation does not server to support and preserve adoption.

iv. Statute just says that she is not treated as an heir of her natural parents, but it DOESN’T say that she can’t inherit from the grandparents through the parents.

v. Professor’s problem with this. If Kathleen weren’t around, does that mean that the estate would escheat? Under the majorities rationale, probably yes.

h. Adoption by stepparent

i. Step parent adoption, modern statutes draw a separate disctinction to keep the relationship intact with the custodial parent, and arguably we still might under some circumstances might want her to maintain her legal relationship with her biological father.

ii. §6451

i. In-family adoption

i. UPC: the legal adoption of a child severs all inheritance rights between the child and the natural parents and their kindred, except where the adopting parent is married to one of the natural parents.

j. Dual inheritance

i. Some allow, some don’t.

ii. UPC does not allow, instead if dual inheritance arises, the beneficiary takes the larger of the two shares.

k. Inheritance from or though an adoptive child

i. In general, the modern statutes treat adopted children and their lineal descendants as integral members of the adoptive family, fully entitled to inherit from and through the adoptive parents.

l. Successive adoptions

i. Statutes cutting off an adopted child’s right to inherit from natural parents are also seen as cutting off an adopted child’s right to inherit from initial adopted parents.

m. Equitable adoption

i. §6455, can pursue equitable adoption if the requirements are met.

ii. In the case of foster parents, where there are no official adoption proceedings, the child may be able to participate in the estate if certain requirements are met.

iii. Legal adoption does occur, there is a legal defect that occurs, or there was an informal arrangement where child was given up to be brought up and cared for by another couple and they never got around to formal adoption proceedings. What kind of inheritance rights, if any, will be there for these children. Under CA law, there are two possible avenues.

iv. For the very limited adoption purposes, courts will allow a child to inherit if he had been adopted, if the requirements are met:

1. main requirement, there have been an agreement on the part of the parents who took in the child that they actually had an adoption.

2. performance, natural parents give up kid, “adopting” parents take in and raise child.

v. If this occurs, doctrine of equitable adoption can take place. Equitable adoption is a very narrow doctrine. It permits the child to claim an intestate share to claim estates if they die intestate, it estops the foster parents from dying intestate.

vi. Equitable adoption does not: allow the child’s own descendants to inherit, it does not allow the child to adopt through the parents. It is a bilateral relationship that runs one way. Without a formal agreement, equitable adoption doesn’t apply.

vii. §6454—Foster parent or stepparents

viii.In CA a foster child or a stepchild can inherit from and through the foster parent and step parent, and not vice versa, if two requirements are met:

1. Parent child relationship must have begun during minority and continued throughout the joint lifetimes of child or parent (until the first one of them dies)—leaves what a parent child relationship is open

2. The foster parent would have adopted the child but for a legal barrier. I.e. natural parent refuses to consent. This legal barrier goes away in adult adoption

n. De facto families

o. Adoption of adult

i. Generally allowed but susceptible to collateral attack on grounds of fraud or undue influence.

ii. Parents and children can be older, and there is such a thing as adult adoption. Adult adoptions attend to occur as a matter of personal planning. When somebody adopts an adult, normally the purpose of such an adoption, the effect of such an adoption is to create an instant parent child bond. Concerned with intestacy rights or standing to contest a will.

iii. You can create an adoptive bond, but you can’t dissolve an adoptive bond.

iv. Same sex couples. Adult adoptions have the potentially beneficial effect of shutting out other relatives, it confers automatic exclusive priority for the adoptive child to inherit and to contest the will.

p. Testamentary gifts (i.e to “children,” “issue,” etc.)

i. The prevailing modern rule of construction presumes that a class gift included not only the testator’s own adopted children but also children adopted by other persons, at least where the child lived with the adopting parent during minority.

2. Nonmarital Children

a. §6453—“Natural parent”

b. §6450(a)

c. The other issue where parent child relationships come up is children born out of wedlock.

d. Still a difference between children born in a marriage and children born out of wedlock.

e. Still barriers if paternity has not been proved during fathers lifetime.

f. Dead beat dad statute:

i. A natural parent can’t inherit from an out of wedlock child, unless the parent both acknowledged the child and provided for him/her.

g. Intestacy statutes frequently avoid any explicit distinction between marital and nonmarital children.

h. Lingering constitutional questions

i. Proving (or disproving) paternity

i. How do we determine who the parents of a child are? Particularly if the mother is unmarried.

ii. There are a whole network of presumptions in CA (i.e. woman’s husband is father, etc.).

iii. The most common way of proving paternity is if the father openly holds out that the child is his own.

3. Posthumous Children

a. Traditional probate codes have preceded on the assumption that a child can’t be conceived once one parent dies.

b. §6407- changes this.

c. In order to qualify as an intestate successor, a person generally must be in existence at the time of the decedent’s death.

i. Typically children who are in gestation are considered ‘alive.’

d. In CA, there is a statute, which actually does purport to resolve this (problem in Woodward).

e. See §249.5

i. There must be written instruction by decadent that sperm is to be used after death

ii. After father dies, written direction must have designated person who has control of genetic material and person within 4 months after determination of death has to give notice that material is out there and they are thinking of using it

iii. Child must be in gestation within 2 years after death, this puts a 2 year moratorium on distribution of estate if there is this type of material out there

f. Woodward v. Commissioner

i. Issue: If a married man and woman arrange for sperm to be withdrawn from the husband for the purpose of artificially impregnating the wife, and the women is impregnated with that sperm after the man, her husband has died, will children resulting from such pregnancy enjoy the inheritance rights of natural children under Massachusetts’ law of intestate succession?

ii. Facts: Mr. and Mrs. Woodward were husband and wife. After being diagnosed with leukemia, Mr. Woodward and Mrs. Woodward had some of Mr. Woodward’s semen preserved. After Mr. Woodward died of Leukemia Mrs. Woodward had two children via artificial insemination using Mr. Woodward’s sperm. Mrs. Woodward then filed for Social Security survival benefits and was denied because she had not established that the twins were “children” under the meaning of the Act.

iii. Holding: The court concluded that limited circumstances may exist, consistent with the mandates of the Legislature, in which posthumously conceived children may enjoy the inheritance rights of “issue” under intestacy law.

D. Disqualification for Misconduct (Bars to Succession)

1. You can be either the perfect model child or spouse, or you can be the child or spouse from hell. Generally the statutes make no allowances for conduct.

2. Breach of Parental Obligations

a. Closest CA comes, is where a parent refuses to provide support from a child. Those parents or relatives are barred from inheritance, this is very limited when looking at inheritance bars.

3. Breach of Marital Obligations

4. Homicide

a. Elmer’s case:

i. Involves a trust, came up in the state of New York. The court invoked something called a constructive trust.

ii. Constructive trust: What is it? Basically it is a legal fiction. Borrows the terminology of trust, it is a trust that is implied at law, rather than expressed in fact, it borrows the equitable remedies of trust law to provide a remedy for unjust enrichment. It is an equitable remedy for unjust enrichment that is dressed up in the guise of a trust.

iii. We can allow you to take legal title, but we can use equity to give everything you got back to the people legally entitled to it.

iv. The court declares the wrongdoer to be a constructive trustee, and the terms of the constructive trust are that it must be given back to the other trust beneficiaries so that the wrongdoer is cut out of the trust altogether.

v. Equity turns around and moves with one hand to take away what they gave to the wrongdoer with the other hand. End up with a result that satisfies the chancellor’s conscience.

b. In Re Tarlo’s Estate

i. FACTS: Albert Tarlo killed his wife and daughter by shooting them while they were asleep. After murdering his wife and daughter he killed himself.

ii. ISSUE: Whether the estate of Mr. Tarlo shall be distributed to the administrator of her father, or to her maternal grandfather, Louis Koch, who is her next of kin if the inheritance may not pass through her father.

iii. HOLDING: The court held that since the statute required that a person be adjudged guilty and sentenced in order to be precluded from intestate succession. In the case at hand, Mr. Tarlo was neither adjudged to be guilty nor sentenced because he had committed suicide and therefore he was not precluded from receiving the estate of his daughter through his administrator.

iv. DISSENT (Kephart, Simpson): Kephart argues that the court erred in its reasoning n the Carpenter case and that the legislature was specifically trying to address this point when they passed the statute in question. Kepler further argues that the court can use equity, consistent with public policy, to reach an opposite conclusion in this case.

v. DISSENT (Frazer-Chief Justice): Frazer argues that as he reads it, the statute in question does not require the killer to be convicted of murder.

c. Slayer Statute

i. Joint tenancies, life insurance, etc., and any case which slips through the cracks, is to be treated in accordance with the principles of this part.

ii. CA legislature a final judgment of conviction is conclusive for purposes of this part.

iii. Insanity will negate a felonious and intentional killing, and therefore an insane person is allowed to inherit under the CA probate code.

iv. What is bothersome is the notion of when somebody who hasn’t been convicted in a criminal way, how do you determine in a civil setting?

v. Tried and acquitted in criminal case or struck a plea bargain to a lesser offense.

vi. In other words, we have an inconclusive criminal proceeding.

vii. 254b—anything short of a criminal goes to probate with burden of proof of a preponderance of evidence. Have a probate court conduct a civil law inquiry to determine by a preponderance of evidence a criminal law issue of guilt. Determine could this person be convicted in a criminal proceeding of an intentional and felonious act.

d. What happens to the estate of the decedent?

i. UPC: The estate is distributed as if the killer had predeceased the decedent.

ii. CA steps in and they say, the killer is not entitled to property passing by will or intestate succession.

iii. What does this mean, what happens to the property?

1. Property interest or benefit referred to in a-1 passes as if the killer has predeceased the decedent.

e. Joint Tenancies and Slayers

i. UPC and under CA code, the rule is basically that when one joint tenant kills another, the joint tenancy is severed and under the UPC it is perfectly clear what that means, ½ that belonged to killer stays with killer but the other half goes to the victims estate and it passes again presumably under the victims will to beneficiaries other than the killer.

E. Advancement, Release, and Assignment

1. Advancement

a. Advancement is a gift of property made by a parent to a child ruing life in anticipation of the child’s intestate share of the parent’s estate.

b. §6409

i. In the case of an intestate decedent, we are only going to treat lifetime gifts as advancements, if the heir acknowledges in writing that it is an advancement, or (see statute §6409).

ii. (b) Value at the time heir came into property or at time of death of decedent, whichever comes first.

c. Well old courts used their equity powers to take account of previous lifetime gifts. Doctrine was intended to equalize shares of the children. The real difficulty was an evidentiary problem, finding out what parent intended when she made the gifts. Common law courts struck out on their own and came up with the common law of advancement.

d. Nowhere is there a statutory doctrine of advancements. The statutes merely impose restrictions on that doctrine.

e. If the heirs are children of the decedent, a living person has no heirs, one of the requirements of being an heir. At the time the gift is made, you don’t know for sure whether the person receiving the gift will be an heir. The intent is what counts when considering these “substantial gifts.” Only have to bring major, substantial gifts back into the hotchpot.

f. Presumption when gift is made that it is meant to offset the intestate inheritance. The child/heir can rebut the presumption. Courts often got entangled trying to figure out what a now dead parent intended.

g. Suppose that A unexpectedly dies before her mother, the advancement wouldn’t apply anyway, but A of course leaves children, the kids turn out to be heirs, they are going to take A’s 1/3 estate, are the kids bounds by the advancement taken by the parent? Common law courts say yes. The UPC drafters were not interested in allowing these hotchpot calculations to go on forever, in 6409(d), they reverse that rule. The children are given a clean state. It is there to reverse the common law rule.

h. Although his rule applies specifically to intestate situations, you can certainly imagine a case where the will doesn’t dispose of the entire estate, so there is a will but there is also intestate property that is not disposed of by the will. UPC intestate as to all or part of the estate. Designed to catch any property that is being distributed under intestate rules.

i. Donor leaves a valid will, but it turns out that some of the devisees have also gotten lifetime bequests that were understood to be advancements or advanced payments. There is a substantially similar statute, which again imposes a requirement of written evidence of intent. If a testator makes this provision, it will generally be in the will, if at all.

j. How do you distinguish between a transfer and an absolute gift?

i. The distinction depends on the parent’s intent at the time of the transfer.

k. Partial intestacy

i. The doctrine of advancement is inapplicable if the decedent leaves a will which disposes of all or part of the estate.

l. Valuation

i. In general, an advancement is valued at the time of the transfer.

2. Release or Assignment of Expectancy

a. Release to the living owner

b. Assignment to a third party

c. Not brought up for advancements, what happens if the donee unilaterally wants to release his intestate rights?

d. Kid who may not get along with the parent, says to the parent, “hey, if you will give me an advancement of my share, I will release any claim that I will otherwise have to your estate when you die.”

e. Technically this is not and advancement, here we are talking about the donee’s intent or agreement what he otherwise might be entitled to. The UPC has nothing to say about releases, or assignments about expectancies.

f. Can we enforce a release in advance of an expected intestate share? We are still stuck with common law here.

i. The answer is yes, common law has traditionally recognized this.

ii. They have traditionally enforced releases or assignments where the deal is made with a third person.

iii. Courts of equity have enforced this even when there is no written evidence.

iv. This still subsists and you still come across these instances.

v. The parent may subsequently write a will, in that case, the child has merely released an intestate share.

vi. The child could also die prematurely, leaving issue, those surviving children will claim outright.

vii. You probably want to reduce this in writing, but nothing on the law books requires it.

F. Disclaimer (see §282 for effect of disclaimer on §240 and Advancements!!!)

1. A disclaimer (or renunciation) is an affirmative refusal to accept a gratuitous transfer of an interest in property.

2. In the case of a testamentary gift, the disclaimed interest is treated as passing directly from the decedent to the ultimate recipient without ever passing through the disclaimant’s hands.

3. Disclaimer offers 2 significant advantages:

a. It keeps the disclaimed interest out of reach of the disclaimant’s creditors, and

b. It avoids the gift tax that might otherwise be imposed on a transfer by the disclaimant.

i. Once somebody dies there is a deemed transfer, it goes somewhere, it may go to a spouse or charity. A good chunk may go to individuals or family, and that will be taxed (if the estate is big enough).

c. §282 specifies what happens to disclaimed interests, “as if the claimant had predeceased disclaimer.”

d. remove disclaimant from the line of succession, it will go to the next in line.

e. For inheritance purposes there is a single step transfer from uncle or decedent, the point of a disclaimer is that the person is taken out of the transaction altogether, it is treated as if it is relinquished in one single step.

f. If the disclaimaint is happy enough with the property being diverted to the next person in line, and if it is going to people it is normally going to benefit, you can do this in one step rather than two and eliminate the second stage of the transfer tax.

g. §283 --a disclaimer is not a fraudulent transfer by a beneficiary.

h. (see §282 for effect of disclaimer on §240 and Advancements!!!)

i. Under Medicaid a disclaimer is not recognized. A disclaimer is equivalent to a fraudulent transfer, for Medicaid accounting purposes, a disclaimer accounts for assets.

j. Note 4, p. 130, all that (b)(1) does is recognize that A is alive for determining where the generational divide is. It has no effect at all on who receives the shares. It affects the size of the shares, not the identities of who has the shares.

k. (b)(2) same affect as (b)(1), but with respect to advancements.

l. Two pitfalls for the tax savings. Disclaimer, potential malpractice liability. One complication is purely technical. The tax requirements for giving an effect to a disclaimer are in addition to, or giving effect to. The tax code is an overlay on state law. In order to get a qualified disclaimer, you must also satisfy the tax code. 2 requirements, 1 is a timing issue, under CA law, you have a reasonable time to make the transfer. For tax purposes there is an automatic 9 months that runs from deceased uncle’s death. People who may know the estate law but don’t know the tax law. Figuring out accurately what the consequences are of making the disclaimer. Who will get the property if nephew disclaims?

III. Protection of the Family

A. Introduction

1. Protection of Surviving Spouse

2. 2 types of protection, community property, and types of protection in a non-community property state (elective share regime).

3. In the case of separate property, a spouse who owns separate property can do whatever he or she wants, it is not subject to any type of forced share or testamentary restrictions.

4. The general principle is this, community property is any property that was earned by either spouse during the marriage.

5. We are interested in what happens when one spouse breaks the rules. Happens in two ways:

a. Lifetime gifts. Stashes money away that other spouse doesn’t know about and starts making gifts. Clearly a violation of non-consenting spouses property rights. The wife in those cases can certainly recapture such property for the benefit of the community.

b. At death? Bray case. Have either a will substitute, or a will that purports to dispose of separate or community property.

6. Protection of Children

B. Statutory Allowances and Social Security

1. Statutory Allowances

a. By statute in many states, surviving family members are entitled to allowances from the decedent’s estate for homestead, exempt property, and family support.

2. Social Security

a. Upon retirement at full retirement age, a worker becomes entitled to a basic retirement benefit known as the “primary insurance amount” PIA which is payable in the form of a monthly annuity for life.

C. Surviving Spouse: Dower and Elective Share

1. Dower

a. A few states still refer to dower, notably Arkansas. For the most part it is a relic of the past when property rights meant something.

b. By far the more common method is to give the surviving spouse an election.

c. Also the dower clogged up the sale of land, because nobody (including creditors) wanted to purchase land hindered with the possibility of being reclaimed as a dower.

2. Traditional Elective Share

a. Most states have replaced the common law dower and curtsey with a statutory elective share which gives the surviving spouse a right to claim a share of property owned by the decedent at death, often on condition that the spouse renounce decedent’s will.

b. Newman v. Dore

i. FACTS: Ferdinand Strauss died leaving a will that gave all of his property in trust to several trustees, none of whom were his wife. This was done in order to circumvent his wife from getting any of his estate at death. To his wife, whom he disliked at the time of his death, he left the benefits of one third of his property held in trust. His wife was not to get the trust, only 1/3 of the profits.

ii. HOLDING: The court held that this was an illusory transfer and that

c. Davis v. KB & T Co.

d. We get the Illinois type elective share:

i. Springs into decedent when decedent dies, gives the surviving spouse the right to claim some fractional share, different from dower because it is an outright ownership and it is subject to creditor claims.

ii. If she does that what is she claiming? Presumably that means she has to give up anything she would have given up under the will. It is the statute that provides her that ability. She would give up any provisions made for her. She would get to take alternatively the 1/3 share after creditors were paid off.

e. What are the problems that come up under the traditional elective share?

i. If what’s covered is 1/3 of the net probate estate, what is not covered is any property that was given away during the husband’s lifetime, or was outside of the probate estate.

ii. So if you really want to disinherit you could just make sure you assets pass outside of probate.

