[George Kent] Wills, Trusts, And Estates for Paral(BookFi.org)

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ISBN 978-0-07-340306-9MHID 0-07-340306-7

Wills, Trusts, and Estates for Paralegals

Kent

Written for paralegal students, not lawyers. Wills, Trusts, and Estates for Paralegals presents the students with hands-on assignments to help develop their legal reasoning skills and demonstrate their knowledge of the material without overwhelming the student in the process. The text provides students with the opportunity to learn about the law of wills, trusts, and estates and develop the skill sets they need to succeed in the legal field.

Topics are presented in a straightforward and comprehensive manner, while the learning features focus on three goals:

Learning Outcomes• Critical thinking• Vocabulary building• Skill development• Issues analysis• Writing practices

Relevance of Topics Without Sacrificing Theory• Ethical challenges• Current law practices• Technology application

Practical Application• Real-world exercises• Portfolio creation• Team exercises

McGraw-Hill Paralegal Titles: where educational support goes beyond expectations.

Building a solid foundation for a successful paralegal career is becoming more challenging as the needs of students and instructors continue to grow. The McGraw-Hill paralegal texts offer the solution to this ever-changing environment. Integrated real-world applications in each chapter teach students the practical skills needed for a thriving career in the field. A common vocabulary among all McGraw-Hill titles ensures consistency in learning. With a thorough set of ancillaries and dedicated publisher support, these texts will facilitate active learning in the classroom and give students the skills sets desired by employers.

Welcome to the new way of learning in paralegal education—McGraw-Hill Paralegal Titles. Visit http://www.mhhe.com/paralegal for more information!

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WHERE EDUCATIONAL SUPPORT GOES BEYOND EXPECTATIONS.

Building a solid foundation for a successful paralegal career is becoming more challenging as the needs of students and instructors continue to grow. The McGraw-Hill paralegal texts offer the solution to this e ver-changing environment. Integrated real-world applications in each chapter teach students the practical skills needed for a thriving career in the field. A common vocabulary among all McGraw-Hill titles ensures consistency in learning. Up-to-date cover-age of the a vailable technology used in a le gal setting and a pur posefully designed set of pedagogical features with shared goals across the list provide the systems needed for students to fully grasp the material and apply it in a paralegal setting. With a thorough set of ancillar-ies and dedicated publisher support, these texts will facilitate active learning in the classroom and give students the skills sets desired by employers.

McGraw-Hill Paralegal Titles

Introduction to the Law & Paralegal Studies Connie Farrell Scuderi ISBN: 0073524638 © 2008

Introduction to Law for Paralegals Deborah Benton ISBN: 007351179X © 2008

Basic Legal Research , Second Edition Edward Nolfi ISBN: 0073520519 © 2008

Basic Legal Writing , Second Edition Pamela Tepper ISBN: 0073403032 © 2008

Contract Law for Paralegals Linda Spagnola ISBN: 0073511765 © 2008

Civil Law and Litigation for Paralegals Neal Bevans ISBN: 0073524611 © 2008

Wills, Trusts, and Estates for Paralegals George Kent ISBN: 0073403067 © 2008

Legal Terminology Explained for Paralegals Edward Nolfi ISBN: 0073511846 © 2008

The Law Office Reference Manual Jo Ann Lee and Marilyn Satterwhite ISBN: 0073511838 © 2008

The Paralegal Resource Manual Charles Nemeth ISBN: 0073403075 © 2008

Ethics for Paralegals Linda Spagnola ISBN: 0073376981 © 2009

Family Law for Paralegals George Kent ISBN: 0073376973 © 2009

Legal Research and Writing for Paralegals Neal Bevans ISBN: 007352462X © 2008

The Professional Paralegal Allan Tow ISBN: 0073403091 © 2009

Torts for Paralegals ISBN: 0073376930 © 2009

Criminal Law for Paralegals ISBN: 0073376965 © 2009

Real Estate Law for Paralegals ISBN: 0073376957 © 2009

Law Office Management for Paralegals ISBN: 0073376949 © 2009

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George KentKeiser University

Boston Burr Ridge, IL Dubuque, IA Madison, WI New York San Francisco St. LouisBangkok Bogotá Caracas Kuala Lumpur Lisbon London Madrid Mexico CityMilan Montreal New Delhi Santiago Seoul Singapore Sydney Taipei Toronto

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WILLS, TRUSTS, AND ESTATES FOR PARALEGALS Published by McGraw-Hill, a business unit of The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, NY, 10020. Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of The McGraw-Hill Companies, Inc., including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning.

Some ancillaries, including electronic and print components, may not be available to customers outside the United States.

This book is printed on acid-free paper.

1 2 3 4 5 6 7 8 9 0 QPD/QPD 0 9 8 7

ISBN 978-0-07-340306-9 MHID 0-07-340306-7

Publisher: Linda Schreiber Associate sponsoring editor: Natalie J. Ruffatto Developmental editor II: Tammy Higham Marketing manager: Keari Bedford Media producer: Marc Mattson Lead project manager: Susan Trentacosti Production supervisor: Jason I. Huls Designer: Marianna Kinnigakis Media project manager: Mark Dierker Cover design: Studio Montage Cover image: © Getty Images Typeface: 10/12 Times New Roman Compositor: Techbooks Printer: Quebecor World Dubuque Inc.

Library of Congress Cataloging-in-Publication Data

Kent, George W. Wills, trusts, and estates for paralegals / George Kent. p. cm. -- (McGraw-Hill paralegal titles) Includes index. ISBN-13: 978-0-07-340306-9 (alk. paper) ISBN-10: 0-07-340306-7 (alk. paper) 1. Wills--United States. 2. Estate planning--United States. 3. Trusts and trustees--United States. 4. Legal assistants--United States--Handbooks, manuals, etc. I. Title. KF755.Z9K46 2008 346.7305--dc22 2007001656

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Dedication

To my wife, Cathy, and my children, Amanda, George, Jeremy, and Chris, for standing b y me during the difficult times.

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vi Part Number Part Title

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George Kent has been a parale gal instructor for K eiser University, formerly Keiser College, since 1997. In 2002, he recei ved the Faculty Teaching Excellence Award, the highest f aculty award given by the Keiser Collegiate System. He practiced law for many years but later changed direction, concentrating on business endeavors, legal writing, and teaching at the colle ge level. These endeavors include: the development of online paralegal courses; being a freelance editor for a national publishing company; and writing, editing, and publishing law books and materials on subjects such as municipal law, insurance law, and the proper service of legal process.

About the Author

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I have had the pleasure of teaching parale gal classes for over a decade. Lik e many instructors who begin teaching with no for mal education on how to teach, I taught the la w the way I was taught the law. The results were disastrous! I quickly realized that the way the law is taught in law school is ill suited for the paralegal classroom. I started over, writing new lectures and develop-ing new lesson plans. The objective was to present the material in a way that would be accessible to the paralegal student. The one major roadblock to reaching my objective was the textbooks themselves. They seemed to be written by lawyers for law students. They did not communicate the infor mation in a way that was readily accessible by most paralegal students. This textbook is my attempt at providing a new approach to a te xtbook on wills, tr usts, and estates. It is based on the lectures and lear ning tools that I developed over the years to help my students. I had two main goals for this textbook. First, it must present the information in a way that is readily accessible to the paralegal student. The key to achieving this goal is to present the material in a manner that the student can easil y digest, while also understanding its importance to his or her future career. It must be written in a direct manner that first shows the students why the subject is important and then introduces them to the skill sets they will need when they get into the field. Second, the student should be presented with hands-on assignments throughout the textbook. The students need to be consistently asked to demonstrate their knowledge of the material covered in a chapter by completing tasks associated with that material.

ORGANIZATION OF TEXT

The text contains 11 chapters that are divided into three parts. It starts with a nonconventional intro-ductory chapter. Like most textbooks, Chapter 1 provides the student with an introduction to some of the key concepts and terms that will be covered throughout the remaining chapters. Unlike most textbooks on the subject, it also gives paralegals an introduction to what their duties would be in a wills, trusts, and estates firm and a warning of the possible ethical issues they may face. The textbook is designed to take students through the steps needed to de velop the required skills, without overwhelming them during the process. Part 1 of the textbook introduces students to the legal concepts associated with the law of wills, trusts, and estates. It does so by using real-world examples and direct, clear language. Part 2 provides students with the skills needed to do some common tasks that they will be asked to perform, including gather information needed for estate planning and the drafting of key documents associated with the creation of an estate plan. Part 3 walks students through the probate and estate administration process. Students are given a step-by-step account of the probate process. Part 3 also provides basic information on tax matters that relate to the probate process.

TEXT DESIGN

Chapters are laid out in a manner that ensures that students will have the opportunity to learn the appropriate legal concepts, the necessar y vocabulary, develop their legal reasoning skills, and demonstrate their knowledge of the material. Each chapter contains the following:

• Case Fact Pattern: Client Interview . Students are given a simple fact pattern that will be referred to within the chapter.

• Case in Point. Students are provided with at least one full-length case opinion that they are asked to brief.

Preface

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• Research This: Hands-on Assignment . Students are given an assignment designed to help develop their research and writing skills.

• Ethics Alert. Students are presented with ethic issues related to the topic covered by the chapter.

• Cyber Trip . Students are given the opportunity to take at least one Cyber Trip that allows them to explore the Web to learn more about the law relating to the chapter’s topics.

• Real World Discussion Topics . Students are presented with a fact pattern taken from an actual court case to help them develop their analytical skills.

• Portfolio Assignment . Students are given assignments that require them to analyze a fact pattern and draft documents associated with material covered in the chapter.

This textbook provides students the oppor tunity to lear n about the la w of wills, tr usts, and estates and develop the skill sets they will need to succeed in the legal field. Hopefully, they will agree that the goals of the book have been met.

viii Preface

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Acknowledgments

I w ant to thank Beth Baugh, De velopmental Editor at Carlisle Pub lishing Ser vices; Tammy L. Higham, De velopmental Editor; and Natalie Ruf fatto, Sponsoring Editor, Business Careers McGraw-Hill/Irwin, for all of their hard work during the development of this textbook. Their support and encouragement was greatly appreciated. I would like to especiall y thank m y wife, Cath y, for the hours she spent proofreading the numerous drafts of this textbook and the uneasy task of putting up with my many moods during the writing process. Finally, special thanks needs to be gi ven to the reviewers who provided invaluable feedback during the steps to completion of the final draft:

Kevin DerrPennsylvania College of Technology

Sharron DillonBranford Hall Career Institute

Linda Wilke HeilCentral Community College

Sheila HuberUniversity of Washington

Terri LindforsMinnesota School of Business

Angela MasciulliMTI College

Diana MurphyMorehead State University

Kemberly MurphySanford-Brown College

Kathleen ReedUniversity of Toledo

Charles R. SplawnHorry-Georgetown Technical College

B. Arthur SwerineKeller Graduate School of Management/DeVry University

Wendy VonnegutMethodist College

Debra WicksPittsburgh Technical Institute

George Kent

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A Guided Tour

Wills, Trusts, and Estates for Paralegals presents students with hands-on assignments to help develop their legal reasoning skills and demonstrate their knowledge of the material without overwhelming the student in the process. The text provides students with the opportunity to learn about the law of wills, trusts, and estates and develop the skill sets they need to succeed in the legal field. The pedagogy of the book applies three goals:

• Learning outcomes (critical thinking, vocabulary building, skill development, issues analysis, writing practices).

• Relevance of topics without sacrificing theory (ethical challenges, current law practices, technology applications).

• Practical application (real-world exercises, portfolio creation, team exercises).

CLASSIFICATIONS OF PROPERTY

There are two broad categories of property: real and personal.

Real Property Real property is the land itself and any personal property affixed to the land such that it becomes part of the land, referred to as a fixture . Fixtures include items such as a built-in dishw asher. Trees are also fixtures. The identification of what is a fixture is important because they are trans-ferred with the property when it is sold or passes to the heirs of a deceased. Courts have developed a number of methods to deter mine if a piece of personal proper ty is, in fact, a f ixture or if it remains personal proper ty. Some courts look at the way the item was at-tached to the property—the more permanent the attachment, the more likely that the item will be

id d fi t Oth t l k t h th th l t t i d i

Client Interview Jamar and Cynthia Scott, a married couple, are owners of a fairly large piece of property that they plan to subdivide and sell for residential development. They have done similar developments in the past, so they are knowledgeable business people. This development, however, presents an unusual problem. The subdivision is located across the street from the Atlantic Ocean. They own a 10-foot piece of property that runs from the street to the beach. With public beach access becoming increasingly

scarce in the area, they thought that granting rights to use the land to the lot owners of the subdivision would be a great incentive to prospective buyers. They do not want to retain ownership in the property and want to avoid the hassles associated with the creation of a homeowners as-sociation. They have come to your firm to help them bet-ter understand what options might be available to transfer ownership of the strip of land to future lot owners of their subdivision.

Case Fact Pattern

homeowners associationAn organization made up of homeowners in a particular development that has the following primary duties: enforcing the association’s rules and regulations and maintain-ing the community’s com-mon property and facilities for use by all homeowners

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Case Fact Pattern: Client Interview gives students a simple, hypothetical fact pattern that references material covered in the chapter.

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Chapter Objectives introduce the concepts students should understand after reading each chapter as well as provide brief summaries describing the material to be covered.

Chapter 1

An Introduction to the Law of Wills, Trusts, and Estates CHAPTER OBJECTIVES

After reading this chapter and completing the assignments, you should be able to:

• Understand how the law of wills, trusts, and estates interrelates to other areas of the law.

• Understand the duties paralegals are often called upon to perform in a firm that deals with wills, trusts, and estates.

• Identify potential ethical issues that might be faced in the law office.

• Understand some of the unique challenges associated with the terminology used in wills, trusts, and estates.

estate


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• Transfer on death. In states that have adopted the Uniform Transfers on Death Security Regis tration Act (UTODSRA), owners of stocks, bonds, mutual fund shares, security accounts, and other accounts can register the title in transfer on death (TOD) form. The securities pass directly to the named beneficiary when the owner dies and are not part of the deceased’s probate estate. The following states have adopted the UTODSRA: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming.

Probate Estate versus Gross Estate

transfer on deathA form of ownership in which stocks, bonds, mutual fund shares, security ac-counts, and other securities pass directly to the named beneficiary upon the owner’s death

Understanding what is and is not probate prop-erty is critical in helping a client with estate planning. Making that determination, however, can be complicated. Paralegals must rely on the

expertise and decisions made by their supervis-ing attorney in this important process. When in doubt, paralegals should always consult with their supervising attorney.

Ethics Alert


Ethics Alert presents ethical issues related to the chapter topics and offers tips for handling situations on the job.

and wife w ere killed in a car accident. The vast majority of states ha ve passed the Unifor m Simultaneous Death Act, which was incorporated into the Uniform Probate Code Article II and the Uniform Act on Intestacy, Wills and Donative Transfers in 1991. The original act provided that when passage of property depends upon priority of death, and there is no sufficient evidence that the persons have died otherwise than simultaneously, the property of each person would be disposed of as if he had sur vived. Most states now provide that the death does not ha ve to be si-multaneous, allowing that, if an heir fails to survive the decedent who dies intestate by 120 hours, the heir does not take under intestate succession.

simultaneous death When it cannot be estab-lished that one person died before another.

Visit these sites to learn more about the topics discussed in Chapter 4:

Nebraska Cooperative Extension NF96-291: http://ianrpubs.unl.edu/homemgt/nf291.htm

CCH Financial Planning Toolkit, “Dying Without a Will”: www.finance.cch.com/text/c50s10d190.asp

Gerry W. Beyer (2005). “The Basics of Texas Intestate Succession Law”: www.professorbeyer.com/Articles/Intestacy_Texas_Basics.htm

“Property Law” (2006). Encyclopædia Britannica . Retrieved January 7, 2006, from Encyclopædia Britan-nica Premium Service: www.britannica.com/eb/article-28569

“Estate and Inheritance Law” (2006) Britannica Student Encyclopedia Retrieved January 7 2006 from

CYBER TRIP

Hands-on Assignment Prepare a degree of kindred chart based on your family. How would

RESEARCH THIS!

your property be distributed if you died without a will under your state’s intestate statute?

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Research This!: Hands-on Assignment engages students to research cases in their jurisdiction that answer a hypothetical scenario, reinforcing the critical skills of independent research and writing.

HOMESTEAD ALLOWANCE

Some states pro vide for a cash amount for the sur viving spouse and dependent children of the deceased. This is called a homestead allo wance and is sometimes used b y states instead of a homestead e xemption. It is e xempt from and has priority o ver all claims ag ainst the estate. Figure 3.13 contains the Montana Homestead Allowance Statute.


Prof. Kurtz, “Trusts & Estates—Spring 2001,” University of Iowa (2001): http://stu.findlaw.com/outlines/submissions/labrea000007.html Naim D. Bulbulia and Jonathan W. Wolfe, “Dying to Get a Divorce?” (2005): www.abanet.org/genpractice/newsletter/lawtrends/0509/family/dyingtodivorce.html Amy Morris Hess, “Surviving Spouse’s Elective Share: Where We’ve Been; Where We’re Going” (accessed 12/15/05): www.aals.org/profdev/family/hess.html “Special Property Rules for Married People” (accessed 12/15/05): http://estate.findlaw.com/articles/2155.html

CYBER TRIP

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Cyber Trip asks the students to engage in a hands-on activity by exploring the Web to learn more about the law relating to the topics in the chapter.

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thrift a large amount of cash would probably be a mistake. A spendthrift trust protects the trust principal from the creditors of the benef iciary. The beneficiary only has the right to the income paid under the trust and cannot assign her rights to unear ned income or the tr ust principal. See Figure 5.5 for a sample spendthrift clause. A sprinkling trust can be used to give flexibility and discretion to the trustee to meet the needs of each individual benef iciary. Under the sprinkling tr ust the trustee can distribute the tr ust in-come and/or principal to the beneficiaries he deems appropriate. This could be based on any num-ber of factors, such as the need of a particular beneficiary or to minimize the tax consequences of the distribution. While this trust has some benefits, care should be exercised when deciding to use it because of the tremendous discretion that is g ranted to the trustee and the possible disharmony that may occur among the beneficiaries because of the way the distributions are made. A pour-over trust is created by the settlor during her lifetime. The trust receives funding after the death of the settlor. This is accomplished by the inclusion of a clause in her will that lea ves the residuary of her estate to the trustee of an already existing living trust. A pet trust is established by a pet owner who is concerned about the care of his pets after his death. The settlor funds a trust with enough money to care for the pets for the remainder of their lives. After the settlor’s death, the trustee pays for the caretaking of the pets. States that allow for the establishment of pet trusts include Arizona, California, Colorado, Hawaii, Missouri, Montana, New Mexico, New York, Nevada, Nor th Carolina, Ore gon, Tennessee, Utah, and Wisconsin. Figure 5.6 contains the Montana Trust for Pets Statute.

GIFTS

sprinkling trustA trust that grants flex-ibility and discretion to the trustee to meet the needs of each individual beneficiary.

pour-over trustA clause in a will that leaves the residuary of an estate to the trustee of an existing trust.

pet trustA trust established to care for a settlor’s pet after the settlor’s death.




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Review Questions

1. Review the sample will from Figure 7.3 and identify its clauses by name, for example, exordium clause.

2. Where should the original will be stored? Where should it not be stored? 3. List the names of the more common clauses contained in wills. Describe their purposes. 4. Describe how a will should be executed. 5. What is a letter of instruction? What is its purpose? 6. What are the problems related to the use of standard form (sample) clauses in a will? What

should the paralegal do to avoid these potential problems? 7. What factors should be considered by a testator when selecting the personal representative

for his/her will? 8. What should a paralegal do if a client asks him or her to interpret a clause in a will? 9. What is a separate writing clause? Why should it be included in wills? 10. What is a self-proof clause? Why should it be included in wills in those states that allow its

usage?


8. What is the difference between legal title and equitable title? 9. What is the meaning of the phrase trust purpose ? Why is it important when drafting a trust? 10. Discuss the differences between private trusts and charitable trusts.

Real World Discussion Topic

Will C. Taliaferro created a personal revocable inter vivos trust. He was also the income benef i-ciary of this trust during his lifetime. After his death, the successor tr ustee was to distribute the accrued income and cor pus among the benef iciaries. Taliaferro never transferred any property to the trust. Was this a valid trust? Why? Why not? Is additional infor mation needed to deter mine the validity of the trust? See Taliaferro v. Taliaferro , 260 Kan. 573, 921 P.2d 803 (1996).


Summary There are man y tools a vailable that can be used to assist clients in planning their estates. Some, like wills and life insurance, are well known and fairly easy to understand. Others, like the vast array of trusts that can be used in estate planning, are more difficult to understand at first. Clients use estate planning for many reasons. It can be to provide for their loved ones, provide for a charity they wish to suppor t, provide for the care of their pets, or a void state and federal estate taxes. The paralegal must be familiar with the various ways a client’s goals can be met and use the appropriate tool to accomplish those goals.

Key Terms AB trust Annual exclusion Appointee Beneficiary

Bypass trust Charitable remainder trust Charitable trust Credit shelter trust


Chapter Summary provides a quick review of the key concepts presented in the chapter.

Key Terms used throughout the chapters are defined in the margin and provided as a list at the end of each chapter. A common set of definitions is used consistently across the McGraw-Hill paralegal titles.

Review Questions ask students to apply critical thinking skills to the concepts learned in each chapter by reviewing the objectives of the chapter.

Real World Discussion Topics present students with a fact pattern taken from an actual court case and ask students to use analytical skills in discussing the topics covered.

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emergency telephone number. After an initial administration of treatment by the responding emer-gency crew, she was transported to the hospital. The hospital performed emergency surgery and respiratory ventilation. The sister allegedly presented a living will signed by Haymes to hospital personnel and demanded that Ha ymes be removed from the v entilator. The hospital personnel refused. Haymes remained on the ventilator for six more days and did recover except that she was totally blind as a result of her self-inflicted wounds. Should the hospital have respected the living will? Does Haymes have a basis to sue the hospital for its refusal to remove her from the respirator? Would it matter if the living will did not comply with statutory requirements? See Haymes v. Brookdale Hosp. Medical Center , 287 A.D.2d 486, 731 N.Y.S.2d 215 (N.Y.A.D. 2 Dept., 2001).

1. Review the facts of the Client Interview. Did Joe do anything wrong in trying to ensure that Florence’s desires were followed? Did the hospital do anything wrong? What basis could Joe have to sue the hospital? Research the laws of your state to determine what Joe needs to do next. For an interesting case on this point, see Allore v. Flower Hosp., 121 Ohio App.3d 229, 699 N.E.2d 560 (Ohio App. 6 Dist. 1997)

2. Locate a living will that can be used in your state. Complete the instrument using facts from your own life or for the life of a hypothetical person.

Portfolio Assignments

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CASE IN POINT

DETERMINING TESTATOR’S INTENT WHEN WILL CONTAINS TWO IRRECONCILABLE CLAUSES.

In the District Court of Appeal of the State of FloridaFourth District

Jureskiv.

ScadutoFiled August 25, 2004

STONE, J. Larry Jureski, as personal representative, filed a petition to construe a will. A residuary beneficiary opposed the petition, contending that the will contained two irreconcilable clauses. The trial court, in construing the self-drafted will of the testa-tor, agreed with the residuary beneficiary and concluded that the two dispository paragraphs in the will conflicted. As the conflict could not be otherwise resolved, the trial court, ap-plying settled law, determined that the latter provision must prevail over the former, as the last statement of the testator’s intent. We affirm.

The applicable provisions of the will are:

Callahan were entitled to all the property, both real and personal, pursuant to clause 11 of the will. Alternatively, Jureski suggested that both he and Callahan were at least entitled to all the testa-tor’s real property. Elizabeth Scaduto, residuary beneficiary, argued that clauses 11 and 12 directly conflicted, making it impossible to determine the testator’s testamentary intent. Further, Scaduto as-serted that, by accepting Jureski’s contention that he and Callahan should receive all the property in the estate, real and personal, the court would essentially void the operation of the residuary clause and fail to carry out the testator’s testamentary intent. We note that none of the parties are a spouse or child of the decedent We further note that neither party seeks a further evi

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Vocabulary Builders

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Portfolio Assignment exercises give students the opportunity to analyze a fact pattern and draft documents associated with material covered in the chapter.

Case in Point presents real cases, connecting students to real-world examples and documents that further develop the information presented in the chapter. Case Brief Assignments can also be found throughout the chapters, asking students to read and brief assigned cases.

Crossword puzzles at the end of each chapter utilize the key terms and definitions so students can become more familiar with legal vocabulary by using it.

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Supplements

Instructor’s Resource CD-ROM An Instructor’s Resource CD-ROM (IRCD) will be available for instructors. This CD provides a number of instructional tools, including PowerPoint presentations for each chapter in the text, an instructor’s manual, and an electronic test bank. The instructor’s manual assists with the creation and implementation of the course by supplying lecture notes, answers to all exercises, page references, additional discussion questions and class activities, a key to using the PowerPoint presentations, detailed lesson plans, instructor support features, and grading rubrics for assignments. A unique feature, an instructor matrix, also is included that links learning objectives with activities, grading rubrics, and classroom equipment needs. The activities consist of individual and group exercises, research projects, and scenarios with forms to fill out. The electronic test bank will offer a variety of multiple choice, fill-in-the-blank, true/false, and essay questions, with varying levels of difficulty, and page references.

Online Learning Center The Online Learning Center (OLC) is a Web site that follows the text chapter-by-chapter. OLC content is ancillary and supplementary and is germane to the textbook—as students read the book, they can go online to review material or link to relevant Web sites. Students and instructors can access the Web sites for each of the McGraw-Hill paralegal texts from the main page of the Paralegal Super Site. Each OLC has a similar organization. An Information Center features an overview of the text, background on the author, and the Preface and Table of Contents from the book. Instructors can access the instructor’s manual and PowerPoint presentations from the IRCD. Students see the Key Terms list from the text as flashcards, as well as additional quizzes and exercises. The OLC can be delivered in multiple ways— professors and students can access the site directly through the textbook Web site, through PageOut, or within a course management system (i.e., WebCT, Blackboard, TopClass, or eCollege.)

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FPO

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PageOut: McGraw-Hill’s Course Management System PageOut is McGraw-Hill’s unique point-and-click course Web site tool, enabling you to create a full-featured, professional-quality course Web site without knowing HTML coding. With PageOut, you can post your syllabus online, assign McGraw-Hill Online Learning Center or eBook content, add links to important off-site resources, and maintain student results in the online grade book. You can send class announcements, copy your course site to share with colleagues, and upload original files. PageOut is free for every McGraw-Hill/Irwin user and, if you’re short on time, we even have a team ready to help you create your site! To learn more, please visit www.pageout.net.