3. Augmented Estate

a. The revised UPC’s “accrual-type” elective share is intended to bring elective share law into line with the contemporary view of marriage as an economic partnership.

b. Expand base for computing 1/3 elective share.

c. In its original form, it introduced the concept of the augmented estate.

d. We are concerned with decedents who either intentionally or unintentionally ended up leaving their spouses unprovided for.

e. UPC sticks with basic 1/3. Less generous in its original form than community property.

f. UPC looks not only at net probate assets but looks beyond to see what other gifts are made at or near death.

g. The UPC splits the difference between the two approaches and allows the spouse to take and to keep whatever she is left in decedent’s will, but it requires that she offset that property against what she is able to claim as an elective share.

h. The virtue is that it doesn’t shatter and disrupt the will that was left, and it minimizes the amount she has to pursue against other beneficiaries.

i. See page 158 of the text for illustrative examples.

j. 1 problem if you are interested in fairness to surviving spouses, the 1/3 share is not adequate reflection of what spouses needs are, but conversely in a huge estate wife could get large settlement for only being married 1 day.

k. 1990 UPC- Come up with a rough approximation of what should be treated as marital assets. This is the accrual based share. His assumption is a very simple one. He assumes that the longer the marriage lasts, the more property is attributed to the spouse.

l. Start with the wife: What type of elective share would she get if the wife died first? Nothing, elective share applies only to the surviving spouse. That means that the order of deaths here makes a huge difference.

m. Try to summarize what difference it makes if you are in a separate property state with an elective share or a community property state.

1. When rights arise.

	Community property	Separate property/elective share
When rights vest	During life	Only at first spouses death
How you define the pool of assets that is subject to splitting	Test that asks whether property is recovered during marriage other than by gift or bequest, the main headache is identifying whether it is community or separate	Look at the combined assets of both spouses. We never have to look at when they were acquired, how they were acquired or where they came from.
How are the marital property rights satisfied. In what manner are they divided	Straightforward ½ item of each property	Satisfied first from assets owned by or passing to the surviving spouse

4. Waiver

a. What if you strike an agreement up front at the beginning of the marriage to waive their shares? These are all death time rights, and the question is can you prospectively rule them out? Yes, of course you can. As long as it is in writing and meets the test for enforceability.

b. The other competing goal is that there is a huge potential here for unfairness or overreaching and there is an instinct that you shouldn’t allow one spouse to take advantage of the other one.

c. In general, a waiver of marital property rights by either spouse is enforceable if the waiving spouse executed the waiver voluntarily and with adequate disclosure or knowledge of the other spouse’s property.

d. Hook v. Hook

i. FACTS: Prior to their marriage the Hooks signed a pre-nuptial agreement stating that each party would keep their own assets (what’s mine is mine and what’s yours is your). Hooks attempted to divorce his wife and will all his property to others. The wife contested the will on the grounds that the deceased husband failed to disclose the value of his property prior to the pre-nuptial signing.

ii. ISSUE: Did the widow/appellee voluntarily enter into the pre-nuptial agreement with full knowledge of the nature, extent and value of her prospective husband’s property?

iii. RULE: Where a court finds that an agreement provides the respective spouse with a disproportionate share of the property, the agreement will only be upheld if it appears that the respective spouse voluntarily entered into the agreement with full knowledge of the nature, extent and value of her prospective husband’s property.

iv. HOLDING: Yes, the widow/appellee voluntarily entered into the pre-nuptial agreement after Donald Hook had made an adequate disclosure of the extent of his assets.

v. DISSENT: Brown dissents arguing that the pre-nuptial agreement was not entered into in good faith.

vi. Common law look to see whether two tests are met:

1. Are the terms grossly disproportionate?

2. Next question, did he adequately disclose to her?

e. UPC

i. UPC has a very straightforward standard:

ii. Must be in writing and must be signed, and that it is not enforceable if 1 of 2 facts exist,

1. -that the spouse did not make waiver voluntarily, or

2. -the waiver was unconscionable when it was executed and the spouse was not provided fair and reasonable disclosure.

iii. Under the UPC, does Agnes still lose under appeal? Yes. Courts don’t want to second guess contracts as long as fraud isn’t involved.

f. California

i. 3 different tests for enforcing waivers:

1. §142, §143, §144

2. If you flunk 143, 144 gives you another bite at the apple.

ii. The bottom line is that in CA prenuptial agreements are no longer reliably enforceable.

iii. Only reliable way to waive rights in CA is to get independent counsel and have adequate disclosure.

D. Surviving Spouse: Community Property

1. Traditional Community Property

a. Estate of Bray

i. FACTS: A father owned a food brokerage business that he ran when he was married to his second wife. During the course of the business the father asked his son from a previous marriage to help run the store. The father started a joint account, of which the son was a joint tenant, but of which the father deposited money into. After the death of the father the wife contended that what was placed into the joint account was community property and thus 50% of the contents of the account belonged to her.

ii. ISSUE: Two issues, 1, are they really community funds? If they are community funds, then the second question is that this is a violation, and what is her remedy?

iii. HOLDING: The court held that the contents of the bank account were community property because the contents were distributed without consideration. Furthermore, deposits to the account were made with community funds. The court decides that these are community funds. Title is not determinative. If you can’t trace the source of a particular profit, you presume it is community property. Presumption is that everything is community unless you can prove it is separate property.

iv. Ways you might attack this and figure out how he can make a gift to his son. What would you suggest?

1. Can hire his son to perform valuable services and can pay his son extra, as long as it is reasonable.

2. Source of the funds are hugely important. He could make a gift from his separate property without having to run anything through his wife. By will he can do whatever he wants with his half of the community property.

3. The other possibility is if he is a little more mistrustful of Belle, his wife. He could put her to a widow’s election.

b. Migrating spouse

i. Spouses live entire life in CA, then retire in FL. Are they automatically supplanted to a fault state after living in a CP state?

1. Short answer, community property rights carryover. Technically the property is still community property.

2. Suppose husband dies, can his wife who already has a ½ undivided interest, can she claim this ½ and then in addition claim an elective share of his assets? The elective share doesn’t apply to community property. Her elective share rights apply only to her husband’s property.

ii. We have to face the opposite situation, they earned a lot of money in FL, but then moved to CA.

1. CA has its own solution, which is the notion of quasi-community property.

2. Uniform Marital Property Act

a. The Uniform Marital Property Act is intended to facilitate the importation of community property principles into common law states.

E. Omitted Heirs

1. Much looser protections for omitted children (heirs).

2. Unlike spouses who get some sort of minimum protection, or an elective share of an augmented estate, children particularly are not entitled to receive anything when a decedent dies.

3. The problem that legislatures are worried about is one of unintended omission.

4. How do you tell if the will does not specifically state who is to be included and who is to be excluded?

5. How do you tell that the will’s silence didn’t want the children to take any share at all, or if that silence reflects something else?

6. Children

a. Goff v. Goff

b. Granville Goff was briefly and unhappily married…Common law presumption, any child born during marriage is presumed to be the child of the father.

c. Last will had two provisions of interest, recites that he is unmarried and has no children. He leaves the bulk of his estate to his some nephews. Second provision that is relevant, he leaves 1 dollar who contests his will.

d. Joe’s two kids come in to contest share.

e. Court has two questions, was Granville aware of existence of his grand kids?

f. Is the proceeding to claim an intestate share a will contest? Yes.

g. If Granville wanted to disinherit, what should he have done? In the case at hand he has made it unclear.

h. What type of language might do the trick? Anybody heir of mine who is not named in this will is intentionally left out, or gets a dollar. Do you know who your heirs are? Argument for heir, this guy had no clue who is heirs were.

i. Instead of heirs, I intentionally make no provision for any child of mine, whether now living or born after the date of this will except by this instrument.

j. What if Granville had in his will, disinherits Joe by name? Joe’s kids would say, we aren’t specifically named, we should inherit.

k. What if Granville had two other children besides Joe, Carl and Lewis. Suppose instead that in his will, he had actually left all of his estate to his favorite nephews, and he specifically disinherited Carl and Lewis, but he never mentioned Joe. How much of the estate is Joe going to get if there are two other kids sitting out there? If the will was intestate, Joe, Karl, and Louis would all get 1/3. When Joe step in, he gets his 1/3 share.

l. Two approaches:

i. Massachusetts approach: provides an intestate share for a child of the testator, or issue of a deceased child, who is not provided for in the will UNLESS it appears that the omission was intentional and not occasioned by accident or mistake.

1. Courts will look beyond the four corners of the will to establish intent.

2. The Massachusetts statute, is somewhat more flexible, there the notion is that if the child of a descendant is not provided for in the will, the statute creates a presumption that the child gets an intestate share, unless the omission was not do to accident or mistake.

ii. Missouri statute: awards an intestate share to any child of the testator, or issue of a deceased child, who is not named or provided for in the will. The court will confine their inquiry to the will, if the will is silent, then extrinsic evidence of the testator’s intent cannot be introduced to bar the omitted heir’s statutory share.

1. The classical Missouri type statute (which is no longer in effect in Missouri) a bright line test, “if a child or any descendant of a testator is not named or provided for in the testator’s will, there is a statutory presumption that that child/heir gets to take an intestate estate. The result is not to invalidate the will. Look at the will and if a child is not named or provide for, then the statute gives them a share.

m. These are really disguised forms of forced shares statutes. Maybe they are intended to protect children who are omitted, and if that was the case, you would think it would be easier to give the children a forced share.

n. CA §2620= a tweaked version of what the UPC had

i. The major innovation was to greatly restrict the scope of the omitted child statutes.

ii. CA now protects only omitted children, so you don’t have to worry about descendant’s further down the line.

iii. The general approach is to allow an intestate share for a child who is not provided for in a will, unless, §21621:

1. omission was intentional and the intention is clear from the will.

2. decedent already had 1 or more children and devised estate to other child’s parent.

3. 21621(c) –this one is peculiar to the UPC.

4. When it comes to non-probate assets, we are free to look at evidence outside the will.

o. What is a testamentary instrument for the purposes of CA law?

i. §21601: Will, codicil, or irrevocable trust.

ii. This expands a pool of assets an omitted child can get.

iii. In order to claim anything, child must have been born after instrument came into existence.

iv. There is a bit of give and take. Figure out when the last will or revocable trust was executed and only children born after the very last one get a shot of claiming protection under these statutes.

p. UPC §2-302

i. The omitted child’s statutory share cannot be satisfied from nonprobate assets.

q. Revised UPC-one of the problems to the CA scheme, is that giving an omitted child an intestate share can work out quite arbitrarily in some cases. Revised UPC draws together all property left to existing children and gives to after born child a pro-rata slice. So the unborn child inherits as the existing children do.

7. Surviving Spouse

a. UPC §2-301

b. Community property and elective share are there to prevent a spouse from intentionally disinheriting and screwing your spouse.

c. This is intended for spouses that are forgotten. The argument here is that if a testator marries, after executing the will, the thought was that presumably, the testator simply wasn’t thinking about the existence of a spouse at all.

d. Original UPC cuts in the spouse of the elective share of the estate if the spouse marries the executor after the will was executed and she has not otherwise been provided for.

e. CA, in §21610-(c), the share of separate property is generally intestate share, but it is capped at ½ of the separate property.

8. Reform Proposals

a. England has a proposal allows judges discretion, although this has been widely criticized as applicable to the U.S.

F. Restrictions on Charitable Gifts

1. most of the statutes restricting charitable gifts have been repealed by the legislature or overturned by the court.

IV. Grounds for Contest: Incapacity, Undue Influence, Fraud, Duress, and Mistake

A. Testamentary Capacity

1. Capacity should be a fairly straightforward.

2. Test in CA is two prong.

a. 1. Age—you have to be at least 18 years old.

b. The other requirement is that the testator must be of sound mind.

i. Testator must be able to understand the nature of the testamentary act.

ii. Must understand nature of property.

iii. He/she must be able to understand her relationship to her immediate family and obligations to her natural family.

iv. If you were to ask the testator, “Do you know what you are doing,” and they can answer, then there is no requirement that the testator has to understand the terms of the will.

v. We are looking at a very low, lenient level.

3. How do you deal with somebody who has been declared incompetent?

a. Conservator has all legal power to enter into property transaction.

b. Suppose there is either no will in place or an old stale will in place. Can the conservator make a valid will?

c. Does the conservator have testamentary capacity?

d. If a testator lacks testamentary capacity, then nobody can draft a will for the testator.

e. A conservator, by contrast, because there is specific statutory authority, with court permission a conservator can draft a will for a conservator.

f. He/she must have testamentary capacity herself, or we must go to court and get permission for a conservator to make a will.

4. Barnes v. Marshall

a. FACTS: This case revolves around the admissibility of evidence used to illustrate the testamentary capacity of the testator. The testator frequently behaved oddly and two medical experts testified that the testator was suffering from manic depression and psychosis.

b. The court held that the will was invalid.

5. Insane Delusions CA law 6100.5

a. For legal purposes an insane delusion refers to a belief that is

i. Unreasonably false belief one that without any basis in fact Must be rooted in some disturbance of the mind. It has to be something that would be recognizable as a symptom of a mental problem

ii. It must have an effect on the disposition of the will.

6. Notes

a. General Definition: The usual definition of testamentary capacity requires that the testator be capable of knowing and understanding in a general way the nature and extent of his or her property, the natural objects of his or her bounty, and the disposition that he or she is making of that property. In addition, the testator must be capable of relating these elements to one another and forming an orderly desire regarding the disposition of the property.

b. Threshold for testamentary capacity:

i. The focus is on the testator’s state of mind at the time the will was executed.

c. Evidentiary Factors

i. Symptomatic conduct of the alleged incompetent

ii. Opinion testimony of incompetency

iii. Organic condition and habits of the alleged incompetent

iv. Moral aspects of the transaction and its consequences

d. Attending physician

i. The party who has the medical testimony in support of his or her position has a distinct advantage.

e. Attorney

i. The attorney who drafted the will is often the best witness on the moral aspects of the transaction.

f. Friends, neighbors, and business associates.

i. The weight of such testimony depends in part on the proximity in time between the events observed by the witness and the execution of the will.

g. Attesting witnesses.

h. Psychiatrist

i. Distinction is made between an expert witness who has never seen the testator, and a psychiatrist who has treated the testator.

i. Terms of the will.

i. Disinheritance of worthy members of the testator’s immediate family is the most decisive factor in persuading a court to invalidate a will on the grounds of incapacity.

j. Jury Trial.

k. Inter vivos gifts.

i. The threshold of capacity seems to be higher for making an inter vivos gift than for executing a will.

l. Professional Responsibility

i. As a matter of professional responsibility, an attorney should not prepare a will for a client if the attorney reasonably believes that the client lacks testamentary capacity.

7. In Re Honigman’s Will

a. FACTS: Mr. Honigman’s wife was cut out of the will and she contested the will at probate upon his death. The trial court ruled that Mr. Honigman was unsound and that the will should be denied probate, but the appellate court reversed.

b. HOLDING: Mr. Feld did not have the testamentary capacity for his will to be valid. Proof supported the jury findings that the testator, at the time he made his will, was suffering from an unwarranted and insane delusion that his wife was unfaithful him, and this condition affected the disposition made in the will. A new trial was granted.

c. DISSENT: Justice Feld dissents, arguing that just because Mr. Honigman believed his wife was cheating on him, doesn’t necessarily mean that he was mentally incapable of making a valid will. Feld also argues that Mr. Honigman cited other valid reasons as to why his wife was left out of the will, namely that she was wealthy in her own right and that he wanted to take care of his brothers.

8. If we have grounds for contesting the will, the intestate successors have interest, and the people who have been cut out of previous wills also have interest. A living person has no heirs, you can guess who the likely heirs will be, but there is no saying that they will still be married, their kids will still be alive, etc. You don’t know definitively who the heirs will be. Also, the testator may change the will before he dies. You must disclose the terms of the will, a lot of people may be upset.

9. Causation

a. The contestant must also demonstrate a causal connection between the delusion and the disposition made by the will.

10. Matter of Estate of Bonjean

a. FACTS: Mrs. Bonjean had a will in which she specifically disinherited her siblings. Prior to her death, Mrs. Bonjean’s siblings tried to have her involuntarily committed to a mental health ward for treatment. Mrs. Bonjean eventually committed suicide, possibly as a result of her depression.

b. The disinherited siblings contended that Mrs. Bonjean was unfit and lacked testamentary capacity.

c. HOLDING: The Court held that Mrs. Bonjean did not lack testamentary capacity. They reasoned that Mrs. Bonjean had a rational explanation for disinheriting her siblings, namely that they tried to have her committed. The court also held that suicide or attempted suicide is not per se proof of insanity or insane delusions.

B. Undue Influence

1. Undue influence arises when a testator s induced by another person to make a will that does not reflect the testator’s true testamentary wishes.

2. The basic test that most courts would agree on, is evidence that somebody either coerced the testator or substituted the beneficiaries own interest for another’s.

3. Testator’s range from the strong willed to the weak minded. The tests for undue influence try to take into account the situation of the testator and the actions of the influencing party.

4. There are different ways of proving undue influence. What does a contestant have to prove in order to get to the jury?

a. Raise a presumption. You can raise a presumption of undue influence if you can show two elements:

i. a confidential relationship

ii. active procurement—some affirmative actions that the third person takes in order to procure the will in question, or other suspicious circumstances—this opens the door wide to evidence of any kind of dealings.

iii. In CA it operates slightly differently. There is a third requirement, and that requirement is undue benefit under the terms of the will—again this is a mushy concept.

5. In Re Will of Moses

a. Mrs. Moses made a will in 1964 that left all of her property to a close male friend, Mr. Holland. Prior to her 1964 will, Mrs. Moses had a will drafted in 1957 that left all of her property to her siblings. Mrs. Moses was an alcoholic and had been married 3 times and it was claimed that she was in love with Mr. Holland. The siblings and beneficiaries contested the 1964 will on grounds that Mr. Holland exercised undue influence over Mrs. Moses.

b. HOLDING: The court found that the nature of the relationship between Mr. Holland and Mrs. Moses was such that it created a presumption of undue influence that must be overcome by Mr. Holland. Undue influence presumption occurred on account of “suspicious circumstances.”

c. DISSENT: Justice Robertson dissents, claiming that there are no grounds for the creation of a presumption of undue influence. Although it is true that Mr. Holland was an attorney, Mrs. Moses got an independent attorney to draft her will. Furthermore, even if a presumption of undue influence was created, Mr. Holland met that burden by clear and convincing evidence. Lastly Justice Robertson argues that the court’s decision leaves no precedent and too much discretion for trial court judges, who will have no choice but to go through the decedent’s life subjectively.

d. The court has a pretty tenuous reading of suspicious circumstances in this instance.

e. Variation #1, suppose instead of actual situation that beneficiary, had actually gotten around to marrying Fanny Moses.

f. Doesn’t it give a rise to undue influence.

g. Why?

i. The general rule seems to be is that you can only contest a marriage while both parties are alive. So if the marriage goes through, it is nearly impossible to contest this.

ii. In theory a spouse can exercise undue influence, but it is rare.

6. You can attack lifetime gifts and revocable trust pretty much on the same grounds, however it is hard to attack these instruments. When you attack the trust, you are suing the trustee. The trustee, is one, going to have had a chance while testator was still living to interacting with her, and the trustee is in the business of getting trust and making sure that the trusts he/she engages in are upheld. It is not that the standards are much different, it is more of a question of who is involved.

7. One final possibility: Adult adoption. If you want to exclude other relatives, like siblings, from having standing to contest a will, one way to do it would be to allow her to adopt him/her as a son/daughter.

8. What do we do about same sex couples? This raises similar issues. The risk of challenge is particularly acute because they can’t marry.

9. Notes

a. Proving undue influence.

i. Relevant considerations:

1. testator’s mental and physical health at the time the will was executed

2. nature of the relationship between the testator and the beneficiary

3. beneficiaries role in procuring the execution of the will

4. independent advice provided to the testator by a lawyer or advisor

5. haste or secrecy in the preparation of the will

6. see p. 227

b. Confidential relationship

i. Testator’s attorney

ii. A guardian or conservator

iii. A spouse

iv. A will which excludes the testator’s blood relatives in favor of a lover.

v. Friend or caregiver

vi. Member of the clergy

vii. Owner or operator of a nursing or foster home

c. Testamentary freedom

d. Partial or total invalidity of will

i. Where specific provisions of a will are the product of undue influence, courts usually ignore the tainted provisions and give effect to the remaining provisions.

10. Haynes v. First National State Bank of New Jersey

a. ISSUE #1: Is there a presumption of undue influence and if so what is the proper burden or proof associated with such a presumption.

b. HOLDING #1: The court held that because Mr. Buttermore was not an attorney independent of the beneficiary then a strong presumption of undue influence was created which could only be overcome by clear and convincing evidence.

c. ISSUE #2: Is the in terrorem clause enforceable?

d. HOLDING #2: No, the in terrorem clause is not enforceable. In terrorem clauses in a will or trust agreement are not enforceable where there is probable cause to challenge the instrument.

e. DISSENT: Justice Clifford dissents to the in terrorem holding of the majority, arguing that at the time the testator made her will and included the in terrorem clause, the clause comported entirely with judicially-declared public policy.

f. Was there a confidential relationship between the testator and her daughter?

i. Yes, she is living in the same house and they are very close.

g. Active participation? Did Dorcas have anything to do with it?

i. Yes.

ii. First red flag is the daughter writing notes to lawyer about what HER mother wants. This is not a good idea.

iii. Buttermore has a conflict of interest here.

h. Undue Benefit: Yes, there was a trust and she could take the principle at any time.

i. Once you have the presumption, ordinarily that can be overcome by preponderance of the evidence, but here you must overcome by clear and convincing evidence, because of Buttermore’s conflict of interest.

j. Buttermore’s position raises the burden of proof.

11. In CA, there is a special rule, you don’t even need to show undue benefit. Presumption is automatically raised when lawyer drafts a will with himself named as the beneficiary.

12. §21350—Disqualified persons (see statute).

a. Why we have 21350

i. Fraud of lawyer in OC, he used to find clients and put him in their wills

13. No Contest Clauses

a. Meant to deter will contests

b. A testator who really wants to disinherit somebody, the Will will try to buy off the beneficiary. I.e. if you contest you risk losing 10k, this is more persuasive than a will that disineherits a person.

14. In CA we have a special series of statutes dealing with no contest clauses.

a. CA no contest rules 21306 and 21307

b. If will is valid, then no contest rule is valid with exceptions

i. 21306-Despite general rule, if based on forgery or revocation or reasonable action under 21350

ii. 21307- Would allow you to attack drafter or person who described instrument, person who gave directions to drafter concerning dispositive or other substantive contents of provision or who directed drafter to include no contest clause, and witness of instrument

C. Fraud, Duress, and Mistake

1. Fraud:

a. Same basic tort, if you have someone who makes an intentional misrepresentation that causes the testator to make a will the testator would not otherwise have done, you have a remedy for fraud.

2. Either ground, fraud in execution or in the inducement are both perfectly good grounds if you can prove them.

3. Latham v. Father Divine

a. Mary Sheldon Lyon died in 1946 and left a will, executed in 1943, that gave almost her entire estate to the defendant Father Divine, two corporate defendants, and an individual defendant. Father Divine was the leader of a religious cult, and the remaining defendants were in some way associated with the cult as well.

b. The plaintiffs contend that the defendants, by force and fraud, kept the testatrix from making a will in favor of them.

c. This case suggests a backdoor way to get around the probate process even when it has been admitted to probate. You must show that there is unjust enrichment. The reason that plaintiffs are not bound by prior probate proceedings. They are trying to get relief since they had no notice and no standing. The court says that if you can prove unjust enrichment then we can order Father Divine to turn over the property. This is the flexibility that the court uses. This is very unlikely to happen.

d. The only time you will see this is where there is no adequate remedy.

4. Undue influence or fraud.

a. Fraud requires proof that a person has made a false representation, knowing it to be false, with the intention that the testator rely on it, which in fact the testator has done, leading to the conclusion that the will does not truly represent the testator’s intent.

b. Fraud may be practiced on an intelligent person who is in no way susceptible to undue influence.

c. A contestant alleging fraud must prove that the fraud affected the disposition in the will.

5. Constructive trust.

a. Where a wrongdoer obtains a legacy by fraud, duress, or undue influence, the usual remedy is by way of a will contest in the probate court.

b. If, for some reason, no relief is available in the probate proceeding, the equitable remedy of a constructive trust has long been available in courts of general jurisdiction.

i. For example: if a beneficiary of an existing will wrongfully prevents the testator from revoking the will.

ii. The decedent was wrongfully prevented by his or her heirs from executing a will.

iii. In such cases, courts generally impose a constructive trust in favor of the intended beneficiaries to prevent unjust enrichment of those who would otherwise profit from the wrongdoer’s actions.

6. Tortious Interference.

a. Many courts recognize a cause of action sounding in tort for wrongful interference with an expected gift or inheritance.

b. Elements of a tortious claima;

i. The existence of an expectancy

ii. Intentional interference with that expectancy

iii. Tortious conduct involvded with the interference, such as fraud, duress, or undue influence

iv. Reasonable certainty that the expectancy would have been realized but for the interference

v. Damages

c. If adequate remedies are available in the probate proceedings, the parties will be required to exhaust those remedies before pursuing a separate action for tortious interference elsewhere.

d. A person, not an heir, how was named as a beneficiary in an earlier will has standing to bring an action for malicious interference with the expected legacy.

7. Secret trust. (see class notes)

a. A “secret trust” arises where a testator leaves property to a legatee in reliance on the latter’s promise to hold the property for the benefit of a third person.

8. Matter of Snide

a. FACTS: A husband and a wife both executed wills at the same time in front of the same witness which left their property to one another. The problem was that the husband signed the will that the wife was supposed to sign and vice versa. The person opposing the will is a minor represented by a guardian, who claims that the husband lacked testamentary capacity because he never intended to execute the will that he actually signed.

b. HOLDING: The court held that the will could be admitted to probate. The court ruled that identical mutual wills executed simultaneously with statutory formality are valid if signed by other party.

c. DISSENT: Justice Jones dissents, saying that there is no precedent for such a decision. Furthermore, Justice Jones claims that such hard cases as this, create bad law and that an individual case such as the one at hand should not twist the application of an unquestioned legal principle.

9. Remedies for mistake.

a. The traditional rule is that there is no remedy to reform mistakes of law or fact made by a testator in the drafting or execution of a will.

10. Ante-mortem probate.

a. Admit will to probate while testator is still alive.

b. This creates problems:

i. Heirs not determined.

V. Wills

A. Formalities of Execution

1. In general a will must

a. Be in writing

b. Signed by the testator

c. Witnessed by at least 2 witnesses

i. What does it mean to witness a will?

ii. Notion of a self proving affidavit. It is a simple 1 paragraph recitation that gets attached to the will and it basically recites that we the testator and witnesses.

iii. This creates a statutory presumption that all the execution formalities are complied with.

iv. Witnesses must know document is a will. Must have intent to witness signature of testator. They do not need know what is in the will.

v. Lends added formality and gives safeguard in insuring other people are involved and they can testify what happened

d. Basically the only way to tell a will is that the will has to meet the statutory formalities and you have to have intent.

e. Example: What if somebody records a tape with instructions to play tape at death? Clearly this is not in writing so it is not valid.

2. Background and Policy

a. Ritual, evidentiary, and protective functions, wills also may serve a channeling function whereby the formalities of will drafting tend to reduce the cost of probate administration.

b. 2 useful functions statutory formalities serve

i. The ritual function, they make the testator know what he is doing. The testator has no doubt about what the document is.

ii. Evidentiary function. Since the testator will be dead, the only thing we have that gives insight into the testator’s intent is what is in the 4 corners of the document.

3. Wills Formalities in Operation

a. Burns v. Adamson

i. ISSUE: Whether one of the two attesting witnesses’ signatures on a will satisfies the statutory requirements of attestation.

ii. HOLDING: Where the witness did not see the testatrix sign the will or acknowledge it, there was a failure to follow the requirements of § 28-25-103 and the probate judge was correct in so ruling.

iii. Her estate will pass by intestacy, this was an innocent mistake, here is a classic example of people tripping up over formalistic requirements. Witness requirement may be unnecessarily rigid.

iv. The niece lost everything, what is her recourse? Her recourse is to go against the person who botched the execution of the will. 1. he was negligent. 2. the other thing she has going for her is that since he is not a lawyer, what business does he have preparing a will in the first place.

v. In CA: follows the UPC, in the sense that the two witnesses must be present at the same time.

vi. In CA, can you sign after the testator has died? The UPC would apparently allow you to do this. In CA the courts have decided that you cannot do this.

b. Notes

i. Significance of attestation.

1. The significance of having a witness lies in giving the witness an opportunity to observe the testator’s execution of the will so that in a probate proceeding after the testator’s death they can give testimony as to the essential elements of the two statutory issues of due execution and testamentary capacity sufficient, if credited by the jury to prove both issues.

ii. Testator’s signature.

1. A full longhand signature is not necessary.

2. If significant material appears after the signature, the additional material is usually held ineffective on the ground that it was presumably inserted after the will was executed.

iii. Electronic documents.

1. Taylor v. Holt held that a computer generated signature fell within the statutory definition, the testator used a computer rather than an ink pen as the tool to make his signature.

iv. Acknowledgment.

1. Although it is common for the testator to sign the will in the presence of the attending witnesses, most statutes permit the testator to sign the will in advance and then to acknowledge the signature or the will to the attesting witnesses.

2. The testator’s conduct need not be express, but may be inferred from the testator’s conduct and surrounding circumstances.

v. Publication and request.

vi. Order and time of witnesses’ signing.

1. In CA, testator must sign before the witness.

vii. Testator under disability.

c. In RE Estate of Weber

i. FACTS: Mr. Weber felt that he was going to die and sought to draw up a will. The president of a local bank presented Mr. Weber with the will and then directed several bank employees to watch the signing of the will. It was cold and the bank employees were standing inside the bank looking through the window at Mr. Weber signing the will in the car. Similarly, Mr. Weber could look into the bank to see the witnesses, but could not see the witnesses actually signing the will due to the windowsill. The will contained a mistake and was contested by Mr. Weber’s wife’s guardian.

ii. ISSUE: If a testator cannot see the witnesses’ pen touching the paper of the will, is there sufficient presence?

iii. RULE: For a will to be valid, there must be presence and sight, or presence and hearing. Presence only, sight only, hearing, only, or sight and hearing only are not sufficient.

iv. HOLDING: No, there was not sufficient presence. The proximity between the witnesses and the testator was not sufficient to establish “presence,” and, therefore the will does not meet the necessary requirements of G.S. 1949, 59-606, authorizing its admission to probate.

d. Notes

i. Presence requirements.

1. 3 types of presence may be required:

a. Signature of the testator in the presence of the witness

b. Signature by the witnesses in the presence of the testator

c. Signature of the witnesses in the presence of each other

2. A majority of the wills statutes require that the witness sign in the testator’s presence.

ii. Meaning of “presence.”

1. “line of sight” rule requiring that the testator be able to see the witness as they sign the will.

2. “conscious presence” rule that is somewhat more flexible (see caselaw).

iii. Self-proved will.

1. A self proving affidavit raises a presumption of due execution, with the result that the will can be admitted to probate without live witness testimony in contested cases.

2. Under the UPC, in the absence of fraud or forgery, the presumption is conclusive with respect to the signature requirements for execution, but the will can be contested on other grounds such as undue influence or lack of capacity.

iv. Liability for negligent supervision.

1. If a will is declared invalid for failure to satisfy all the statutory formalities, the attorney who supervised its execution may be liable to suit for damages by the disappointed beneficiaries.

4. Interested Witnesses

a. Several states, following the UPC, have abrogated this rule entirely.

b. Purging Statute

i. A purging statute is designed as a testator or beneficiary relief measure. It is intended to relax somewhat the harsh common law rule. The traditional explanation allows a witness to testify, even though the witness is interested and not credible, it allows the witness to testify so that it can be admitted to probate, but in turn, the purging statute then proceeds to purge, strike, or void any gift to an interested witness.

c. CA Rule: (see statutes).

d. In Re Estate of Watts (Typical purging statute)

i. PROCEDURAL HISTORY: This case is an appeal from a circuit court decision declaring that the will property be admitted to probate.

ii. FACTS: The will in question was attested by witnessed who were also beneficiaries. Thus the will was attested by interested parties.

iii. ISSUE:

iv. RULE: If the will is duly attested by two credible, disinterested witnesses, then the witnesses who have an interest under the will may take.

v. Their argument is Frank and Virginia gives up their bequests, and then they can turn themselves into disinterested witnesses. This is a slight spin off. This doesn’t work for a fairly obvious reason, the statute, the intent is clearly that in order to validate a gift to an interested witness, you must have at least two disinterested witnesses, you can’t do what Frank, Virginia, and Carl would like to do.

vi. What if they try their disclaimer argument?

1. You could say that they can’t take anything under the will and they are no longer interested witnesses and Carl should get his share and can pay off Virginia and Frank and everybody comes out ahead. Does this work?

2. The point in time in which the purging statute focuses is the time at which the will is signed.

3. The purpose of the purging statute is to protect the testator at the time the will is executed. If you treat the purging statute as operative at the time the will is executed, then Virginia, Frank and Carl are all interested witnesses and they will lost what is left from them. If that is the case, by time Mrs. Watts dies and they make their disclaimers is that they have nothing left to disclaim.

vii. The CA statute goes on and tells us that 6112(c)

1. A removes automatic DQ and B does away with purging statute

2. C says if not at least 2 disinterested witnesses there is presumption that witnesses procured devise by fraud, duress, or undue influence and there is burden on each witness to show it didn’t occur

3. D says if presumption holds, W can get only amount devised in will that does not exceed what he would receive in intestacy, so if will share is less than W would have got in intestacy, there is no issue

4. If you can’t rebut the presumption, do you lose everything?

a. See §6112 (d).

b. By intestacy he would take 1/3 of the state, there is no reason he should be penalized, he could have only gained from witnessing the will.

c. Loss is limited to whatever portion he would have gotten that exceeds what would happen if the will was thrown out.

d. We can imagine a string of 8-9 wills. If this will was thrown out, you have to look back to next previous will to see what next character would have gotten under a previous will. If he would have gotten less, the purging statute doesn’t deprive him of anything, he is entitled to take that amount of the mistake.

e. The purging statutes technically are not a will contest, that is how nephews can come in and challenge the will.

i. What if a no contest clause and a token clause leaving half a million to each nephew, but if they contest they get nothing. Would their use of a purging clause trigger the no contest clause?

1. clause? In general we would tell the heirs to think twice before bringing a will contest. Depends on the wording of the no contest clause. If it says anybody who contests the will, court may say this technically is not a contest, so it doesn’t apply. If it is competently drafted, and says anybody who interferes with my intent, then clearly this does involve the purging and would trigger the no contest clause.

2. In CA, check §21307 (c) –no contest clause would not be enforceable.

f. Notes

i. Pecuniary interest.