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xvi

Brief Contents

PART ONE An Overview 1 1 An Introduction to the Law of Wills, Trusts,

and Estates 2 2 Ownership of Property 22 3 Testate versus Intestate 38 4 Intestate Succession 66

PART TWO Planning 82 5 Estate Planning Tools and Tax

Considerations 83 6 The Importance of Having a Will 112 7 Drafting and Executing Wills 128 8 Trusts 152 9 Final Decisions 170

PART THREE Probate and Administration 191 10 Probate 192 11 Tax Matters Associated with Probating an

Estate 220

APPENDIXESA Guide to Locating Legal Information on the

Web and Briefing Cases 252 B Last Will and Testament of

Joe DiMaggio 258

GLOSSARY 269

INDEX 276

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Table of Contents

PART ONE AN OVERVIEW 1

Chapter 1 An Introduction to the Law of Wills, Trusts, and Estates 2 Why “An Introduction to the Law of Will, Trusts, and Estates” Is Important to the Paralegal Student 3 Introduction to Terminology Used in Wills, Trusts, and Estates 3 Other Areas of the Law That Affect Wills, Trusts, and Estates 5

Family Law 5 Elder Law 5 Contract Law 6 Research and Writing 6 Tort Law 7 Criminal Law 7 Tax Law 7 Civil Litigation 7 Ethics 7 Business Entities 7 Real Property Law 8

The Role of the Paralegal in the Wills, Trusts, and Estates Law Firm 8 Ethical Problems Presented in the Wills, Trusts, and Estates Law Firm 11

Unlicensed Practice of Law 12 Undue Influence 12 Breach of Confidentiality 13 Conflict of Interest 13 Falsely Attesting to an Affidavit, Such as When a Paralegal Is a Notary 16 Improper Handling of Client Funds and Assets 16

Chapter 2 Ownership of Property 22 Why “Ownership of Property” Is Important to the Paralegal Student 22 Classifications of Property 23

Real Property 23 Personal Property 24

Probate Property versus Nonprobate Property 24 Probate Property 24 Nonprobate Property 25 Probate Estate versus Gross Estate 26

How Property Is Owned 26 Ownership in Severally 26 Tenants in Common 27 Joint Tenants with Right of Survivorship 28 Tenants by the Entirety 28 Community Property 29

Other Matters Related to Ownership 31 Trusts 31 Implied Trusts 32 Living Trusts 32 Testamentary Trust 32

Chapter 3 Testate versus Intestate 38 Why “Testate versus Intestate” Is Important to the Paralegal Student 38 Testate Succession 38 Types of Wills 39 Intestate Succession and Its Relationship to Wills, Trusts, and Estates 49 Other Factors Affecting Passage of Decedent’s Property 51

Community Property 51 Homicide and Other Wrongdoing 51

Children and the Law of Wills and Intestate Succession 53

Escheat 55 Homestead Exemption 57

Other Exempt Property 57 Family Allowance 60 Homestead Allowance 61

Chapter 4 Intestate Succession 66 Why “Intestate Succession” Is Important to the Paralegal Student 67 Intestate Succession 67

Other Possible Heirs 68 Kindred 75 Applying the Law of Intestate Succession 76 Per Stirpes versus Per Capita 77

Simultaneous Death 77

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PART TWO PLANNING 82

Chapter 5 Estate Planning Tools and Tax Considerations 83 Why “Estate Planning Tools and Tax Considerations” Is Important to the Paralegal Student 83 Estate Planning 84 Life Insurance 85

Whole Life 85 Universal Life 85 Term Life 85

Wills 86 Trusts 86 Specialized Trusts 89 Gifts 96

Status of Estate Tax 98 Estate Tax and Estate Planning 98

Postmortem Planning 104 Which Tool Is the Best to Use? 104 Other Professionals Used in Estate Planning 107

Chapter 6 The Importance of Having a Will 112 Why “The Importance of Having a Will” Is Important to the Paralegal Student 112 Basic Requirements for Executing a Will 113 Reasons for Not Having a Will 113 The Reasons for Having a Will 116 Ways Property Can Be Conveyed in a Will 118 When Gifts May Not Pass as Set Out in the Will 119 How Wills Are Changed or Revoked 123 Importance of Keeping Wills Up to Date 124

Chapter 7 Drafting and Executing Wills 128 Why “Drafting and Executing Wills” Is Important to the Paralegal Student 128 Getting Started 128 Use of Checklists 129 Requirements for a Valid Will 132 Drafting the Will 133 Will Clauses 133

Exordium Clause 133 Revocation Clause 135 Funeral Direction Clause 135 Organ Donation Clause 135 Payment of Debts Clause 136 Dispositive Provisions (Specific Legacies, Specific Devises, Residuary Clauses) 136 Simultaneous Death Clause 136 Appointment of Fiduciaries Clause, Including Personal Representative, Guardian, and Trustee 137 No Bond Required Clause 138

Powers of Personal Representative Clause 138 No Contest Clause 139 Separate Writing Clause 139 Testimonium Clause 141 Attestation Clause 141 Self-Proof Clause 141 Other Common Clauses 141

Reviewing the Final Draft with the Client 143 Execution of Will 143 Where Should the Will Be Stored? 146 Letter of Instruction 146

Chapter 8 Trusts 152 Why “ Trusts” Is Important to the Paralegal Student 152 Use of Checklists 153 Who Needs a Trust? 153 Trusts—The Basics 155 The Participants in the Trust Arrangement 157

Settlor 157 Trustee 157 Beneficiary 158

Requirements for a Valid Trust 158 Trust Instrument 158 Drafting a Trust 163 Rule against Perpetuities 165 Termination of Trusts 167

Chapter 9 Final Decisions 170 Why “Final Decisions ” Is important to the Paralegal Student 170 Advance Directives 171 Living Wills 176 Designation of Health Care Surrogate (Proxy) 181 Durable Power of Attorney 181 Do Not Resuscitate Orders 184 Anatomical Gifts 185 Advance Funeral Arrangements 187

PART THREE PROBATE AND ADMINISTRATION 191

Chapter 10 Probate 192 Why “Probate ” Is Important to the Paralegal Student 192 What Is Probate? 193 Purposes of Probate 193 Jurisdiction and Venue 194 Formal Probate versus Informal Probate 194 The Procedure 194

Step 1—Death 200 Step 2—Hiring Legal Counsel 201 Step 3—Petition for Probate 201

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Step 4—Notice 203 Step 5—Hearing 203 Step 6—Notice to Creditors 204 Step 7—Inventory 209 Step 8—Payment of Debts and Taxes 209 Step 9—Final Accounting and Petition for Discharge 210 Step 10—Discharge 212

Compensation of Personal Representative and Attorney 212 Informal Probate 213 Ancillary Administration 214 Will Contests 214

Chapter 11 Tax Matters Associated with Probating an Estate 220 Why “Tax Matters Associated with Probating an Estate” Is Important to the Paralegal Student 220 The Role of Taxes in the Probate Process 221 Status of Estate Tax 224 Forms, Forms, and More Forms! Federal Tax Forms 224

IRS Form 56—Notice Concerning Fiduciary Relationship 225

IRS Form SS-4—Application for Employer Identification Number 225 IRS Form 1040—U.S. Individual Income Tax Return 229 IRS Form 1041—U.S. Income Tax Return for Estates and Trusts 229 IRS Form 706—Federal Estate (and Generation-Skipping) Tax Return 229

Even More Forms! State Tax Forms 243 Taxable Estate 243 Other Professionals Involved in Tax Matters 247

Appendix A Guide to Locating Legal Information on the Web and Briefing Cases 252

Appendix B Last Will and Testament of Joe DiMaggio 258

Glossary 269

Index 276

Table of Contents xix

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Part One

1

An Overview CHAPTER 1 An Introduction to the Law of Wills, Trusts,

and Estates

CHAPTER 2 Ownership of Property

CHAPTER 3 Testate versus Intestate

CHAPTER 4 Intestate Succession

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Chapter 1

2

An Introduction to the Law of Wills, Trusts, and Estates CHAPTER OBJECTIVES


• Understand how the law of wills, trusts, and estates interrelates to other areas of the law.

• Understand the duties paralegals are often called upon to perform in a firm that deals with wills, trusts, and estates.

• Identify potential ethical issues that might be faced in the law office.

• Understand some of the unique challenges associated with the terminology used in wills, trusts, and estates.

Wills, trusts, and estates law—the very name has a rather formal and pretentious sound to it. Rather dull when compared to the lik es of criminal law or civil litigation. After all, when is the last time they made a television show or movie about an estate attor ney? It is cer tainly an area of la w that most paralegal students usually have low on their list of courses they are looking forward to taking. Surprisingly, however, students really enjoy the study of this area of the la w once they start the course. Why? Because it involves some of the most impor tant things in everyone’s lives. It impacts our loved ones and friends. It in volves our proper ty and how we maximize our assets, both while we are alive and after our death. It even may involve charitable institutions that have a special meaning in our li ves. It could be the American Cancer Society, a university that the student graduated from, or the student’s church. The reality is that wills, tr usts, and estates law is one of the most interesting areas of the la w for students to study because it presents countless real-world applications to which everyone can relate. Maybe a student’s uncle died without a will and the student saw the problems that created for his f amily. Or, maybe it was the arguments within a student’s own family when granddad passed away without a will, leaving her family to argue about who granddad wanted to have what property. As paralegal students read the chapters in this textbook they will see examples of what happens when people, even those who have little in the w ay of material things, f ail to plan for their future. Chapter 1 introduces the student to some of the ter minology used in wills, tr usts, and es-tates; reviews its inter relationship with other areas of the la w; explains some of the duties that a paralegal working in a wills, trusts, and estates f irm will be called upon to complete; and dis-cusses some of the ethical issues a paralegal might face when working in this field.

estate Assets and liabilities of decedent at the time of his or her death.

probate The court process of determining will validity, settling estate debts, and distributing assets.

codicil A provision that amends or modifies an existing will.

will A document representing the formal declaration of a person’s wishes for the manner and distribution of his or her property upon death.

decedent The deceased.

domicile The place where a person maintains a physical residence with the intent to permanently remain in that place; citizenship; the per-manent home of the party.


Chapter 1 An Introduction to the Law of Wills, Trusts, and Estates 3

WHY “AN INTRODUCTION TO THE LAW OF WILLS, TRUSTS, AND ESTATES” IS IMPORTANT TO THE PARALEGAL STUDENT

The law of wills, trusts, and estates often intimidates paralegal students. This is due to a lot of different factors. There are many new words to learn, some of which still use Latin and French phrases that are difficult to spell and pronounce. It is a reminder that the language of the la w is often one of the hardest barriers for paralegal students to overcome in their study of the law. There are also many statutes, court rules of procedure, and cases that can seem o verwhelming at first. Chapter 1 is intended to give a basic understanding of some of the key concepts and terms that will be covered in this textbook in an attempt to show that the law of wills, trusts, and estates is far more accessible than it might f irst appear. This will include a discussion of some of the k ey legal principles involved with this area of the law, an introduction to its key terminology, the role played by the paralegal, and also words of caution relating to the ethical issues that may be faced by a paralegal working in a wills, trusts, and estates firm.

INTRODUCTION TO TERMINOLOGY USED IN WILLS, TRUSTS, AND ESTATES

It is often said that the study of the la w is like learning a foreign language. There is no question that the law uses a complex array of words. In fact, Latin terms are still in use despite efforts to simplify legal terminology. The words used in the title to this book are a good place to star t to learn more about the terminology used in this field. A will is a written declaration of the intended distribution of proper ty upon a person’s death. While it is one of the most important documents that a person will ever execute, the actual formal-ities required are few and are set out by the laws of the state in which the decedent is domiciled . A trust is one of the man y methods used to help clients pro vide for their loved ones or, in some case, charities. It is a process by which ownership is split into legal and equitable title. The settlor (the person who is creating the tr ust) transfers the legal title to the trustee. The trustee holds the property for the beneficiary , who owns the equitable title . An estate is the proper ty a decedent had either prior to the distribution to a tr ust or owned at the time of his death. As with most areas of the law, a wide range of terms and phrases are used in wills, trusts, and estates law. It also adds a level of complexity that is somewhat unique. There is still a great divide between the states on what terminology to use. Traditional terms related to wills, trusts, and es-tates are used in many states. Other states have made an attempt to simplify the terminology that is used in this area of the law by adopting the Uniform Probate Code . The Uniform Probate Code (UPC) is one of the numerous proposed statutes drafted b y the National Conference of Commissioners on Unifor m State Laws (NCCUSL). The NCCUSL is made up of commissioners w ho are lawyer-legislators, attorneys in private practice, state and

Client Interview Cathy Wilson was named as the per-sonal representative of her late aunt’s estate . After check-ing on the qualifications of a number of attorneys in her area, Cathy selected Irvin Comfort, who specialized in estate matters and probate , to serve as the attorney for the es-tate. Mr. Comfort had previously assisted in adding a codicil to her aunt’s will a few months before her death. After a brief introductory meeting with Mr. Comfort, in which he welcomed her as a client and had her sign the employment

contract, Mr. Comfort introduced Cathy to Jane Jones, his paralegal. Cathy followed Jane to her office. Jane let Cathy know that she had been Mr. Comfort’s secretary for almost 20 years and assured her that she was very familiar with the procedures and laws that would be involved in the probate of her aunt’s estate. In fact, she would be the one to prepare all of the documents that would be filed in this case. Cathy was told to call Jane anytime she had a question.

Case Fact Pattern

trust A process by which owner-ship is split into legal and equitable title. The trustee of the trust has the legal title to the property of the trust but holds it for the beneficiary, who owns the equitable title.

settlor The person who creates a trust. Also know as trustor.

legal title A title that indicates legal ownership but not neces-sarily a beneficial interest.

trustee The person who oversees the assets of a trust.

beneficiary The person named in a will to receive the testator’s assets.

equitable title A title that shows a benefi-cial interest in property.

Uniform Probate Code A uniform law intended to modernize the laws relat-ing to decedents’ estates and trusts.

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4 Part One An Overview

federal judges, law professors, and legislative staff attorneys. The NCCUSL promotes uniformity in state laws in areas such as probate la w. Uniform laws do not actually become law until they are adopted by the state. Each state can adopt all or part of the version proposed by the NCCUSL and can also change the proposed statute. Visit NCCUSL’s Web site ( www.nccusl.org ) for more information on uniform laws. Traditionally, wills, trusts, and estates law terminology has included distinctions based on the sex of the person, whether real property or personal property is involved, and whether a person dies with a will ( testate ) or without a will ( intestate ). The phrase last will and testament is an example of how terminology was based on the type of property that was being disposed of in a will. Almost all of us have heard that phrase. Tradi-tionally a will was an instrument that disposed of real proper ty and a testament w as an instru-ment that disposed of personal proper ty. The law no longer makes such a distinction. Today, if you look up testament, you will probably find it defined as a will. In many states there are words that still retain their connection to w hether an item being re-ferred to is personal proper ty or real proper ty. These states are those that ha ve not adopted the Uniform Probate Code. For example, a devise is a gift of real property in a will. A legacy is a gift of personal property in a will. In states that have adopted the UPC, a devise is a gift of either real or personal property. Terminology is often based on the se x of the person who is being refer red to. The reason for this is largely historical and relates to dif fering rights women and men had in the le gal system. Today those distinctions have been removed, but some of the ter minology remains. A good ex-ample of this are the ter ms testator and testatrix . Testator traditionally referred to a man w ho makes a will, but now generally is used to refer to either a man or a w oman who makes a will. Testatrix refers to a woman who makes a will. In general, words ending in “or” refer to a man. Those that end with “ix” refer to a woman. Terminology may also vary based on whether the deceased died testate or intestate. For exam-ple, in states that have adopted the UPC, the term personal representative is used when referring to anyone who is authorized to administer an estate, while in states using traditional terminology, the person appointed by a court to administer an estate without a will is called an administrator or administratrix and a person named in the deceased’s will to be a personal representati ve is referred to as an executor or executrix .

CYBERTRIP

To view the com-plete text of the Uniform Probate code visit: http://www.law.upenn.edu/bll/ulc/upc/final2005.htm

testate The state of having died with a valid will.

intestate The state of having died without a will.

last will and testament The phrase tradition-ally used as the written declaration of intended distribution of both real and personal property upon a person’s death.

devise A disposition of real property by will.

FIGURE 1.1 UPC versus Tradi-tional Terminology

UPC Traditional

Person appointed in a Personal representative Executor if manwill to administer an Executrix if womanestate

Person appointed by Personal representative Administrator if a mancourt to administer an Administratrix if aestate with no will woman

Gift of money by will Devise Legacy

Gift of personal Devise Bequest property by will

Gift of real property Devise Deviseby will

Person who receives a Devisee Legateegift of money by will

Person who receives a gift of personal property Devisee Beneficiaryby will

Person who receives a Devisee Devisee gift of real property by will

Person entitled to receive Heir Heir/heir at lawreal property under intestate succession



Figure 1.1 compares the terminology used by the UPC with traditional terminology. Figure 1.2 provides a list of the states that have adopted the UPC. Additional terminology will be introduced in subsequent chapters of this textbook. Paralegals must also make sure that they are familiar with the terminology that is used in their state as par t of their preparation for working in the legal field.

OTHER AREAS OF THE LAW THAT AFFECT WILLS, TRUSTS, AND ESTATES

The way law is studied makes it difficult for the student to fully understand how each area of the law interrelates with other areas of the law. Whether students are in law school or studying to be a parale gal, they take courses in specif ic areas of the la w. This creates the impression that the law is divided up into nice, neat categories. While there really is no other way to study the law because of its comple xity, it is impor tant to keep in mind that these areas of the la w are all interrelated. All areas of the law share common legal principles because they all share a common history. Wills, trusts, and estates law is a perfect example of how interrelated the law really is. Areas of the law impacted by wills, trusts, and estates are as follows.

Family Law Families have always been concerned about planning for the future. Traditionally, this has meant drafting a will to pro vide for their lo ved ones after death and the purchase of a life insurance policy. That is still true for many people today. However, the traditional f amily has changed dramatically in recent years. Divorce is one of the main reasons for this change. Few families have been left untouched by divorce and exposure to the challenges of blended families . Stepchildren, half brothers or sisters, and e x-spouses are common members of our society’s increasingly complex relationships. It is estimated that one-third of all children will live in a blended family before they reach the age of 18. Wills, tr usts, and estates ha ve become increasingl y impor tant to more and more people, whether rich, middle class, or poor, to help them plan for their future and their lo ved ones. Fail-ure to plan may result in situations that are contrar y to the decedent’s desires. For example, if the decedent’s family included stepchildren for which she desired to provide for after her death, failure to include those desires in her will would result in the stepchildren receiving nothing from her estate under the laws of most states. A will is a way to make sure that the decedent’s desires are carried out.

Elder Law This is a relatively new area of the law. Traditionally the law merely treated the elderly as it did all people, without any recognition of the special needs of the elderly. That has changed. People are living longer, and with an increasingly older population there has been an increased need for laws relating to the elderl y. Many of those changes ha ve impacted the law of wills, tr usts, and estates. Living wills , organ donations, health care proxies , and other advance directives are examples of documents that are no w increasingly important as the bab y boomer generation is aging. Paralegals are often called upon to draft many of these documents if they work in a wills, trusts, and estates law firm.

testator/testatrix The person who writes a will.

administrator A male personal repre-sentative appointed by the court to administer the estate when there is no will.

administratrix A female personal representative appointed by the court to administer the estate when there is no will.

executor A male administrator of the estate.

executrix A female administrator of the estate.

blended family A family made up of one or more parents having been previously married and having children of that previous marriage. Sometimes referred to as a stepfamily.

living will A document that expresses a person’s wish to be allowed to die without being kept alive by artificial means. It is not a will, but rather an expression of a person’s desires.

organ donation Donation of organs or tis-sues to another person.

FIGURE 1.2 States That Have Adopted the Uniform Probate Code

The following states have adopted some version of the Uniform Probate Code. The UPC was initially created in 1969 and has been amended numerous times over the years. Many states have also adopted changes to the UPC.

Alaska Maine North Dakota Arizona Michigan South Carolina Colorado Minnesota South Dakota Florida Montana Utah Hawaii Nebraska Idaho New Mexico

legacy A gift made in a will. Traditionally referred to a gift of money made under a will.



Many firms that specialize in elder law also are called upon to assist clients in what is some-times referred to as Medicaid planning. A Google search of “Medicaid planning” results in a long list of Web sites providing information on the topic from law firms throughout the country. As our population ages, there is a g rowing concern over the need for long-ter m nursing home care and how the cost of that care will reduce the estate indi viduals will be able to leave to their loved ones upon their death. The goal of Medicaid planning is to assist the client in transfer ring assets in such a way that it allows the client to take advantage of Medicaid while preserving his assets for the benefit of his loved ones.

Contract Law Everyone comes into contact with contract la w on a re gular basis. Contracts are for med when a person is doing g rocery shopping or buying something at the mall. Contracts are involved with the purchase and use of cell phones. Acquiring and using credit cards involve contracts. In f act, the list of contracts that ma y be involved in the a verage person’s life is almost endless. The law of wills, tr usts, and estates is no e xception! While a will is usuall y not a contract, many contracts are involved relating to this area of the la w. Contracts with attor neys, apprais-ers, and other professionals will often be involved in the planning and administration of estates. There are contractual agreements between settlors and trustees. Prenuptial agreements , also called ante nuptial or premarital ag reements, are another great example of how interrelated the law really is. A prenuptial agreement is a contract that is entered into prior to mar riage. Marriage is a central topic in the study of f amily law. One aspect that is often included in many people’s prenuptial agreements is the elective share . Most states grant a surviving spouse the right to elect a percentage share of his or her deceased spouse’ s estate if they are unhappy with the provisions of the will. Needless to sa y, wills are a major topic in the study of wills, trusts, and estates law. So even a cursory review of the areas of law that impact a prenuptial agreement reveals at least three: contract law; family law; and wills, trusts, and estates law. Other areas of the law may also be involved!

Research and Writing While this may not technically be a separate area of the la w, it is usuall y a separate course taken by all paralegal students. Legal research and writing is more appropriatel y referred to as a skill. It is a skill that parale gals will use no matter w hat area of the law that they work in. Paralegals in a wills, tr usts, and estates law f irm will need to be ab le to locate, read, and understand statutes, r ules of cour t, case law, forms, and other documents in order to fulf ill their role in the law f irm. Using the prenuptial ag reement as an example, paralegals may be called upon to research what can and cannot be included in the ag reement under the laws of their state.

Hands-on Assignment Traditionally, prenuptial agreements have been used by individuals with substantial financial assets. The agreements al-low them to continue to control those assets after marriage and protect them from claims of their spouse in the event of a divorce. Today, be-cause of the increase in blended families, many people use prenuptial agreements as a way to protect their assets for the benefit of children from a previous marriage. Most states require that the parties disclose their financial assets prior to entering into a pre-

nuptial agreement. States differ, however, as to requiring disclosure in a prenuptial agreement that waives the right to an elective share upon the death of one of the spouses. Find the statute in your state that sets out the disclosure requirements for a prenuptial agreement that waives a spouse’s right to claim an elective share. Find a case in your state that interprets or ex-plains the statute and disclosure requirements for prenuptial agreements in which a spouse waives his or her right to claim an elective share.

RESEARCH THIS!

health care proxy A document that expresses the maker’s desires as to medical care in the event that he or she is unable to do so. Also referred to as a health care surrogate or durable medical power of attorney.

advance directives A term used to describe a variety of legal documents that allow people to ex-press their desires about end-of-life care ahead of time, including a living will, durable power of attorney, and health care proxy.

Medicaid A government program that provides medical and long-term care to those who cannot afford it and is funded by a partnership between the federal and state governments.

prenuptial agreement An agreement made by parties before marriage that controls certain aspects of the relationship, such as management and ownership of property.

elective share The statutory right of the surviving spouse to elect to take a share of the deceased spouse’s estate rather than taking what was provided for by the de-ceased spouse’s will. (Also called forced share .)



Tort Law A tort is a civil wrong, as compared to a criminal act, that does not include breach of contract. This is a very broad area of the law. In this day of lawyers advertising on TV and radio, in news-papers, and even on the sides of buses, most people are a ware of one part of tort law—personal injury law. Tort law’s scope is much wider and does impact the la w of wills, tr usts, and estates. Some torts that are often associated with this area of the law include undue influence and duress . So, how could tort law be involved with a prenuptial agreement? The prenuptial agreement’s va-lidity might be questioned if one of the parties’ signatures was obtained through undue influence.

Criminal Law The acts that constitute undue influence and duress also are criminal acts. Other criminal acts which can be involved in wills, tr usts, and estates, as well as elder law, include abuse, neglect, fraud, conversion, and a variety of other f inancial crimes. In fact, some sources indicate that f i-nancial abuse is one of the more common crimes committed against the elderly and these crimes are often committed by family members or other people trusted by the victim. [See, e.g., National Center on Elder Abuse, National Elder Abuse Incidence Study: Final Report (1998) and www.elderabusecenter.org .] Like tort law, undue influence is a crime that ma y impact not onl y the validity of the contract itself, but also whether criminal charges will be brought against the party who exerted undue influence to obtain the signature of the other person.

Tax Law Perhaps the most dislik ed three letters of the alphabet, at least w hen they are put together, are IRS. The importance of taxes in the law of wills, trusts, and estates cannot be overstated. As the old saying, often attributed to Ben Franklin, puts it: There is nothing certain but death and taxes! The truth of this statement will be clear as estate planning is dealt with in later chapters of this textbook. In fact, taxation, or the avoidance of taxation, is one of the prime reasons people con-sult attorneys and other financial professionals to assist them in estate planning.

Civil Litigation Civil litigation is the means for people to resolv e civil disputes through the use of the le gal sys-tem. Conflicts arise for a wide variety of reasons. One that is often associated with wills, tr usts, and estates involves will contests. A will contest arises when a person, who would otherwise have an interest in the decedent’s estate, feels that his interest was somehow improperly interfered with by another person. For example, Janet is a nurse’s aid who works in an assisted living facility for the elderly. Janet has a lot of contact with her patients, more contact than even the patients’ relatives have. One of her patients, John, suddenly changes his will just prior to his death to leave everything he owns to Janet. John’s only child, Nigel, feels that Janet exercised undue influence over him. Nigel could contest the will on this basis.

Ethics Like research and writing, ethics is involved in every area of the law. Paralegals and others work-ing in a firm that deals with the law of wills, trusts, and estates are confronted with many situations that can create ethical dilemmas. Attorneys and paralegals operate in a position of trust with their clients, and they must take every reasonable step possible not to violate, or even appear to violate, that trust. A number of cases involving ethical issues are set out in the Real World Discussion Top-ics section at the end of this chapter, and specific ethical issues are discussed in more detail in the Ethical Problems Presented in the Wills, Trusts, and Estates Law Firm section of this chapter.

Business Entities Many people have worked hard at accomplishing the dream of owning or being part of a success-ful business. They may be a sole proprietor who owns a popular pizza restaurant, a partner in a law firm, or the owner of a small corporation. Whatever the situation, these people will have to take steps to plan for the future, including drafting a will and using tr usts and other estate plan-ning tools to make sure that their estate passes in a manner that is consistent with their desires and with the least possible impact of estate taxes.

tort A civil wrongful act, com-mitted against a person or property, either intentional or negligent.

undue influence Using a close personal or fiduciary relationship to one’s advantage to gain assent to terms that the party otherwise would not have agreed to.

duress Unreasonable and unscru-pulous manipulation of a person to force him or her to agree to terms of an agreement that he or she would otherwise not agree to.

sole proprietor A person who individu-ally owns all assets and is personally responsible for all liabilities of a business operated as a sole propri-etorship.

partner One of two or more people who operate a business as a partnership.



Real Property Law For most people, the most v aluable asset that the y own is their home. And, in a more general sense, real property is one of the major categories of wealth in the United States. This increases the need for careful planning on how to best provide for the passage of real property to those who the client wishes to receive it. As will be seen in Chapter 2 and later chapters, this can be done while the client is still ali ve, for example, by selecting the for m of ownership that will accom-plish the goals of the client, or at the client’s death by means of a will or trusts.

THE ROLE OF THE PARALEGAL IN THE WILLS, TRUSTS, AND ESTATES LAW FIRM

The paralegal working in a wills, tr usts, and estates law f irm performs a wide variety of tasks. Some of them include:

1. Interviewing clients—both for wills and for estate planning. The paralegal will often be responsible for gathering the critical information needed to prepare the client’s will or other documents. The paralegal will use a questionnaire, sometimes referred to as a checklist, to ensure that all the necessary information is obtained to complete the documents being prepared on behalf of the client.

2. Maintain attorney’s calendar. (Note: Probate and other matters relating to wills, trusts, and estates firms are very time sensitive.)

3. Maintain records such as wills, vault inventories, and powers of attorney. Maintain a tickler system . Even a quick review of this list of possible duties indicates that the paralegal plays a vital role in the operation of a wills, trusts, and estates law firm. These duties, combined with the numerous time requirements set out by state law in probate proceedings, mean that memory alone is not enough to make sure that everything is taken care of in a timely manner. That is why a tickler system must be used. It, combined with filing checklists, helps ensure that all necessary documents are completed and filed on time.

4. Legal research on issues relating to the laws of wills, trusts, and estates. The laws relating to wills, trusts, and estates vary from state to state. Paralegals will often have to research the laws of their state as they relate to a particular issue. This could include locating the state laws setting out what must be done to execute a valid will or finding cases that inter-pret those statutes. There are also times paralegals may need to find laws of other states, such as when the decedent owned property in another state at the time of her death.

5. Act as notary public on documents such as the testator’s will. To perform this duty paralegals will have to meet the requirements for becoming a notary in their state. The process usually requires making an application, paying a fee, and taking an oath. Some states also require the person to post a bond, take classes, and take a test. Information on the requirements for becoming a notary in all 50 states can be found at www.nationalnotary.org/howto/ .

6. Discuss the proposed contents of the will—including tax considerations, identification of assets, beneficiaries under the will, and other items relating to the fulfillment of the testator’s wishes. Great care must be taken by paralegals when discussing topics such as these with the client. Paralegals should not give the impression that they are giving legal advice. Giving legal advice constitutes the practice of law, which is a violation of professional ethics and the law.

7. Drafting wills and trusts. Paralegals will often prepare the first draft of wills and trusts for review by their supervising attorney. A wide variety of sample clauses for use in comple-tion of this task are available to the paralegal. These include online resources, such as Westlaw and Lexis, as well as forms on CD-ROM.

8. Witness wills and other documents associated with wills and trusts. 9. Assist in the execution of the final draft of the will. Once paralegals assist the attorney

in the completion of the client’s will, they will usually be involved in its execution. These duties would include providing the client with the final draft for review, making any last-

execution Validation of a will.

tickler systemA method of keeping track of important dates and filing of documents.



minute corrections, and helping supervise the signing of the will. Paralegals may also act as a witness to the testator’s signing of the will, and they should be cognizant of the testator’s testamentary capacity when performing this task.

10. Drafting documents associated with the creation of trusts. These include trust agreements, declaration of trusts, living trusts, and testamentary trusts. As with drafting wills, paralegals will prepare the first draft for review by their supervising attorney and assist in making needed revisions.

11. Assist in the location of the will at the time of administration. One of the first things that must be done when a person dies is to locate his will. A family member or the personal representative of the state often does this. Occasionally the paralegal will need to assist in obtaining the will. For example, if the will was located in the decedent’s safe deposit box, the paralegal may draft a petition to have the safe deposit box opened. See Figure 1.3 for a sample petition and order to open a safe deposit box.

testamentary capacity The ability to understand and have the legal capacity to make a will.

FIGURE 1.3 Michigan Petition and Order to Open Safe Deposit Box

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12. Assist in the collection and maintenance of an estate’s assets. Once a person dies her estate goes into a state of limbo. The decedent’s will and the laws of her domicile state will de-termine when and how that property is transferred. Assets must be collected and protected. This is primarily the duty of the personal representative, but the paralegal may be called upon to assist in the completion of this task. Firms that specialize in estate work sometimes provide storage for valuable items until the probate procedure is completed. The paralegal may be required to inventory and secure these items.

13. Set up a family conference after the death of the decedent, if needed. While movies and TV shows often include a family conference where the attorney solemnly reads the contents of the decedent’s will, such conferences are not required. However, there are circumstances in which its use is appropriate.

14. Filing appropriate papers to initiate probate proceedings. 15. Assist in all steps that must be performed in formal probate administration. These include

obtaining death certificates, depositing the original will with the appropriate court, fil-ing the petition for probate, mailing notice of probate to interested parties, notifying the decedent’s creditor, and filing the petition for final discharge.

16. Locate beneficiaries under the will. In today’s mobile society, families are spread out all over the country. People fall out of touch with family members and other loved ones. The paralegal may be called upon to locate the beneficiaries under a deceased’s will, or heirs at law . The Internet has opened up many new ways of locating individuals. There are also probate genealogy firms that can aid the paralegal in locating beneficiaries and possible heirs.

17. Send notice of probate proceeding to beneficiaries and heirs at law. While states vary on when and how notice of probate is completed, paralegals are often required to prepare and mail forms that notify individuals that they were named in a will as a beneficiary, or to notify the heirs at law who would inherit if there was no valid will.

18. Aid in opening an estate checking account. 19. Record payments of debts. 20. Prepare an inventory of the assets of the estate. 21. Assist in the appraisal of assets. Placing a value on the decedent’s estate at the time of

death is an important part of the probate processes. Paralegals will often assist the personal representative of an estate in getting help in establishing the value. Some items, such as cash in a bank account, are easily established. Others, such as works of art or antiques, present more of a challenge. Paralegals may need to provide the name of reputable appraisers in those situations.

22. Speak with banks and other institutions and professionals such as stockbrokers and CPAs. The probate process involves the use of a number of professionals. For example, a CPA may be used to prepare the necessary tax forms for an estate, or a stockbroker may be needed to assist in the transfer of stock according to the terms of the will. Paralegals will often coordinate the work that needs to be done with these other professionals and act as the main contact person for the law firm.

23. Organize data relating to the tax implications of the estate. 24. Prepare preliminary federal and state death tax returns. 25. Assist in tasks normally associated with a litigation firm. While most people do not think

of probate as litigation, it does involve filing of documents with the court and court hear-ings. If the will is contested for whatever reason, then the case becomes an adversarial case and is handled much like any other litigation matter.

State law largely determines what a paralegal can ethically and legally do. Paralegals must take great care to avoid activities that may be considered the practice of law. The ethical problems discussed later in this chapter include an e xample of how careful paralegals must be to a void potential problems.

heirs at law Heirs that would inherit if the decedent had died intestate.

CYBERTRIP

Visit these sites to learn more about wills, trusts, and estates: Crash course in wills and trusts: www.mtpalermo.com/ Wills and estate planning: www.nolo.com/resource.cfm/catID/FD1795A9-8049-422 C-9087838F86A2BC2B/309/ Estate planning: www.law.cornell.edu/wex/index.php/Estate_Planning

CASE BRIEF

ASSIGNMENT

Read and brief the Ohio State Bar Assn. v. Cohen case on page 11. (See Appendix A for information on how to brief cases.)


CASE IN POINT

UNAUTHORIZED PRACTICE OF LAW

Supreme Court of Ohio Ohio State Bar Association

v. Cohen

No. 2004-2164. Submitted June 15, 2005.Decided Nov. 23, 2005.

Per Curiam.

On April 26, 2004, relator, Ohio State Bar Association, charged that respondent, Randy Cohen, had engaged in the unauthor-ized practice of law by rendering and receiving payment for a variety of legal services while doing business as DocuPrep USA. The Board on the Unauthorized Practice of Law considered the cause on the parties’ stipulations of fact and waiver of notice and hearing. See Gov.Bar R. VII(7)(H). Accepting these filings, the board made the following findings of fact, conclusions of law, and recommendation. Respondent conducted business at DocuPrep USA, part of a nationwide chain advertised as independently operated parale-gal offices. For his particular operation, respondent advertised that he would help customers “prepare and file the important documents of [their] life without the services and expense of a lawyer.” More specifically, respondent offered to prepare wills and living trusts, as well as the documents necessary for divorces, name changes, stepparent adoptions, evictions, immigration, and bankruptcies, and to establish corporations, among “other uncontested legal procedures.” Respondent is not and never has been an attorney admitted to the practice of law, granted active status, or certified to practice law in the state of Ohio pursuant to Gov.Bar R. I, II, VI, IX, or XI. Yet on numerous occasions, respondent drafted and completed documents, including several wills, a dissolution pleading and related orders, and many bankruptcy petitions, all of which affected or determined oth-ers’ legal rights. He also gave advice and counsel to people about their legal rights, all the while charging for his services. During his deposition, respondent testified that when cus-tomers came to him, they did not know what type of legal docu-ment was required to accomplish their objective, and respondent would choose for them by using official forms and software pro-grams. By selecting the causes of action and legal instruments he thought might protect his customers’ interests, however, respon-

dent was engaged in the unlicensed practice of law; he just did not realize it. In fact, although he did know that his customers were relying on the documents he prepared to protect their legal rights in court and elsewhere, respondent described himself as merely a document preparer. Based on this conduct, respondent conceded and the board found that he had engaged in the unauthorized practice of law while doing business as DocuPrep USA. The board recommended that we issue an order finding that respondent engaged in the unauthorized practice of law and enjoining him from engaging in such practices in the future. On review of the record, we adopt the findings, conclusions, and recommendation of the board. Section 2(B)(1)(g), Article IV of the Ohio Constitution confers on this court original jurisdiction over all matters related to the practice of law. With few excep-tions, see, e.g., Cleveland Bar Assn. v. Pearlman, 106 Ohio St.3d 136, 2005-Ohio-4107, 832 N.E.2d 1193 (allowing a nonlawyer to prepare and file a complaint for another in small claims court under certain circumstances), the unauthorized practice of law consists of rendering legal services and includes the preparation of legal pleadings and other papers for another without the su-pervision of an attorney licensed in Ohio. Richland Cty. January Term, 2005; Bar Assn. v. Clapp (1998), 84 Ohio St.3d 276, 278, 703 N.E.2d 771; Cleveland; Bar Assn. v. Coats , 98 Ohio St.3d 413, 2003-Ohio-1496, 786 N.E.2d 449, ¶ 3. Respondent is therefore enjoined from preparing legal docu-ments for others and from any other conduct constituting the unauthorized practice of law. Costs are taxed to respondent. Judgment accordingly.

MOYER, C.J., RESNICK, LUNDBERG STRATTON, O’CONNOR and LANZINGER, JJ., concur.

PFEIFER and O’DONNELL, JJ., concur but would also impose a $10,000 civil penalty.

ETHICAL PROBLEMS PRESENTED IN THE WILLS, TRUSTS,AND ESTATES LAW FIRM

Paralegals are confronted with ethical issues on a dail y basis. While the mention of legal ethics often draws snickers from even lawyers, the reality is professional ethics are v ery important, although sometimes confusing.

11



Some of the confusion, and the snickers, come from the fact that most people equate morality to ethics. Legal ethics, like other professional ethics, are not necessarily morality based. In fact, some legal ethics seem to conflict with morality . An example of this is the duty of attor neys to do their best in a criminal case even when they know that the client is guilty. Instead, legal ethics focuses on the duties legal professionals owe to others in their profession, to the cour ts, and to their clients. Paralegals who work in a f irm that deals with wills, trusts, and estates law will be faced with numerous situations in which they may be confronted with ethical dilemmas. The following are examples of ethical issues that a paralegal may face.

Unlicensed Practice of Law It is very common for a paralegal to be the client’s main contact in the law office. This is espe-cially true with wills, trusts, and estates cases. Much of the document preparation will be done by the paralegal, and many paralegals have a very good working knowledge of the law associated with their area of practice. For example, Jane from the Client Interview has worked for Mr. Comfort for almost 20 years. During that time she has probab ly prepared the paperw ork for countless wills and tr usts and been actively involved in the probate of hundreds of wills. Mr . Comfort has g rown to rely on her knowledge and expertise. In fact, Jane may have a better working knowledge of the laws and procedure that are part of the probate process than her boss does! While it is cer tainly good that Jane is competent and does a professional job, this situation presents a number of potential ethical dilemmas. Notice that Jane has pointed out to Cath y Wil-son (1) that she will be preparing most of the documents associated with the probate of the estate, (2) that she has knowledge of the laws and procedures involved, and (3) that Cathy should call her whenever she had a question. Jane is correct; she will probably be preparing most of the for ms associated with the probate. That’s what probate paralegals do. What she left out was that she was preparing them under the su-pervision and review of her supervising attorney, Mr. Comfort. Failing to inform the client of this fact gives the impression that Jane is handling the le gal work, even though she is not a licensed attorney. The unlicensed practice of law is not only an ethical issue; it may also be a crime! Jane was probably just tr ying to reassure the client that she w as qualif ied and was there to help. Her comments, however, could be seen as encouraging the client to unduly rely on her ex-pertise. Cathy certainly can call Jane with questions such as whether the initial papers are ready to review. If the questions involve answers relating to the law, Mr. Comfort must answer them. It is important that paralegals inform the client of their status as a paralegal at the time of the initial meeting. Paralegals should also inform the client of what paralegals can and can’t do and remind the client of those limitations as often as needed. Mr. Comfort must also be careful in this situation. He may be overrelying on Jane’s expertise and no longer re viewing her work as carefully as he has in the past. He ma y also allow her to answer too many of the client’s questions because of the constraints of his o wn schedule. This reliance on Jane’s skills could be viewed as facilitating the unauthorized practice of la w by his employee.

Undue Influence Undue influence was previously mentioned in the discussion of tor ts. It occurs where a person is able to take advantage of another because of a relationship based on tr ust and conf idence. It sometimes becomes an issue with wills and probate because the testator ma y have executed his will while under the influence of a trusted person, such as a family member. The testator may not use the same kind of diligence in protecting his interests because of this relationship of tr ust. A will contest can result if other family members discover this abuse. Attorneys and paralegals have such a relationship with their clients. Many of the people com-ing to an attorney to have their will drawn up are elderly and with no family close by. These cli-ents can form a friendship with the attorneys and staff of the law office. Use of this relationship to acquire an interest in the testator’s estate by the paralegal or attorney must never occur. Even the appearance of impropriety can create ethical issues for the attor ney and the paralegal. (See also the Conflict of Interest section later in this chapter.)

CYBERTRIP

Visit these sites to learn more about legal ethics: ABA Center for Professional Responsibility: www.abanet.org/cpr/mrpc/mrpc_toc.html NALA standards— Model Standards and Guidelines for Utilization of Legal Assistants: www.nala.org/98model.htm



Breach of Confidentiality All members of the le gal staff owe a duty of conf identiality to their clients. While there are some exceptions to this duty, the best approach to confidentiality is simple—what happens at the office stays at the office. Paralegals should avoid discussing clients’ cases with people outside of the office or even people in the office who do not have a need to know. Keep in mind that a parale gal will know many things about the client’s personal life, family relationships, and financial matters in order to assist the client in planning his estate, drafting his will, or probating an estate. This information should be respected and not disclosed to an yone who does not have a right to know it, even if it may seem relatively unimportant. Paralegals should not try to be clever to get around the duty of confidentiality owed to the client. Changing the names of the client is not enough nor is assuming that since the paralegal is in another town from that of the client, the paralegal can discuss the case without regard to confidentiality. Here are two real-world examples of how clever paralegals violated their duty:

Clever Approach 1: Not Mentioning the Name of the Parties Jim was a paralegal in a family law firm that was located in a fairly good size city. He and other paralegals often met after work on Fridays at a local bar and grill. They all knew they should not be talking about their cases but f igured that by not mentioning the names of the par ties every-thing would be OK. That Friday night Jim told his friends of a v ery nasty divorce. It involved a prominent local doctor who had filed for divorce from his long-time wife so that he could marry the nurse who worked for his office. He included all the juicy details of the case, just as the cli-ent, the husband, had relayed them to the attor ney just days before. All the paralegals enjoyed the story and had a great time discussing the case and laughing about the client’s activities. What Jim was not aware of was that a woman sitting in the booth next to him was a good friend of the client’s family. She did not need to know the names of the parties in order to understand the case Jim was discussing. The next day, she told the doctor what she had heard and, in turn, the doctor called his attorney. Jim was unemployed shortly thereafter.

Clever Approach 2: Don’t Worry about Confidentiality When You Are out of Town Sharon was a paralegal who worked in a law firm in upstate New York. One day, while she was on a shopping trip to New York City, Sharon was riding on a city bus when she heard an interesting con-versation between two people seated in front of her. It turns out that the two people were paralegals from a firm in the same town in which Sharon lived and worked. What’s more, the case they were discussing involved a case in which her firm was representing the other party! This shows that it is truly a small world and also demonstrates that what happens in the office should stay in the office.

Conflict of Interest An attorney should not accept a client in a situation w here it would conflict with the interest of another client or where the representation would be limited by the attorney’s duties to a client, a former client, or a person of interest to the attorney. Conflicts of interest can occur in a variety of ways. The American Bar Association is a volun-tary organization that includes as one of its functions the drafting of Model Rules of Professional

Paralegals should be vigilant in watching for signs of possible undue influence by the testator’s fam-ily members or other people who have gained the testator’s trust. These signs include: substantial changes to a will that favors a particular family member or a caregiver in a manner inconsistent with the client’s previous desires, nonfamily care-giver living with the client, a particular family member or caregiver being present at all impor-

tant meetings and not letting the client speak for herself, and unwarranted reliance on a particular family member or caregiver. It is sometimes diffi-cult to distinguish between a well-meaning fam-ily member or caregiver and one who is trying to exert undue influence over the client for his personal benefit. If the paralegal feels that undue influence might be present, she should report it to her supervising attorney immediately.

Ethics Alert

CASE BRIEF

ASSIGNMENT

Read and brief the Sisson v. Jankowski case on page 14. (See Appendix A for information on how to brief cases.)


CASE IN POINT

NEGLIGENCE

Supreme Court of New Hampshire Thomas K. Sisson

v. Shari Jankowski, Esq. & a.

No. 2002-0129 Submitted: July 26, 2002

Opinion Issued: November 15, 2002

BROCK, C.J. The United States District Court for the District of New Hampshire ( McAuliffe , J.) has certified the following ques-tion of law, see Sup. Ct. R. 34:

Whether, under New Hampshire law and the facts as pled in plaintiff’s verified complaint, an attorney’s neg-ligent failure to arrange for his or her client’s timely execution of a will and/or an attorney’s failure to pro-vide reasonable professional advice with respect to the client’s testamentary options (e.g., the ability to cure a draft will’s lack of a contingent beneficiary clause by simply inserting a hand-written provision), which fail-ure proximately caused the client to die intestate, gives rise to a viable common law claim against that attorney by an intended beneficiary of the unexecuted will.

For the reasons stated below, we answer the certified question in the negative. Because this question arose in the context of a mo-tion to dismiss and absent a copy of the plaintiff’s complaint, we assume the truth of the factual allegations recited by the court in its certification order, and construe all inferences in the light most favorable to the plaintiff. Hungerford v. Jones, 143 N.H. 208, 209 (1998). In December 1998, the decedent, Dr. Warren Sisson, retained the defendants, Attorney Jankowski and her law firm, Wiggin & Nourie, P.A., to prepare his will and other estate planning docu-ments. According to the plaintiff, Thomas K. Sisson, the dece-dent informed Attorney Jankowski that he was suffering from cancer, did not want to die intestate, and, therefore, wished to prepare a will that would pass his entire estate to the plaintiff, his brother. The decedent told Attorney Jankowski that he was particularly interested in ensuring that none of his estate pass to his other brother, from whom he was estranged. The record, however, does not reflect any request by the decedent that the will be executed by a date certain. Attorney Jankowski prepared a will and other estate planning documents and, in mid-January 1999, mailed them to the dece-dent for his review and execution. The decedent was injured in mid-January, however, and, therefore, did not receive the docu-ments until January 22, 1999, when a neighbor delivered them to him at a nursing home. Three days later, the plaintiff contacted Attorney Jankowski to tell her that the decedent wanted to final-ize his estate planning documents quickly because of his deterio-rating condition. On February 1, 1999, Attorney Jankowski and two other law firm employees visited the decedent in the nursing home to wit-ness his execution of the estate planning documents. The dece-

dent executed all of the documents except his will. After Attorney Jankowski asked him whether the will should include provisions for a contingent beneficiary, the decedent expressed his desire to insert such a clause, thereby providing that his estate would pass to a charity in the event the plaintiff predeceased him. According to the plaintiff, the decedent’s testamentary intent was clear as of the end of the February 1, 1999 meeting: the unexecuted will accurately expressed his intent to pass his entire estate to the plaintiff. Nevertheless, rather than modify-ing the will immediately to include a hand-written contingent beneficiary clause, modifying it at her office and returning later that day for the decedent’s signature, or advising the decedent to execute the will as drafted to avoid the risk of dying intestate and later drafting a codicil, Attorney Jankowski left without obtaining the decedent’s signature to the will. Three days later, Attorney Jankowski returned with the revised will. The decedent did not execute it, however, because Attorney Jankowski did not believe he was competent to do so. She left without securing his signature and told him to contact her when he was ready to sign the will. The plaintiff twice spoke with a Wiggin & Nourie attorney “to discuss Attorney Jankowski’s inaction regarding the will.” The at-torney told him that he had spoken to other firm members about the situation. Nevertheless, after February 4, 1999, Attorney Jankowski made no attempt to determine whether the decedent regained sufficient testamentary capacity to execute his will. The decedent died intestate on February 16, 1999. His estate did not pass entirely to the plaintiff as he had intended, but in-stead was divided among the plaintiff, the decedent’s estranged brother, and the children of a third (deceased) brother. The plain-tiff brought legal malpractice claims against the defendants, al-leging that they owed him a duty of care because he was the intended beneficiary of their relationship with the decedent. For the purposes of this certified question, there is no dispute as to the decedent’s testamentary intent: he wanted to avoid dy-ing intestate and to have his entire estate pass to the plaintiff. Nor does the plaintiff claim that the defendants frustrated the decedent’s intent by negligently preparing his will. Rather, the plaintiff asserts that the defendants were negligent because they failed to have the decedent execute his will promptly and to ad-vise him on February 1 of the risk of dying intestate if he did not execute the draft presented at that meeting. The narrow question before us is whether the defendants owed the plaintiff a duty of care to ensure that the decedent executed his will promptly. Whether a duty exists is a question of law. Hungerford , 143 N.H. at 211. A duty generally arises out

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of a relationship between the parties. See MacMillan v. Scheffy , 147 N.H. 362, 364 (2001). While a contract may supply the re-lationship, ordinarily the scope of the duty is limited to those in privity of contract with one another. Id . We have, in limited circumstances, recognized exceptions to the privity requirement where necessary to protect against reasonably foreseeable harm. See Hungerford , 143 N.H. at 211. “[N]ot every risk of harm that might be foreseen gives rise to a duty,” however. Id . (quotation and brackets omitted). “[A] duty arises if the likelihood and mag-nitude of the risk perceived is such that the conduct is unreason-ably dangerous.” Id . (quotation and brackets omitted). “When determining whether a duty is owed, we examine the societal interest involved, the severity of the risk, the likelihood of the occurrence, the relationship between the parties, and the burden upon the defendant.” Id . Ultimately, whether to impose a duty of care “rests on a judicial determination that the social importance of protecting the plaintiff’s interest outweighs the im-portance of immunizing the defendant from extended liability.” Walls v. Oxford Management Co. , 137 N.H. 653, 657 (1993). In Simpson v. Calivas , 139 N.H. 1, 4 (1994), we recognized an exception to the privity requirement with respect to a will beneficiary and held that an attorney who drafts a testator’s will owes a duty to the beneficiaries to draft the will non-negligently. In Simpson , a testator’s son sued the attorney who drafted his father’s will, alleging that the will failed to incorporate his father’s actual intent. Id . at 3. The will left all real estate to the plaintiff, except for a life estate in “our homestead,” which was left to the plaintiff’s stepmother. Id . The probate litigation concerned whether “our homestead” referred to all of the decedent’s real property, including a house, over one hundred acres of land and buildings used in the family business, or only to the house, and perhaps limited surrounding acreage. Id . The plaintiff argued that the decedent intended to leave him the buildings used in the family business and the bulk of the surrounding land in fee simple. Id. at 4. The plaintiff lost the will construction action, and then brought a malpractice action against the drafting attorney, arguing that the decedent’s will did not accurately reflect his in-tent. Id. at 3. We held that the son could maintain a contract action against the attorney, as a third-party beneficiary of the contract between the attorney and his father, and a tort action, under a negligence theory. Id. at 7. With respect to the negligence claim, we con-cluded that, “although there is no privity between a drafting attorney and an intended beneficiary, the obvious foreseeability of injury to the beneficiary demands an exception to the privity rule.” Id. at 5-6. Simpson is consistent with the prevailing rule that a will ben-eficiary may bring a negligence action against an attorney who failed to draft the will in conformity with the testator’s wishes. See generally R. Mallen & J. Smith, Legal Malpractice § 32.4, at 735 (5th ed. 2000); Stowe v. Smith , 441 A.2d 81 (Conn. 1981); Lucas v. Hamm , 364 P.2d 685, 688-89 (Cal. 1961), cert. denied , 368 U.S. 987 (1962); Succession of Killingsworth , 292 So. 2d 536, 542 (La. 1973); Hare v. Miller, Canfield, Paddock & Stone , 743 So. 2d 551 (Fla. Dist. Ct. App. 1999). Simpson is not dispositive of the certified question, how-ever. The duty in Simpson was to draft the will non-negligently, while the alleged duty here is to ensure that the will is executed promptly. Courts in several jurisdictions have declined to impose a duty of care where the alleged negligence concerns the failure to have the will executed promptly. See Krawczyk v. Stingle , 543 A.2d 733 (Conn. 1988); Miller v. Mooney , 725 N.E.2d 545 (Mass.

2000); Charia v. Hulse , 619 So. 2d 1099 (La. Ct. App. 1993); Radovich v. Locke-Paddon , 35 Cal. App. 4th 946 (Ct. App. 1995); Babcock v. Malone , 760 So. 2d 1056, 1056-57 (Fla. Dist. Ct. App. 2000). The majority of courts confronting this issue have con-cluded that imposing liability to prospective beneficiaries under these circumstances would interfere with an attorney’s obligation of undivided loyalty to his or her client, the testator or testatrix. In Krawczyk , 543 A.2d at 733-34, for instance, the decedent had met with his attorney approximately ten days before he died and informed her that he was soon to have open heart surgery and wanted to arrange for the disposition of his assets without going through probate. Accordingly, he directed the attorney to prepare two trust documents for his execution. Id. at 734. Com-pletion of the trust documents was delayed, and by the time they were ready for execution, the decedent was too ill to see his at-torney. He died without signing them. Id. The Connecticut Supreme Court concluded that imposing lia-bility to third parties for negligent delay in executing estate plan-ning documents would contravene a lawyer’s duty of undivided loyalty to the client. Id. at 736. As the court explained:

Imposition of liability would create an incentive for an attorney to exert pressure on a client to complete and execute estate planning documents summarily. Fear of liability to potential third party beneficiaries would con-travene the attorney’s primary responsibility to ensure that the proposed estate plan effectuates the client’s wishes and that the client understands the available options and the legal and practical implications of whatever course of action is ultimately chosen. These potential conflicts of interest are especially significant in the context of the final disposition of a client’s estate, where the testator’s testamentary capacity and the ab-sence of undue influence are often central issues.

Id. The Massachusetts Supreme Judicial Court has similarly rea-soned that:

[I]n preparing a will[,] attorneys can have only one cli-ent to whom they owe a duty of undivided loyalty. A client who engages an attorney to prepare a will may seem set on a particular plan for the distribution of her estate. . . . It is not uncommon, however, for a cli-ent to have a change of heart after reviewing a draft will. . . . If a duty arose as to every prospective benefi-ciary mentioned by the client, the attorney-client relation-ship would become unduly burdened. Attorneys could find themselves in a quandary whenever the client had a change of mind, and the results would hasten to ab-surdity. The nature of the attorney-client relationship that arises from the drafting of a will necessitates against a duty arising in favor of prospective beneficiaries.

Miller , 725 N.E.2d at 550-51 (quotation, ellipses and brackets omitted). We have recently reaffirmed the importance of an attorney’s undivided loyalty to a client. See MacMillan , 147 N.H. at 365. In MacMillan , we declined to extend Simpson to permit the buy-ers in a real estate transaction to sue the sellers’ attorney who prepared a deed, which failed to include a restrictive covenant. We ruled that there was no evidence that the primary purpose of employing the attorney to draft the deed was to benefit or influence the buyers. Id . Accordingly, we held that the buyers



were not the intended beneficiaries of the attorney’s services. Id . Moreover, we held that it was imprudent to impose liability upon the attorney under these circumstances because doing so would “interfere with the undivided loyalty which the attorney owes his client and would detract from achieving the most advantageous position for his client.” Id . (quotation omitted). Both parties cite compelling policy considerations to support their arguments. The plaintiff asserts that there is a strong public interest in ensuring that testators dispose of their property by will and that recognizing a duty of an attorney “to arrange for the timely execution of a will” will promote this public interest. He further argues that “[t]he risk that an intended beneficiary will be deprived of a substantial legacy due to delay in execution of tes-tamentary documents” requires the court to recognize the duty he espouses. The defendants counter that recognizing a duty to third parties for the failure to arrange for the timely execution of a will potentially would undermine the attorney’s ethical duty of undivided loyalty to the client. After weighing the policy considerations the parties identify, we conclude that the potential for conflict between the inter-ests of a prospective beneficiary and a testator militates against recognizing a duty of care. “It is the potential for conflict that is determinative, not the existence of an actual conflict.” Miller , 725 N.E.2d at 550. Whereas a testator and the beneficiary of a will have a mutual interest in ensuring that an attorney drafts the will non-negligently, a prospective beneficiary may be interested in the will’s prompt execution, while the testator or testatrix may be interested in having sufficient time to consider and under-

stand his or her estate planning options. As the Massachusetts Supreme Judicial Court recognized:

Confronting a last will and testament can produce complex psychological demands on a client that may require considerable periods of reflection. An attorney frequently prepares multiple drafts of a will before the client is reconciled to the result. The most simple dis-tributive provisions may be the most difficult for the client to accept.