1. Courts have tended to uphold gifts to clubs or corporations where members of the clubs and corporations have also served as a witness.

2. Courts generally hold that the executor or trustee is a competent witness, on the theory that fiduciary commissions are compensation for services rather than gratuitous benefits; and on similar reasoning, the fees are not treated as a gift for purposes of the purging statutes.

ii. Capacity of witnesses.

1. A witness to a will must have the capacity and maturity to observe, recall, and narrate the events that took place at the attestation of the will.

iii. Beneficiary’s spouse as a witness.

1. Unless a purging statute expressly covers gifts made by will to the spouse of an attesting witness, modern courts are reluctant to imply such a result.

iv. Supernumerary witnesses.

1. If one of three witnesses is a beneficiary and the applicable wills statute requires only two witnesses, the interested witness, being superfluous, need not forfeit his or her benefit under the will.

v. Application of purging statutes.

1. The common approach is to permit the witness to take the legacy, but only to the extent it does not exceed the value of the intestate share to which the witness would be entitled if there were no will.

vi. Disclaimer.

5. Excusing Harmless Errors

a. Pretty harsh rules if you make a mistake on a will. Equity can step in and for almost anything other than a will. Why are Wills special?

b. Why can’t courts do the same thing they do with the statute of wills that the due with the statute of frauds. This is what Ranney is about.

c. In Re Will of Ranney

i. ISSUE: Whether an instrument purporting to be a last will and testament that includes the signature of two witnesses on an attached self-proving affidavit, but not on the will itself, should be admitted to probate.

ii. HOLDING: The signatures on the subsequently-executed self-proving affidavit did not literally satisfy the statutory requirements as signatures on a will, however a will may be admitted to probate if it substantially complies with these requirements.

iii. RULE: If the witnesses, with the intent to attest, sign a self proving affidavit, but do not sign the will or an attestation clause, clear and convincing evidence of their intent should be adduced to establish substantial compliance with the statute.

iv. The intent is clear, we have the two witness signatures, you would think what is the problem? Technically the self-proving affidavit is not part of the will.

v. Court: You can either treat them as if they had signed the will, or if they had signed the affidavit separately. Can’t have both. If you use as signatures on a will, it must go through probate in solemn form as if they had signed the will but not if they signed the separate affidavit.

d. Notes

i. Self-proving affidavits.

1. The traditional self-proving affidavit is technically not part of the will, but a separate instrument which should be signed by the testator and witnesses after they have signed the will.

2. Although the court is willing to give effect to the self-proving affidavit as if it were an attestation clause, probate must proceed in solemn form, meaning the witnesses must appear in court to testify concerning the execution of the will.

ii. Distinguishing alternative approaches.

1. Under substantial compliance (a common law doctrine), a court asks whether the formalities actually observed come sufficiently close to meeting the statutory requirements, while under UPC § 2-503 the court asks whether the instrument was intended as a will.

2. CA courts have never adopted substantial compliance.

6. Illustrative Form of Attested Will

a. Notes

i. Attestation clause.

1. Such a clause is commonly included for two reasons:

a. It provides a convenient summary of the execution ceremony, and thus serves as a prompting device to ensure that all the required steps are actually followed.

b. The attestation clause raises a presumption of due execution, which may play a decisive role if the attesting witnesses are unavailable or unable to testify in the probate proceeding.

b. Note on Powers of Attorney and Health Care Directives

i. A normal power of attorney is freely revocable by the principal at any time, and automatically terminated upon the death or incapacity of the principal.

ii. A durable power of attorney remains effective even if the principal becomes incapacitated; unless otherwise terminated, the authority of an agent under a durable power continues until the principal’s death.

iii. Right to die.

1. Although a competent person is free to refuse life-saving medical treatment, in most states it is a criminal offense to assist another in taking his or her own life.

2. The ban on assisted suicide does not prevent a physician from withdrawing artificial life support or prescribing pain-killing drugs which may hasten the patient’s death.

B. Holographic Wills

1. A holographic will is one that is written in the testator’s handwriting and signed by the testator; attestation is unnecessary.

2. Under a traditional statute, a holographic will must be entirely written, dated and signed by the hand of the testator himself.

3. CPC-§6111.

a. Beauty of a holographic will is that it does not have to be attested. The only requirements are that it has to be in writing and the signature and material provisions of the will must be in the testator’s own handwriting.

4. In Re Estate of Muder

a. FACTS: Edward Frank Muder died on March 15, 1984. In September 1986, REtha Muder, the surviving spouse, submitted a purported will dated January 26, 1984 to the probate court. The purported will was on a preprinted will form. The daughters of the decedent by a previous wife contested the will. They were unsuccessful at the trial court level, but successful with the appeal.

b. ISSUE: Is the purported will of Frank Muder a valid holographic will?

c. RULE: A will is valid as a holographic will, whether or not witnessed, if the signature and the material provisions are in the handwriting of the testator.

d. HOLDING: A testator who uses a preprinted form, and in his own handwriting fills in the blanks by designating his beneficiaries and apportioning his estate among them and signs it, has created a valid holographic will.

e. DISSENT: Moeller contends that the document purported to be the last will and testament of Edward Muder does not comply with Arizona’s holographic will statute.

f. This goes beyond substantial compliance. The UPC interestingly now does that. UPC 1990, requires only that material provisions be required in the testator’s handwriting. UPC adopts this holding, but codifies it.

g. The CA statute does the same thing. 6111(c) is in direct response to this scenario.

5. How do you know which one is the latest will?

6. §6111(b)(1).

a. If you have two handwritten wills both of them undated, one leaves entire estate to x, the other one to y…

b. If you can’t establish by a preponderance of the evidence what order they were executed in, the answer is that they are both invalid.

7. §6111(b)(2), no date and it is established that the testator lacked testamentary capacity at any time at which the will could be executed, the will is invalid.

8. Testamentary intent, the statutory fix to Muder:

9. §6111(c)

a. Allows someone like Mooter to make valid holographic will by filling in blanks and signing

b. Something that t created themselves, maybe on like Microsoft Word or something likely would not pass muster

10. Notes

a. Surplusage approach.

i. Some courts determined that printed matter could be disregarded as surplusage if it was neither “material to the substance of the will” nor “essential to its validity as a testamentary disposition.”

11. In Re Estate of Kuralt

a. ISSUE #1: Did the District Court err when it found that the June 18, 1997 letter expressed a present testamentary intent to transfer property in Madison County?

b. HOLDING #1: No, the district court did not err. The conveyance of the 20-acre parcel for no real consideration and extrinsic evidence that Kuralt intended to convey the remainder of the Montana property to Shannon in a similar fashion provides substantial factual support for the District Court’s determination that Kuralt intended that Shannon have the rest of the Montana property.

c. ISSUE #2: Did the District Court err when it held that the letter was a codicil without affording the parties an opportunity to be heard on that issue?

d. HOLDING #2: The District Court did not err. The letter met the threshold requirements for a valid holographic will. The letter was a codicil as a matter of law because it made a specific bequest of the Montana property and did not purport to bequeath the entirety of the estate.

e. Testamentary intent is the touchstone here. The question is whether this was intended as a will or something else. This question comes up all the time with a holographic will.

f. Expression of testamentary intent is pretty ambiguous. Once it is clear what he wants to do (put property in her hand) the court has little trouble.

12. Notes

a. Testamentary intent.

i. A holographic will, like any other will, must be executed with testamentary intent; that is, the instrument must represent a definitive expression of the testator’s directions which are to become operative at death.

ii. Courts routinely hold that a letter of instructions cannot be admitted to probate as a holographic will.

b. Letters as holographic wills.

i. Informal letters are frequently admitted to probate as holographic wills.

ii. Since many letters are handwritten and signed as a matter or course, the issue of testamentary intent assumes heightened importance.

c. Conditional wills.

i. The kind of informal letter that on its face doesn’t necessarily look as if it is intended to be valid because it conditions some sort of condition precedent.

ii. If the operation of a will appears to be conditioned on a particular event that does not actually occur, the question arises whether the will can nevertheless be given effect.

iii. I am going on a long journey, if I don’t return. What if the testator returns from Iraq, hospital, etc?

iv. Does this initial expression, take effect if an only if the testator died from the peril.

v. No. We do not take this literally. This is more a question of interpreting the language in the will. Was this intended to operate on these facts? How do courts get around this type of language? The illness is the occasion that makes them want to make the wil.

13. Is this a valid will? Is it a writing? If I did not execute this with a serious final intent that it was/is my last will and testatment then it is not valid. INTENT. If intent was other than to make anything other than a binding intent of property, it is not valid.

C. Noncupative Wills

1. A nuncupative will is one that is declared orally by the testator in the presence of witnesses.

D. What Constitutes the Will?

1. Integration

a. Integration refers to the process of embodying the testator’s will in one or more writings which are physically present at the time of execution and are intended to be included in the will.

2. Every will is going to be some kind of writing that is signed by the testator with or without witnesses.

3. By definition, every will is supposedly an integrated document. Supposedly a final and complete statement of contents.

4. You don’t look outside the document for inconsistent statements, you don’t look outside the document to contradict the terms.

5. Requirements of integration:

6. Each page of the writing must have been in existence and physically present and were intended to be part of a final will.

7. Does that mean that we can’t look outside of the will? No. Virtually impossible to set fourth a complete unambiguous statement of testamentary intent.

8. Republication by Codicil

a. A codicil is a written instrument, executed with the same formalities as a will, which modifies or supplements and existing will.

i. In general, republication causes the will to be treated as if it were reexecuted at the same time as the codicil.

ii. Republication is a doctrine of presumed intent; it does not apply if the result would defeat the testator’s testamentary plan.

b. Interested witnesses.

i. T executes a will leaving her entire estate to A. The will is attested by A and B. A is an interested witness, however if 2 years later T executes a codicil in front of 2 disinterested witnesses changing a part of the will unrelated to A. The doctrine of republication may be invoked to validate the gift to A.

c. Republication is a fancy name for the consequence that is assumed to follow when a testator has an existing will, subsequently published when the testator executes a codicil. Will executed in year 1, codicil executed in year 4, what effect does codicil have on original will.

d. Republication means that when the testator executes the codicil, it is deemed by operation of law, and republishes his will. As if the testator republishes his original will. Formalities of the codicil supersede the formalities of the other one.

e. It is no more complicated to execute a new will than it is a codicil.

f. Disinterested witnesses

i. If witness of first will is interested witness and subsequent codicil is witnessed by disinterested witnesses, through doctrine of republication the terms of the first will are valid

1. If Will 1 gives everything to A & B and they both witness and then codicil is witnessed by C and D, A and B can inherit

g. Notes

i. Validation of a defective will. (See p. 332)

9. Facts of Independent Significance

a. CA statute, §6131

b. A will may identify the beneficiaries of the estate, as well as the property given to them, by reference to acts of events which have independent, nontestamentary significance.

i. For example, “all the furnishings of my home.”

c. What problem do you suppose that 6131 is getting at: If you were to allow people simply to direct in a will to look outside to particular facts, and if those extrinsic facts had no significance apart from the will, it is designed to protect wills formalities.

d. Also to prevent you from going outside and orally changing the terms of an existing will.

e. A few well trodden examples: Container cases. (Name on envelopes doesn’t work because it is for something other than to get around will statute). But using the desk as a storage container is okay.

f. 6131-Will may dispose of property by reference to acts and events that have significance apart from their effect upon the dispositions made by will , whether acts and events occur before or after the execution of the will and before or after T’s death

g. Hypo- Will leaves all books in library to surviving nieces and nephews and residue to X.

i. In order to determine what property is covered we have to look to property outside of the will (like extrinsic evidence or an event) that will allow us to determine what property is

ii. In order to determine which nieces and nephews, have to look outside the will

iii. Allows executors and beneficiaries to look at extrinsic acts and events to give meaning to substance of the terms of the will

iv. Allow courts flexibility in determining T’s true intentions

h. Hypo- Will says leave all property in accordance with my known wishes

i. This will not be enforceable as it is indefinite as it is known as shell document as T’s known wishes could be verbal and different

i. Contrast acts or events that have significance apart from disposition (Hypo 1 where T has no control over these events) and others that have indefinite intentions (Hypo 2 where T has control)

j. Hypo- Contents of my safe deposit box to B. This is Ok since there is another reasonable non-testamentary purpose (storing valuables)

i. Leave all the cash in top desk drawer to B. Can argue it has independent significance to T and will probably be valid

ii. Leave cash in envelope to people whose names are on envelope. This is probably not Ok because only function of writing name on envelopes is to act as a will and there is no non testamentary rationale

k. Final point

i. Say revocable trust with 100k to A, and you have will that leaves all property to trustee of revocable trust. Trust is private document and you pour over all property into pour over trust, trust will already be present as inter vivos trust.

ii. Question is whether revocable trust has independent significance and whether terms of will will be enforceable

1. Yes, by creating trust settler has created independent fiduciary relationship between trust and B and trust has been funded and since this pour over trust is valid because trust would be enforceable

10. Incorporation by Reference

a. Originally, the doctrine required

i. The separate writing must be in existence at the time the will was executed

ii. The will must refer to the separate writing as being in existence and sufficiently identify it

iii. The will must manifest an intent to incorporate the separate writing as part of the will.

b. Codified in UPC § 2-510

i. “A writing in existence when a will is executed may be incorporated by reference if the language of the will manifests this intent and describes the writing sufficiently to permit its identification.”

1. This omits the requirement that the will refer to the document as being presently in existence.

c. CA §6130

i. Writing in existence when will is executed may be incorporated by reference if the language of the will manifests this intent and describes the writing sufficiently to permit its identification

ii. If you later change the writing, change may be inadmissible if you don’t republish will by use of a codicil or similar

iii. IE Description of real property on a deed or will or someone who is already dead is on file, T can identify writing and incorporate part or all of terms in document in the will, doc must be in writing.

iv. If you have a separate document, like a trust agreement already signed, but not funded, you could refer to that separate trust agreement to fill in a residuary clause in the will.

d. Under some circumstances you can look at extrinsic evidence, even non-written acts if they have non-testamentary significance. Fill in blanks by looking at extrinsic facts as long as you are not circumventing will formalities.

e. Unless there is some legal basis for looking outside the terms of the will, we want the will to be an integrated document. Where does incorporation by reference play into this? You can incorporate an extrinsic writing that is not part of the will, that is not physically present that is not integrated in part of the will. Allows a testator to refer in writing to something outside of the will. §6130.

f. Clark v. Greenhalge

i. FACTS: The testator had a will which stated that she would like to dispose of her personal property by reference to a ‘memorandum’ listing the beneficiaries of such property.

ii. ISSUE: Whether specific, written bequests of personal property contained in a notebook maintained by a testatrix were incorporated by reference into the terms of the testatrix’s will.

iii. HOLDING: Yes, the specific, written bequests of personal property contained in a notebook maintained by the testatrix were incorporated by reference into the terms of the testatrix’s will.

iv. RULE: A property executed will may incorporate by reference into its provisions any “document or paper not so executed and witnessed, whether the paper referred to be in the form of a mere list or memorandum if it was in existence at the time of the execution of the will, and is identified by clear and satisfactory proof as the paper referred to therein.

v. The only problem with the memo, people often change their minds, and once they’ve got the will executed, they think that they can then go about making adjustments, and small changes.

vi. The difficulty with this is that the extrinsic writing has to be in existence when the will itself is executed. It is unclear whether making subsequent changes or writings will defeat the entire purpose.

vii. Because she executed 2 codicils, the will is reexectued so will is as if it has been executed in 1980, and that removes major obstacle as to incorporating the two references. The notebook is a second writing in existence at the execution of the codicils.

viii.There is no specific manifestation of intent to create a separate writing. Incorporation by reference, you know what the writing looks like and you describe it, this is impossible if you haven’t written the document yet. A subsequently written set of instructions is hardly the sort of thing that would meet that requirement. Court: a memorandum can mean a past prepared memorandum and a subsequently prepared notebook.

g. CA legislature—they enacted –can’t dispose of cash, or inventory. Otherwise uncut gemstones, gold bullion, out to be disposable, then CA statute gets interesting:

h. Formal requirements—separate writing must be dated or handwritten by the testator.

i. (e) if no date, uncertainty, etc…importing the same approach we saw in holographic wills, makes you wonder how crucial date requirement is.

j. CA statute, if the writing fails to conform to those requirements, it doesn’t preclude evidence…extrinsic evidence, what they mean, even if there was no signature at all, if you can prove by extrinsic evidence if this was intended, that maybe the court can still admit it.

k. Value of items, CA legislature, tried to solve the problem of value here and try to find notion of separate writing: §6132 (g) total value of tangible personal property is limited to 25k.

l. What is an item of tangible person property? Is it 5k limit, or does it go up to 25k? 10 singed volumes of Shakespeare’s works? Is the entire thing one single item, or is each book an item in itself?

11. Pour-Over Wills

a. Under a typical pour-over will, property owned at death (and hence included in the probate estate) is given to the trustee of an inter vivos trust, with a direction that the pour-over assets be added to the trust property and be disposed of in accordance with the terms of the trust.

b. If you have an existing funded living trust with at least some property in it, if you want to link the terms of that trust, if you want to link the terms of that trust, can you do it simply by leaving any property I have at my death to a trustee.

c. How do you give that inter vivos trust significance? You put property in it. Then you have an act of independent non testamentary significance.

d. You must have at least some property in that trust to give it significance. It is possible today to achieve the same result without any significant property.

e. § 2-511 of the UPC

f. UTATA

i. Under the UTATA, a testamentary pour-over to an inter vivos trust is valid even if the arrangement does not satisfy the requirements of incorporation by reference or facts of independent significance.

ii. The trust instrument need not have been in existence when the will was executed, and the trust itself need not have become funded or operative until the testator’s death.

iii. The UTATA requires only that the trust be identified in the testator’s will and that its terms be set fourth in a written instrument in existence at the testator’s death.

iv. Devise may be made by will to the trustee of a trust to be established by the testator if the trust is identified. If you want to make a valid pour over devise as long as there is a separate trust instrument that is executed before or concurrently, it doesn’t have to have any property in it before the settler dies. All funds can come at death through probate before the testator’s will.

v. In terms of formalities this allows you to decouple the operative terms of who gets what, allows you to put that in a separate part of the document, not a public document, allows them to retain privacy and to make changes. That in itself is a major advance in flexibility.