Id . at 551. Creating a duty, even under the unfortunate circumstances of this case, could compromise the attorney’s duty of undivided loyalty to the client and impose an untenable burden upon the attorney-client relationship. To avoid potential liability, attorneys might be forced to pressure their clients to execute their wills summarily, without sufficiently reflecting upon their estate plan-ning options. On balance, we conclude that the risk of interfering with the attorney’s duty of undivided loyalty to the client exceeds the risk of harm to the prospective beneficiary. For these reasons, we join the majority of courts that have considered this issue and hold that an attorney does not owe a duty of care to a prospective will beneficiary to have the will executed promptly. Accordingly, we answer the certified question in the negative.

Remanded .

NADEAU, DALIANIS and DUGGAN, JJ., concurred.

Conduct. These rules include a specific provision that addresses the potential conflict of interest created when an attorney is a beneficiary under a will. Rule 1.8 (c) of the ABA Model Rules of Professional Conduct prohibits an attorney from so-liciting gifts, including testamentary gifts , from a client and from drafting an instr ument, such as a will, in w hich the attorney receives a gift. Exceptions are allo wed in a situation w here the attorney is related to the client. The attorney is not the only one who needs to be concerned with this possible conflict of inter-est. A failure of paralegals to follow this rule could expose their employer to disciplinary action by the state bar association and a possible lawsuit. Sometimes it is dif ficult to deter mine who is the client in wills, tr usts, and estates cases. Sisson v. Jankowski is an example of this problem.

Falsely Attesting to an Affidavit, Such as When aParalegal Is a Notary Paralegals, who may also be notary publics, are often asked to witness or attest to the e xecution of a will or other le gal document prepared in the la w f irm. They should only do so if the y are actually present at the time the document is signed. In the hectic routine of man y law offices, it is all too tempting to ask someone to notarize a document that the person did not see signed. This can become an issue if the will is contested and the parale gal is called to testify as to w hat occurred.

Improper Handling of Client Funds and Assets During the course of representing a client or the probating of an estate, a la w firm will often be in possession of funds or other proper ty of the client or the estate. Commingling of the client’ s funds with those of the law office is improper and must be avoided at all cost. Other items being held for the client must be properly inventoried and stored in an appropriate manner.

testamentary gift A gift made in a will.



Summary The law of wills, trusts, and estates impacts a wide variety of other areas of the law that presents both a challenge and an oppor tunity for the paralegal who works in this area of the law. One of the challenges is to develop adequate professional skills to perfor m the many duties the parale-gal will be called upon to perfor m. Another is the need to understand the ter minology used in this field of law. The terms and phrases are in a process of change, with many states eliminating distinctions in terms based on whether a decedent died testate or intestate, or based on the sex of the person. The Uniform Probate Code is an example of the fact that the legal system recognizes a need to simplify the terminology associated with wills, trusts, and estates. The law is not stag-nant; it changes as society changes, and paralegals must do their best to keep abreast of them. To do so presents the opportunity to work in one of the most interesting fields of law. Paralegals must be mindful of the many ethical dilemmas that will be present as they perform their duties in the law office. Examples of areas of ethical concer n include: unlicensed practice of law, undue influence, conflict of interest, breach of confidentiality, conflict of interest, falsely attesting to an af fidavit, and the improper handling of client funds and assets. Care should be taken to avoid even the appearance of impropriety when dealing with the day-to-day work of the law office. The cases and the Real World Discussion Topics demonstrate how important it is to comply with professional ethics.


Key Terms Administrator Administratrix Advance directives Beneficiary Blended families Codicil Decedent Devise Domicile Duress Elective share Equitable title Estate Execution Executor Executrix Health care proxy Heirs at law Intestate Last will and testament Legacy

Legal title Living will Medicaid Organ donation Partner Prenuptial agreement Probate Settlor Sole proprietor Testamentary capacity Testamentary gift Testate Testator Testatrix Tickler system Tort Trust Trustee Undue influence Uniform Probate Code Will

Review Questions

1. List the areas of the law that interrelate with wills, trusts, and estates, and give an example of each.

2. When should paralegals identify their status as a paralegal in the law firm to the client? 3. List five duties paralegals may be called upon to perform in a wills, trusts, and estates

law firm. 4. Why should paralegals be careful not to violate any rules of professional ethics? 5. Discuss and compare undue influence and duress. 6. What is a tickler system, and why is it important in a wills, trusts, and estates law firm? 7. Compare the traditional meaning of the term last will and testament to its modern meaning. 8. Discuss the changes in terminology brought about by the Uniform Probate Code.


were not the intended beneficiaries of the attorney’s services. Id . Moreover, we held that it was imprudent to impose liability upon the attorney under these circumstances because doing so would “interfere with the undivided loyalty which the attorney owes his client and would detract from achieving the most advantageous position for his client.” Id . (quotation omitted). Both parties cite compelling policy considerations to support their arguments. The plaintiff asserts that there is a strong public interest in ensuring that testators dispose of their property by will and that recognizing a duty of an attorney “to arrange for the timely execution of a will” will promote this public interest. He further argues that “[t]he risk that an intended beneficiary will be deprived of a substantial legacy due to delay in execution of tes-tamentary documents” requires the court to recognize the duty he espouses. The defendants counter that recognizing a duty to third parties for the failure to arrange for the timely execution of a will potentially would undermine the attorney’s ethical duty of undivided loyalty to the client. After weighing the policy considerations the parties identify, we conclude that the potential for conflict between the inter-ests of a prospective beneficiary and a testator militates against recognizing a duty of care. “It is the potential for conflict that is determinative, not the existence of an actual conflict.” Miller , 725 N.E.2d at 550. Whereas a testator and the beneficiary of a will have a mutual interest in ensuring that an attorney drafts the will non-negligently, a prospective beneficiary may be interested in the will’s prompt execution, while the testator or testatrix may be interested in having sufficient time to consider and under-

stand his or her estate planning options. As the Massachusetts Supreme Judicial Court recognized:

Confronting a last will and testament can produce complex psychological demands on a client that may require considerable periods of reflection. An attorney frequently prepares multiple drafts of a will before the client is reconciled to the result. The most simple dis-tributive provisions may be the most difficult for the client to accept.

Id . at 551. Creating a duty, even under the unfortunate circumstances of this case, could compromise the attorney’s duty of undivided loyalty to the client and impose an untenable burden upon the attorney-client relationship. To avoid potential liability, attorneys might be forced to pressure their clients to execute their wills summarily, without sufficiently reflecting upon their estate plan-ning options. On balance, we conclude that the risk of interfering with the attorney’s duty of undivided loyalty to the client exceeds the risk of harm to the prospective beneficiary. For these reasons, we join the majority of courts that have considered this issue and hold that an attorney does not owe a duty of care to a prospective will beneficiary to have the will executed promptly. Accordingly, we answer the certified question in the negative.

Remanded .

NADEAU, DALIANIS and DUGGAN, JJ., concurred.

Conduct. These rules include a specific provision that addresses the potential conflict of interest created when an attorney is a beneficiary under a will. Rule 1.8 (c) of the ABA Model Rules of Professional Conduct prohibits an attorney from so-liciting gifts, including testamentary gifts , from a client and from drafting an instr ument, such as a will, in w hich the attorney receives a gift. Exceptions are allo wed in a situation w here the attorney is related to the client. The attorney is not the only one who needs to be concerned with this possible conflict of inter-est. A failure of paralegals to follow this rule could expose their employer to disciplinary action by the state bar association and a possible lawsuit. Sometimes it is dif ficult to deter mine who is the client in wills, tr usts, and estates cases. Sisson v. Jankowski is an example of this problem.

Falsely Attesting to an Affidavit, Such as When aParalegal Is a Notary Paralegals, who may also be notary publics, are often asked to witness or attest to the e xecution of a will or other le gal document prepared in the la w f irm. They should only do so if the y are actually present at the time the document is signed. In the hectic routine of man y law offices, it is all too tempting to ask someone to notarize a document that the person did not see signed. This can become an issue if the will is contested and the parale gal is called to testify as to w hat occurred.

Improper Handling of Client Funds and Assets During the course of representing a client or the probating of an estate, a la w firm will often be in possession of funds or other proper ty of the client or the estate. Commingling of the client’ s funds with those of the law office is improper and must be avoided at all cost. Other items being held for the client must be properly inventoried and stored in an appropriate manner.





documents to Ohio residents. TEP, which was owned by Henry W. Abts III, associated with companies and individuals, known as advisors, who marketed and sold its products. Most of the advisors were not lawyers, and none of the advisors in these cases were licensed attorneys in Ohio. Advisors were under contract with TEP, were trained by TEP, and were required to adhere to a sales and marketing manual that instructed them how best to market TEP products. Typically, a transaction began with advisors developing prospects through telemarketing, followed by a sales presentation in the prospective customer’s home. The advisors used TEP products to assist the prospective customer in determining what type of living trust or other estate plan was appropriate. When a prospect agreed to purchase a TEP living trust or estate plan, the advisor procured a signed purchase agreement from the customer and two checks. One check was payable to the advisor; the other was payable to the review attorney, who had been selected by the advisor from a list provided by TEP. The review attorney, who was typically under contract with TEP, would enter the customer’s in-formation into a TEP computer software program, usually without having had contact with the customer. TEP would then prepare the requested documents and return them directly to the advisor, who would deliver the documents to the customer.

Did the acts of the advisors and TEP constitute the unauthorized practice of law? Did it matter that the trusts were actually prepared by an attorney? Why was it relevant that the attorney used the TEO software? Why was it relevant that the attorney did not have contact with the customer? Research the laws of your state as needed to discuss these questions. See Cleveland Bar Assn. v. Sharp Estate Serv., Inc., 107 Ohio St.3d 219, 837 N.E.2d 1183 (Ohio, 2005).

Research the law relating to undue influence and conflict of interest as they relate to the law of wills, trusts, and estates. Write a one-page summary of the results of the research. Possible Web resources that can be used for research purposes include:

Find Law: www.findlaw.com

Stetson College of Law: www.law.stetson.edu/law/default.htm

LexisOne: www.lexisone.com/caselaw/freecaselaw?action�FCLDisplayCaseSearchForm

(This site provides free limited access to the Lexis computer databases with registration.) Abraham Nievod, Ph.D., J.D., “Undue Influence in Contract and Probate Law” : www.csj.org/infoserv_articles/nievod_abraham_undue_influence_law.htm

Important note: Web sites are notorious for their impermanence, so you may have to use reliable search engines to aid in locating information on this topic.

Portfolio Assignment



Vocabulary Builders

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Vocabulary Builders

ACROSS 1. The phrase traditionally used as the written declaration of

intended distribution of both real and personal property upon the person’s death

7. A man who makes a will 8. A process by which ownership is split into legal and eq-

uitable title. The trustee of the trust has the legal title to the property of the trust but holds it for the beneficiary, who owns the equitable title

10. The court process of determining will validity, settling es-tate debts, and distributing assets

14. Using a close personal or fiduciary relationship to one’s advantage to gain assent to terms that the party other-wise would not have agreed to

16. Assets and liabilities of decedent at the time of his or her death

17. Gift made in a will 18. A male personal representative appointed by the court to

administer the estate when there is no will 19. A civil wrongful act, committed against a person or prop-

erty, either international or negligent 20. One of two or more people who operate a business as a

partnership 23. Traditionally referred to a gift of money made under a

will 24. A family made up of one or more parents having been

previously married and having children of that previous marriage. Sometimes referred to as a step-family

25. A woman who makes a will 26. A provision that amends or modifies an existing will 28. Donation of organs or tissues to another person 29. The deceased 32. The state of having died with a valid will 33. The statutory right of the surviving spouse to elect to take

a share of the deceased spouse’s estate rather than taking what was provided for by the deceased spouse’s will

34. Gift made in a will 35. The ability to understand and have the legal capacity to

make a will

DOWN 1. A document that expresses a person’s wish to be allowed

to die without being kept alive by artificial means. It is not a will, but rather an expression of a person’s desires

2. The person who creates a trust 3. A male administer of the estate 4. A government program that provides medical and long-

term care to those who cannot afford it and is funded by a partnership between the federal and state govern-ments

5. A method of keeping track of important dates and filing of documents

6. Documents that express the maker’s desires as to medical care in the event that he or she is unable to do so. Also referred to as a health care surrogate or durable medical power of attorney

9. The person who oversees the assets of a trust 10. An agreement made by parties before marriage that con-

trols certain aspects of the relationship, such as manage-ment and ownership of property

11. Unreasonable and unscrupulous manipulation of a per-son to force him or her to agree to terms of an agree-ment that he or she would otherwise not agree to

12. A female personal representative appointed by the court to administer the estate when there is no will

13. A document representing the formal declaration of a person’s wishes for the manner and distribution of his or her property upon death

15. A person who individually owns all assets and is person-ally responsible for all liabilities of a business operated as a sole proprietorship

21. Validation of a will. 22. The place where a person maintains a physical residence

with the intent to permanently remain in that place; citi-zenship; the permanent home of the party

27. A female administer of the estate 30. The state of having died without a valid will 31. Heirs that would inherit if the decedent had died

intestate.


Ownership of Property CHAPTER OBJECTIVES


• Identify the various types of property, for example, real versus personal property.

• Be able to differentiate between the various ways real and personal property may be owned .

• Understand the basic terminology used relating to how property is owned .

• Identify the characteristics of the various forms of ownership of property .

• Understand the differences between probate property and nonprobate property .

• Be able to differentiate between what property is normally classified as part of the probate estate and the gross estate .

Everyone knows what owning property is—don’t they? John owns his boat and Samantha owns her condominium. Seems simple enough. But, refer back to Chapter 1, which discusses the wide variety of areas of the law a paralegal will come into contact with while working in a f irm that specializes in wills, tr usts, and estates. It should become apparent that few things are really as simple as they seem when it comes to the law, including ownership of property. This chapter introduces the paralegal student to many of the legal principles associated with the ownership of property and how these principles apply to wills, trusts, and estates.

WHY “OWNERSHIP OF PROPERTY” IS IMPORTANT TO THE PARALEGAL STUDENT

Few areas of the law have a greater importance to wills, trusts, and estates than the law relating to the ownership of property, whether it is real property, tangible personal property, or intangible personal property. Ownership is key in determining whether a person is able to leave property in his or her will. Ownership is also an important tool in estate planning to help carry out the intent of the testator, minimize the costs associated with probate, and reduce the estate’ s exposure to federal and state estate taxes. While the use of ownership of property as a tool in estate planning is discussed in more de-tail in Part 2, it is critical to have a basic understanding of the terminology and concepts related to the ownership of property before going further in the study of wills, trusts, and estates. Understanding the concepts set out in this chapter will gi ve paralegal students a w orking knowledge of the fundamental concepts related to ownership that will allow them to more easily comprehend the material that will be covered in future chapters.

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Chapter 2


Chapter 2 Ownership of Property 23

CLASSIFICATIONS OF PROPERTY

There are two broad categories of property: real and personal.

Real Property Real property is the land itself and any personal property affixed to the land such that it becomes part of the land, referred to as a fixture . Fixtures include items such as a built-in dishw asher. Trees are also fixtures. The identification of what is a fixture is important because they are trans-ferred with the property when it is sold or passes to the heirs of a deceased. Courts have developed a number of methods to deter mine if a piece of personal proper ty is, in fact, a f ixture or if it remains personal proper ty. Some courts look at the way the item was at-tached to the property—the more permanent the attachment, the more likely that the item will be considered a fixture. Other courts look at whether the personal property was customized in some way to be installed—the more customization, the more lik ely it will be considered a f ixture. Still other courts look at the intentions of the parties—if the evidence indicates that the parties intended that the personal property become part of the real property, the court will find it to be a fixture. For example, a spa can remain personal proper ty or become a f ixture, depending on the sur-rounding circumstances. If the spa is self-contained and por table, and does not require any spe-cial electrical or plumbing connections, then the spa w ould not be considered a f ixture. If the spa is self-contained, but does requires special plumbing and electrical connections, then it is possible that the court may consider it a fixture, depending on which of the tests it applies. If the spa is customized to fit a specific spot in the master bathroom and requires special plumbing and electrical connections, then it is very likely the court will find that the spa is a fixture. Attorneys who work in the real estate field, as well as realtors, often have many funny stories about what some homeowners have done after the time they have signed a contract for the sale of their home and the day of closing. One buyer went to view the home one more time before clos-ing and found that the seller had removed the in-ground sprinkler system—not just the pump but the underground pipes! Trade fixtures are personal property installed by a tenant to aid in operating a business. Exam-ples include shelves and counters. Tenants are normally allowed to remove these items when they leave the leased premises, but they are responsible to repair any damages to the real property.

fixturePersonal property that has become permanently attached or associated with the real property.

Hands-on Assignment Research the laws of your state and determine which test is used to determine if an item is a fixture. Also, determine whether your state allows trade fixtures to be re-

moved from real property when a tenant leaves. Be sure to research both case and statutory law. See Appendix A for tips on how to find case and statutory law online.

RESEARCH THIS!

Client Interview Jamar and Cynthia Scott, a married couple, are owners of a fairly large piece of property that they plan to subdivide and sell for residential development. They have done similar developments in the past, so they are knowledgeable business people. This development, however, presents an unusual problem. The subdivision is located across the street from the Atlantic Ocean. They own a 10-foot piece of property that runs from the street to the beach. With public beach access becoming increasingly

scarce in the area, they thought that granting rights to use the land to the lot owners of the subdivision would be a great incentive to prospective buyers. They do not want to retain ownership in the property and want to avoid the hassles associated with the creation of a homeowners as-sociation. They have come to your firm to help them bet-ter understand what options might be available to transfer ownership of the strip of land to future lot owners of their subdivision.

Case Fact Pattern

homeowners associationAn organization made up of homeowners in a particular development that has the following primary duties: enforcing the association’s rules and regulations and maintain-ing the community’s com-mon property and facilities for use by all homeowners in the development.



Personal Property Personal property is anything that is not real property or fixtures attached to real property. It is divided into two parts: tangible and intangible. Tangible personal property is characterized by its mobility, as compared to real property, which is immobile and is personal property the value of which cannot be touched or detected by the senses. Examples of tangible personal property include:

• Automobiles • iPods • Laptop computers • Furniture • Clothes • Jewelry • Cameras

Intangible personal property is property where the true value of the item is not capab le of being touched. Notice that the key phrase in the definition is true value. Unlike tangible personal property, you cannot touch what gives intangible property its value. For example, Gina Robertson owns 500 shares of common stock in Walt Disney Company. So she does own some interest in that corporation. She even has a piece of paper, a stock certificate, which says she is par t owner of Walt Disney Company. However, she can’t visit Walt Disney World and look for the part she owns and touch it. The value of her stock is something that can-not be touched. It is an interest in all the things that make up the Disney empire—all the property and other assets, such as goodwill . The classification of property as tangible or intangible can be a little confusing to some. You can see and touch a $20 bill. But are y ou touching the real v alue of the bill? No, cash is v ery similar to the Walt Disney World stock certificate that Gina owns. Its value is not the bill itself. Instead its value comes from the goodwill of the U.S. government. That $20 bill will have value as long as the public believes in the government and the strength of the U.S. economy. Examples of intangible personal property include:

• Stocks • Bonds • Notes • Bank deposits • Cash • Accounts receivable • Trademarks • Copyrights • Patents • Goodwill • Partnership interest • Life insurance policies

PROBATE PROPERTY VERSUS NONPROBATE PROPERTY

Probate Property Probate property is the property that is owned solely by the decedent or as a tenant in common at the time of the decedent’s death. The probate court administers the distribution of this prop-erty, based on the wishes of the decedent as e xpressed in his last will and testament or the la ws of intestate succession if the decedent had no will at the time of his death. The statutes of the state the decedent died in control the passage of his property in the event he died without a will. Probate property is subject to administration costs and the claims of creditors, which reduces the assets that will ultimately be distributed to the deceased’s heirs.

personal propertyProperty that is not real property or fixtures at-tached to real property.

tangible personal propertyPersonal property that can be held or touched, such as furniture or jewelry.

intangible personal propertyPersonal property that has no physical presence but is represented by a certificate or some other instrument, such as stocks or trademarks.

goodwillA business’s reputation, its good business name, the marketability of its products.

probate propertyProperty that is owned solely by the decedent or as a tenant in common at the time of his or her death.

tenants in commonA form of tenancy that occurs when two or more people own and possess an undivided interest in the whole property. Each tenant’s interest does not have to be equal. All tenants have a right of possession but no right of survivorship.

intestate successionThe passage of a decedent’s estate as provided by state law when the decedent dies without a valid will.



Examples of probate property include:

• Real property owned by the decedent individually ( severally ). • Real property owned as tenants in common. • Personal property, including intangible personal property, owned individually or as tenants in

common. • Life insurance. Life insurance that has the estate as the named beneficiary is part of the

deceased’s probate estate. Also, when a life insurance policy designates an individual as ben-eficiary, but the individual is not alive at the time of the decedent’s death, and no alternate beneficiaries are named in the policy, the property becomes part of the probate estate.

• Civil lawsuits for money damages. • Testamentary trusts. Trusts that are included in the last will and testament of the deceased.

The assets of the testamentary trusts are included in the probate estate and the gross estate. • Debts owed the deceased.

Nonprobate Property Some property owned by the decedent at the time of her death cannot be transferred by will or through the laws of intestate succession. The decedent took some act during her lifetime that caused the prop-erty to pass directly to her heirs, rather than first going through probate. This is usually done by select-ing a type of joint ownership that provides for the transfer of the property to the surviving joint owner. Examples of nonprobate property include:

• Pay on death accounts, also called Totten trusts. Sometimes referred to as grandparent’s trusts because grandparents often use this simple and inexpensive method to leave money to their grandchildren. A pay on death account is often a savings account that is in the name of the deposi-tor as trustee and lists another person as the beneficiary in the event the trustee dies. The depositor has full use of the funds while he is alive, but the property passes directly to the beneficiary upon his death. The proceeds are not, therefore, part of the depositor’s estate. However, the property will be part of the depositor’s estate if the beneficiary dies before the depositor unless they take some other action to remove the property from his probate estate. Most banks have a simple form that trustees can fill out to create a pay on death account at the time they open the account.

• Jointly owned property. Property held as joint tenants with right of survivorship (JTWROS) or tenants by the entirety passes directly to the surviving tenants, outside of the deceased’s estate, and is generally not subject to the claims of creditors of the deceased.

• Tenancy in partnership. This is a form of ownership between partners that is similar to jointly owned property. When one partner dies, her interest in the partnership property passes to the other partners. The heirs of the decedent partner may, however, have a claim to the dollar value of the partner’s interest of the property.

• Life insurance policies. A life insurance policy with a named beneficiary who is alive at the time of the insured’s death passes directly to the beneficiary and is not part of the deceased’s probate estate.

• Living trusts. Trusts, also referred to as inter vivos trusts, are created during the life of the testator. The trust is not part of the probate estate.

• Life estates. This is a form of ownership that is tied to the life of the owner, or to the life of another, referred to as the measuring life. The life tenant has the right to the use and enjoyment of the property during his lifetime or the measuring life. The property passes to whoever has a remainder interest at the time of the death of the life tenant. Life estates can be created by deed or will. They are not part of the deceased’s probate estate. Life estates are being used more frequently in recent years.

For example, Mrs. Griffith has two adult children, John and Barbara. She owns her own home, which is her only major asset. After consulting with her attorney, she decides to use a life estate so that her house will pass directly to her children at the time of her death. Mrs. Griffith transfers interests to John and Barbara but retains a life estate in the property for herself. She has the right to use and enjoy her property for the remainder of her life. For all practical purposes, she is the owner of that property until the time she dies. John and Barbara will own the property when Mrs. Griffith dies without the house being included as part of her probate estate.

life insuranceInsurance against death.

severallyIndividually.

beneficiaryA person named in a will to receive the testator’s assets.

nonprobate propertyProperty owned by the decedent at the time of his or her death that passes to a beneficiary by a means other than a will. It is not subject to probate but is included in the decedent’s gross estate.

pay on death accounts (Totten trusts)An account that is in the name of the depositor as trustee and lists another person as the beneficiary in the event the trustee dies.

joint tenants with right of survivor-ship (JTWROS)A form of tenancy that requires four unities: posses-sion, interest, title, and time.

titleLegal evidence of the person’s ownership.

tenants by the entiretyA joint tenancy between husband and wife, similar to JTWROS, but with the addi-tional unity of marriage. It is not recognized in all states.

tenancy in partnershipA form of ownership in which property is titled in the name of the partnership. Unless otherwise provided by agreement between the partners, each partner has an equal right to use the prop-erty for partnership purposes. At the death of one partner, his or her interest passes to the surviving partners.

remainder interestInterest in real property that passes after another interest in the property ends.

life estatesAn ownership interest in property for a designated period of time, based on the life of another person.


• Transfer on death. In states that have adopted the Uniform Transfers on Death Security Regis tration Act (UTODSRA), owners of stocks, bonds, mutual fund shares, security accounts, and other accounts can register the title in transfer on death (TOD) form. The securities pass directly to the named beneficiary when the owner dies and are not part of the deceased’s probate estate. The following states have adopted the UTODSRA: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming.

Probate Estate versus Gross Estate As discussed previously, not all of the property owned by the decedent at the time of death is part of the probate estate . This is important because it reduces the cost of administration, such as attorney and court expenses, that is associated with probating an estate. It may also allow for passage of the nonprobate property without being exposed to the claims of creditors of the estate. The decedent is, however, unable to leave any of her nonprobate proper ty to heirs in the will since the will onl y controls items that are included in the probate estate. For example, let’s say that Jane owns a condo-minium with her sister Judy as joint tenants with right of sur vivorship. Jane’s interest in the condo will pass to Judy as nonprobate proper ty because of the way the property is owned by the sisters. Any attempt by Jane to leave her interest to anyone else in her will would be ineffective. There are, however, additional issues relating to the property owned, regardless of whether the property is classif ied as probate property or nonprobate property. It must also be deter mined if the property is part of the decedent’s gross estate . As a general rule, all property owned by the decedent at the time of his death, whether probate or nonprobate, is included in his gross estate. This is another demonstration of the f act that the law is a complicated beast! But, if it w ere easy, there would be no need for trained paralegals. The treatment of the deceased’s gross estate is an e xample of the detail in volved in the law of wills, trusts, and estates. While nonprobate property does not go through probate, it is, along with the probate property, included in the deceased’s gross estate for federal and state death tax purposes. Tax consequences will be discussed in detail in Part 2, along with methods a client can use to avoid inclusion of property in her gross estate.

HOW PROPERTY IS OWNED

Ownership is relatively easy to understand if the property is owned individually, also referred to as severally, without any joint owners. It becomes more complex when property is owned jointly by a number of indi viduals. The way property is owned also has a major impact on the la w of wills, trusts, and estates and can be a valuable tool in estate planning.

Ownership in Severally Owning property severally means that the proper ty is owned individually. John owns his boat severally, as does Sally her condominium. No one shares ownership of the property. This is usu-ally what an average person means when he says that he “owns” property. Figure 2.1 contains a sample warranty deed of property that is owned severally.

transfer on deathA form of ownership in which stocks, bonds, mutual fund shares, security ac-counts, and other securities pass directly to the named beneficiary upon the owner’s death

Understanding what is and is not probate prop-erty is critical in helping a client with estate planning. Making that determination, however, can be complicated. Paralegals must rely on the

expertise and decisions made by their supervis-ing attorney in this important process. When in doubt, paralegals should always consult with their supervising attorney.

Ethics Alert

probate estateProperty, both real and personal, owned by the decedent at the time of his or her death that is subject to administration.

gross estateThe total value of property owned by the decedent at the time of his or her death. The fair market value of these items is used to determine the dollar value of the gross estate.

warranty deedA deed guaranteeing clear title to real property.



FIGURE 2.1 Sample Warranty Deed—Purchaser Owning Property Individually

Return to: (enclose self-addressed stamped envelope)

Name: Jorge Rodriquez

Address: 12 Moving On Up Street Wilsonville, FL 32000

This Instrument Prepared by: Johnson & Johnson, Attorneys at Law

Address: 299 Pine St. Wilsonville, FL 32000

Property Appraisers Parcel Identification (Folio) Number(s): T49-7832

Grantee(s) S.S. #(s) 555-55-5555 Space above This Line for

Space above This Line for Processing Data Recording

WARRANTY DEED(Statutory Form —Section 689.02, F.S.)

THIS INDENTURE, made this 5th day of July, 2004, between James Johnson and Sara Johnson, his wife, of 495 Happiness Way, Wilsonville, of the County of Polk, State of Florida, Grantors, and Jorge Rodriquez, a single person, whose Social Security No. is 555-55-5555 and whose post office address is 12 Moving On Up Street, Wilsonville, of the County of Polk, State of Florida, Grantee,

WITNESSETH:

That said Grantors, for and in consideration of the sum of ten DOLLARS ($10), and other good and valu-able considerations to said Grantors in hand paid by said Grantee, the receipt whereof is hereby acknowl-edged, has granted, bargained and sold to the said Grantee, and Grantee’s heirs and assigns forever, the following described land, situate, lying and being in Polk County, Florida, to-wit:

Lot 1, Pine Dunes, according to the plat thereof, as recorded in Map Book 43,at Pages 192 and 193 of the Public Records of Polk County, Florida

SUBJECT TO a mortgage to Mortgage, Inc., in the original principal amount of $99,000, dated July 5, 2004, and recorded in Book 4896, Page 2884 in the Public Records of __________ Polk County, Florida.

SUBJECT ALSO TO restrictive covenants of record, if any, which are not specifically reimposed or extended hereby.

and said Grantors do hereby fully warrant the title to said land, and will defend the same against the lawful claims of all persons whomsoever.

IN WITNESS WHEREOF, Grantors have hereunto set their hands and seals the day and year first above written.

Signed, sealed and delivered in our presence: ______________________________ _____________________________ [Typed Name]

______________________________ _____________________________ [Typed Name]

STATE OF FLORIDA COUNTY OF

The foregoing instrument was acknowledged before me this ______ day of ________ _____, by ____________________, who are personally known to me or have produced their Florida Drivers’ Licenses, Nos. __________and ____________ respectively, and who did (did not) take an oath.

WITNESS my hand and official seal in the County and State last aforesaid this day of ____________, ____________.

Printed Name: Notary Public, State of Florida at Large

My commission expires:


Tenants in Common One of the most common for ms of co-ownership of proper ty is tenants in common. It occurs when two or more people own and possess an undivided interest in the whole property. Note that there is not a requirement for each person to own an equal share of the proper ty. So, one person may own one-half and two others may own one-fourth each. While the owners each have an un-divided interest in the whole property, they only own their portion in fee simple . The term undivided interest is confusing to many people. The key is to understand that each tenant in common has a right to the use and enjoyment of the property as a whole even though he only owns one part of the whole.

undivided interestA title in property held by two or more people that does not specify the inter-est of each party.

fee simpleThe most complete form of ownership of real property allowed by law.



For example, the Scotts from the Client Inter view end up subdividing their property into 33 home sites. If they decide to transfer the beach access property in equal shares as tenants in com-mon to the o wners of the sites, each homeo wner would own a 1/33 interest in the 10-foot-wide piece of property. When the homeowners decide to use that piece of proper ty to take a walk on the beach, they do not have to worry about staying on the little strip of the property that they own in fee simple. They are each free to use any portion of the 10-foot strip. It is important to note that the right of sur vivorship is not a characteristic of tenants in com-mon. Each owner retains the right to dispose of her interest in her will without concer ns about claims of the other co-owners. When one owner dies, her interest in the proper ty owned in ten-ants in common passes through her estate.

Joint Tenants with Right of Survivorship Joint tenants with right of sur vivorship (JTWROS) is a popular for m of owning property for people who want to share ownership in property, whether real or personal, and want that property to pass to the other owners upon their death. Let’s use the beach-lo ving homeowners from the Client Inter view to demonstrate w hat the right of survivorship means. If the 33 homeowners owned the 10-foot beach access proper ty as JTWROS, they would still each own an undivided 1/33 interest in the beach access property. There would be a signif icant difference, however, when one of the homeo wners died. If the proper ty were owned as tenants in common, each homeowner’s 1/33 would go to his heirs. However, if they owned the property as JTWROS, each homeowner’s 1/33 share would be divided equally among the surviving homeowners. The requirements for owning property as JTWROS are, as may be expected, different from owning property as tenants in common. They include four unities :

1. Unity of possession. Joint ownership and control. This unity is one that is shared with a tenancy in common. Note that each owner has an undivided interest in the property and has the right to use and enjoy the entire property, as was true if they owned the property as tenants in common.

2. Unity of interest. The interests in the account must be identical. Unlike a tenancy in com-mon, in a JTWROS each owner must own an equal share of the property. Two or more persons can own the property, but each person must own an equal share.

3. Unity of title. The interests must have originated in the same instrument. The parties must obtain their ownership in the same document, such as a deed or a will.

4. Unity of time. The interests must have commenced simultaneously. In other words the joint tenants must have obtained their interests at the same time as the other joint tenants.

When one owner dies, her interest in the property owned as JTWROS does not pass through her estate. Instead it passes in equal share to the surviving joint owners.

Tenants by the Entirety This form of ownership shares many of the characteristics of JTWROS. There is one key differ-ence—only a husband and wife can own property as tenants by the entirety. This is an additional unity—the unity of marriage. The American legal system, which is largely drawn from the English common law, considers a man and a woman as becoming a separate entity when they marry. Historically they were con-sidered one person in the eyes of the law. Tenancy by the entirety grew out of this premise. Some states have a legal presumption that property owned by husband and wife is owned as tenants by the entirety. This presumption principally applies to real property. The idea is that both the husband and wife own the entire property, so if one dies the surviving spouse still owns the entire property. While both spouses are alive, neither can sell or otherwise obligate the property without the consent of the other spouse. Therefore, both must sign any deed or mortgage. If the par ties divorce, their ownership interest automatically becomes tenancy in common under the laws of most states that still allow this form of ownership. The Passalino v. Protective Group Securities, Inc., case discusses the unities associated with tenants by the entirety form of ownership and answers the question of whether proceeds from the sale of such property retain their character as a tenancy by entireties.

unityA requirement for creating a joint tenancy, such as joint tenants with right of survivorship.

CYBERTRIP

Visit these sites to learn more about joint ownership of property:

James T. Blazek & Associates, P.C.. L.L.O. (2000), “Joint Tenancy Q and A”: http://library.findlaw.com/2000/Apr/1/129100.html

Carol Masden Simpson of Hattery, Simpson & West (2000), “Joint Tenancy”: http://library.findlaw.com/2000/Sep/1/131953.html

Missouri Bar Center (1999). “What Is a Joint Tenancy?”: http://library.findlaw.com/1999/May/ 25/128642.html



Property owned as tenants b y the entirety at the time of one spouse’ s death is immediatel y owned completely by the surviving spouse and the proper ty is not par t of the deceased spouse’s probate estate. Tenancy by the entirety is not reco gnized in all states. In those states that do not reco gnize this form of ownership, married couples usually own property as JTWROS or, in those states that have community property, as community property.

Community Property A number of states ha ve an additional for m of shared o wnership of proper ty, kno wn as community property . Community property is based on civil law rather than English common law. This form of co-ownership is used in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. States differ on the rules relating to this form of ownership. Unlike the other forms of ownership discussed in this chapter, community property is created by operation of law. Property may be classified as community property even though title is in the name of only one of the spouses. In those instances the other spouse still has a one-half interest in the property even though his or her name is not on the title or other for m of conveyance. The other forms of ownership discussed are created by the way the property is conveyed. Community property states consider proper ty acquired during the time a couple is mar ried, with limited exceptions, as being owned equally by each spouse. The parties own the property equally and must both consent to a sale or other transfer of the entire property. A spouse can leave his interest in community proper ty to anyone he chooses by will, but, if there is no will, some community property states provide that the deceased’s share in any commu-nity property owned at death passes to the surviving spouse. Some community property states also allow the parties to select a form of community property that includes a right of survivorship. States that provide for owning property as community property also recognize separate prop-erty. Separate property is property owned by each spouse prior to the mar riage and property re-ceived individually by a spouse while married by gift, will, or inheritance. Incomes or rent from separately owned property is also considered separate proper ty, unless the spouse that o wns it takes some act that indicates she intends to gi ve the other spouse an interest, as in ne w property purchased with the funds obtained from the sale of separate property. It is very important that paralegals understand the various ways that property can be owned and how the way property is owned affects what happens to the proper ty when the owner dies. Figure 2.2 provides a comparison of the forms of ownership discussed in this chapter.

CASE BRIEF

ASSIGNMENT

Read and brief the Passalino v. Protec-tive Group Securities, Inc., case on page 30. (See Appendix A for information on how to brief cases.)

community propertyAll property acquired during marriage in a community property state, owned in equal shares.

FIGURE 2.2 Comparison of Forms of AOwnership

Form of Ownership Unities

Tenants in common Unity of possession —joint ownership and control No right of survivorship Created by gift, sale, or will Joint tenants with Unity of possession—joint ownership and controlright of survivorship Unity of interest—the interests in the account must be identical Unity of title—the interests must have originated in the same instrument Unity of time—the interests must have commenced simultaneously Right of survivorship Created by gift, sale, or willTenants by the entirety Unity of possession—joint ownership and control Unity of interest—the interests in the account must be identical Unity of title—the interests must have originated in the same instrument Unity of time—the interests must have commenced simultaneously Unity of marriage—the parties must have been married at the time the property

became titled in their joint names Right of survivorship

Created by gift, sale, or will Community property Unity of possession—joint ownership and control Unity of interest—undivided equal shares Unity of marriage—must be owned by husband and wife Created by operation of law Right of survivorship only if the parties create it pursuant to state law



CASE IN POINT

PROCEEDS FROM SALE OF REAL PROPERTY MAINTAIN THEIR CHARACTER AS A TENANCY BY ENTIRETIES.

IN THE DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDAFOURTH DISTRICT JULY TERM 2004

JEFFREY PASSALINO,Appellant,

v.PROTECTIVE GROUP SECURITIES, INC.,

STEVEN GRAU and STEPHENMOLINARI,Appellees.

CASE NO. 4D03-4477Opinion filed November 10, 2004.

Appeal of a non-final order from the CircuitCourt for the Seventeenth Judicial Circuit,Broward County; Richard Eade, Judge; L.T.Case No. CACE 03-15289 07.

WARNER, J. The issue presented in this appeal is whether proceeds from the sale of property held as a tenancy by the entireties retain their character as entireties property when deposited in an at-torney’s trust account. We hold that the proceeds do remain entireties property and affirm the judgment of the trial court dissolving a writ of garnishment against the trust account by a creditor of one spouse. Appellee, Stephen Molinari, was a judgment debtor of appellant, Jeffrey Passalino. Mrs. Molinari was not a debtor of Passalino. Mr. and Mrs. Molinari sold prop-erty held as a tenancy by the entireties. The proceeds of the sale were deposited in a trust account held by their attorney. They were not co-mingled with other client’s funds. The Moli-naris intended to use them to purchase a home, although their first contract for purchase fell through. During the five months that the proceeds were in trust, the attorney, at the direction of the Molinaris, disbursed some of the monies into the Molinaris’ personal bank account for their living expenses. The remainder

amount of approximately $400,000 was intended as the deposit on the second contract for purchase of a home, which was signed October 10, 2003, and scheduled to close by October 22, 2003. In between that time, Passalino filed a writ of garnishment against the attorney’s trust account, which the trial court ultimately dissolved because it found the proceeds were held as a tenancy by the entireties. Passalino argues that after the transfer of the proceeds of the sale to the trust account, the property no longer had the six unities necessary for it to constitute a tenancy by the en-tireties, which are (1) unity of possession (joint ownership and control); (2) unity of interest (the interests in the account must be identical); (3) unity of title (the interests must have origi-nated in the same instrument); (4) unity of time (the interests must have commenced simultaneously); (5) survivorship; and (6) unity of marriage (the parties must be married at the time the property became titled in their joint names). Beal Bank, SSB v. Almand&Assoc., 780 So. 2d 45, 52 (Fla. 2001) (citations omit-ted, footnote omitted). He specifically claims that the transfer of the funds to the trust account destroyed the unities of pos-session and title because the attorney was in possession of the funds and was the only person with authority to sign on the account.

Hands-on Assignment Research the laws of your state and determine if it recognizes tenancy by the entirety and, if so, whether it is limited to ownership of real property. Be sure to research both case and statutory law.

See Appendix A for tips on how to find case and statutory law online.

RESEARCH THIS!

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The proceeds from the sale or rental of tenancy by the en-tireties property are also held as a tenancy by the entireties and are owned in total by both the husband and the wife. Dodson v. Nat’l Title Ins. Co., 31 So. 2d 402, 404 (Fla. 1947); Miller v. Rosenthal, 510 So. 2d 1127, 1128 (Fla. 2d DCA 1987); Brown v. Hanger, 368 So. 2d 63, 64 (Fla. 3d DCA 1979); Sheldon v. Waters, 168 F.2d 483, 485 (5th Cir. 1948). Here, there is no dis-pute that the Molinaris owned the rental property as a tenancy by the entireties and the proceeds from the sale retained that character. The issue is whether this character was lost when the Moli-naris deposited the proceeds into their attorney’s trust account. A tenancy by the entireties can be terminated by the divorce of the owners, the death of one of the owners, or an agreement between the owners. Sheldon, 168 F.2d at 485. “[W]ithout an agreement neither alone can [do] anything to alter the tenancy of identifiable property so held.” Id. The agreement need not be explicit; it can be inferred from the conduct of the parties. See id. at 485-86. Transferring the proceeds of the sale of en-tireties property to a trustee for the benefit of the husband and wife does not terminate the unities of title or possession, where the parties clearly intended their property to be held as a tenancy by the entireties by exercising beneficial owner-ship of the property and controlling the property’s disposition. See Snyder v. Dinardo, 700 So. 2d 726 (Fla. 2d DCA 1997) (finding escrow agreement between husband and wife and their attorney for the proceeds of sale of entireties property clearly established the intent to create an entireties estate even though the escrow agent was given sole signatory authority over account); see also In re Nagel, 298 B.R. 582, 588 (Bankr. E.D. Va. 2003) (stating that under Virginia law, which is similar to Florida law, “[t]he proceeds, which the settlement attorney retained and continues to hold, are held—automatically—as tenants by the entirety . . . until the parties jointly agree to the contrary.”) Passalino cites a footnote in Rollins v. Alvarez, 792 So. 2d 695 (Fla. 5th DCA 2001), as support for his position. In Rollins, a husband and wife funded an inter vivos trust with marital property. The wife transferred her interest in the property to the trust, under which her husband had sole control over the funds and had authority to amend, modify, or revoke the trust. The husband executed amendments changing the beneficiaries. These were challenged, and the trial court’s ruling on the valid-ity of the amendments was appealed. Although not in issue, in a footnote the district court stated, “There is no dispute that

the effect of this transfer to the trustee destroyed any tenancy by the entireties that may have existed in the property pre-trans-fer.” See Hunt v. Covington, 145 Fla. 706, 200 So. 76 (1941); 12 Fla. Jur. 2d Cotenancy and Partition § 29 (1998).” 792 So. 2d at 696 n.2. Appellant suggests that Rollins stands for the proposition that a transfer to a trustee of entireties property in and of itself terminates the entireties. We disagree with his interpretation. Rollins’s citation to Hunt is instructive. In Hunt, a husband’s conveyance of entireties property to his wife terminated his interest in the property and, thus, the entireties character of the property. 200 So. 2d at 77-78. Likewise, in Rollins the wife’s transfer of marital property to the trust in which her husband maintained sole control and could direct the disposition of property terminated the entireties character of property. In other words, the unities of possession and interest were terminated, because the wife no longer exercised control over the property. The evidence in this case established that Mr. and Mrs. Molinari did not intend to terminate the tenancy by the entireties when they deposited the proceeds of the sale from their entireties property in the trust account. The money was held for their use and benefit, and only they could direct its disposition. While the evidence indi-cated that either Mr. or Mrs. Molinari could order disbursements, this does not defeat the characterization of the trust funds as property held as a tenancy by the entireties. See Beal Bank, 780 So. 2d at 56 (finding that the unilateral alienation by one spouse of money in a bank account does not demonstrate that the account is not held as a tenancy by the entireties where “there is evidence that each spouse had permission to act for the other”). Further-more, the fact that the Molinaris withdrew funds from the account in order to pay living expenses rather than for the purchase of a new home does not alter the character of the property. There is no restriction on how a couple may spend the proceeds from the sale of entireties property as long as both spouses are in agreement. See Oliver v. Givens, 129 S.E.2d 661, 664 (Va. 1963) (noting that “creditors are not prejudiced by a gift of property which is exempt from their claims”). As the unities of title and possession were not destroyed in the sale proceeds deposited in the attorney’s trust account, the proceeds maintain their character as a tenancy by entireties. Thus, the trial court correctly dissolved the writ of garnishment. We also find no abuse of discretion in the remaining issue raised by Passalino as to the timing of the hearing on the motion to dissolve. Affirmed.

OTHER MATTERS RELATED TO OWNERSHIP

Trusts Trusts are essential tools in the la w f irm’s toolbox to use in meeting the estate planning needs of its clients. A settlor for the benef it of the benef iciary creates them. While use of tr usts as a planning tool will be dealt with in detail in Part 2, they do involve an interesting way of owning property that should be considered when discussing ownership. As was discussed earlier, one or more people can own property. It can be owned severally, as tenants in common, as tenants by the entirety, or as community proper ty. The legal evidence of the person’s ownership is called title. This includes the right to possess and enjo y the property.

legal titleA title that indicates legal ownership but not neces-sarily a beneficial interest.

equitable titleA title that shows a benefi-cial interest in property.




Testamentary Trust A trust may also be created in a will and go into ef fect when the testator dies. These trusts are called testamentary trusts . Like revocable living trusts, the testator has the right to change, amend, or terminate the trust during her lifetime. A testamentary trust becomes operative upon the death of the testator. The assets of the testamentary trust are included in the probate decedent’s probate estate and are part of the deceased’s gross estate for state and federal taxation purposes.

For example, Wanda and Gary own a condominium together as tenants in common. Each has an undivided one-half ownership of the condo, and each has the right to use and enjo y the entire condo. Their deed, representing title to the proper ty, states that they own an undivided one-half interest in the proper ty. They can do w hatever they want with that one-half interest, including selling it or leaving it to someone in their will. Trusts add another wrinkle to the understanding of ownership. Title is actually split in a trust. The trustee holds the legal title, and the benef iciary of the tr ust holds the equitable title . Put simply, the trustee controls the property of the trust, but it must be used pursuant to the terms of the trust for the benefit of the beneficiary.

Implied Trusts Implied trusts are trusts that are not intentionally created by a settlor. Instead they are created by operation of la w. Included in the broad phrase implied trusts are resulting tr usts and con-structive trusts.

• Resulting trusts are created in situations where the acts of the parties show that they intended that the property be held in trust for another person’s benefit. For example, Jake pays for a car but places the title in his brother’s name. Both Jake and his brother know that this is not intended as a gift. Resulting trust can also result when an express trust is unsuccessful for some reason.

• Constructive trust s are imposed by courts to ensure equity . In the law, equity is the concept of fairness and justice. A constructive trust is one way a court may use its power to promote fairness by preventing people from being unjustly enriched. Courts normally impose them when the person obtained title to the property by some wrongdoing, such as fraud or undue influence. See Real World Discussion Topic 2 for more on constructive trusts.

Living Trusts Living trusts , also refer red to as inter vivos trusts , are trusts that go into ef fect during the lifetime of the person who created it. There are two main categories of living trusts— revocable living trusts and irrevocable living trusts . Revocable living trusts are ones in which the settlor, the person who creates the trust, retains the right to change, amend, or terminate the trust during his lifetime. Irrevocable living trusts, on the other hand, cannot be revoked or changed by the set-tlor. Irrevocable living trusts have certain tax advantages that are not shared by revocable living trusts, which will be covered in more detail in Part 2.

Summary While laypeople may feel that they understand what ownership of property is, paralegal students must be aware that ownership is a complex legal concept that plays a signif icant role in helping clients plan for their future. How property is owned has a major impact on the rights of clients while they are alive and how their property is treated when they die. Property can be broadly divided into two main categories—real and personal proper ty. Real property includes the land itself and an y personal proper ty that is so attached to the land as to

express trustA trust expressly created by the settlor.

equityThe doctrine of fairness and justice; the process of mak-ing things balance or be equal between parties.

constructive trustA trust imposed by a court on equitable grounds against a person who has wrongfully obtained property of another.

revocable living trustTrust created during the settlor’s lifetime and one in which the settlor reserved the right to terminate the trust and recover the trust property.

living trustA trust created during a settlor’s lifetime. Also called an inter vivos trust.

Inter vivos trustSee living trust.

testamentary trustA trust created in the settlor’s will that takes ef-fect upon his or her death.

irrevocable living trustTrust created during the settlor’s lifetime and one in which the settlor did not reserve the right to termi-nate the trust and recover the trust property.

implied trustTrust created by operation of law.

resulting trustA trust created by a court when the facts indicate the parties did not intend for the legal owner of the property to also have a beneficial interest in the property.

Visit this site to learn more about trusts: Paralegal Plus. Guide to Trusts: www.paralegal-plus.com/trust_0.htm

CYBER TRIP



Key Terms BeneficiaryCommunity propertyConstructive trustEquitable titleEquityExpress trustFee simpleFixtureGoodwillGross estateHomeowners associationImplied trustIntangible personal propertyInter vivos trustIntestate successionIrrevocable living trustJoint tenants with right of survivorship (JTWR OS)Legal titleLife estatesLife insurance

Living trustNonprobate propertyPay on death accounts (Totten trusts)Personal propertyProbate estateProbate propertyRemainder interestResulting trustRevocable living trustSeverallyTangible personal propertyTenancy in partnershipTenants by the entiretyTenants in commonTestamentary trustTitleTransfer on deathUndivided interestUnityWarranty deed

Review Questions

1. What is the difference between real and personal property? What is the difference between tangible personal property and intangible personal property?

2. What is a fixture? 3. What is probate property? What is nonprobate property? 4. What is the gross estate and why is it significant? 5. What is the difference between joint tenants with right of survivorship and tenants by the

entirety?

become part of it. Personal property so affixed to the land is called fixtures. Courts use a number of tests to determine if personal property should be considered a fixture. Personal property is everything else. It is divided into two categories: tangible personal property and intangible personal property. Examples of tangible personal property include automobiles, iP-ods, and televisions. Examples of intangible personal property include stocks, bonds, copyrights, and trademarks. Property law also classif ies property as probate proper ty and nonprobate proper ty. Probate property is the property that is owned solely by the decedent or as a tenant in common at the time of the decedent’s death. Nonprobate property is property that passes by operation of law, rather than by will, such as a life insurance polic y that has a named benef iciary and proper ty that is owned jointly as joint tenants with right of sur vivorship. Both probate and nonprobate proper ty are included in a deceased’s gross estate for state and federal tax purposes. Property can be owned severally, as tenants in common, as joint tenants with right of survivor-ship, as tenants by the entirety, or as community proper ty. Each way of owning property has its own requirements and impacts the legal rights of the owners as it relates to whether the property will be part of their probate estate or not. Trusts add another interesting wrinkle w hen considering ownership. Title is actually split in a trust. The trustee holds the legal title and the benef iciary of the trust holds the equitable title. Trusts can be created while the settlor is alive, which are referred to as living trusts, or in a will, which are referred to as testamentary trusts. Paralegal students must learn the details of proper ty ownership, as well as how that form of ownership will impact the decedent’s estate, to properly perform their duties in the wills, tr usts, and estates law firm.



Real World Discussion Topics

1. In 1972, Philip Miller married Barbara Jenks Miller. Both of them had three adult children from previous marriages. In May 1976, Philip Miller purchased two adjacent, undeveloped waterfront lots. In September 1976, Philip transferred ownership of the undeveloped lots from himself, individually, to Barbara and himself, as tenants by the entireties. The transfer was made based on an oral promise by Barbara that she would leave the two pieces of property to his children upon her death. The children were to pay estate taxes and administrative expenses associated with the devise. Philip’s intent was that Barbara would have the use and enjoyment of the properties during her lifetime without the children paying estate taxes until her death.

The Millers built a house on one lot, referred to as the main house, and a house on the other lot, referred to as the guesthouse. Barbara resided in the main house after Philip’s death.

In 1982, Philip’s children were notified that Barbara intended to provide for them in her will the property (or a value equivalent thereto) net of marginal estate tax rate. However, until that time Barbara reserved the right to use the houses or to dispose of them. In 1990, Barbara sold a remainder interest in the main house to her daughter.

Philip’s children learned that Barbara did not leave them the main house after her death. They subsequently brought suit to impose a constructive trust on the property transferred to Barbara’s daughter, which was granted by the trial court.

Do you agree with the trial court’s imposition of a constructive trust in this situation? Why or why not? See Collinson v. Miller, 30 Fla.L.Weekly D952 (Fla. 2d DCA 2005).

2. Elizabeth Hillyer died on November 6, 1993. At the time of her death, she owned a con-dominium as tenants in common with her daughter, Gale Hillyer. Elizabeth and Gale each owned 50 percent interest in the condominium.

Elizabeth’s will contained the following paragraph:

With respect to any property which I may own jointly with one or more per-sons, either as joint tenants with rights of survivorship or otherwise, I do hereby confirm the same and direct that such property shall pass to the surviving joint tenant or tenants as the case may be.

Gale, as personal representative of her mother’s estate, petitioned the court to determine that her one-half interest in a condominium, which she owned as tenants in common with the decedent, was homestead property and passed pursuant to the quoted provision in the will.

The probate court entered an order determining that Elizabeth’s one-half interest in the condominium would pass pursuant to the residuary clause of the will, which was to be divided equally between Gale Hillyer and Douglas Van Allen Hillyer, Elizabeth’s son. The decedent also executed a codicil to her will in which she made a specific bequest of a mo-bile home to Douglas Van Allen Hillyer.

On appeal, the court held that the probate court erred by considering documents and lan-guage outside the will where the language of the quoted paragraph clearly left the decedent’s interest in the property that she owned as tenants in common with her daughter, to her daughter.

Do you agree with the appellate court’s ruling in the case? Was the use of tenancy in common the central issue that created the problem that resulted in this litigation? Or, was it a poorly worded will? What could Elizabeth have done before her death to save her children the cost and emotional distress, caused by the two siblings arguing over the question of to whom their mother left the condominium, that resulted in this case? See In re Estate of Hillyer, 664 So.2d 361 (Fla. 4th DCA 1995).

3. The Dietl family operated a family farm for many years. Joseph Dietl took out a loan using the farm as security. The mortgage document granted the lender a security interest in “in all goods now owned or hereafter acquired [that are] intended to be used or are actually used

6. What are implied trusts and why are they important in the law? 7. What is the difference between resulting trusts and constructive trusts? 8. What is a revocable living trust? What is an irrevocable living trust? 9. What is community property?10. What is a life estate?



so as to become Fixtures.” The mortgage defined the premises to include “all improvements and fixtures * * * now or hereafter existing or constructed upon the land, including but not limited to buildings and other structures.”

Dietl defaulted on the loan, and a foreclosure action was initiated by the lender. A notice of foreclosure was published in the paper that included a legal description which included “all improvements and fixtures * * * now or hereafter existing or constructed upon the Land, including but not limited to buildings and other structures.” A decree of foreclosure was entered, and the property was set for a sheriff’s sale. Prior to that sale, notice of the sheriff’s sale was published in an area newspaper that set forth the legal description of the real estate at issue and further indicated that the sale included “all buildings and improvements thereon[ ] and the tenements, hereditaments[,] and appurtenances thereunto belonging.”

Nokomis Quarry Company was the high bidder at the sheriff’s sale. The sheriff’s deed included the legal description of the property, but it did not specifically reference any fixtures or buildings located on the farmland. Sometime before Nokomis took possession of the property, Dietl removed the following items from the farm that had been on the property for some time:

a. Unloading fixtures from the tops of the grain silosb. A one-car garage buildingc. An egg-house buildingd. A storage buildinge. Tubular fencing

Nokomos filed suit, contending among other things that Dietl had no right to remove the items. The trial court ruled that he had no right to remove the items.