E. Revocation and Amendment

1. Contractual Restriction on Revocation CA § 21700 is applicable statue

a. Will Contracts: The notion of will contracts is perfectly straightforward. In terms of the doctrine it gets a little bit tricky, for all sorts of reasons a testator may want to enter into a binding contractual arrangement that will make an existing will irrevocable.

b. There is no way to make a will itself irrevocable, however there are ways to interpose other contractual duties that will have much the same effect.

c. We have essentially 2 cross cutting bodies of law. Wills law and contracts law. The basic notion is pretty straightforward, wills law governs.

d. There is nothing special about a contractual will, however a contract is also a contract and there is nothing in basic contract law that says you can’t enter into a binding contract that ties your hands or makes you make a will in particular terms. Or to agree to not make a will and to die intestate.

e. Anytime you see an attempt like this, and you see a disappointed beneficiary coming in, you probably want to break things down into several steps:

i. Is there a contract whose existence can be proved

ii. Assuming there is a contract, what were the terms of the contract. The existence of a contract doesn’t often tell you what the terms are or what they mean.

iii. Assuming you have an enforceable agreement, what type of remedies are available?

f. Joint will is a single testamentary instrument executed by both parties which may be offered for probate as the will of each

g. Mutual wills are separate instruments with reciprocal or parallel provisions.

h. Garrett v. Read

i. FACTS: Both have been previously married, the wills are mirrors to each other, at the death of the surviving spouse the community property is to be divided equally among 1/7^th shares and distributed. Husband dies and his will gets probated. The wife decides a few years later that she has different ideas about what to do with her property. The husband’s kids understood that they would get 4/7^thsand her step kids and grandkids are upset.

ii. In terms of determining which of her wills is admissible to probate, which one of W’s various wills will be admissible to probate? The second will. She made a valid revocation of the first will under wills law.

iii. First obstacle is proving a contract. In the absence of a statute, is there any requirement that a will contract meet any particular formalities? No. You just have to have an agreement, consideration, etc. Is there an agreement in this case?

iv. Why are will contracts such a problem?

1. Unless the terms of the contract are set out in some written document, we don’t know if there is a written agreement or not.

2. Merely executing reciprocal wills, with terms that mirror each other is not in itself sufficient evidence of a contract to not change those wills.

3. Assuming you have a binding contract, most husband wife teams are not going to be able to think through, much less advise to think through all of the possible changes or circumstances that might effect their original estate plan.

v. 21700(a)(4)—enforceable in equity. These build in the two equitable exceptions, case in Garrett v read is (5).

i. Notes

i. Wills and contracts.

ii. Joint wills and mutual wills.

1. The execution of mutual wills indicates that the testators formed a common testamentary plan, but is not sufficient by itself to support an inference that the plan was intended to be irrevocable.

iii. Oral Contracts

1. Oral contracts concerning testamentary dispositions are viewed “with misgivings and suspicion.”

iv. Disposition by surviving testator.

1. There is an implicit good faith element to every contract and courts may use this to disprove of disposition via inter vivos gifts. For example, if a will contract promises that x amount of property is to be distributed to decedent’s children, the surviving spouse cannot liquidate all assets via inter vivos gifts.

v. Death of a contract beneficiary.

1. Courts are split on this point. If a contract beneficiary dies, some courts say his/her interest lapses, while other do not.

vi. Collision of statutory and contract rights.

vii. Estate tax consequences.

2. Methods and Effects of Revocation

a. Once a will has been validly executed, it is admissible to probate if it remains unrevoked at the testator’s death.

b. There are two principal methods for revoking a will.

i. By written instrument executed with testamentary formalities

ii. By a physical act performed on the original will.

1. This act must be carried out with the requisite intent of destroying the will.

c. Revocation by Written Instrument

i. CPC §6120

ii. Is it possible to revoke an existing will by a new instrument executed that jus says ‘I revoke my previous will’ Yes. A subsequent will means a subsequent writing executed with testamentary formalities, it does not need to make any new dispositions.

iii. The usual way of revoking an existing will is by a new will containing express words of revocation.

iv. In the absence of express words of revocation, the codicil generally revokes the will only to the extent that the new provisions are inconsistent with the will.

v. Gilbert v. Gilbert

1. FACTS: Frank Gilbert died testate leaving behind an 8 page typewritten will. Before Frank died, and after Frank executed his will, he wrote and dated two notes which directed the disposition of some money he had in the safe at his place of employment.

2. ISSUE: Whether or not the two documents written by Frank are valid holographic wills that would revoke the outstanding attested will.

3. RULE: One testamentary instrument revokes another only if it is the clear intent of the testator to do so, and even then the revocation is only to the extent necessary.

4. HOLDING: The court held that while the writings can be considered valid wills, they are only valid to the extent that they are codicils and only serve to direct the disbursement of the property named within the written documents. The writings do not revoke the formal will.

5. No problem in using a holographic will to modify an existing will.

6. Because we think that this term rest is meant to refer to the rest of th 50k and NOT the rest of his property that the paper be read as a codicil, and not as a new disposition of the rest of his property. The term will includes the term codicil

vi. Notes

1. Revocation by inconsistency.

a. According to the 1990 UPC a will that makes a complete disposition of the testator’s estate is presumed to replace a previous will, revoking all its provisions in inconsistency.

b. A will that does not make a complete disposition of the estate is presumed to “supplement” the previous will, revoking it only to the extent the subsequent will is inconsistent with the previous will.

2. Handwritten notations.

a. Courts differ on whether or not a testator may revoke a will by writing on the margins, etc.

d. Revocation by Physical Act

i. A testator may revoke a will by intentionally performing a physical act of revocation (e.g. mutilation or destruction) on the original will.

ii. When you perform a physical act of revocation on the will, the physical act, the intent isn’t always terribly clear.

iii. CA Prob Code §6120.

1. Statute requires that the testator perform the act with the intent to destroy the will.

iv. If you find a will torn up by the side of the testator, how do you know who tore the will up? Physical acts are inherently ambiguous and need to be explained by extrinsic evidence. The statute, 6120, makes it clear that there are two valid methods of revocation. You cannot mix and match, either you need to find that revocation by subsequent instrument, or by physical act.

v. 2 Examples to illustrate:

1. 1- suppose our testator knows she has an existing will and it is in a lawyers safe and she doesn’t want to get it, so she writes a note saying, “dear legal assistant, please retrieve the will and tear it into pieces.” This physical act of tearing the will, does it meet the requirements of the statute? No, the statute says that on its face that the testator has to destroy the will, or the will must be destroyed by somebody in the testator’s presence. What about the written document? No, this is a letter of instructions and this is not a presently operative legal act, it is a request.

2. A typewritten will that was property executed by a testator and two witnesses, and the testator decides to revoke the will. She includes the word cancelled and includes the date in her own handwriting. Does this work either as a revocation by subsequent testatmentary instrument or a physical act. What does it mean to cancel a will? Cancelled for what it is worth.

vi. If you intend to revoke the will, you only need to burn it to the extent that it chars some letters.

vii. Traditionally canceling refers to any placement of a line, drawing a line through part of the text to the written document. In order to cancel all or part of the will, the lines you draw must touch some part of the writing of the will.

viii.What do we do about admitting a lost will to probate? T

ix. he basic answer is that it happens all the time and there are presumptions. The easy presumption at common law, is that if the original will cannot be produced, the presumption is that if that will was last in the testator’s possession, the testator destroyed the will revoking it. The basic presumption puts the burden, and runs against putting up the will if it is available. There is all sorts of case law allowing a missing or lost will to be probated, if you can prove what it said. How do you do this? You can produce a copy of the will.

x. Harrison v. Bird

1. FACTS: Ms. Speer executed a will in 1989. Subsequently she wrote to her attorney saying that she wished to revoke the will. The attorney then tore the will into four pieces and then sent the pieces to Ms. Speer saying that she was without a will. Shortly thereafter the envelope was found with nothing inside and Ms. Speer had died.

2. ISSUE: Did the destruction of Ms. Speer’s will revoke the will?

3. HOLDING: The court held that under the facts of the case, there existed a presumption that Ms. Speer destroyed her will and thus revoked it. The proponent did not meet the burden of rebutting the presumption and thus Ms. Speer’s estate will pass via the laws of intestacy.

4. RULE: If the evidence established that Ms. Speer had possession of the will before her death, but the will is not found among her personal effects after her death, a presumption arises that she destroyed the will. ALSO, if she destroys a copy of the will in her possession, a presumption arises that she has revoked her will and all duplicates, even though a duplicate exists that is not in her possession.

5. We have a battle of presumptions here:

6. 1^st set of presumptions has to do with lost wills. The testator destroyed the will with the intent to revoke it. The burden is on the beneficiary to rebut this.

7. Common law rule, if you have any number of duplicate wills, if the testator performs an act of revocation on any one of those duplicates, the act of revocation is valid as to all of them (same if revocation by subsequent instrument is performed).

8. Catherine loses, she cannot show that there was a flaw in testator’s presumed revocation.

9. If the testator kept everything would the will be revoked then?

a. No, it would not be. The testator must to some subsequent physical act to destroy the will.

xi. Slightly more complicated problem in CA. Too many codifications of the rule that are in play here.

1. §6124 of CA probate code

a. explicit presumption about lost wills, as long as there is a duplicate original, the presumption is that the will is still valid and unrevoked.

2. Why would CA courts have a narrower presumption about this when there is a duplicate will out there? In CA, Catherine Harrison is still on solid ground, however the heirs who want to take by intestacy comes across 6121.

3. Reconciling §6121 and §6124, if we knew that she destroyed it with the intent of revoking her will, then §6121 will give us this flat rule, if it is proved. §6121 isn’t going to enter into effect unless we know in fact what happened to that will. We are going to be left with a battle between the beneficiary of the will and the heirs about what happened to the will.

xii. Notes

1. Mutilated wills.

a. Where the testator retained possession and control of a will during life and the will is discovered in a mutilated condition after death, a presumption arises that the mutilation was performed by the testator with revocatory intent.

b. There is no effective revocation if the will is destroyed outside the testator’s presence.

2. Duplicate wills.

3. Alterations

a. If the testator attempts to substitute a new disposition—e.g. by addition the name of a different beneficiary or specifying a different type or amount of property—the new testamentary act must comply with the regular wills formalities..

e. Revival

i. You have a will and then you execute another will.

ii. In CA what we have is a version of the UPC provisions.

iii. §6123, it gives us 2 presumptions.

iv. A substantial number of states have anti-revival provisions.

v. Other states follow the revised UPC, which raises specific presumptions concerning revival.

f. Dependent Relative Revocation

i. Dependent relative revocation is an equitable doctrine developed by courts to provide limited relief in situations where a testator has made a formally sufficient revocation of a will but the revocation turns out to be premised on a mistaken assumption of fact or law.

ii. The revocation may be dependent and relative in the sense that it depends on and relates to a contrary-to-fact condition.

iii. Schneider v. Harrington

1. RULE: Where a testator cancels or obliterates portions of his will in order to substitute different provisions, and in such a way as to show clear intent that the revocation is conditional on the validity of the substitution, and the substitution fails for want of proper authentication, the will stands as originally drawn.

2. HOLDING: The cancellations and the substitutions were inextricably linked together as parts of one transaction; and it is evident that the testatrix intended the cancellations to be effective only if the substitutions were valid. The decree of the probate court is reversed and the will is to go forward as it existed prior to the changes.

g. Revocation by Operation of Law—Changed Family Circumstances

i. Almost every state has a statute providing that divorce revokes all provisions for the testator’s former spouse in a will executed before the divorce.

ii. Clymer v. Mayo

1. FACTS: The decedent was married to Mayo and during the marriage set up a pour-over trust which would benefit Mayo in the event that she died. Mayo and the decedent divorced each other, but the provisions of the pour –over trust remained the same.

2. ISSUE: Despite the fact that a pour-over trust is not a will, is a pour-over trust revoked by operation of the law when it benefits a divorced spouse?

3. HOLDING: Yes.

4. ISSUE #2: If Mayo’s share is revoked by operation of law, do the decedent’s nephews on Mayo’s side still inherit, or are they cut off via the divorce because they are not blood related?

a. RULE: Divorce revokes only the provisions in favor of the testator’s former spouse, leaving the rest of the will intact.

5. HOLDING: No, the non-blood nephews are not cut off as a consequence of the divorce. The statute is silent as to how a divorce affects more distant relatives. The statute is only clear on what happens to the spouse. The nephews may inherit according to the will.

iii. Notes

1. Statutory presumptions.

a. Divorce revokes only the provisions in favor of the testator’s former spouse, leaving the rest of the will intact.

2. Nonprobate assets.

3. Former spouse’s relatives.

a. The revised UPC revocation by divorce applies equally to the decedent’s former spouse and to relatives of the former spouse.

4. Employee benefits.

a. ERISA (Employee Retirement Income Security Act 1974)

5. Statutory vacuum.

a. In the absence of a statute, the courts are divided over the effect of divorce on an existing will.

F. Interpretation of Wills

1. The statue of wills is what most courts look to when they refuse to look outside the four corners of the will.

2. Wills formalities exclude things outside of the will. Backing this up is the parole evidence rule.

3. Ambiguity and Mistake

a. Mahoney v. Grainger

i. Probably still a pretty good statement of what is going on in the country

ii. FACTS: Helen A. Sullivan called upon a lawyer to draft her final will and testament. Ms. Sullivan told the attorney that she wished for the remainder of her estate to pass to her 25 first cousins. The lawyer drafted a will that left the remainder of Ms. Sullivan’s property to “my heirs at law living at the time of my decease.” The problem was that Ms. Sullivan had an aunt who under the laws of intestacy was the sole heir at law, thus cutting out the share of the cousins.

iii. ISSUE: May a court use extrinsic evidence to show testamentary intent when the existing testamentary language is clear?

iv. Does the term heirs at law mean what it would mean under the intestacy statute, or is it susceptible to some other sort of interpretation?

v. RULE: Only where testamentary language is not clear in its application to facts may evidence be introduced as to the circumstances under which the testator used that language in order to throw light upon its meaning.

vi. HOLDING: No, a court may not use extrinsic evidence to contradict terms of a will that are clear in their application.

vii. The court is in absolutely no doubt about this. Justice Rugg says that we know exactly what this means. Heirs at law means who would take under an intestacy estate. Aunt is the sole devisee, even though we know for sure that testator’s intent was for her property to be divided equally among her cousins.

viii.There is a problem here, is this a sound interpretation of her will. In terms of managing a court’s caseload it makes sense, balance that with the testator’s intent.

b. The infamous Plain Meaning rule—

i. One view of plain meaning at least is that if the written words in the face of the will have a generally accepted plain meaning—we presume the words are to be interpreted as a regular English speaker would interpret them.

ii. The notion here is that were making our way slowly towards a distinction that courts draw, which is crude and malleable, they distinguish between mistakes and ambiguities. You cannot give a remedy for a mistake.

iii. Ambiguities are supposedly a different kettle of fish, a different category altogether. Classic form of ambiguity, it turns out that there are in fact two nieces named Mary, must look outside the will to see which one testator, all that extrinsic evidence would be admissible.

c. Notes

i. Plain meaning.

1. If a will refers to the intestacy laws to identify a beneficiary or delimit a bequest, courts regularly adhere to the literal or technical meaning of the words used in the will and refuses to consider extrinsic evidence that might suggest a contrary intent.

ii. Personal usage.

1. Courts recognize a “personal usage” exception to the plain meaning rule where a particular word or expression in the will reflects the testator’s idiosyncratic use of language.

2. Moseley case may do us some good here—the intended beneficiary took the bequest. Looking at a particular meaning that the testator had in mind, when the will was executed, but one that changed over time.

3. Mosley—if we can, let’s assume it is the testator’s own words.

4. Moseley what they have to be able to find is that the intended beneficiary is a reasonable plausible meaning. Using it to explain use of Mrs. Moseley. When the intended beneficiary introduced this evidence, she was introducing evidence about his daily usage of language, and for purely non-testatmentary purposes, the furthest thing from his mind was stating what was to have happen at his death.

iii. Role of attorney-drafter.

d. In Re Estate of Russell

i. Leading case to approach ambiguity and extrinsic evidence.

ii. FACTS: Will left 10 dollars to Georgia, and the remainder to Chester Quinn and Roxy Russell. Roxy is a dog.

iii. Under basic Wills and Trusts law, a non human creature does not have legal capacity to own property. A will that’s on its face at least appears to live property in equal shares to Chester Q and Roxy Russell.

iv. Case known for lenient approach to admitting extrinsic evidence. Court: we have to look outside the will to determine who the named beneficiaries are. Here is where things begin to get a little bit dicier.

v. Questions: 1—can we get out of that unpalatable result by saying that the handwritten note to Chester, and treat it as a holographic will or codicil. Should that be useful as a holographic codicil?

1. Will has to make an effective affirmative bequest. Must affirmatively make a gift to somebody else. Whatever she wrote on the pad, unless it indicates an intent to name some other beneficiary it won’t work.

vi. 2^nd problem. Whether a bequest to Chester and Roxy means an equal bequest to both as tenants in common.

vii. Today the result would not necessarily be as bad, because there is on more level of ambiguity due to the statutes dealing with failed bequests. If Roxy is not allowed to take her share that half of the estate falls to intestacy. These days by statute, if you had a residuary request to A and B and B can’t take, then that failed portion is reallocated to the other residuary takers, so the problems caused by Russell would not be a problem.

e. Notes

i. Testator’s intent.

ii. Misdescriptions.