Based on the facts given, what do you think are the key reasons that the trial court ruled as it did? Do you agree with the court’s ruling that Dietl had no right to remove the listed items? If yes, why? If no, why? See Nokomis Quarry Co. v. Dietl, 333 Ill.App.3d 480, 775 N.E.2d 669 (Ill.App. 2002).

1. You are a member of the local chapter of the Paralegal Association of America, a professional organization for legal assistants and paralegals. The local chapter president knows that you work in the probate division of Bank, Fort and Knox and has asked you to do a presentation on the various ways that property can be owned and how ownership impacts whether the property will be part of an estate when the owner dies.

Using your textbook, the Internet, and other resources available to you, research the topic of your discussion and prepare an 8- to 10-slide PowerPoint presentation to be used as part of your speech before the organization.

2. The U.S. legal system is complex, and much of that complexity comes from the fact that there are 50 states and the federal government, each with its own legislature that passes its own laws. Many of these laws impact the ownership of property and the law of wills, trusts, and estates. How property can be owned is an example of how state laws differ. Research the laws of your state; determine which of the various forms of ownership are available to property owners; and prepare an interoffice memorandum of law to your supervising attorney, Joe Stevenson, that contains your findings. Be sure to cite authority, such as cases and statutes that support your conclusions.

3. Review the facts of the case set out in this chapter’s Client Interview. Write an interoffice memorandum of law to your supervising attorney, Joe Stevenson, outlining the form of ownership you would recommend that the Scotts use in transferring the 10-foot piece of oceanfront property. You should include the reasons you selected the form of ownership you recommended as well as why you did not select the other forms available. Be sure to cite authority, such as cases and statutes that support your conclusions.

4. Review the sample deed contained in Figure 2.1. Prepare separate warranty deeds for a trans-fer of the real estate from James Johnson and Sara Johnson to Jorge Rodriquez and his wife, Cathy Rodriquez, as: (1) tenants in common, (2) joint tenants by the entireties with rights of survivorship, and (3) tenants by the entireties.




Vocabulary Builders

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ACROSS 2. Insurance against death 4. A deed guaranteeing clear title to real property 5. Form of ownership in which property is titled in the name

of the partnership 7. Fairness, justice 8. An ownership interest in property for a designated period

of time, based on the life of another person 9. Individually11. A trust created by a court when the facts indicate the par-

ties did not intend for the legal owner of the property to also have a beneficial interest in the property

12. A trust created during the settlor’s lifetime and one in which the settlor reserved the right to terminate the trust and recover the trust property

15. A business’s reputation, its good business name, the mar-ketability of its products

16. A person named in a will to receive the testator’s assets21. Trust created by operation of law22. Personal property that has become permanently attached

or associated with the real property23. A requirement for creating a joint tenancy24. An account that is in the name of the depositor as trustee

and lists another person as the beneficiary in the event the trustee dies

DOWN 1. A form of tenancy that requires four unities: possession,

interest, title, and time 3. A trust created during a settlor’s lifetime 6. Property that is owned solely by the decedent or as a

tenant in common at the time of his or her death10. Property owned by the decedent at the time of his or her

death that passes to a beneficiary by a means other than a will.

13. Trust imposed by a court on equitable grounds against a person who has wrongfully obtained property of another

14. A title in property held by two or more people that does not specify the interest of each party.

17. The most complete form of ownership of real property allowed by law

18. A trust expressly created by a settlor19. Trust created during a settlor’s lifetime20. Legal evidence of the person’s ownership

Vocabulary Builders


Chapter 3

38

Testate versus Intestate CHAPTER OBJECTIVES


• Explain the differences between testate and intestate.

• Recognize and demonstrate an understanding of the terms associated with testate and intestate succession.

• Identify the various types of wills.

• Demonstrate an understanding of factors that affect the passage of a decedent’s estate.

• Explain what slayer statutes are and the reasons most states have adopted them.

• Explain how the law protects the surviving spouse and children of the decedent.

What happens to a person’s property when he dies? This is a simple but v ery important question. And, like the answers to most legal questions, there is no easy answer. This chapter introduces the parale gal student to some of the basic concepts associated with the passage of a person’s property at death. The primary factor in determining what happens with the decedent’s estate is whether the person dies with or without a will. This chapter will discuss some of the basic concepts associated with both intestate and testate succession.

WHY “TESTATE VERSUS INTESTATE“ IS IMPORTANT TO THE PARALEGAL STUDENT

Chapter 3 provides basic introductory information about the passage of proper ty at the time of the owner’s death and related material. P aralegals who work in wills, tr usts, and estates f irms must have a thorough comprehension of the dif ferences in how a decedent’s estate passes if she dies with or without a will, the protection states gi ve to the decedent’s surviving spouse and children, and the types of wills that are used. Understanding these introductor y concepts will provide paralegal students with a foundation on w hich to build their understanding of the more intricate details that will be addressed in later chapters.

TESTATE SUCCESSION

Testate succession is the passage of proper ty pursuant to the provision of a will. A person dies testate when he has a valid will at the time of his death . There is one obvious advantage of having a will as compared to dying intestate: the testator has the ability to deter mine who will receive his property upon his death.

testate successionThe passage of property following the dictates of a will.

valid willA will that is executed in compliance with the laws of the state in which it was executed.

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Chapter 3 Testate versus Intestate 39

FIGURE 3.1California Holographic Will Provision

6111. (a) A will that does not comply with Section 6110 is valid as a holographic will, whether or not witnessed, if the signature and the material provisions are in the handwriting of the testator.

It is not enough that the testator writes down her intent of how her estate should be handled. If the writing does not comply with the statutory requirements, it will not take effect when she dies. Intent alone is not enough. See the Angelus v. Pass case later in this chapter for an example of how important complying with statutory requirements is to ensure the decedent’s intent is carried out.

TYPES OF WILLS

In this text reference to a will means a valid will—a will that is executed in compliance with the laws of the state in which it was executed. There are, however, many different types of wills, each with their own name. Some are valid in all states.

Holographic (Olographic) Will A holographic will is one written in the testator’s own handwriting. This type of will is valid in some states. Some states, like Florida and Alabama, recognize holographic wills if they comply with the statutory execution requirements. Others recognize them if they are entirely written by hand and signed by the testator. Figure 3.1 contains the California statute on holographic wills. Figure 3.2 sets out the states in w hich they are invalid and those states that allo w them, along with any restrictions the state applies.

Joint Will A joint will is a single will with more than one testator. It may create an obligation on the surviving testator to dispose of the property under the provisions of the joint will. It is probated each time that a co-testator dies. Joint wills are often made pursuant to a contract betw een the parties that sets out how each person’s estate will be distributed. These contracts are sometimes refer red to as joint will agreements. Some states require such a contract in order for the joint will to be enforceable. While joint wills are often used for married couples, their use should be avoided absent special cir-cumstances. Changes in the testators’ lives may occur that diminish the suitability of the terms of the joint will to the parties involved. Examples of some of the things that might occur include: the couple may get a divorce, the will may be destroyed by one of the parties, or one party may revoke the will.

Living Will The use of the term living will causes confusion in the minds of many people, including parale-gal students. The word will is normally used in the law of wills, trusts, and estates to refer to an expression of the testamentary intent of the testator. A living will does not refer to an expression of what a person wants to happen to his property after his death. Instead it is an advance direc-tive that expresses the maker’s desires relating to the use of e xtraordinary measures to prolong his life when there is no reasonab le expectation of recovery. Living wills and other adv ance directives are covered in detail in Chapter 7.

holographic willA will entirely written and signed by the testator in that person’s own hand-writing.

Client Interview Sara Johnson and Brad Law lived together for a number of years. They recently had a daughter, Sharon. Sara and Brad never got married but considered themselves soul mates. The house they lived in was in Brad’s name, as was the car and motorcycle. They were both in their 20s and had no reason to worry about either of them dying. As a

result, neither of them thought that a will was needed. Brad died in a motorcycle accident while at Bike Week in Daytona Beach, Florida. Sara has come to your office to find out what will happen to the house and other items owned by Brad at the time of his death.

Case Fact Pattern

joint willA single document intended to be the will for both spouses and which is signed by both parties.

living willA document that expresses a person’s wish to be allowed to die without being kept alive by artificial means. It is not a will, but rather an expression of a person’s desires.

CASE BRIEF

ASSIGNMENT

Read and brief the Merritt v. Yates case on page 43. (See Appendix A for information on how to brief cases.)



FIGURE 3.2Validity of Holo-graphic Will by State

Alabama Invalid unless it complies with state law relating to executionInternet access to all Alabama statutes:http://alisdb.legislature.state.al.us/acas/ACASLogin.asp

Alaska ValidInternet access to all Alaska statutes:www.legis.state.ak.us/folhome.htm

Arizona ValidInternet access to all Arizona state statutes:www.azleg.state.az.us/ArizonaRevisedStatutes.asp

Arkansas ValidInternet access to all Arkansas statutes:www.arkleg.state.ar.us/data/ar_code.asp

California ValidInternet access to all California statutes:www.leginfo.ca.gov/calaw.html

Colorado ValidInternet access to all Colorado statutes:http://198.187.128.12/colorado/lpext.dll?f=templates&fn=fs-main.htm&2.0

Connecticut Invalid unless it complies with state law relating to execution or was valid in the state where it was executedInternet access to all Connecticut statutes:www.cga.ct.gov/2005/pub/titles.htm

Delaware Invalid unless it was valid in the state where it was executedInternet access to all Delaware statutes:www.delcode.state.de.us/

Florida Invalid unless it complies with state law relating to executionInternet access to all Florida statutes:www.leg.state.fl.us/Statutes/index.cfm?Mode=View%20Statutes& Submenu=1&Tab=statutes

Georgia InvalidInternet access to all Georgia statutes:www.legis.state.ga.us/cgi-bin/gl_codes_detail.pl?code=1-1-1

Hawaii ValidInternet access to all Hawaii statutes:www.capitol.hawaii.gov/site1/docs/docs.asp?press1=docs

Idaho ValidInternet access to all Idaho statutes:www3.state.id.us/idstat/TOC/idstTOC.html

Illinois InvalidInternet access to all Illinois statutes:www.ilga.gov/legislation/ilcs/ilcs.asp

Indiana Invalid unless it complies with state law relating to execution or was valid in the state where it was executedInternet access to all Indiana statutes:www.ai.org/legislative/ic/code/

Iowa Invalid unless valid in the state where it was executedInternet access to all Iowa statutes:www2.legis.state.ia.us/IACODE/

Kansas Invalid unless valid in the state where it was executedInternet access to all Kansas statutes:www.kslegislature.org/legsrv-statutes/index.do

Kentucky ValidInternet access to all Kentucky statutes:www.lrc.state.ky.us/statrev/frontpg.htm



Louisiana ValidInternet access to all Louisiana statutes:www.legis.state.la.us/lss/tsrssearch.htm

Maine ValidInternet access to all Maine statutes:http://janus.state.me.us/legis/statutes/

Maryland Invalid except in certain situations relating to members of the armed services on active duty and mariners at seaInternet access to all Maryland statutes:http://mlis.state.md.us/#stat

Massachusetts Invalid unless it complies with state law relating to execution or was valid in the state where it was executedInternet access to all Massachusetts statutes:www.mass.gov/legis/laws/mgl/index.htm

Michigan ValidInternet access to all Michigan statutes:www.legislature.mi.gov/(uuyu1x55xso43wahdwzwvqnb)/mileg.aspx?page=mclbasicsearch

Minnesota InvalidInternet access to all Minnesota statutes:www.leg.state.mn.us/leg/statutes.asp

Mississippi ValidInternet access to all Mississippi statutes:www.sos.state.ms.us/ed_pubs/mscode/

Missouri InvalidInternet access to all Missouri statutes:www.moga.state.mo.us/STATUTES/STATUTES.HTM

Montana ValidInternet access to all Montana statutes:http://data.opi.state.mt.us/bills/mca_toc/index.htm

Nebraska ValidInternet access to all Nebraska statutes:www.unicam.state.ne.us/laws/index.htm

Nevada ValidInternet access to all Nevada statutes:www.leg.state.nv.us/law1.cfm

New Hampshire InvalidInternet access to all New Hampshire statutes:www.gencourt.state.nh.us/rsa/html/indexes/default.html

New Jersey ValidInternet access to all New Jersey statutes:www.njleg.state.nj.us/Default.asp

New Mexico InvalidInternet access to all New Mexico statutes:http://legis.state.nm.us/lcs/

New York Invalid except in certain situations relating to members of the armed services on active duty and mariners at seaInternet access to all New York statutes:http://public.leginfo.state.ny.us/menugetf/cgi?COMMONQUERY=LAWS

North Carolina ValidInternet access to all North Carolina statutes:www.ncleg.net/gascripts/Statutes/Statutes.asp

North Dakota ValidInternet access to all North Dakota statutes:www.legis.nd.gov/information/statutes/cent-code.html

FIGURE 3.2(Continued)



Ohio InvalidInternet access to all Ohio statutes:http://onlinedocs.andersonpublishing.com/oh/lpExt.dll?f=templates&fn=main-h.htm&cp=PORC

Oklahoma ValidInternet access to all Oklahoma statutes:www.lsb.state.ok.us/osstatutestitle.html

Oregon InvalidInternet access to all Oregon statutes:www.leg.state.or.us/ors/

Pennsylvania Invalid unless it complies with state law relating to executionInternet access to all Pennsylvania statutes:http://members.aol.com/StatutesPa/Index.html

Rhode Island InvalidInternet access to all Rhode Island statutes:www.rilin.state.ri.us/Statutes/Statutes.html

South Carolina InvalidInternet access to all South Carolina statutes:www.scstatehouse.net/code/statmast.htm

South Dakota ValidInternet access to all South Dakota statutes:http://legis.state.sd.us/statutes/index.aspx

Tennessee ValidInternet access to all Tennessee statutes:www.tennesseeanytime.org/laws/laws.html

Texas ValidInternet Access to all Texas statutes:www.capitol.state.tx.us/statutes/statutes.html

Utah ValidInternet access to all Utah statutes:www.le.state.ut.us/~code/code.htm

Vermont InvalidInternet access to all Vermont statutes:www.leg.state.vt.us/statutes/statutes2.htm

Virginia ValidInternet access to all Virginia statutes:http://leg1.state.va.us/000/src.htm

Washington Invalid unless valid in the state where it was executedInternet access to all Virginia statutes:http://apps.leg.wa.gov/rcw/default.aspx

West Virginia ValidInternet access to all West Virginia statutes:www.legis.state.wv.us/WVCODE/masterfrm3Banner.cfm

Wisconsin InvalidInternet access to all Wisconsin statutes:www.legis.state.wi.us/rsb/stats.html

Wyoming WyomingInternet access to all Wyoming statutes:http://legisweb.state.wy.us/titles/statutes.htm

nuncupative will An oral will, usually made by the testator near death.

Nuncupative (Oral) Will A nuncupative will consists of the spok en desires of the indi vidual as to the disposition of personal proper ty, usually made in anticipation of impending death. These are sometimes

FIGURE 3.2(Concluded)


CASE IN POINT

INTERPRETATION OF MUTUAL WILLS

IN THE COURT OF APPEALS OF TENNESSEE AT NASHVILLE

Merritt v.

Yates No. M1999-00775-COA-R3-CV

Filed October 10, 2000 July 11, 2000 Session

J

This appeal involves a dispute between Plaintiff June Yates Merritt (“Ms. Merritt”) and Defendants Aileen Biron Yates (“Mrs. Yates”) and Claire Biron (“Mr. Biron”) regarding the proper interpreta-tion or construction of mutual wills executed in April of 1985 by Mrs. Yates and her husband Thomas Harry Yates (“Mr. Yates”), who was the father of Ms. Merritt. After the death of Mr. Yates in December of 1985, Mrs. Yates deeded certain real property to Mr. Biron, gifted certain personal property to Mr. Biron, and established a revocable trust using money received as a result of her husband’s death. In an action filed by Ms. Merritt challenging these transactions, the trial court determined that there were no genuine issues of material fact and entered a judgment in favor of Ms. Merritt. Additionally, the court denied Ms. Merritt’s motion for discretionary costs. Mrs. Yates appeals the court’s order grant-ing a judgment in favor of Ms. Merritt and Ms. Merritt appeals the court’s ruling regarding her motion for discretionary costs. For the reasons set forth below, we affirm the ruling of the trial court. Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed; and Remanded. DAVID R. FARMER, J., delivered the opinion of the court, in which W. FRANK CRAWFORD, P.J., W.S., and ALAN E. HIGH-ERS, J., joined. OPINION Ms. Merritt (formerly June Yates Flesch) is the step-daughter of Mrs. Yates, who married Ms. Merritt’s father, Mr. Yates, in 1959. Mr. Biron is the brother of Mrs. Yates. In April of 1985, Mr. Yates executed a will providing as follows:

My Wife, Aileen Biron Yates, is executing simultane-ously herewith a Will containing provisions similar to those set out herein, and our said Wills are executed each in consideration of the other and pursuant to our agreement as to the disposition of our respective prop-erties at our deaths, that is, that after certain specific bequests made by each of us as set out in our respec-tive Wills, the remainder of the estate of the first to die will pass to the survivor of us, and on the death of the survivor his or her estate will pass to June Yates Flesch.

On the same date, Mrs. Yates executed a will containing a provision that is identical to the one quoted above, except that the word “Husband” and the name Thomas Harry Yates is substituted for the word “Wife” and name Aileen Biron Yates. Mr. Yates died in December of 1985, at which time the majority of his property, including a piece of real property lo-cated at 4929 Roselawn Circle, passed to Mrs. Yates by right

of survivorship (not through his probate estate). In January of 1991, Mrs. Yates deeded the Roselawn Circle property to Mr. Biron, reserving a life estate in the property for herself. Ad-ditionally, in September of 1994, Mrs. Yates gave all of her furniture, furnishings, and other personal effects to Mr. Biron but retained the right to use these items of personal property for the remainder of her lifetime. Finally, in March of 1996, Mrs. Yates created a revocable trust and placed assets totaling $174,770.17 into the trust. The trust instrument contains spe-cific instructions regarding the disposition of the trust property following the death of Mrs. Yates. Under these instructions, none of the trust property passes to Ms. Merritt. In April of 1997, Ms. Merritt filed a complaint against Mrs. Yates and Mr. Biron asking the court to set aside the trans-fer of the Roselawn Circle property to Mr. Biron and enjoin Mrs. Yates from making any further conveyances of her property that would defeat or impair the intention of the wills that she and Mr. Yates executed in 1985. Ms. Merritt filed an amended complaint in October of 1997 asking the court to determine the rights of the parties with respect to the furniture, furnishings, and other personal effects that Mrs. Yates gifted to Mr. Biron and the property contained in the revocable trust that Mrs. Yates established in 1996. In January of 1998, the trial court entered a memorandum and order finding that there are no genuine issues of material fact between the parties and that Ms. Merritt is en-titled to a judgment as a matter of law. Thereafter in September of 1999, the court entered orders setting aside the deeds that Mrs. Yates had executed in favor of Mr. Biron, the transfer of Mrs. Yates’ furniture, furnishings, and personal effects, and the re-vocable trust established by Mrs. Yates. Ms. Merritt subsequently filed a motion seeking an award of discretionary costs, which was denied by the trial court. This appeal by Mrs. Yates followed. The issues raised by the parties on appeal, as we perceive them, are as follows:

I. Was the agreement between Mr. and Mrs. Yates regarding the disposition of their property at their deaths void for lack of consideration?

II. Under the terms of this agreement, was Mrs. Yates pro-hibited from transferring certain real property, tangible personal property, and intangible personal property that did not pass to her as part of the probate estate of Mr. Yates?

III. Assuming that the agreement did prohibit Mrs. Yates from transferring this property, is the amount by which the

43


property increased after the death of Mr. Yates also sub-ject to the terms of the agreement?

IV. Did the trial court err in denying Ms. Merritt’s motion for discretionary costs?

To the extent that these issues involve questions of fact, our review of the trial court’s ruling is de novo with a presumption of correctness and thus we may not reverse the court’s factual findings unless they are contrary to the preponderance of the evidence. See, e.g., Randolph v. Randolph , 937 S.W.2d 815, 819 (Tenn. 1996); T.R.A.P. 13(d). With respect to the court’s legal con-clusions, however, our review is de novo with no presumption of correctness. See, e.g., Bell ex rel. Snyder v. Icard, Merrill, Cullis, Timm, Furen and Ginsburg, P.A. , 986 S.W.2d 550, 554 (Tenn. 1999); T.R.A.P. 13(d). Mrs. Yates first contends that her agreement with Mr. Yates that the survivor of the two would leave his or her estate to Ms. Merritt is void for lack of consideration. In support of this argument, Mrs. Yates claims that, because no property passed to her under Mr. Yates’ will that she was not already entitled to receive by right of survivorship, she did not receive a benefit as a result of the execution of this will. In order to be enforce-able, a contract must be supported by consideration. Smith v. Pickwick Elec. Co-op. , 367 S.W.2d 775, 780 (Tenn. 1963); Frank Rudy Heirs Assocs. v. Moore & Assocs., Inc. , 919 S.W.2d 609, 613 (Tenn. Ct. App. 1995); Price v. Mercury Supply Co. , 682 S.W.2d 924, 933 (Tenn. Ct. App. 1984). It is well settled that the mutual promises of the parties to the contract to ei-ther take some action or refrain from taking some action can serve as consideration for a contract. See Buraczynski v. Eyring , 919 S.W.2d 314, 322 n.6 (Tenn. 1996); Rodgers v. Southern Newspapers, Inc. , 379 S.W.2d 797, 800 (Tenn. 1964); Squibb v. Smith , 948 S.W.2d 752, 755 (Tenn. Ct. App. 1997); Pearson v. Garrett Fin. Servs. , 849 S.W.2d 776, 779 (Tenn. Ct. App. 1992). In the instant case, Mr. and Mrs. Yates both promised each other that they would execute wills disposing of their property pursuant to their agreement that the last to die would leave his or her property to Ms. Merritt. This is evidenced by the statement in both of their wills that “our said Wills are executed each in consideration of the other and pursuant to our agreement as to the disposition of our respective prop-erties at our deaths.” Thus, the mutual promises of Mr. and Mrs. Yates served as consideration for their agreement re-garding the disposition of their property. We therefore reject Mrs. Yates’ argument that the agreement is unenforceable for lack of consideration. The remaining two issues raised on appeal by Mrs. Yates both require us to determine the precise terms of the agreement between Mr. and Mrs. Yates. When two persons execute mu-tual wills pursuant to an agreement regarding the manner in which their property is to be disposed of, the terms of the agreement must be ascertained by examining the contents of the wills themselves. See 1 Jack W. Robinson, Sr. & Jeff Mobley, Pritchard on Wills and Administration of Estates § 25 (5th ed. 1994). Thus, this Court must attempt to ascertain and enforce the intention of Mr. and Mrs. Yates as expressed by the lan-guage of the wills that they executed in 1985. See Williams v. Estate of Williams , 865 S.W.2d 3, 5-6 (Tenn. 1993) ; Wright v. Brandon , 863 S.W.2d 400, 402 (Tenn. 1993); Daugherty v. Daugherty , 784 S.W.2d 650, 653 (Tenn. 1990). As stated above, the wills of Mr. and Mrs. Yates state that “after certain specific bequests made by each of us as set

out in our respective Wills, the remainder of the estate of the first to die will pass to the survivor of us, and on the death of the survivor his or her estate will pass to June Yates Flesch.” It is Mrs. Yates’ position on appeal that her agreement with Mr. Yates applies only to property that passed through the es-tate of the first to die and therefore does not apply to property that she received by right of survivorship upon the death of Mr. Yates or to any increase in value to this property that occurred subsequent to Mr. Yates’ death. We think, how-ever, that this contention is contrary to intention expressed in Mr. and Mrs. Yates’ wills. There is no language in the wills limit-ing the scope of the agreement to the probate estate of the first to die. Rather, the wills state that “on the death of the survivor his or her estate will pass to June Yates Flesch.” Thus, Mr. and Mrs. Yates agreed that the entire estate of the last to die would ultimately pass to Ms. Merritt, regardless of the origin of the assets contained in the estate. The estate of the survivor, Mrs. Yates, contains property that she received through the probate estate of Mr. Yates, property that she received by right of survivorship upon the death of Mr. Yates, and the amount by which the value of these assets have increased following Mr. Yates’ death. Because Mrs. Yates is bound by her agree-ment with Mr. Yates to devise the entirety of this property to Ms. Merritt, we conclude that the trial court properly set aside the deeds that Mrs. Yates executed in favor of Mr. Biron, the trans-fer of Mrs. Yates’ furniture, furnishings, and personal effects to Mr. Biron, and the revocable trust established by Mrs. Yates. We therefore affirm the ruling of the trial court with respect to these matters. With this ruling, we by no means suggests that Mrs. Yates may not reasonably use for her own benefit the property which she received from Mr. Yates. We merely recognize that the mu-tual wills made by Mr. and Mrs. Yates simply limit her use of the property to reasonable use, and that Mrs. Yates may not dispose of the property in a manner inconsistent with the obvi-ous intent of the wills. The Tennessee Supreme Court adopted this rationale in Ashley v. Volz , 404 S.W.2d 239 (Tenn. 1966). Quoting the Rhode Island case of Daniels v. Aharonian , 7 A.2d 767 (R.I. 1939), the supreme court stated:

if that part of the agreement which binds the surviv-ing party [, the mutual will,] contains no provision defining such party’s powers over the whole prop-erty during the survivorship, but only provides that he shall by will dispose of his property at his death to certain beneficiaries a certain way, then it seems to be well settled that he holds all the property subject to a trust to carry out the agreement, but may use not only the income but reasonable portions of the principal for his support and for ordinary expendi-tures, and may change the form of it by reinvestment and the like, [b]ut must not give away any consider-able portions of it or do anything else with it that would be inconsistent with the spirit or the obvious intent and purpose of the agreement.

Ashley v. Volz , 404 S.W.2d 239 (Tenn. 1966) (quoting Daniel v. Aharonian , 7 A.2d 767 R.I. 1939). We feel that this ruling proves clear and fair guidelines for the use of property obtained through a mutual will and, as such, limit Mrs. Yates’ use of the property to reasonable use not inconsistent with the intent or purpose of the agreement.



Finally, Ms. Merritt argues on appeal that the trial court erred in refusing to grant her motion for discretionary costs. Rule 54.04 of the Tennessee Rules of Civil Procedure, which authorizes the court to award discretionary costs, provides in pertinent part as follows:

Costs not included in the bill of costs prepared by the clerk are allowable only in the court’s discretion. Dis-cretionary costs allowable are: reasonable and neces-sary court reporter expenses for depositions or trials, reasonable and necessary expert witness fees for de-positions or trials, and guardian ad litem fees; travel expenses are not allowable discretionary costs.

T.R.C.P. 54.04(2). Thus, Rule 54.04 expressly authorizes the trial court, in its discretion, to award as discretionary costs only cer-tain types of expenses. Trial courts are afforded a great deal of discretion when considering whether to award costs. See, e.g., Placencia v. Placencia , 3 S.W.3d 497, 503 (Tenn. Ct. App. 1999). Absent a clear abuse of discretion, appellate courts gen-erally will not alter a trial court’s ruling with respect to costs. See, e.g., Placencia , 3 S.W.3d at 503 (citing Perdue v. Green

Branch Mining Co. , 837 S.W.2d 56, 60 (Tenn.1992)). In her motion for discretionary costs, Mrs. Yates sought reimburse-ment in the amount of $2,467.77 for the expense of filing a Notice of Lis Pendens against the Roselawn Circle property, the expense of obtaining an appraisal of the Roselawn Circle property, and certain court reporter expenses. With respect to the fee for filing a Notice of Lis Pendens and the fee of the property assessor, we do not think that these type of expenses qualify as discretionary costs within the meaning of Rule 54.04. Court reporter fees, however, may be awarded as discretionary costs in the trial court’s discretion. See T.R.C.P. 54.04(2). In its order denying Mrs. Yates’ request for such fees, the trial court stated, and we agree, that “this litigation was prosecuted by both sides in good faith.” Under such circumstances, we con-clude that the trial court did not abuse its discretion in denying Mrs. Yates’ motion for discretionary costs and therefore affirm the court’s ruling with respect to this matter. Based on the foregoing, the ruling of the trial court is in all respects affirmed. The costs of this appeal are assessed against Aileen Biron Yates and her surety, for which execution may issue if necessary.