1. Frequently wills contain garbled or mistaken descriptions of beneficiaries. To prevent a bequest from going to an unintended beneficiary, many courts admit extrinsic evidence both to discover an ambiguity and then to resolve it.

iii. Omitted provisions.

1. A recurring problem involves language that is mistakenly omitted from a will, due to clerical error or inept drafting.

2. Courts generally refuse to admit extrinsic evidence to establish the terms of an omitted provision or to change the words of the will.

iv. Reformation of wills and will substitutes.

1. Courts readily grant reformation in cases involving revocable trusts and other will substitutes, and Langbein & Waggoner argue that reformation should be available as a remedy for mistake in wills as well as in revocable trusts and other will substitutes.

2. Goals and methods of interpretation.

4. Changes in Property Holdings

a. Dispositions under a will are classified as specific, demonstrative, general, or residuary.

i. A specific devise or bequest is a gift of a specific item of property which is identifiable and distinguishable from the rest of the testator’s estate.

ii. A general devise or bequest is a gift of a certain amount or quantity which is payable from general assets of the estate and which does not require delivery of any particular property or payment from any designated source. Example: gift of money.

iii. A demonstrative devise or bequest is a gift of a specified amount or quantity to be paid primarily from a designated source, and ultimately, if necessary, from general assets of the estate.

iv. A residuary devise or bequest is a gift of whatever property remains after all other dispositions have been satisfied.

b. 3-4 standard classifications of testamentary gifts:

i. First three though of a preresiduary

1. Specific gifts: example-my MG automobile.

2. General bequests: one that is payable from general assets of the estate. We don’t have to own specific property to satisfy it. Example a sum of money.

3. Deomonstrative-characteristics of specific and general. Example, 10,000 dollars payable from my account payable at first national bank. If account has 10,000 it is satisfied as a specific gift, if less than 10k in account, beneficiary will take what is left, if any, in the named account, and any unpaid balance will come from unpaid assets of the estate.

4. Residuary (i.e. not preresiduary)

ii. Why we care: Ademption, and creditor’s claims, which are payable first from residuary estate, and then under the governing statute, from general assets, and then specific bequests.

c. Ademption

i. Basic doctrine, traditional rule under identity theory of ademption, if the decedent made a specific gift of property by will and if the subject of that gift is no longer owned at death then the doctrine of ademption provides that the gift fails.

ii. Ademption is in full force in CA, there is no statute that lays it out. There are however a statutory set of exceptions.

iii. (§21133) CA exceptions to ademption of specific bequests; replacement property

1. Balance of purchase price (together with any security agreement) owing from buyer to seller at time gift takes effect in possession or enjoyment by reason of sale of property

2. Any amount of unpaid eminent domain award relating to property

3. Casualty insurance, pending insurance claim for destroyed property

4. Where T owned debt instrument secured by mortgage, T foreclosed on property and got underlying security

iv. Ordinarily a specific devise or bequest can be given effect only if the property which forms the subject matter of the gift exists as part of the probate estate.

v. If the property has been destroyed or disposed of before death, the gift fails because there is no property on which the will can operate.

vi. In Re Estate of Nakoneczny

1. FACTS: The testator owned a tavern and restaurant that he specifically bequeathed to his son in his will. The tavern was acquired by the Urban Redevelopment Authority and the bulk of the proceeds were used by the decedent to purchase bonds. The son is arguing that he should take the bonds.

2. ISSUE: Is the devise of the property in question a specific devise?

3. RULE: Intent is relevant when the issue to be determined is whether the legacy is demonstrative or specific.

4. HOLDING: Yes, the devise in question is a specific devise, and as such the devise set fourth in the will was adeemed. The terms and language of the will make it clear that the testator intended a specific devise.

vii. Notes

1. Identity theory.

a. Classification

i. Courts are often able to avoid ademption in doubtful cases by interpreting a bequest as general rather than specific.

b. Time of death construction.

i. This applies to specific gifts of property, i.e. “my gold watch.” This specific gift is normally taken to refer to property owned at the time the will was executed, but if it is sufficiently similar, it can mean property at the time of death.

c. Change of form.

i. Ademption does not occur if the change in the testator’s property holdings is one of form and not of substance.

2. Non-adeeming dispositions.

a. In some circumstances the rule of automatic ademption has been abrogated by statute or judicial decision. Case and point is when the testator has been declared incompetent and a guardian or conservator sells property which is the subject of a specific devise or bequest.

3. Anti-ademption statutes

a. The common law doctrine of ademption is usually subject to statutory exceptions.

4. Change in stock or securities.

a. P.407

d. Satisfaction

i. A legacy under an existing will may be satisfied in whole or in part by an inter vivos gift from the testator to the legatee, if the testator so intends.

ii. The basic problem is this-suppose that testator leaves 1,000 to my beloved daughter Dina. Testator then makes a 1,000 gift to Dina, and then dies a week later. The question is does she still get the 1,000 left to her in the will? Closely analogous to the issue of advancements.

iii. Arguably there is a good reason for requiring some sort of testamentary intent.

iv. UPC and CA law take the same approach as they did in intestacy, which is to say unless there is some sort of written evidence of the testator’s intent that the gift offset, we are generally not going to bother with this.

v. If you want provisions in the will to be offset by inter-vivos gifts, then make an indication in your will or in some other writing.

e. Abatement

i. Creditors and federal taxing authorities get paid off the top of the estate before the beneficiaries get their shares. Question: who gets pinched first? In what order will their bequests abate?

1. residuary, general, demonstrative, specific

ii. Before distributing any assets of the estate to beneficiaries under the will, the executor must first pay all debts and other charges, including administrative expenses, taxes, and statutory allowances.

iii. In the absence of a contrary provision in the will, testamentary dispositions usually abate in the following order of priority:

1. property not disposed of by the will, if any

2. residuary gifts

3. general gifts (and demonstrative gifts, to the extent payable from general assets)

4. specific gifts (and demonstrative gifts, to the extent payable from the designated source).

iv. How are we going to raise the funds if all we have are 2 specific assets?

1. There are actually 2 ways to make this work out property, what is the most obvious solution if you are thinking of this yourself?

2. The executor would sell off the property and then pay them off and then pay the difference to the beneficiaries.

3. The other way is for the beneficiaries to buy out the executor for the amount owed.

v. The only final wrinkle in this question is that if you look at the CA probate code 21402—they basically follow the general scheme of the UPC, within each category CA introduces one further refinement stating that relatives take priority and relatives (related by blood) take after non-relatives shares have been abated.

f. Exoneration

i. At common law, a specific devisee of land was entitled to exoneration from the residuary estate or liens securing the decedent’s personal obligations.

ii. Many states have abandoned this in favor of a presumption against exoneration.

iii. What about encumbered property? Testator owns a house and the house is subject to a mortgage debt when she bought it, she paid 20,000 down and she paid the balance in the form of a mortgage note, at her death there is still an outstanding debt of 80,000.

iv. CA 21131 of the CA probate code, reverses, unless the will says something different, the burden on the mortgage lien remains encumbered on the property. Example, A takes the house subject to that outstanding mortgage debt, the residuary beneficiaries are not going to be called on to pay that debt, unless the debt becomes accelerated on testator’s death.

5. Lapse

a. Lapsing means that a gift fails because a beginning taker dies before the execution of the will.

b. CA probate code §21109:

i. Note that the terms transferee, transferor, etc., are defined terms.

c. At death transfer is a statutory construct, §21104 introduces this.

d. A transfer that is revocable during the lifetime of the transferor but it does not include a joint tenancy with right of survivorship or a joint account with right of survivorship. Everything other than joint accounts.

e. If you are going to take under a will you must survive by an instant in time.

f. When we talk about surviving by an instant, the only problem is that if you have an estate where part of the property passes by intestacy, you can have different survival requirements (120 hours by a moment).

g. What happens if the beneficiary dies or is treated as dying before the testator.

i. General rule is that failed gifts fall into the residuary, if they were pre-residuary gifts. If the residuary beneficiary dies, the general rule as to common law is that the estate passes by intestacy.

h. Suppose the residue is left to A & C and that one of the shares fails. If A’s share of the residue fails, what happens? Common law, when A failed, the result is that the ½ half share of residuary estate fell to intestacy.

i. These days 21111-in example before C would get the entire state. If there is a residuary clause and if at least one survives, intestacy is a last resort.

j. What do we do about lapsed gifts and what does the anti-lapse statute do?

i. The statute does not prevent a gift from a deceased taker from lapsing, what it does is prevent the natural usual consequence of lapsing, what it does is prevent the gift from falling into the residue, it preserves the lapsed gift for the issue of the dead taker.

k. CA statute §21110—still a work in progress:

i. Who is a transferee here? It is defined much more broadly than in the UPC. Transferee means a person who is kindred of the transferor or kindred of the surviving or…all blood relatives to the transferor are covered. Step child, in-laws would still be protected under the anti lapse statute, this statute is tremendously broad.

l. At common law, a devise or bequest failed if the intended beneficiary died before the testator.

m. The attempted disposition was said to lapse if the beneficiary’s death occurred after the will was executed, and to be void if the beneficiary was already dead when the will was executed.

n. In Re Estate of Burns

i. FACTS: The testator had a will in which she left the residuary of her estate to three beneficiaries, each to take equally. The residue was to be divided equally among the surviving sisters. The case arose because none of the named beneficiaries survived the testator. Two of the beneficiaries died without issue, however the last beneficiary died with issue, and they are the ones who are bringing suit. If the will passes by intestacy, it will be distributed to 21 heirs at law.

ii. ISSUE: Whether a gift to two or more beneficiaries or the survivor of them shows the intention to exclude the operation of an anti-lapse statute, if all the beneficiaries die before the testator.

iii. HOLDING:

iv. The anti lapse statute prevents intestacy, it provides a substitute gift, and Fannie’s kids get the protection of the anti-lapse statute. Fannies kids get not only Fannies 1/3 share, but they get the entire residuary estate, this is why the other group of nieces and nephews are so furious. How did this happen? Under the statutory scheme, doesn’t it make sense?

v. Under the failed gifts statute CA 21111, which comes first, the failed gift statute or the anti-lapse statute? By its terms section 21111, except as provided and subject to 21110, the anti lapse statute applies first. First we find that Fannies gift passes to her kids, then we look to 21111, to reallocate the residuary.

VI. GIFTS

A. Gifts: focus basically on how the lines get drawn between outright gifts during lifetime, alternatives to wills, etc.

1. For a valid transfer you need:

a. Donative intent

b. Delivery

c. Acceptance

B. Real Property

1. There are two relative statutory requirements for transfers of land:

a. statute of frauds (all SOF requires is a signed writing).

b. 2- recording statute-in CA that appears in civil code 1214—recording statute requires a deed, and there are various standard forms of deeds. It must be signed and attested by witnesses and notarized.

2. Mertz v. Arendt

a. ISSUE: Whether the trial court erred in ruling John Jr. acquired title to the disputed property through an executed parol gift from his parents.

b. RULE: Where under a parol gift of land the donee takes possession and makes improvements in reliance on the gift so it would work a substantial injustice to hold the gift void, the transaction is taken out of the statute of frauds.

c. HOLDING: The court held that the parol gift of the property to John Jr. was a valid gift. All evidence supports that John Jr. acquired the property by parol gift from his parents. He exclusively used the land, paid taxes on the land, and his parents thought the land was his.

d. Nobody raised any questions about sons owner ship of land until the parents died. The siblings come in and confront him with the fact that he has no written title. Is he out of luck? No, the SOF has several equitable exceptions. Looking for detrimental reliance on the part of the donee. If there is clear and convincing evidence…

3. Notes

a. Statute of frauds.

i. An informal writing (letter) may satisfy the statute of frauds even though it is not a recordable deed.

b. The “part performance” exception to the statute of frauds.

i. Under the equitable doctrine of “part-performance,” an oral gift of land may be enforceable against the donor if the donee takes possession of the land and makes lasting and valuable improvements on it.

c. Other exceptions to the statute of frauds.

i. The statute of frauds applies to express trusts of land but not to trusts arising by operation of law, i.e. constructive trusts.

4. Lenhart v. Desmond

a. FACTS: Mr. Desmond executed a warranty deed to his daughter, Mrs. Lenhart, and placed it into his safety deposit box. While Mr. Desmond was in the hospital the deed was removed and Mrs. Lenhart recorded the deed.

b. ISSUE: Did Mr. Desmond constructively deliver the deed to Mrs. Lenhart by placing the deed in a safety deposit box and giving her access to the box?

c. RULE: To effect a conveyance transferring title, a deed must be both executed and delivered and the transferor must intend to deliver the title at the time of delivery.

d. HOLDING: No, Mr. Desmond did not validly give the deed to his property to Mrs. Lenhart. The court held that the evidence was sufficient to declare the deed invalid and the property was property restored to Mr. Desmond. It cannot be shown that Mr. Desmond intended to give the property to Mrs. Lenhart.

e. If there is a recorded title from the donor to the donee, does this mean the land has transferred? The very act of recording the deed raises a strong presumption that the deed is property executed and delivered.

f. The problem is extrinsic to the deed, what father intended to do was that when he died, her daughter would go into the safe deposit box, retrieve the deed and then record it at his death. He is trying to do something that he can’t do. The problem here is more with the donative intent.

g. His version of events makes a good deal of sense. He was trying to use the formalities of a lifetime gift to give land after he died.

h. The practical message behind the Lenhart case is that even if you have a perfectly good deed on its face, it can still be contested.

i. Net result is that he still owns the property.

5. Delivery must be completed in lifetime, or otherwise it must be in the will

a. Hypo- F has executed deed for D. Is there way to trigger the deed but prevent daughter from taking possession until death

i. You can put in writing that she has possessory interest only upon death

b. What if he doesn’t want D to know about gift, wants to stay in possession

i. This is OK, delivery depends on donor’s actions

ii. You could deliver to 3^rd party escrow company to hold on until death

iii. Or you can give deed to kid now, and then have kid give back to hold until death, could be risky because courts may say there is no delivery

6. Notes

a. Delivery requirement.

i. In general, an inter vivos gift of land takes effect only if the grantor delivers a deed (or other writing sufficient to satisfy the statute of frauds) during life with the intent of presently conveying some interest in the land.

b. Delivery to third party on behalf of grantee.

C. Personal Property

1. Inter vivos gifts

2. Gruen v. Gruen

a. The dividing line between lifetime gifts and deathtime gifts.

b. FACTS: The case where the mother and son fought over a Klempt painting.

c. Question #1: can you do this? The traditional wisdom was no. If you want to make a tangible gift, you must give it all at once, or not at all. The NY court of appeals says that if you can do this for real property and intangible property, there is no reason we shouldn’t allow people to do it for tangible personal property as well. Father’s intent is perfectly clear, as is the fact of the symbolic delivery here.

d. Gifts and contracts and wills. Difference between a gift and a sale or contract, basically the difference is that for a contract you need consideration and normally in a gift there is no consideration. If father still wants lifetime possession on his painting, one possible way would be for father to promise to leave the property to his son.

e. A promise to make a gift in the future is not enforceable, unless it is a contract made for valid consideration.

f. Suppose father doesn’t own the painting, but he intends to but it within a few weeks and he says when I buy this painting I will give it to you. You cannot make a gift of property of which you do not own.

3. Notes

a. Donative intent.

b. Delivery.

i. There are 3 types of delivery; manual, constructive, and symbolic.

ii. If delivery does not occur during the donor’s lifetime, the gift generally fails.

c. Constructive delivery.

d. Instrument of gift.

e. Uncashed checks.

i. Gifts of checks: Suppose that elderly aunt writes a string of Christmas checks to her nieces and nephews and then they deposit the checks in their bank accounts. Unfortunately aunt dies before the checks clear. These checks are still outstanding, what is the subject matter of the gift and when, if ever, do these gifts become complete? In the case of a gift check, delivery of the check has no legal effect at all. Delivery in that sense doesn’t mean the funds have been set aside, the delivery of a signed check is merely the authorization that when the check is presented there are adequate funds in the account, etc. Under the UPC, the way this generally works, the banks are protected in paying checks up to 10 days after the donor dies.

f. Securities and other intangibles.

g. Delivery to a third person.

i. In deciding whether or not to uphold the gift courts will look to see whether the third person is classified as a “trustee” or as an “agent.”

ii. Trustee signifies that the gift is valid, while agent indicates that the gift fails for lack of delivery since the agency terminates automatically at the donor’s death.

1. Retained control: if the donor indicates that he or she may ask for a return of the subject matter or otherwise purports to retain a power of revocation, the inference is that the third party is the donor’s agent.

2. Reasons for indirect delivery: if there is a valid reason for making the gift through an intermediary, this tends to support the inference that the third party is NOT the donor’s agent.

3. Previous relationship between the donor and third party: if the third party is the donor’s former lawyer or business partner, a court may find a continuing agency relationship.

h. Authority of agent or conservator.

i. Acceptance.

i. In theory, a gift is valid only if the donee accepts it.

ii. Acceptance is presumed, however, if the gift is beneficial to the donee.

j. Promise to make a future gift.

i. In general a gratuitous promise to make a future gift is unenforceable.

4. Gifts Causa Mortis

a. CA-these gifts are codified §5700 and following.

b. A gift causa mortis is a gift of personal property, that is made in contemplation of imminent death.

c. What makes it special is that it is by its terms intended to be revocable, which most lifetime gifts can’t be. The reason that they are allowed is that presumably if you are on your deathbed you don’t have an opportunity to make a will.

d. Allows you to hand over property on the condition that if your donee dies first, or if the donor recovers, then the gift is automatically revoked.

e. A gift causa mortis is a gift made in contemplation of death for the purpose of making a final disposition of the subject matter if death occurs.

f. Scherer v. Hyland

i. FACTS: The testator received a large settlement check which she signed over to her companion, Mr. Scherer, shortly before she committed suicide. This case arose because the transfer was being challenged as an improper causa mortis gift.

ii. HOLDING: The evidence of decedent’s intent to transfer the check to Mr. Scherer is concrete, unequivocal, and undisputed. When she left the apartment she completed a constructive delivery of the check to Mr. Scherer.

iii. Delivery is a somewhat elastic requirement.

g. Notes

i. Gifts in contemplation of marriage.