FIGURE 3.3States That Allow Nuncupative Wills in Limited Circum-stances as Set Out in State Statute

Alabama North CarolinaIndiana OhioKansas OklahomaLouisiana TennesseeMassachusetts TexasMississippi VermontMissouri VirginiaNew Hampshire WashingtonNew York West Virginia


referred to as deathbed wills or battlefield wills. The reason is obvious; the person is close to death and wants to make her final wishes known, but there is no time to write and to execute a will. While these wills were recognized by common law for the disposition of personal prop-erty, the UPC and many states no longer recognize the validity of this type of will. The states that do recognize them place limits on w hat property can be disposed of and w hen they can be made, such as during the person’s last illness. Figure 3.3 lists the states that will recognize a nuncupative will in limited circumstances. State la w should be consulted to deter mine the specific requirements.

Reciprocal (Mutual) Wills Unlike a joint will, w here there is one will for more than one testator , reciprocal (or mutual) wills are two or more wills that contain reciprocal provisions. In fact, they may be identical as to the plan for disposing of the proper ty. The Merritt v. Yates case demonstrates some of the issues that may arise when mutual wills are used.

Statutory Will Many states provide a basic will for m for individuals to complete. Figure 3.4 contains Cali-fornia’s statutory will form. The advantage of the statutory will is that it is easy to complete and helps individuals who cannot afford to have an attorney to express some of their desires in a valid legal will. The disadvantage grows out of one of the adv antages of the statutor y

reciprocal will See mutual will.

mutual will Joint wills executed by two or more persons.

statutory will Fill-in-the-blank will form set out in state statute.



FIGURE 3.4 California Statutory Will

Statutory Will Form California Probate Code, Article 3, Section 6240

CALIFORNIA STATUTORY WILL OF

Print Your Full Name

1. Will. This is my Will. I revoke all prior Wills and codicils.

2. Specific Gift of Personal Residence (Optional—use only if you want to give your personal residence to a different person or persons than you give the balance of your assets to under paragraph 5 below). I give my interest in my principal personal residence at the time of my death (subject to mortgages and liens) as follows:

(Select one choice only and sign in the box after your choice).

a. Choice One: All to my spouse, if my spouse survives me; otherwise to my descendants (my children and the descendants of my children) whosurvive me.

b. Choice Two: Nothing to my spouse; all to my descendants (my children and the descendants of my children) who survive me.

c. Choice Three: All to the following person if he orshe survives me: (Insert the name of the person):

__________________________________________________

d. Choice Four: Equally among the following persons who survive me: (Insert the names of two or morepersons):

__________________________________________________

__________________________________________________

__________________________________________________

__________________________________________________

3. Specific Gift of Automobiles, Household and Personal Effects (Optional—use only if you want to give automobiles and household and personal effects to a different person or persons than you give the balance of your assets to under paragraph 5 below). I give all of my automobiles (subject to loans), furniture, furnishings, household items, clothing, jewelry, and other tangible articles of a personal nature at the time of my death as follows:

(Select one choice only and sign in the box after your choice).

a. Choice One: All to my spouse, if my spouse survives me; otherwise to my descendants (mychildren and the descendants of my children)who survive me.

b. Choice Two: Nothing to my spouse; all to my descendants (my children and the descendantsof my children) who survive me.

c. Choice Three: All to the following person if he or she survives me: (Insert the name of the person):

__________________________________________________

d. Choice Four: Equally among the following personswho survive me: (Insert the names of two or morepersons):

__________________________________________________

__________________________________________________

__________________________________________________

__________________________________________________

4. Specific Gifts of Cash. (Optional) I make the following cash gifts to the persons named below who survive me, or to the named charity, and I sign my name in the box after each gift. If I don’t sign in the box, I do not make a gift. (Sign in the box after each gift you make.)



Name of Person or Charity to receive gift

(name one only—please print)

Amount of Cash Gift:

____________________________________________

Sign your name in this box to make this gift


(name only—please print)


____________________________________________





____________________________________________





____________________________________________





____________________________________________


5. Balance of My Assets. Except for the specific gifts made in paragraphs 2, 3 and 4 above, I give the balance of my assets as follows:

(Select one choice only and sign in the box after your choice. If I sign in more than one box or if I don’t sign in any box, the court will distribute my assets as if I did not make a Will).

a. Choice One: All to my spouse, if my spouse survives me; otherwise to my descendants (my children and the descendants of my children) who survive me.

b. Choice Two: Nothing to my spouse; all to mydescendants (my children and the descendants of my children) who survive me.

c. Choice Three: All to the following person if he or she survives me: (Insert the name of the person):

__________________________________________________

d. Choice Four: Equally among the following persons who survive me: (Insert the names of two or more persons):

__________________________________________________

__________________________________________________

__________________________________________________

__________________________________________________

6. Guardian of the Child’s Person. If I have a child under age 18 and the child does not have a living par-ent at my death, I nominate the individual named below as First Choice as guardian of the person of such child (to raise the child). If the First Choice does not serve, then I nominate the Second Choice, and then the Third Choice to serve. Only an individual (not a bank or trust company) may serve.

Name of First Choice for Guardian of the Person

Name of Second Choice for Guardian of the Person

Name of Third Choice for Guardian of the Person

7. Special Provision for Property of Persons Under Age 25. (Optional—Unless you use this paragraph, assets that go to a child or other person who is under age 18 may be given to the parent of the person, or to the Guardian named in paragraph 6 above as guardian of the person until age 18, and the court will require a bond; and assets that go to a child or other person who is age 18 or older will be given outright to the person. By using this paragraph you may provide that a

FIGURE 3.4 (Continued)



custodian will hold the assets for the person until the person reaches any age between 18 and 25 which you choose). If a beneficiary of this Will is between age 18 and 25, I nominate the individual or bank or trust company named below as First Choice as custodian of the property. If the First Choice does not serve, then I nominate the Second Choice, and then the Third Choice, to serve.

Name of First Choice for Custodian of Assets

Name of Second Choice for Custodian of Assets

Name of Third Choice for Custodian of Assets

Insert any age between 18 and 25 as the age forthe person to receive the property:(If you do not choose an age, age 18 will apply.)

8. I nominate the individual or bank or trust company named below as First Choice as executor. If the First Choice does not serve, then I nominate the Second Choice, and then the Third Choice, to serve.

Name of First Choice for Executor

Name of Second Choice for Executor

Name of Third Choice for Executor

9. Bond. My signature in this box means a bond is not required for any person named as executor. A bond may be required if I do not sign in this box:

No bond shall be required.

(Notice: You must sign this Will in the presence of two (2) adult witnesses. The witnesses must sign their names in your presence and in each other’s presence. You must first read to them the following two sentences.)

This is my Will. I ask the persons who sign below to be my witnesses.

Signed on ________________________ at ________________________, California. (date) (city)

Signature of Maker of Will

(Notice to Witnesses: Two (2) adults must sign as witnesses. Each witness must read the following clause before signing. The witnesses should not receive assets under this Will.)

Each of us declares under penalty of perjury under the laws of the State of California that the follow-ing is true and correct:

a. On the date written below the maker of this Will declared to us that this instrument was the maker’s Will and requested us to act as witnesses to it;

b. We understand this is the maker’s Will;

c. The maker signed this Will in our presence, all of us being present at the same time;

d. We now, at the maker’s request, and in the maker’s and each other’s presence, sign below as witnesses;

e. We believe the maker is of sound mind and memory;

f. We believe that this Will was not procured by duress, menace, fraud or undue influence;

g. The maker is age 18 or older; and

h. Each of us is now age 18 or older, is a competent witness, and resides at the address set forth after his or her name.

Dated:___________________,____________

Signature of witness: Signature of witness:

Print name here: Print name here:

______________________________ ______________________________

Residence Address: Residence Address:

______________________________ ______________________________

______________________________ ______________________________




will—its simplicity. It is a one-size-fits-all approach to drafting a will and is completed with-out the aid of a trained professional who can counsel on the ramifications of the choices being made.

Valid Will A valid will is a will that complies with the laws of the state in which it was executed. Require-ments for the drafting and execution of a valid will are discussed in Chapters 5 and 8.

INTESTATE SUCCESSION AND ITS RELATIONSHIP TO WILLS, TRUSTS, AND ESTATES

The concept of intestate succession is a relatively easy one to understand. Its impact on a family can be both complicated and financially devastating to the deceased’s survivors. The most common meaning of intestate is that a person dies without lea ving a valid will. Intestate succession refers to what happens to the deceased’s property when she dies without a valid will, when a will does not dispose of all of the decedent’s property, or, in some states, when the court declares a part of a will invalid. The law in which the decedent was domiciled at the time of her death controls the passage of most of her estate. Ho wever, if the decedent owns real proper ty in another state, the la ws of that state will control ho w that proper ty is distributed. For example, John Anderson dies intestate in Nashua, New Hampshire. He has bank accounts in Nassau F irst National Bank; he o wns a home on Main Street, w here most of his personal property is located; and he has a hunting lodge in F ranconia, New Hampshire. He also owns a condominium in St. Petersburg, Florida. John’s real property located in New Hampshire, which would include the home in Nashua and the hunting lodge in Franconia, would pass according to the laws of New Hampshire. Generally, all of John’s personal proper ty, wherever it is located , would also pass according to the laws of New Hampshire. The condo in Florida, however, would pass according to the laws of Florida. It is important to keep in mind that the laws of intestate succession vary from state to state. So, while John might understand what will happen to his property under the laws of New Hampshire,

An interesting thing happens when someone finds out that you are a paralegal—people will start asking you for legal advice. The general public does not fully appreciate the fact that, while paralegals have a substantial amount of knowledge of the law, they cannot practice law. This is especially true with questions relating to wills. The large number of “form” wills sold in

office supply stores and on the Internet lead many to believe that drafting a will is a simple matter. Paralegals need to exercise great care in answering questions relating to wills and avoid drafting a will for other people if they are not doing so under the supervision of a lawyer. Answering the questions may constitute the practice of law, as would drafting the will.

Ethics Alert

Hands-on Assignment Locate the statutory will form used in your state, or another state if your state does not have a statutory will, and complete the will using the directions presented

in the statute, if any, based on the facts of your life or by making up facts of the life of a hypo-thetical person.

RESEARCH THIS!

valid will A will that is executed in compliance with the laws of the state in which it was executed.


CASE IN POINT

IN THE DISTRICT COURT OF APPEAL OF FLORIDA THIRD DISTRICT

Angelus v.

Pass NO. 3D02-3343

PER CURIAM.

TESTAMENTARY TRANSFER OF PROPERTY MUST COMPLY WITH STATUTORY REQUIREMENTS TO BE EFFECTIVE.

IN THE DISTRICT COURT OF APPEAL OF FLORIDA

THIRD DISTRICT Angelus

v. Pass

NO. 3D02-3343 Opinion filed May 14, 2003

PER CURIAM. Angelus appeals an order determining the validity of an “option” for the sale of her deceased mother’s condominium. For the rea-sons which follow, we reverse. Ruth Snyder wrote a letter to her nephew-in-law, appellee Henry Pass, informing him that she had written a will. The letter indicated that she had not included her condominium in the will and further stated “If I am still here when I die I would like to sell it to you and Eileen [Ms. Snyder’s niece and Henry’s wife] for $100.” Upon Ms. Snyder’s death, Mr. Pass, treating the letter as an option to purchase the condominium, delivered a check for the $100.00, and made a claim against the estate. Upon appellant’s objection to the claim, appellees instituted the instant action for declaratory judgment and specific performance. The

trial court appointed an administrator ad litem to evaluate the claim. In his report, which was adopted by the trial court, the administrator found sufficient consideration for the agreement and determined the letter to be a valid option contract. We cannot agree with this ruling which in effect sanctions a testamentary transfer of property that does not comply with the statutory requirements of a will. See § 732.502, Fla. Stat. (2001); Williams v. Williams, 6 So. 2d 275 (Fla. 1942) (“If the intention is manifest that the deed should not take immediate effect, but shall be operative only upon the grantor’s death, it will never take effect at all unless it is executed with such formalities that it may be given effect as a testamentary disposition.”) We, therefore, reverse the judgment below and remand for further proceedings.

he may not know what will happen to the condo under the la ws of the state of Florida. This uncertainty will cause those f amily members who survive him to have to incur legal fees to re-solve their legal rights and may result in the passing of the condo in a manner that is inconsistent with John’s desires. Note that there is one v ery important thing that w as not included in the discussion of ho w John’s property will pass upon his death: w hat are John’s wishes as to w ho gets his proper ty after he dies? Without a will, he has no sa y in who will get w hat from his estate. He lost his opportunity to select who gets his property when he decided not to execute a valid will. Instead the laws of the states of Ne w Hampshire and Florida will decide. Those laws may or may not accomplish what John would have liked to have happen to his estate. Intestate succession laws, which are dealt with in detail in Chapter 4, distribute the decedent’s estate to his heirs . The statutes provide f irst for the sur viving spouse and the decedent’s lineal descendants. State intestate succession laws vary, but generally provide a share of the estate to the surviving spouse with the lineal descendants splitting the remainder of the estate. Intestate succession statutes pro vide for other possib le heirs at la w in the e vent there is no sur viving spouse or lineal descendants.

50

heir A person entitled to receive property based on intestate succession.



The case of Angelus v. Pass demonstrates that even a written expression of intent of w hat a decedent wanted to happen with a specific item is not controlling when the writing does not meet the requirements for a valid will.

OTHER FACTORS AFFECTING PASSAGE OF DECEDENT’S PROPERTY

The deceased does not have total freedom in what she does with her property in her will. The law provides protection to the sur viving spouse so that a person cannot totall y exclude that spouse from taking under the person’s estate. In the past the la w gave the surviving spouse the right of dower or curtesy, depending on w hether the sur viving spouse was a man or a woman. Dower and curtesy were the means that the law provided for the needs of the surviving spouse. Dower provided for the maintenance of a sur viving wife and minor children. Cur tesy was in-tended to help the husband raise minor children. Dower and cur tesy have been abolished in those states that ha ve adopted the UPC. Other states have made substantial changes to dower and curtesy by statute. The UPC and the statutory provisions of other states set out how a decedent’s estate will be distributed in the e vent he dies intestate. Elective shar e is a moder n trend in the la w to protect sur viving spouses from being disinherited by their spouse. The elective share is sometimes referred to as a forced share . Under these statutes, the sur viving spouse has the right to either tak e what was left in the deceased’s will or to take under the statute. Figure 3.5 is an example of a state statute that grants a surviving spouse the right to an elective share. Note that the UPC and other newer laws have eliminated the distinction between whether the surviving spouse is a man or a woman. The sex of the surviving spouse is no longer a consider -ation in the rights of the spouse under elective share statutes or under intestate succession statutes in most states.

Community Property As discussed in Chapter 2, community proper ty is a form of property ownership that is rec-ognized in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Community property includes all earnings during marriage and all proper ty acquired with those earnings. Husband and wife own the property equally. A spouse’s share in community property will automatically pass to the surviving spouse upon death, unless the deceased’s will provides otherwise or there is a written agreement between the spouses to the contrary. Those states that do not ha ve this form of ownership do have statutes that set out how com-munity property that is located in another state is distributed. The Montana Community Property Statute set out in Figure 3.6 is an example of such a provision.

Homicide and Other Wrongdoing The movie and television industries have used an interesting possibility presented by the law of succession as a basis for many movies and TV shows. The plot goes something like this: the evil son, desperate for money, decides to hasten his father’s death. He cleverly plots how he will cause his father’s hasty demise and commits the murder! Of course, inevitably the clever detective who is working the case discovers his acts. Such plots are not conf ined to f ictional stories. The news often relates cases that are eeril y similar to those stories. States have reacted differently in how they deal with this problem. Some states have enacted slayer statutes . The UPC provides that the person w ho “feloniously and intentionally kills the decedent forfeits all benefits” to the estate. See §2-803, Uniform Probate Code. Figure 3.7 is an example of a slayer statute. Slayer statutes apply not only to intestate succession, but also to cases involving wills, trusts, joint assets, life insurances, and other situations that include a designation of a benef iciary. The court system in some states imposes constr uctive trusts on the ill-gotten

dower The legal provision grant-ing a wife a portion of a deceased husband’s property. Many states have replaced dower with the statutory right to an elec-tive share.

curtesy The legal provision grant-ing a husband a portion of a deceased wife’s property. Many states have replaced curtesy with the statutory right to an elective share.

forced share See elective share.

elective share The statutory right of a surviving spouse to elect to take a share of the deceased spouse’s estate rather than taking what was provided for by the de-ceased spouse’s will. (Also called forced share .)

slayer statute A statute that prohibits a person from benefiting from the acts of killing an-other person. For example, the beneficiary under a will would be barred from tak-ing under the will if he or she killed the testator.



FIGURE 3.5 Montana Elective Share Statute Note: Montana has adopted the UPC and its statues are representative of those states that have adopted the UPC.

72-2-221. Elective share. (1) The surviving spouse of a decedent who dies domiciled in this state has a right of election, under the limitations and conditions stated in this part, to take an elective-share amount equal to the value of the elective-share percentage of the augmented estate, determined by the length of time the spouse and the decedent were married to each other, in ac-cordance with the following schedule:

If the decedent and the spouse were married to each other: The elective-share percentage is:

Less than 1 year Supplemental amount only

1 year but less than 2 years 3% of the augmented estate

2 years but less than 3 years 6% of the augmented estate













15 years or more 50% of the augmented estate

(2) If the sum of the amounts described in 72-2-222 (2)(d), 72-2-227 (1)(a) through (1)(c), and that part of the elective-share amount payable from the decedent’s probate estate and nonpro-bate transfers to others under 72-2-227 (2) and (3) is less than $50,000, the surviving spouse is entitled to a supplemental elective-share amount equal to $50,000, minus the sum of the amounts described in those sections. The supplemental elective-share amount is payable from the decedent’s probate estate and from recipients of the decedent’s nonprobate transfers to others in the order of priority set forth in 72-2-227 (2) and (3).

(3) If the right of election is exercised by or on behalf of the surviving spouse, the surviving spouse’s homestead allowance, exempt property, and family allowance, if any, are not charged against but are in addition to the elective-share and supplemental elective-share amounts.

(4) The right, if any, of the surviving spouse of a decedent who dies domiciled outside this state to take an elective share in property in this state is governed by the law of the decedent’s domicile at death.

FIGURE 3.6 Montana Community Property Statute

72-9-107. Disposition upon death. Upon death of a married person, one-half of the property to which this part applies is the property of the surviving spouse and is not subject to testamen-tary disposition by the decedent or distribution under the Uniform Probate Code. One-half of that property is the property of the decedent and is subject to testamentary disposition or distribution under the Uniform Probate Code. With respect to property to which this part applies, the one-half of the property which is the property of the decedent is not subject to the surviving spouse’s right to elect against the will.

72-9-108. Perfection of title of surviving spouse. If the title to any property to which this part applies was held by the decedent at the time of death, title of the surviving spouse may be per-fected by an order of the district court or by execution of an instrument by the personal represen-tative or the heirs or devisees of the decedent with the approval of the district court. Neither the personal representative nor the district court in which the decedent’s estate is being administered has a duty to discover or attempt to discover whether property held by the decedent is property to



which this part applies, unless a written demand is made by the surviving spouse or the spouse’s successor in interest.

72-9-109. Perfection of title of personal representative, heir, or devisee. If the title to any property to which this part applies is held by the surviving spouse at the time of the decedent’s death, the personal representative or an heir or devisee, as those terms are defined in 72-1-103, of the decedent may institute an action to perfect title to the property. The personal representative has no fiduciary duty to discover or attempt to discover whether any property held by the surviving spouse is property to which this part applies, unless a written demand is made by an heir, devisee, or creditor of the decedent.

72-9-110. Purchaser for value or lender. (1) If a surviving spouse has apparent title to property to which this part applies, a purchaser for value or a lender taking a security interest in the property takes his interest in the property free of any rights of the personal representative or an heir or devi-see, as those terms are defined in 72-1-103, of the decedent.

(2) If a personal representative or an heir or devisee of the decedent has apparent title to property to which this part applies, a purchaser for value or a lender taking a security interest in the property takes his interest in the property free of any rights of the surviving spouse.

(3) A purchaser for value or a lender need not inquire whether a vendor or borrower acted properly.

(4) The proceeds of a sale or creation of a security interest must be treated in the same manner as the property transferred to the purchaser for value or a lender.

72-9-114. Creditor’s rights. This part does not affect rights of creditors with respect to property to which this part applies.

72-9-116. Limitations on testamentary disposition. This part does not authorize a person to dispose of property by will if it is held under limitations imposed by law preventing testamentary disposition by that person.

gains so that the wrongdoer will not benef it from his acts. Constr uctive trusts are also used to prevent gain by use of duress or undue influence.

CHILDREN AND THE LAW OF WILLS AND INTESTATE SUCCESSION

The words child and children should be uni versally understood. But, once ag ain, nothing is simple in the law. Not even the words child and children. In this section, ter ms associated with children will be examined. Here is a partial list of terms associated with children: Adopted child. The person adopted through le gal process of estab lishing a relationship of parent and child when it does not already exist. Many states treat the adopted child as the natu-ral child of the adopti ve parent, rather than the child’ s former natural parents, for pur poses of inheritance. However, the rights of adopted children as to the right of inheritance are dealt with differently by the states. Paralegals need to become familiar with the specif ic laws of their state on this and other matters associated with the law of wills, trusts, and estates. After-born child. In testate cases, an after -born child (also refer red to as a posthumous child ) is one that is born after the execution of a will. In intestate cases, an after-born child is one that is conceived before the decedent’s death but born after his death. Issue. All persons descending from a common ancestor, including children and grandchildren. Natural child. A child born to the parents, as compared to an adopted child w here the rela-tionship is created by law. Nonmarital child. A child bor n out of w edlock. Also refer red to as an ille gitimate child. Historically, a child born out of wedlock was also referred to as a bastard or f ilius nullius. To-day, these terms have been replaced in the law by nonmarital child and illegitimate child. Pretermitted child. A pretermitted child is one who is left out of a will, either intentionally or by mistake. If the child can establish that the omission was unintentional, she may be able to take an intestate share from the parent’s estate. Under UPC §2-302, if a testator f ails to provide for a child born or adopted after the execution of the will, the child receives an intestate share from the estate

adopted child The person adopted through the legal process of establishing a relationship of parent and child when the status does not already exist. Many states treat the adopted child as the natural child of the adoptive parent, rather than the child’s former natural parents, for purposes of inheritance.

after-born child A child born after the decedent’s death. [Also called posthumous heir (child)(issue) .]

posthumous child See after-born child.

issue Lineal descendants of any degree, including children and grandchildren.

natural child A child of the birth parents.

nonmarital child A child born out of wedlock.

pretermitted child A child left out of a parent’s will, either inten-tionally or unintentionally.

FIGURE 3.6 (Concluded)



FIGURE 3.7 Montana Slayer Statute

72-2-813. Effect of homicide on intestate succession, wills, trusts, joint assets, life insurance, and beneficiary designations. (1) For purposes of this section, the following definitions apply:

(a) “Disposition or appointment of property” includes a transfer of an item of property or any other benefit to a beneficiary designated in a governing instrument.

(b) “Governing instrument” means a governing instrument executed by the decedent.

(c) “Revocable”, with respect to a disposition, appointment, provision, or nomination, means one under which the decedent, at the time of or immediately before death, was alone empowered, by law or under the governing instrument, to cancel the designation in favor of the killer, whether or not the decedent was then empowered to designate the decedent in place of the decedent’s killer and whether or not the decedent then had capacity to exercise the power.

(2) An individual who feloniously and intentionally kills the decedent forfeits all benefits under this chapter with respect to the decedent’s estate, including an intestate share, an elective share, an omitted spouse’s or child’s share, a homestead allowance, exempt property, and a family allowance. If the decedent died intestate, the decedent’s intestate estate passes as if the killer disclaimed the killer’s intestate share.

(3) The felonious and intentional killing of the decedent:

(a) revokes any revocable:

(i) disposition or appointment of property made by the decedent to the killer in a govern-ing instrument;

(ii) provision in a governing instrument conferring a general or nongeneral power of ap-pointment on the killer; and

(iii) nomination of the killer in a governing instrument, nominating or appointing the killer to serve in any fiduciary or representative capacity, including a personal representative, executor, trustee, or agent; and

(b) severs the interests of the decedent and killer in property held by them at the time of the killing as joint tenants with the right of survivorship and transforms the interests of the decedent and killer into tenancies in common.

(4) A severance under subsection (3)(b) does not affect any third-party interest in property ac-quired for value and in good faith reliance on an apparent title by survivorship in the killer un-less a writing declaring the severance has been noted, registered, filed, or recorded in records appropriate to the kind and location of the property, which records are relied upon, in the ordinary course of transactions involving such property, as evidence of ownership.

(5) Provisions of a governing instrument are given effect as if the killer disclaimed all provisions revoked by this section or, in the case of a revoked nomination in a fiduciary or representative capacity, as if the killer predeceased the decedent.

(6) A wrongful acquisition of property or interest by a killer not covered by this section must be treated in accordance with the principle that a killer cannot profit from the killer’s wrong.

(7) After all right to appeal has been exhausted, a judgment of conviction establishing criminal accountability for the felonious and intentional killing of the decedent conclusively establishes the convicted individual as the decedent’s killer for purposes of this section. In the absence of a conviction, the court, upon the petition of an interested person, shall determine whether, under the preponderance of evidence standard, the individual would be found criminally accountable for the felonious and intentional killing of the decedent. If the court determines that under that standard the individual would be found criminally accountable for the feloni-ous and intentional killing of the decedent, the determination conclusively establishes that individual as the decedent’s killer for purposes of this section.

(8) (a) A payor or other third party is not liable for having made a payment or transferred an item of property or any other benefit to a beneficiary designated in a governing instrument affected by an intentional and felonious killing, or for having taken any other action in good faith reliance on the validity of the governing instrument, upon request and satisfactory proof of the decedent’s death, before the payor or other third party received written notice of a claimed forfeiture or revocation under this section. A payor or other third party does not have a duty or obligation to make any determination as to whether the decedent was a victim of a homicide or to seek any evidence with respect to a homicide even if the circumstances of the decedent’s death are suspicious or questionable as to the beneficiary’s participation in a homi-cide. A payor or other third party is only liable for actions taken 2 or more business days after



the actual receipt by the payor or other third party of written notice. The payor or other third party may be liable for actions taken pursuant to the governing instrument only if the form of the service is that described in subsection (8)(b).

(b) The written notice must indicate the name of the decedent, the name of the person asserting an interest, the nature of the payment or item of property or other benefit, and a statement that a claim of forfeiture or revocation is being made under this section. Written notice of a claimed forfeiture or revocation under subsection (8)(a) must be mailed to the payor’s or other third party’s main office or home by certified mail, return receipt requested, or served upon the payor or other third party in the same manner as a summons in a civil action. Notice to a sales representative of the payor or other third party does not constitute notice to the payor or other third party. Upon receipt of written notice of a claimed forfeiture or revoca-tion under this section, a payor or other third party may pay any amount owed or transfer or deposit any item of property held by it to or with the court having jurisdiction of the probate proceedings relating to the decedent’s estate or, if no proceedings have been commenced, to or with the court having jurisdiction of probate proceedings relating to decedents’ estates located in the county of the decedent’s residence. In addition to the actions available under this section, the payor or other third party may take any action authorized by law or the governing instrument. If probate proceedings have not been commenced, the payor or other third party shall file with the court a copy of the written notice received by the payor or other third party, with the payment of funds or transfer or deposit of property. The court may not charge a filing fee to the payor or other third party for the payment to the court of amounts owed or transferred to or deposited with the court or any item of property. The court shall hold the funds or item of property and, upon its determination under this section, shall order disbursement in accordance with the determination. A filing fee, if any, may be charged upon disbursement either to the recipient or against the funds or property on deposit with the court, in the discretion of the court. Payments, transfers, or deposits made to or with the court discharge the payor or other third party from all claims for the value of amounts paid to or items of property transferred to or deposited with the court.