1. Engagement ring cases: What was the donative intent? Probably his intent when he gave the ring was that I assume that we are going to get married provided that we do not break up before marriage. The newer cases recognize this future intent. The trend is that, if for any reason the marriage doesn’t go forward, the giver gets the ring back.

VII. WILL SUBSTITUTES

A. Contract approach:

1. Contract with a third party. Third party beneficiary contract.

2. Classic example is a life insurance policy.

B. In CA-we have a set of statutes in the probate code §5100, which specify quite precisely the lifetime and death time rights of depositors and beneficiaries.

C. Property Approach

1. Joint tenancies with right of survivorship.

2. One of their functions was to avoid probate, how does a joint tenancy work?

3. A joint tenancy is a property arrangement that when created has immediate consequences, assuming you have a valid joint tenancy it gives, each tenant and equal undivided present interest in the land. Right of survivorship takes effect by operation of law.

4. This is the conceptual mechanism for how we avoid probate. There is nothing that passes at death. It springs into being when the tenancy was first created. As a practical matter, a lot of people think JT are an easy way to avoid probate.

5. Will irrelevant for what happens to JT property.

6. Creditors rights, creditors can reach either joint tenants half of the property while they are both alive. Either can break up a joint tenancy, either joint tenant can convey their interest to a third party, it will sever the joint tenancy and defeat survivorship rights and turn them into tenancy in common. They put the property beyond the ability to rethink or change by will.

7. Standard answer to the joint bank account puzzle is as follows:

8. Party A contributes all money to the account, what do we think A and B (holders of joint account) think? That would be equivalent to a common law tenancy. It is presumed that if A provided all the funds in the account, A is the owner of those funds in an account, under CA law a joint account the funds belong to the depositor until death. What happens when one dies? Why is it a rebuttable presumption? Suppose that A puts all funds into the account, maybe A didn’t intend to have survivorships at all, maybe he just wanted to give B the ability to withdraw funds on his behalf. This is known as a convenience account and the ambiguity of joint accounts in this regard is what causes a problem.

9. CA probate code §5000.

a. Taken straight from UPC, this section announces that a non-probate transfer at death, in a life insurance policy, or other arrangement is non testatmentary and it is valid. This is a blanket validating statute. Any non probate transfer if it is in writing will not be struck down just because it strikes down property at death.

b. Clearly validates life insurance, pay on death directions, what is not clear is where it all ends. There is conflicting case law on some issues. Intended to validate common will substitute arrangements.

VIII. TRUSTS

A. Introduction

1. Trust—fiduciary relationship between trustee and beneficiary with respect to property.

2. Want to have a good idea who the trustee is, who the beneficiaries are, once the trust is up and running it is essentially a web of obligations. With respect to identifiable property, you cannot have a trust without trust property.

3. Cast of characters of three sets of people: settler, trustee, beneficiaries. There can be overlap. The same person can be multiple as long as they are not the sole beneficiary and trustee…

4. Purposes that trusts serve these days:

a. Serving as a will substitute, avoiding probate. Will pass by trust instrument rather than by will.

b. Management function, trust is a vehicle for holding and managing property over time. The basic idea behind the trust is that we take property that was originally owned by the settlor and we split up ownership into legal title and equitable or beneficial title. Once the settlor puts the property in trust, the trustee is said to hold legal title. The beneficiaries themselves have no direct interest in the property. If you want to ensure professional management of property, one of the things that trustees do for a living is to manage that property.

c. Trusts are often set up to last for a long period of time. You can essentially lock up property for as long as the trust continues, and specify during the term of the trust just who is entitled to receive the income from that property, distributions of property from time to time, tremendous flexibility as to discretionary beneficiaries and mandatory beneficiaries. Allows settlor to direct a long term disposition.

d. Equitable interest is the bundle of rights that a beneficiary has. Beneficiary has the right to compel the trustee to carry out the terms of the trust. If the trustee breaches the obligations, or distributes to the wrong people, the beneficiaries have the right to go to court and compel the trustee to account for whatever losses that have occurred. Beneficiaries have what you would expect as far as rights against the trustee.

e. They also have, and this is what separates a trust from a third party beneficial contract, there is something more to a trust than simply a deal between the settlor and the trustee. If this were merely a contract between a settlor and a trustee, there is no way to explain how the beneficiaries have such broad remedies under the law. What if the beneficiaries go after trustee and the trustee is bankrupt? The trust beneficiaries can pursue rights into third parties as well. A special type of property right, they don’t have special rights in a trust property, they have a bundle of rights and they get the benefits eventually of the rights against them.

f. In trust law as well, a beneficiary’s interest is transferable, but what does this mean in terms of creditor’s rights? Beneficiary’s creditors can’t go against the trust property, but they can take over the interest the trust provides to (ask professor). In general it is possible to structure the trust to give beneficiaries the right to receive distributions but also the right to prevent creditors to step into the beneficiary’s shoes.

g. Tax planning.

5. Functions of Trusts

a. Probate avoidance. Use a trust to separate legal ownership from beneficial ownership which is the hands of the beneficiaries. Present interests and future interests.

b. If you wanted, instead of leaving property at death by will, to design a vehicle that would take effect during life, and create a lifetime transfer that mimicked as closely as possible the effect of a will, a trust is a natural example of how to do this. Trust, no need of statute, trusts are inherently equitable in nature.

c. The way they are designed are as follows.

i. Settlor puts property into a trust, by the terms of the trust the settlor retains beneficial ownership rights for lifetime.

ii. Settlor reserves rights during his lifetime to revoke trust, something you can’t do with an outright gift.

d. Farkas case.

i. T opened mutual account and wanted to set D up as beneficiary for when he died

ii. Cleary intended to set yup trust naming himself as trustee with minimum fiduciary responsibilities

iii. Problem in this case is what T was doing looked a lot like a will that dint comply with formalities

iv. To be a trust, T had to give up some control

1. Here B had no present interest really and interest only vested at T’s death

v. Did he maintain too much control?

vi. Did beneficial interest pass?

vii. Practically if you retain right for income for life and can end account at stroke of pen, you are not giving up too much

viii. Since there was never violation of any fiduciary duties or anything, we don’t really know if B had enforceable rights

1. You would almost never see this type of a trust litigated, because trustee could just argue that with actions he constructively revoked trust prior and there is nothing B could do

ix. Court said formalities provided were adequate to make valid trust, they were bowing to realities that revocable trusts are very popular

x. As a result you have a perfect template for a will substitute. There is not much difference between the effects of a revocable trust and a will taken effect at death.

6. The Nature, Utility, and Classification of Trusts

a. One person holding legal title to certain property for the benefit of another person, whose interest is equitable.

7. Methods of Creating Trusts

a. Two primary methods of creating a trust

i. Transfer in trust:

1. This occurs when A, the settler, transfers property to B, the trustee, in trust for C, the beneficiary.

ii. Declaration of trust:

1. This occurs when A, the owner of property, declares himself or herself trustee of the property for the benefit of C, the beneficiary.

b. TRUST CREATION:

i. -express trust (not constructive or resulting)

ii. -private (no charitable)

iii. -testamentary (created by a will)

iv. -inter vivos

1. -by agreement

2. -by declaration

8. The Uniform Trust Code

B. The Express Trust

1. Constructive trust has noting to do with a manifestation of intent. Just an equitable remedy for unjust enrichment.

2. Charitable trust generally no enforceable by beneficiaries. A private trust always needs to have a trustee and some private beneficiaries who are capable of asserting their rights.

3. Declaration of Trust

a. Oral trusts—in CA a statute on the matter probate code §15207—in CA by declaration, if the subject matter of trust is personal property.

b. CA clear and convincing evidence to show trust. Standing by itself, oral declaration is not enough to show the existence of the trust. Case where grandma delivers property to son for grand-daughters tuition.

c. If I own stock today, what I have given away is a stream of income which has not been realized and I can certainly declare this, unlike property which has not yet been realized. I.e. can give transfer existing stock dividends to a beneficiary, but you cannot transfer a piece of land that someone has promised to give you.

d. Cannot devise a gift of property that you expect to acquire.

e. Taliaferro v. Taliaferro

i. It is possible for the settlor of the trust to name him or herself as a trustee or as the sole trustee.

ii. He already owns legal title to the property as settlor, all we need as a matter of trust is a sufficient manifestation to intent to subject himself to fiduciary obligations. All that is needed is a sufficient manifestation of intent to create a beneficial interest. Whether he abides doesn’t make much difference since he has a power to revoke.

f. Notes

i. Transfers in trust.

ii. Statute of Frauds.

1. SOF does in fact require that if you want to create a trust in land you do need a signed writing for the purpose. Must have some signed writing indicating an attempt to create that trust. Nothing in trust law that precludes a writing (except for trust in land).

4. The Trust Res (Property)

a. Farmers’ Loan & Trust Co. v. Winthrop

b. She dies before the transaction is completed and her trustee has already collected almost about a million dollars, and has gone ahead and added that to her trust. There is another 1.5 million that is undistributed.

c. The question is obviously what happens that 1.5 million. Can the trustee collect that 1.5 millions and add it to the trust, or does it pass by intestacy.

d. Cardozo announces the harsh rule that ‘no this is like any other undelivered gift, she had not completed delivery, it was still her property when she died, the transaction has not been completed, she owns it at death and it passes out of intestacy.”

e. Two points worth noting about this case:

i. Malpractice think carefully about the difference between a revocable authorization and a statement of immediate transfer.

ii. Think about what her existing property rights are, at the point her husband died, she became entitled to the residuary estate. Cardozo is quite right that he says she has existing property rights in the residuary estate which she could have assigned. Why did she do what she did?

f. Notes

i. Dispositive outcome.

ii. More on defective gifts.

1. Restatement (3d) of Trusts acknowledges that failure to complete a contemplated transfer of property in trust generally does not result in the creation of a trust.

iii. Property.

1. Restatement (3d) of Trusts: A trust cannot be created unless there is trust property in existence and ascertainable at the time of the creation of the trust.

2. An expectation or hope of receiving property in the future, or an interest that has not come into existence or has ceased to exist, cannot be held in trust.

iv. Life insurance trusts as nontestamentary.

1. Courts almost invariably hold insurance trusts to be nontestamentary.

5. Testamentary trust is created by will.

a. How do you tell whether what testator intended was a trust or something else?

b. Where this comes up is where parent leaves child a disposition of property with the hope that the bequested child will take care of the other children.

c. What happens if you leave property to T as trustee for “my children.”

d. Suppose either T is an individual who dies before the bequest takes place, or that T declines to accept the bequest as trustee.

e. Does the trust fail or do we look for a new trustee?

i. A testamentary trust will not fail merely for want of a trustee. A court can always go out and find somebody. You can always find somebody to fill that role.

6. Inter vivos trusts

a. How do we set them up?

b. They were traditionally made by agreement. Settlor physically delivers trust property to trustee. How do you create a trust by agreement? Trusts can be revocable but legal title must land in the hands of the 3^rd party trustee. Inter vivos trust will most likely fail if the trustee does not accept.

C. Alienability of a Beneficiary’s Interest

1. Spendthrift Trusts

a. General rule: trust interest is transferable (like any property int.)

b. Spendthrift provision: prohibits transfer

c. Exceptions

i. creditors:

ii. dependent spouse/child

iii. Necessaries, services benefiting beneficiary’s interest

iv. Self-settled trusts

d. In general qualified retirement benefits are out of reach of creditors. (ERISA)

e. For most assets it is impossible legally to keep them available to yourself and keep them out of creditors reach.

f. Spendthrift trusts basically allow within limits to protect the trust assets from beneficiaries.

g. A beneficiary’s rights in a trust is itself a kind of property right. If the trust says nothing, the general rule is that a beneficiaries interest in an existing trust is transferable, just like any other property. If A wants to transfer her income interest, she can generally do that as a default method.

h. If the only source of funds we can identify is the beneficiary’s interest in the trust, what remedies does a beneficiary’s creditor’s have?

i. A court can order the trustee instead to pay over the distributions to the creditor to satisfy the creditor’s claim. If a court decides that it would be unreasonable or unfair to order a trustee under all of the circumstances, that is a matter for the court’s exercise of equitable discretion. It would depend in part on what kind of interest the beneficiary has.

i. The trust terms themselves may include a specific spendthrift provision.

j. A spendthrift provision is a term of the trust that prohibits transfer of a beneficiary’s interest.

k. Courts have by and large embraced spendthrift provisions.

i. Notion of spendthrift trusts is that settlor can do what they wish with their property.

l. If you include a spendthrift provision in a trust instrument, it is generally valid.

i. Creditors cannot reach either rights of income before they are distributed to the beneficiary.

m. Creditors like beneficiaries are out of luck if they want to compel a trustee to make a discretionary disbursement of trust funds.

n. Another wrinkle: forfeiture restraint.

i. This is a little bit more sophisticated in its design. A forfeiture restraint allows a beneficiary some fixed interest, until a creditor tries to reach the trust, and when that happens the trust is automatically converted from an automatic interest trust to a discretionary trust.

o. In more specific policy terms, there are at least 3 players, maybe 4 in play here.

i. We have a settlor, and American trust law almost always gives preference to the settlor’s intent.

ii. Beneficiary: Trusts don’t necessarily encourage beneficiary’s to be productive.

iii. 3^rd player in interest: creditors: they have methods such as credit checks, etc, to reduce risk.

p. Sligh v. First National Bank of Holmes County

i. FACTS: Mr. Sligh was involved in an automobile accident with Mr. Lorance. Mr Lorance was intoxicated and found to be guilty of intentional negligence and was liable in tort. Mr. Lorance was named in a spendthrift trust.

ii. ISSUE: Whether the interest of the beneficiary of a spendthrift trust can be reached by persons against whom he has committed a tort.

iii. RULE: As a matter of public policy a beneficiary’s interest in spendthrift trust assets is not immune from attachment to satisfy the claims of the beneficiary’s intentional gross negligence tort creditors, and that such claims take priority over any remainder interests in such assets.

iv. HOLDING: The court held that the spendthrift trust could be reached by Mr. Sligh, relying on public policy grounds.

v. Mom sets up trust for son Gene. Gene does serious damage to the Sligh. There is a 5 million dollar decision against Eugene who is solvent aside from the trust. The question is whether or not the Slighs can reach the trust funds. Case gives a nice overview of the kind of traditional black letter law on the subject.

vi. There are 4 specific creditors of which a spendthrift trust doesn’t operate:

1. A dependent spouse (or ex spouse) or child of beneficiary.

2. Claims for necessaries. Creditors who provide necessaries, items for basic support needs, food, shelter, basic clothing. If you are a landlord or grocery store, you first go against the beneficiary and get your judgment, then you go to the trustee.

3. . Services benefiting a beneficiary’s interest. Types of people who do this, would be a trustee, trust lawyers. This appears to be a special rule that benefits trust lawyers.

4. Government claims—if congress wants to override spendthrift preemption it can. Federal law overrides state law. Spendthrift doesn’t apply to federal tax liens. Claims for Medicaid reimbursements.

q. Notes

i. General principles.

1. If the governing instrument includes language that makes the beneficiary’s interest inalienable, the beneficiary may not voluntarily transfer the interest, and the interest may be unreachable in whole or in part by the beneficiary’s creditors.

ii. Slight update.

iii. More on the tort exception.

iv. Child support.

1. Child support is one of the most widely accepted exceptions.

v. Former spouses.

1. Courts are divided as to the accessibility of spendthrift trusts by former spouses seeking alimony. The restatement (2d) of Trusts supports this exception.

2. Discretionary Trusts

a. Protective Nature of a Discretionary Trust – Although creditors can get a lean on the assets of the trust, this would be pointless, because the trustee can refuse to pay money from the trust.

b. Difference between the spendthrift trust and the discretionary trust –

i. Spendthrift - The spendthrift trust is basically unreachable by the creditors, unless they are under an exception. Therefore, the beneficiary can get money from the trust in the face of the creditors.

ii. Discretionary - Under a discretionary trust, if the creditor goes against the trustee, this will cause the trustee to stop distributing money from the trust. That means the beneficiary will not get any money until the creditors are paid off.

c. Protective Trust –

i. Gives beneficiary money until such time as a creditor tries to reach the proceeds or the beneficiary tries to transfer the trust. The trust can be shut down until the threat is gone.

d. Self Settled Trust –

i. Refers to the situation where a settlor is named as one of the beneficiaries. To the extent that a person keeps a retained interest, this is a self settled trust.

ii. Overriding Consideration – a settlor cannot use a trust to shelter his or her own property from creditors. Nether a spendthrift or a discretionary clause are protected with a self settled trust.

1. Spendthrift - Spendthrift clauses are ineffective as to the settlor’s creditors.

2. Discretionary - The settlor’s creditor can reach the maximum amount that can be revoked

e. United States v. O’Shaughnessy

i. FACTS: Lawrence P. O’Shaughnessy was the beneficiary of two discretionary trusts. Mr. O’Shaughnessy owed the IRS a substantial sum of money

ii. HOLDING: Under a discretionary express trust, a beneficiary is entitled only to so much of the income or principal as the trustee in his uncontrolled discretion shall see fit to distribute, the beneficiary cannot compel the trustee to pay him or to apply for his use any part of the trust property.

3. Self-Settled Trusts

a. State Street Bank and Trust Company v. Reiser

i. FACTS: T runs up some debts, using property in a self settled revocable trust as collateral. He then dies.

ii. ISSUE: Whether it is possible to insulate assets from the claims of creditors after death simply by transferring them during life to a revocable trust.

iii. RULE:

iv. HOLDING: Where a person places property in trust and reserves the right to amend and revoke, or to direct disposition of principal and income, the settlor’s creditor’s may, following the death of the settlor, reach in satisfaction of the settlor’s debts to them, to the extent not satisfied by the settlor’s estate, those assets owned by the trust over which the settlor had such control at he time of his death as would have enabled the settlor to use the trust assets for his own benefit.

v. Although the traditional rule is that when the settlor of a self settled trust dies his interest extinguishes in favor of the remainder beneficiary, the court states that this violates public policy for an individual to have an estate on which to live, but not an estate to pay his debts with.

D. Termination of Trusts

1. What happens when terms of the trust become obsolete due to changed circumstances or become obsolete over time?

2. Ask who has the power to terminate the trust completely, and what methods do you have to pursue in order to change what was cast in stone when the trust was created? Asking how to approach the terms of a trust that do not originally provide all the flexibility that a drafter may have put into the trust.

3. Trust revocation: The notion of revocation refers to the settlor’s action of terminating the trust.

a. Once you find that the trust is revocable, what procedural hoops must you go through?

b. Whether the settlor complied with whatever formalities are necessary to revoke the trust.

c. Unlike the will statutes which specify a mandatory set of formalities, the basic answer is the first place to look is the terms of the trust.

d. Power to revoke: assuming a trust instrument specifies that the trust is either revocable or irrevocable (which all trusts should do), what if the trust is silent?

i. The default rule: A trust is revocable only to the extent that the settlor retains such a power under the trust instrument. If the trust didn’t say anything about a power to revoke, the assumption is that it is irrevocable.

e. Following along consistently, if the trust says on its face that it is revocable, suppose that the instrument doesn’t go on to specify what the formal requirements are for doing a valid revocation, do we assume for example that it can be revoked only by written statement?

i. Any sufficient manifestation of intent will do. If a method is listed, then we assume what is listed is exclusive and is the sole method for revocation. If it doesn’t say, then any sufficient manifestation of intent will do.

4. Termination Pursuant to the Terms of the Trust

a. Most trusts terminate pursuant to their own terms.

b. Alternatively, a trust may end when one who has the power to revoke or terminate it exercises that power.

c. Barnette v. McNulty

i. His trust instrument was designed to allow the settlor to take a specific asset, and to declare himself as trustee and to name beneficiaries at his death. He doesn’t notify himself that he is officially revoking the trust. From the perspective of any third party he never made it clear. Accordingly, when he dies, the divorce is still pending and his wife discovers the trust instrument and he claims ownership of the stock because she is named a the trust beneficiary. She actually has a pretty reasonable argument, that in fact he never formally revoked the trust. Yet the court comes down saying that there was a valid revocation.

ii. Divorce pending but not yet decreed, revocation by divorce statutes may be useful for helping sloppy parties.

iii. We are looking specifically at the question of what the trust specifically requires.

iv. The court twists and turns on this a little bit. They cite comment in Restatement, which says on its face if the settlor did not specify any method of revocation, any intent is adequate to do the trick.

v. The trust did set forth methods of revocation, none of which are complied with. The court did not read the following comment which states that if terms of revocation are set fourth, the trust must be revoked exclusively by those provisions set fourth in the trust.

vi. How did Barnett manifest his intent? Conversation with estate planning lawyer and divorce lawyer. He also executed a will which specifically contradicted the terms of his trust. We have a subsequent statement of intent that is completely inconsistent with the terms of the trust.

vii. Will must comply with greater formalities and safeguards and is the most reliable statement of intent, a will is by definition ambulatory, so it doesn’t have any legal effect until testator dies, will itself will be no good at executing the will at death.

viii.The only thing they are left with is Mr. Barnett’s statements to his lawyers. Court, his oral indication is valid even though a properly executed attested will has no effect as far as the trust itself goes. Manage to find this combination of oral statements sufficient to revoke the trust. This is obviously the way any competent trust drafter would want to see his or her product turn out.

d. CA has taken a strongly contrasting approach to these questions.

i. CA has for at least a century presumed that unless an inter vivos trust instrument provides to the contrary, that the trust is in fact revocable, and the settlor has a power to revoke, unless the trust says ‘This trust is irrevocable” the trust is revocable.

ii. §15401-- if you specify a particular method of revocation, that is good. If the instrument is silent, the default method of revoking by a writing other than a will signed by the settlor and delivered to the trustee during the settlor’s lifetime. Would this make a difference in the case of Barnett? Would a Dacey(sp) trust, the key here is that the CA statutes specifically excludes a will, and if the will doesn’t say anything about revocation, the revocation must be by a signed writing.

e. Notes

i. Major change in the default rule.

ii. Formalities for revocation and amendment.

1. Unless a governing instrument provides otherwise, no particular formality is necessary to revoke a trust or to amend a trust instrument.

2. On the other hand, if the terms of the trust reserve to the settler a power to revoke or amend the trust exclusively by a particular procedure, the settler can exercise the power only by substantial compliance with the method prescribed.

iii. Revocation by will.

1. A valid, witnessed will can revoke a revocable trust if the terms of the trust are not to the contrary

iv. Oral revocation.

v. Amendment.

1. The courts usually interpret a power of revocation as authorizing the settler to amend the terms of the trust without first revoking the trust.

vi. While the trust is revocable.

5. Modification and Termination by anybody besides the settlor…

a. Once a settlor is dead, what do you do when the original terms of a trust have either become outdated or it becomes clear that they are no longer serving the original desires or beneficiaries their purpose.

b. 2 ways of going about this

i. Court authorized deviation-court proceeding where somebody goes into court and asks the court to authorize to compel the trustee to do something differently from what the trust terms demand. Courts have always pretended when they authorize a deviation that they are allowing the settlor to carry out his/her intent through a different route. The courts have hedged around the document of deviation with a number of requirements.

ii. You must show that there is some circumstance not foreseen or anticipated by the settlor.

iii. Can the beneficiaries gang up and get the trustee to terminate the trust earlier to modify the trust?

1. In order to modify or terminate a trust, you don’t need court approval, in theory the beneficiaries, if they get together, by unanimous consent the general default rule is that they can indeed compel an early termination of the trust.

2. They can only do that to the extent that the proposed termination and modification does not conflict with a material purpose of the settlor.

3. The settlor’s material purpose trumps the ability of the beneficiaries to change the terms of the trust if it breaches a material purpose of the settlor.

iv. If the settlor is still around, the settlor can always change his or her mind. This change can occur without trustee approval or court approval.

v. Leaves open one hugely important question, namely, what counts as a material purpose?

c. Claffin doctrine:

d. Claffin dies, has trust distribute money to son at his 20^th, 25^th, 30^th birthday, the son is in his early 20’s and says I’ve had it, and I want to get it anyway there are no other beneficiaries so I am going to get the trustee to hand it over.

e. Yes, in general the beneficiaries can rewrite the terms of the trust, but not if the trust inhibits a material purpose of the settlor. This disposition is sufficient to prevent the son from getting to the trust. Sets the bar extremely low.

f. Real significance of Claffin, is that since there is almost always material purpose for the settlor, unless you can get the settlor’s consent, there will almost always be material purpose which will be unable to be changed by the beneficiaries of the trust.

g. Most trustees won’t consent to a realistic matter. The trustee is earning its living by administering the trust. Built in self interest in keeping the trust going. What about the other main cause? Where trustees get their business, they have a stake in having a good relationship with the settlers.

6. Left with two obstacles: material purpose doctrine, and as a practical matter the notion of getting unanimous beneficiary consent, which is a pretty tall order. Any holdout beneficiary has a veto right for what the other beneficiaries want to do.

7. New Restatement takes a somewhat more flexible approach: basically under the new restatement, it starts off in a very traditional way, says that beneficiaries if they can get unanimous consent (if settlor is dead), if there is a material purpose that would prevent what the beneficiaries want to do, the beneficiaries can go to court and the court can weight whether the reason for terminating the trust outweighs the settlers intent. Settlors must be more creative and inventive in order to lock in dead hand control to prevent people from second guessing their schemes. One way to plan for this is to build in some flexibility up front.

8. CA statutes allow deviation, we see under CA statutes and restatement we see a move towards courts being able to step in and balance interests with beneficiaries of trust and settlers intent.

9. Termination by Consent

a. In Re Bayley Trust

i. RULE: When all the beneficiaries of a trust desire to terminate it in part, they can compel that result unless the continuation of the entire trust estate is necessary to carry out a material purpose of the trust.

IX. Administration of Estates & Trusts

A. Overview of Fiduciary Duties

1. Duty of care

2. Duty of loyalty

3. Duty of impartiality (trustee expected to be impartial)

B. Trustee is entitled to compensation for his/her services. If the trustee is acting solely in a fiduciary capacity, the only interest he/she has is for their compensation.

C. The trustee is explicitly forbidden from deriving any personal profit.

D. There are a whole range of transactions that can trigger breaches.

1. Self dealing transactions are one.

a. I.e. a trustee holds property in trust and then sells the property to himself.

b. Even if a trustee pays full fair market value for that property, the trustee is not allowed to sell that property to itself. Trustee would be disabled from lending property to himself, etc.

2. Any transaction where the trustee is standing on both sides of the transaction. This is the harshest, stringent prohibition in conflict of business that you will ever find.

3. In theory trust remedies are that if the trustee has violated they are put back in position that they would have occupied had there been no breach.

4. A corporate trustee is generally prohibited from owning stock in their own company.

E. Duty of Loyalty: The core foundation of the trust relationship.

1. The notion is that if you have a trust, and you have a relationship between trustee and beneficiary, one of those duties is that the trustee must act for the sole benefit of the beneficiaries. The beneficiaries should be able to rely on the trustee to treat them fairly so that they don’t have to worry about the trustee making a profit on the side.

2. The duty of loyalty implies that a trustee should never engage in a transaction where there is a conflict of interest without getting some kind of protection. Either:

a. getting a court order approving such a transaction, and if the trustee can get court approval.

b. The second approach is if you don’t want to go through the delay of getting court approval you can do it informally by getting consent from various beneficiaries whose interests are affected.

i. The problem is that you will almost never be able to get unanimous beneficiary consent and the only complaints that you are able to cut off are the ones who have consented. If there is one group of unborn or unascertained beneficiaries then you are leaving yourself open to liability.

c. You know when you have court approval, but you never know when you have made an adequate advance to beneficiaries.

3. Where problems tend to crop up:

a. How serious does the conflict of interest does there have to be?

b. Rothko case:

i. We have 3 executors who are in charge of administering an estate that consists mostly of very valuable (but hard to value) paintings. They enter into a bunch of sale agreements, but their agreements are with art dealers of with two of them are closely affiliated. The situation is pretty straightforward, they are doing business with galleries that they are interested in. They are drumming up business for themselves and the commissions seem to be inflated.

ii. This is a clear conflict of interest.

iii. The second executor has a slightly more tenuated conflict, he doesn’t have a interest: he is a struggling artist, the notion is that if you judgment as a fiduciary might be affected by any factor, has an incentive to offer him a deal on Mr. Rothco’s paintings. Slightly different type of conflict but it should leap to the eye. The reason the case is still often used has less to do with whether their conduct is improper, the case illustrates the financial exposure that they can be vunerable to. How do we measure damages from the breach?

iv. General principle is the equitable one: the beneficiaries who are the innocent parties are to be put in the same position that they would have been in had there been no breach of trust.

v. I.e. if the paintings we worth 10 million and they were sold for 2 million there would be 8 million of damages.

vi. What time do we look at?

1. The time of when the paintings were sold or the value at the time of the decree, this is what the court refers to as appreciation damages.

vii. The damages now go into the millions because it is what they are worth now, instead of at the time of the original sale.

1. Difference between what they got and what painting had appreciated too.

viii. The third executor was not in any conflict of interest at all. He knew what was going on, but still signed on to what was going on.

ix. Points out to the problems of co-trustees. Once you do so, you are potentially liable if you go ahead and cooperate with the co-trustees. If you fear they are about to engage in some suspicious behavior, you must go to court and get an order to stop it. Levine’s failure to do that, even though he got unhelpful legal advice, will not shield him for his liability.

x. Second point: The will itself didn’t say anything specific about how these paintings are to be disposed of, but not surprisingly the will left no instructions about the sale either.

1. This raises the question about what effect the drafter would have. Of course you can give instructions that will either make the duty of loyalty more demanding or you can relax it. You can implicitly by naming certain people as executors, you can build in a conflict of interest where you understand that one of your executors will also be a beneficiary. Testator’s intent controls to a point.

xi. Language that frees trustee’s from fiduciary responsibility would not be given effect or it would be taken to mean that within the limits of a reasonable fiduciary discretion they can decide when and how to sell to.

4. The Prudent Investor Rule

a. Prudent man rule from 1830 was originally articulated as a fairly permissive flexible general standard which said it is enough for a trustee to expect them to act as men or prudence in the community would do in managing their own affairs.

b. 3 qualifications, if you are managing trust property to

i. generate a decent amount of current income

ii. we also expect them to preserve the capital value

iii. Avoid speculation

c. Courts have tended to fall into two traps, 1. they have tended to think of speculation as risk. Courts have also taken particular case holdings and generalize them and say that categories of investments are either good or bad.

d. Prudent Investor rule, now statutory in California is built on a few standard principles.

i. Risk & Return

ii. Total Return

iii. Diversification

iv. Delegation

v. Interaction with duties of loyalty, impartiality

e. By diversifying your investments you can generally reduce the specific firm risks for the companies covered in your portfolio without sacrificing your return.

f. Whereas traditionally trustees have been presumed not able to turn over investment decisions to advisors, the modern rule flips this around. A trustee is authorized to delegate in the same manner as any investor would do.

g. Matter of Estate of Janes

i. Left estate which he held mostly in Kodak stock, in trust to his widow. Result turns out to be much the same, as a basic matter of prudence, what is trustee to do when faced with a new portfolio.

ii. First duty was to look at the portfolio and determine whether or not it is prudent. Even before the prudent investor rule came into the books, most people would not hold the bulk of their investment portfolio in a single stock.

iii. When the investor gets the portfolio, it may be perfectly acceptable to invest some money in Kodak, but what is acceptable for 1-5% is not acceptable for 75% of the stock. This is clearly imprudent. The court is careful to say that there is no straightforward duty to diversify, but there is a presumption that if you hold the stock, you should have a reason to do so. Another reason would be tax liabilities. I.e. you sell it off and recognize a large gain.

iv. Prudent standard is a rule of conduct. Look at the judgment at the particular time the decisions were made. As long as those decisions were made with adequate, is not supposed to influence our view on whether there was a breach. Looking at whether or not trustee made decisions with adequate due care.

v. It encourages trustees to select an active fund manager. It encourages trustees to manage risk by investing passively in mutual funds or it has encouraged trustees alternatively to choose particular managers to pick their stocks for them. It has encouraged them away from investing themselves.

h. Impartiality

i. Impartiality the Dennis case: perfectly easy to imagine a trust portfolio that has an adequate total return, and yet if that return is disproportionally weighted toward current income, and the remainder beneficiaries are going to be saying “what about us” the trustee is under an obligation to balance the interest between different beneficiaries.

X. Future Interests

A. Introduction

1. It’s been possible to split up beneficial interest in trust property over time, so you have one group of beneficiaries entitled to present use of property and presumably when the present interest terminates someone else becomes entitled to property.

2. Most trust forms will take the form of a life estate in those properties. Just as you could create a life estate in land, you can do the same thing in trust, when A dies, B as the remainder beneficiary will become entitled to that trust property.

3. Reversionary interests are always deemed to be fully vested and hence they don’t have to be tested under the RAP, because it will always pass.

B. Classification of Future Interests

1. Complication is the type of remainders: vested or contingent.

2. Executory interest for our purposes is for most cases not substantially different than a contingent remainder.

3. What makes a remainder vested rather than contingent? Basically the traditional approach is pretty simple: a remainder is vested unless it is subjected to a condition precedent (some condition other than the natural termination of the preceding estate) or if the gift it to somebody who is unborn or unascertained.

4. Degrees of Vesting:

a. Indefeasibly vested: nothing can take it away from the holder.

b. Vested, but subject to divestment: there might be a condition subsequent which could cause the interest to fail.

c. subject to partial divestment or subject to open (i.e. it is a class gift)—holder may have to share with others not yet in existence.

5. Can’t create a remainder that would divest another remainder.

6. Executory interest takes effect by divesting another interest.

7. Executory interest is treated the same as a contingent remainder for RAP purposes.

C. Class Gifts

1. Want to know 2 things:

a. Who is in the class-how long does it remain open?

b. first we are concerned when the class closes, but we are also concerned about other conditions imposed. If there are conditions imposed on a class gift, then in general any class member is going to have to satisfy those conditions to take his or her share. This is the question of vesting (a different meaning).

D. Rule Against Perpetuities

1. “No interest is good unless it must vest, if at all not later than 21 years after some life in being at the creation of the interest.”

2. We will only concentrate on non-vested future interests. I.e. remainders and executory interests.

3. First question is the future interest vested or not?

4. Once you have identified all non-vested future interests, then we worry about applying the rule.

a. When is the interest created? A future interest is created ordinarily when the trust is created or when it becomes irrevocable.

b. Identify the latest possible time at which the interest you are looking at might vest. Imagine what ever sequence of events, no matter how unlikely, that could delay vesting as long as possible.

5. Because the common law rule is a little big intricate and lay some traps, the Uniform Laws people in the 1980s decided it was time for a major overhaul. If you flunk the common law test, the statutory rule established a flat 90 year period, if the interst actually vests within 90 years, the rule presumes that all future interests are valid for 90 years and then you look around to see if any interest vests or fails within that period, this narrows the inquiry to that narrow subset which don’t vest or fail within 90 years, and if that interest has not vested in that 90 year time period the court can step in and settle the interest in terms closest to the testator’s probable intent.

6. Final approach to deal with the RAP is a savings clause.

a. Consists of:

i. If at the end of (some specified group of some lives in being) you specify that the trust will terminate 21 years after the last survivor of a group of lives in being.

ii. Specify what happens to the property in event that the savings clause comes into effect. You should specify who takes instead.

iii. If you do this then you never have to worry about testing particular types of interests.