(9) (a) A bona fide purchaser who purchases property or who receives a payment or other item of property in partial or full satisfaction of a legally enforceable obligation is neither ob-ligated under this section to return the payment, item of property, or benefit nor liable under this section for the amount of the payment or the value of the item of property or benefit. However, a person who, not for value, receives a payment, item of property, or other benefit to which the person is not entitled under this section is obligated to return the payment, item of property, or benefit, or is personally liable for the amount of the payment or the value of the item of property or benefit, to the person who is entitled to it under this section.

(b) If this section or any part of this section is preempted by federal law, other than the federal Employee Retirement Income Security Act of 1974, as amended, with respect to a payment, an item of property, or any other benefit covered by this section, a person who, not for value, receives the payment, item of property, or other benefit to which the person is not entitled under this section is obligated to return the payment, item of property, or benefit, or is personally liable for the amount of the payment or the value of the item of property or benefit, to the person who would have been entitled to it were this section or part of this section not preempted.

(10) For the purposes of this section, a felonious and intentional killing includes a deliberate homicide as defined in 45-5-102 and a mitigated deliberate homicide as defined in 45-5-103.

unless: (1) it appears from the will that the omission w as intentional, (2) at the time of making the will the testator had one or more children but left substantiall y all of her estate to the sur viv-ing spouse, or (3) the testator provided for the child by a transfer outside the will with the intent the transfer was in lieu of a testamentary provision. See Figure 3.8 for a sample of a pretermitted children statute.

Escheat The law wants to know who owns property, especially real proper ty. After all, one of the main reasons the law provides rules for the passage of property at the death of a decedent is to provide

CASE BRIEF

ASSIGNMENT

Read and brief the McKean v. Warbur-ton case on page 58. (See Appendix A for information on how to brief cases.)




FIGURE 3.8 Montana Statute of Pretermitted Children

72-2-332. Omitted children. (1) Except as provided in subsection (2), if a testator fails to provide in the testator’s will for any of the testator’s children born or adopted after the execution of the will, the omitted after-born or after-adopted child receives a share in the estate as follows:

(a) If the testator had no child living when the testator executed the will, an omitted after-born or after-adopted child receives a share in the estate equal in value to that which the child would have received had the testator died intestate unless the will devised all or substantially all of the estate to the other parent of the omitted child and that other parent survives the testator and is entitled to take under the will.

(b) If the testator had one or more children living when the testator executed the will and the will devised property or an interest in property to one or more of the then-living children, an omit-ted after-born or after-adopted child is entitled to share in the testator’s estate as follows:

(i) The portion of the testator’s estate in which the omitted after-born or after-adopted child is entitled to share is limited to devises made to the testator’s then-living children under the will.

(ii) The omitted after-born or after-adopted child is entitled to receive the share of the testator’s estate, as limited in subsection (1)(b)(i), that the child would have received had the testator included all omitted after-born and after-adopted children with the children to whom devises were made under the will and had given an equal share of the estate to each child.

(iii) To the extent feasible, the interest granted an omitted after-born or after-adopted child under this section must be of the same character, whether equitable or legal, present or future, as that devised to the testator’s then-living children under the will.

(iv) In satisfying a share provided by this subsection (1)(b), devises to the testator’s children who were living when the will was executed abate ratably. In abating the devises of the then-living children, the court shall preserve to the maximum extent possible the charac-ter of the testamentary plan adopted by the testator.

(2) Subsections (1)(a) and (1)(b) do not apply if:

(a) it appears from the will that the omission was intentional; or

(b) the testator provided for the omitted after-born or after-adopted child by transfer outside the will and the intent that the transfer be in lieu of a testamentary provision is shown by the testator’s statements or is reasonably inferred from the amount of the transfer or other evidence.

(3) If at the time of execution of the will the testator fails to provide in the testator’s will for a living child solely because the testator believes the child to be dead, the child is entitled to share in the estate as if the child were an omitted after-born or after-adopted child.

(4) In satisfying a share provided by subsection (1)(a), devises made by the will abate as provided in 72-3-901.

FIGURE 3.9 Montana Escheat Statute

72-3-918. Disposition of unclaimed assets—escheat. (1) If an heir, devisee, or claimant cannot be found, the personal representative shall distribute the share of the missing person to his conservator, if any, otherwise to the department of revenue to be deposited in the state escheat fund as provided in chapter 14, as amended.

(2) Any person having any claim to a share deposited in the state escheat fund under the provisions of this code shall follow the procedures set out in chapter 14, concerning escheated estates, to claim such share.

72-14-403. Deposit of unclaimed property in state treasury—escheat. (1) All money or other property distributed in the administration of an estate of a decedent or as the subject of a trust and deposited with the county treasurer to the credit of the distributee or beneficiary and any money re-maining on deposit to the credit of an estate after final distribution must, within 1 year of receipt by the county treasurer, be delivered into the state treasury for deposit in the private purpose trust fund.

(2) If money or other property deposited in the state treasury is not claimed by the person or persons entitled to the property by bringing an action as provided in part 3 of this chapter, the money or property escheats to the state and must be placed in the public school permanent fund.



FIGURE 3.10 Montana Homestead Exemption Statute

70-32-201. Homestead exempt from execution generally. The homestead is exempt from execu-tion or forced sale, except as in this chapter provided.

70-32-202. Execution allowed under certain judgments. The homestead is subject to execution or forced sale in satisfaction of judgments obtained:

(1) on debts secured by construction or vendors’ liens upon the premises;

(2) on debts secured by mortgages on the premises, executed and acknowledged by the husband and wife or by an unmarried claimant; or

(3) on debts secured by mortgages on the premises, executed and recorded before the declaration of homestead was filed for record.

70-32-203. Execution under judgments not enumerated—application required. When an execution for the enforcement of a judgment obtained in a case not within the classes enumerated in 70-32-202 is levied upon the homestead, the judgment creditor may apply to the district court of the county in which the homestead is situated or a judge thereof for the appointment of persons to appraise the value thereof.

for a means to transfer ownership to the appropriate heir. In very rare cases, a person dies without a will and no heirs. When this occurs, there is no one for the o wnership of the proper ty to be transferred to, so the law provides that the proper ty passes to the state ( escheat). The Montana Escheat Statute set out in Figure 3.9 is similar to that of many states.

Homestead Exemption Many states provide protection for homes owned by its residents by exempting them from forced sale or execution. This exemption does not apply to mortgages or other liens on the proper ty that are entered into by the homeowners. The idea behind this homestead exemption is intended for the family to keep their family home. Some states also allo w homestead protection for personal property. The Montana Homestead Exemption Statute is set out in Figure 3.10 .

OTHER EXEMPT PROPERTY

Some states pro vide the sur viving spouse, or the decedent’ s children if there is no sur viving spouse, certain property that is exempt from the claims of creditors. The protected proper ty is usually items such as household furniture, automobiles, furnishings, and personal effects up to a specific dollar value. The right to this proper ty is in addition to the homestead allowance , any benefit or share passing to the sur viving spouse or children by the decedent’s will unless other-wise provided, by intestate succession, or by way of the elective share. Figure 3.11 contains the Montana Exempt Property Statute.

homestead exemption A law that allows the head of household to keep the family home even against claims of creditors.

FIGURE 3.11 Montana Exempt Property Statute

72-2-413. Exempt property. In addition to the homestead allowance, the decedent’s surviv-ing spouse is entitled from the estate to a value, not exceeding $10,000 in excess of any security interests therein, in household furniture, automobiles, furnishings, appliances, and personal effects. If there is no surviving spouse, the decedent’s children are entitled jointly to the same value. If encumbered chattels are selected and if the value in excess of security interests, plus that of other exempt property, is less than $10,000 or if there is not $10,000 worth of exempt property in the estate, the spouse or children are entitled to other assets of the estate, if any, to the extent neces-sary to make up the $10,000 value. Rights to exempt property and assets needed to make up a deficiency of exempt property have priority over all claims against the estate, but the right to any assets to make up a deficiency of exempt property abates as necessary to permit earlier payment of homestead allowance and family allowance. These rights are in addition to any benefit or share passing to the surviving spouse or children by the decedent’s will unless otherwise provided, by intestate succession, or by way of elective share.

homestead allowance A statutory allowance of cash award to the surviving spouse and children.

escheat To pass property to the state, as is done with the assets of a person who dies without a will and without heirs.


PASSAGE OF HOMESTEAD PROPERTY WHEN DECEDENT IS NOT SURVIVED BY A SPOUSE OR MINOR CHILD.

Supreme Court of Florida McKean

v. Warburton

No. SC04-1243 Decided September 8, 2005.

We have for review a decision of the Fourth District Court of Appeal which certified the following question to be of great pub-lic importance:

WHERE A DECEDENT IS NOT SURVIVED BY A SPOUSE OR ANY MINOR CHILDREN, DOES DECEDENT’S HOME-STEAD PROPERTY, WHEN NOT SPECIFICALLY DEVISED, PASS TO GENERAL DEVISEES BEFORE RESIDUARY DEVISEES IN ACCORDANCE WITH SECTION 733.805, FLORIDA STATUTES?

Warburton v. McKean, 877 So. 2d 50, 53 (Fla. 4th DCA 2004). We have jurisdiction. See art. V, § 3(b)(4), Fla. Const. For the reasons discussed below, we answer the certified question in the negative, and hold that where a decedent is not survived by a spouse or minor children, the decedent’s homestead property passes to the residuary devisees, not the general devisees, unless there is a specific testamentary disposition ordering the property to be sold and the proceeds made a part of the general estate. FACTS Henry Pratt McKean II died testate and was not survived by a spouse or minor child. When he died, McKean owned a condo-minium which was his homestead. The condominium was sold and netted $141,000. McKean also had nominal assets valued at approximately $10,000. The estate’s liabilities amounted to $14,000, plus personal representative’s fees and attorney’s fees. McKean’s will states in pertinent part as follows: ARTICLE III I hereby give, devise and bequeath the following amounts of money to the following named individuals, per capita: Russell Cappelen, Jr. of Vero Beach, Florida . . . . . . . . . $ 20,000.00; and Peter Warburton of Hamilton, Massachusetts . . . . . . . . . $150,000.00. ARTICLE IV I hereby give, devise and bequeath the automobile which I own at the time of my death to Glenn Van Hest of Vero Beach, Florida. ARTICLE V I hereby give, devise and bequeath to my half-brother ROBERT McKEAN, all of the oil interest I own and royalties due me in Exxon Well, Webster Field. ARTICLE VII All the rest, residue and remainder of my prop-erty which I may own at the time of my death, real, personal or mixed, tangible or intangible, of whatsoever nature and where-soever situate, including all property which I may acquire or be given title to after the execution of this Will, including all lapsed legacies and devises or gifts made by this Will which fail for

any reason, including all insurance(s) on my life payable to my estate or receivable by my Personal Representative, and including any property over or concerning which I may have any power of appointment, I give, devise and bequeath to my halfbroth-ers, THOMAS McKEAN, JOHN W. McKEAN, ROBERT McKEAN and DAVID McKEAN, in equal shares, share and share alike, per stirpes. Absent the homestead proceeds, the estate assets are insuffi-cient to satisfy any creditor’s claims and the specific cash bequests. Peter Warburton, McKean’s nephew, argues that the assets from the homestead property should be used to fund the specific cash gift to him, free from creditor’s claims, as preresiduary property. McKean’s half brothers argue that the homestead property passes through the residuary clause of the will to them. LAW AND ANALYSIS The issue before this Court is who is entitled to homestead property that is not specifically devised in a testator’s will when the testator does not have a surviving spouse or minor children. Although section 731.201, Florida Statutes (2004), does not define homestead, it defines “protected home-stead” as that property described in the Florida Constitution “on which at the death of the owner the exemption inures to the owner’s surviving spouse or heirs.” § 731.201(29), Fla. Stat. (2004). The Florida Constitution defines and protects homesteads in three distinct ways: it provides homesteads with an exemption from taxes; it protects homesteads from forced sale by creditors; and it places certain restrictions on a homestead owner from alienating or devising the homestead property. See Snyder v. Davis, 699 So. 2d 999, 1001 (Fla. 1997). The public policy fur-thered by a homestead exemption is to “promote the stability and welfare of the state by securing to the householder a home, so that the homeowner and his or her heirs may live beyond the reach of financial misfortune and the demands of creditors who have given credit under such law.” Public Health Trust v. Lopez, 531 So. 2d 946, 948 (Fla. 1988). To that end, issues of home-stead protections have been interpreted broadly by the courts. See Snyder, 699 So. 2d at 1002; Tramel v. Stewart, 697 So. 2d 821 (Fla. 1997) (liberally construing the homestead provision in the face of an attempted forfeiture action against homestead property). It is with these policy considerations that we consider the issue in this case. The parties agree that McKean’s property was protected homestead property. Because McKean had no surviving spouse or minor child at the time of his death, the devise of his homestead property to certain family members was protected from credi-tors. See Snyder v. Davis, 699 So. 2d 999, 1005 (Fla. 1997). Flor-

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CASE IN POINT



ida’s intestacy statute, section 732.103, Florida Statutes (2004), includes the following family members: the surviving spouse, the lineal descendants, the decedent’s mother or father or both, the decedent’s brothers and sisters, and then the descendents of the brothers and sisters. Petitioners are McKean’s half brothers. Sec-tion 732.105, Florida Statutes (2004), provides:

When property descends to the collateral kindred of the intestate and part of the collateral kindred are of the whole blood to the intestate and the other part of the half blood, those of the half blood shall inherit only half as much as those of the whole blood; but if all of the half blood they shall have whole parts.

Thus, McKean’s half brothers and his nephew are “heirs” pursu-ant to Florida’s intestacy statute. It is an elementary principle that a person can dispose of his or her property by will as he or she pleases so long as that person’s intent is not contrary to any principle of law or public policy. See, e.g., Mosgrove v. Mach, 182 So. 786, 790-91 (Fla. 1938). More-over, once the intent of the testator is ascertained, the entire will should be considered and construed liberally to effectuate the testator’s intent. See Marshall v. Hewett, 24 So. 2d 1, 2 (Fla. 1945). The primary objective in construing a will is the intent of the testator. Id. When McKean died, he had approximately $10,000 in assets, plus his homestead condominium. The condominium was sold and netted approximately $141,000.00. The estate’s liabilities included funeral expenses, credit card debt, the personal representative’s fees, and the attorney’s fees. The $10,000 in assets was insuf-ficient to settle the liabilities and the specific cash gifts. Warbur-ton, one of the specific devisees, seeks to have the $141,000.00 in proceeds from the sale of the homestead satisfy his cash gift, and as an “heir,” he seeks to have the cash gift satisfied with protected homestead assets free from all creditor’s claims. The Fourth District agreed with Warburton and considered the pro-ceeds from the sale of the protected homestead as part of the general assets of the estate and available to satisfy specific and general devises under the will. Relying on section 733.805, Florida Statutes (2004), the Fourth District concluded that residuary gifts abate or fail before general or specific devises. It then applied the estate assets, including the $141,000, in accordance with section 733.805 and found that the residuary gift abated or failed. While it is true that a decedent may devise protected home-stead property in his or her will if there is no surviving spouse or minor child, the property may only pass as a general asset of the estate by a specific devise. In the absence of a specific devise, the property may pass through the residuary, which is a sufficiently precise indicator of testamentary intent to pass protected home-stead property. See Estate of Murphy, 340 So. 2d 107 (Fla. 1976) (finding that a specific devise of homestead property is preferred, but the general language of a residuary clause is a sufficiently precise indicator of testamentary intent). In this case, the will did not specifically devise the protected homestead property to Warburton, and therefore the homestead passed under the residuary clause to the four half brothers. This result is consistent with Snyder v. Davis, 699 So. 2d 999 (Fla. 1997). In Snyder, the decedent left a will devising cash gifts to her children. In the residuary clause of her will, the decedent left the “rest, residue and remainder” of her property to her grand-daughter, Kelli Snyder. Her only surviving child was Milo Snyder, Kelli Snyder’s father. The personal representative attempted to sell the homestead property to satisfy the cash gift to Milo and credi-

tors’ claims and to pay the costs of administration. The personal representative argued that Kelli would not have qualified as an heir under the intestacy statute because Milo was first in line and would have been the sole taker of the protected homestead. The personal representative reasoned that Kelli should not be permitted to receive the homestead free from protection. The personal representative advocated the forced sale of the home-stead to pay the general cash bequest to Milo. Guided by the principle of interpreting homestead protections broadly, this Court held otherwise. Id. at 1002, 1005. This Court concluded that any person to whom homestead property is devised under a will and who is categorized as an “heir” in the intestacy statute, regardless of whether that person would be next in line had the decedent died intestate, receives protected homestead property under the Florida Constitution. Id. at 1005. We opined that the testator is in the best position to know which family member is most likely to need or to properly maintain the homestead. Id. The certified question in Snyder asked whether Kelli’s gift of homestead property, which passed to her via the residuary clause of her grandmother’s will, was protected from forced sale even though her father, Milo, would have received the property had the decedent died intestate. We answered the question in the affirmative. In this case, the Fourth District dismisses Snyder as inappli-cable because the certified question in Snyder was not the same as the certified question in this case. Support for the Fourth Dis-trict’s theory is found in cases that hold, “[N]o decision is author-ity on any question not raised and considered, although it may be involved in the facts of the case.” Benson v. Norwegian Cruise Line Ltd., 859 So. 2d 1213, 1217 (Fla. 3d DCA 2003) (quoting State ex rel. Helseth v. Du Bose, 128 So. 4, 6 (Fla. 1930)); see also Goldman v. State Farm Fire Gen. Ins. Co., 660 So. 2d 300, 304 (Fla. 4th DCA 1995); City of Miami v. Stegemann, 158 So. 2d 583, 584 (Fla. 3d DCA 1963). Although the same question was not presented in Snyder, the two cases have virtually the same facts, both deal with the dis-position of protected homestead property through a residuary clause of a will, but they reach completely different results. In Snyder, the homestead property was not specifically bequeathed and thus passed through the residuary clause to the heir named as the recipient of all residual property, the property was pro-tected homestead, was not subject to forced sale, and could not be used to satisfy a general bequest of cash. Likewise, in this case, the homestead property was not specifically bequeathed. It therefore passes through the residuary clause to McKean’s heirs and is protected from forced sale to satisfy the general bequest cash gift to Warburton. A contrary result creates an apparent conflict because the same factual situation has resulted in differ-ent outcomes. See art. V, § 3(b)(3), Fla. Const. The Fourth District reasoned that because a homestead can be freely devised, absent a surviving spouse or minor child, it becomes property of the estate subject to division in accordance with the established classifications giving some gifts priority over others. In this case, the Fourth District found that the gift of $150,000 to Warburton was a general bequest and should be satisfied before the residual bequest, and reasoned that the proceeds of the sale of the homestead property should go to Warburton. Such a result is contrary to Snyder, which prohibits a forced sale of protected homestead property to satisfy a general cash bequest. Florida’s statutory scheme and cases from other Florida district courts of appeal support the result we reach today. Section 733.607, Florida Statutes (2004), provides that the personal

Chapter 3 Testate versus Intetate 59


representative takes possession or control of the decedent’s prop-erty, except for protected homestead. The personal representative is then charged with the duty to protect the estate until distribution. Nothing in the statutes indicates that the protected homestead should be distributed as part of the decedent’s estate, as Warbur-ton contends. Florida’s case law supports this conclusion. In Clifton v. Clifton, 553 So. 2d 192, 194 n.3 (Fla. 5th DCA 1989), the court held that “[h]omestead property, whether devised or not, passes outside of the probate estate. Personal rep-resentatives have no jurisdiction over nor title to homestead, and it is not an asset of the testatory estate.” See also Cavanaugh v. Cavanaugh, 542 So. 2d 1345, 1352 (Fla. 1st DCA 1989) (holding that the transfer of probate jurisdiction to the circuit court did not change the law that the homestead is not an asset of the probate estate); Leslie A. Jeffries, Redfearn: Wills and Administration in Florida §§ 18-1; 18-8; 18-10 (6th ed. 1986). It is only when the testator specifies in the will that the homestead is to be sold and the proceeds are to be divided that the homestead loses its “pro-tected” status. See Knadle v. Estate of Knadle, 686 So. 2d 631, 632 (Fla. 1st DCA 1996). In Knadle, the decedent’s will provided:

My Personal Representative shall sell my homestead as soon as reasonably practical and the net proceeds thereof shall be added to the residue of my estate. Within 90 days after my death, all occupants of my home shall vacate the premises with all their belong-ings. The home shall remain vacant until sold. My per-sonal Representative in his sole and absolute discretion shall make necessary repairs and improvements to the house to best market the home. (Emphasis added.)

Thus, where the will directs that the homestead be sold and the proceeds added to the estate, those proceeds are applied to

satisfy the specific, general, and residual devises, in that order. See also Elmowitz v. Estate of Zimmerman, 647 So. 2d 1064 (Fla. 3d DCA 1994); Estate of Price v. West Florida Hosp., Inc., 513 So. 2d 767 (Fla. 1st DCA) (holding that where testator directed in her will that her homestead be sold and the proceeds divided between her adult children, the proceeds lost their homestead character and became subject to the claims of creditors), cause dismissed, 518 So. 2d 1274 (Fla. 1987); cf. In re Estate of Tudhope, 595 So. 2d 312 (Fla. 2d DCA 1992) (finding that because the homestead estate was not converted to dollars before it passed and vested in the decedent’s children as in Estate of Price, the proceeds could not be reached by creditors). In fact, the Second District has stated that “[t]he best, and perhaps the only, recognized exception to the general rule occurs when the will specifically orders that the property be sold and the proceeds be divided among the heirs.” In re Estate of Hamel, 821 So. 2d 1276, 1279 (Fla. 2d DCA 2002). Because the law is clear that the protected homestead is not a part of the decedent’s estate for purposes of distribution, the ac-cepted way the $141,000 in proceeds could be applied to the spe-cific and general devises in this case is if McKean had ordered the sale of his protected homestead and ordered that the proceeds be made a part of his general estate. It is clear that McKean’s will did not direct that the protected homestead be sold for this purpose. We therefore answer the certified question in the negative and hold that where a decedent is not survived by a spouse or minor children, the decedent’s homestead property passes to the residu-ary devisees, not the general devisees, unless there is a specific testamentary disposition ordering the property to be sold and the proceeds made a part of the general estate. Accordingly, the decision of the district court of appeal is quashed and the case is remanded for further proceedings consistent with this opinion. It is so ordered .


FIGURE 3.12 Montana Family Allowance Statute

72-2-414. Family allowance. (1) In addition to the right to homestead allowance and exempt property, the decedent’s surviving spouse and minor children whom the decedent was obligated to support and children who were in fact being supported by the decedent are entitled to a reason-able allowance in money out of the estate for their maintenance during the period of adminis-tration, which allowance may not continue for longer than 1 year if the estate is inadequate to discharge allowed claims. The allowance may be paid as a lump sum or in periodic installments. It is payable to the surviving spouse, if living, for the use of the surviving spouse and minor and depen-dent children, otherwise to the children or persons having their care and custody. If a minor child or dependent child is not living with the surviving spouse, the allowance may be made partially to the child or the child’s guardian or other person having the child’s care and custody and partially to the spouse, as their needs may appear. The family allowance is exempt from and has priority over all claims except the homestead allowance.

(2) The family allowance is not chargeable against any benefit or share passing to the surviving spouse or children by the will of the decedent unless otherwise provided, by intestate succession, or by way of elective share. The death of any person entitled to family allowance terminates the right to allowances not yet paid.

FAMILY ALLOWANCE

Probate of an estate can take some time. In many instances, this can create a hardship for the surviving spouse and children. Man y states allow for the probate cour t to provide a family allowance , a reasonable allowance in money out of the estate to help maintain the sur viving spouse and children while the estate is being administered. This amount is in addition to the homestead allowance and exempt property. Figure 3.12 contains the Montana Family Allow-ance Statute.

family allowance A statutory provision for care of family members prior to payment of debts and regardless of what was provided for in the deceased’s will.



HOMESTEAD ALLOWANCE

Some states pro vide for a cash amount for the sur viving spouse and dependent children of the deceased. This is called a homestead allo wance and is sometimes used b y states instead of a homestead e xemption. It is e xempt from and has priority o ver all claims ag ainst the estate. Figure 3.13 contains the Montana Homestead Allowance Statute.


Prof. Kurtz, “Trusts & Estates—Spring 2001,” University of Iowa (2001): http://stu.findlaw.com/outlines/submissions/labrea000007.html Naim D. Bulbulia and Jonathan W. Wolfe, “Dying to Get a Divorce?” (2005): www.abanet.org/genpractice/newsletter/lawtrends/0509/family/dyingtodivorce.html Amy Morris Hess, “Surviving Spouse’s Elective Share: Where We’ve Been; Where We’re Going” (accessed 12/15/05): www.aals.org/profdev/family/hess.html “Special Property Rules for Married People” (accessed 12/15/05): http://estate.findlaw.com/articles/2155.html

CYBER TRIP

FIGURE 3.13 Montana Homestead Allowance Statute

72-2-412. Homestead allowance. A decedent’s surviving spouse is entitled to a homestead allow-ance of $20,000. If there is no surviving spouse, each minor child and each dependent child of the decedent is entitled to a homestead allowance amounting to $20,000 divided by the number of minor and dependent children of the decedent. The homestead allowance is exempt from and has priority over all claims against the estate. Homestead allowance is in addition to any share passing to the surviving spouse or minor or dependent child by the will of the decedent unless otherwise provided, by intestate succession, or by way of elective share

Summary Property of a decedent passes in one of two ways at the time of his death. If the decedent leaves a valid will that disposes of all his property, the estate will be distributed for the most part according to the terms of the will. His surviving spouse can take advantage of the elective share if it is allo wed in the spouse’s state and/or other allo wance provisions provided by law, such as the homestead allowance. If the decedent dies without a v alid will, his estate will pass according to the intestate laws of succession. Under the intestate succession la ws of most states, the spouse and children will share in the decedent’s estate as set out in the statutes. The case of Sara Johnson and Brad La w set out in the Client Inter view is an example of how a loved one may not be provided for if a person does not tak e the time to execute a valid will. Since Sara w as not mar ried to John, she w ould not tak e as a spouse un-der traditional intestate succession statutes. Instead John’s estate would go to Sharon, the couple’s baby. Failing to ha ve a will eliminates the decedent’ s ability to choose w ho will ha ve the property he leaves behind after death. Instead, the property will pass in the manner set out by statute.



Review Questions

1. Describe why intestate succession is important to wills, trusts, and estates law. 2. List the advantages and disadvantages of the types of wills discussed in this chapter. 3. What is the major disadvantage of standard form wills such as statutory wills? 4. Why is it difficult for a testator to exclude a surviving spouse from taking from her estate? 5. When can a child be omitted from his parent’s will? 6. What is a living will? What is its purpose? 7. What is a homestead exemption? Why is it important in the study of wills, trusts, and estates? 8. What is the difference between a joint will and a reciprocal will? 9. What is a holographic will? What is a nuncupative will? What are the disadvantages of each? 10. What are slayer statutes? Why is it important in the study of wills, trusts, and estates?


Claude Slay executed the following will:

1-11-98

Claude Slay, being of sound mind & do hereby declare this to be my last will & testament(sic) upon my death—

I am leaving the Home place known as E.R. Slay Home Place to:

Clydie Nugent and Clois Slay.

86 acres more or less will be left to:

Charles F. Nugent, Trois Douglas Nugent, Robert Slay, Kenneth Slay, Edwin Ray Belgard

/s/ Claude W. Slay

Signed and witnessed before me on this day 11 of January, 1998

/s/ Doris R Price

On the back of the page appeared:

Witnesses /s/ Roy L. Slay /s/ Ray Belgard /s/ Kathleen Belgard

Key Terms Adopted child After-born child CurtesyDower Elective share Escheat Family allowance Forced share Heir Holographic will Homestead allowance Homestead exemption Issue

Joint will Living will Natural child Nonmarital child Nuncupative will Posthumous child Pretermitted child Reciprocal (mutual) will Slayer statutes Statutory will Testate succession Valid will



1. Examine the Client Interview. What should Brad and Sara have done before his death? What will happen to Brad’s estate after his death? What will Sara receive from Brad’s estate? What will Sharon get from Brad’s estate?

2. Research the laws of your state as they relate to the various types of wills discussed in this chapter. Write a brief paper setting out which types of wills your state recognizes and which it does not.

3. Research the laws of your state as they relate to children discussed in the section entitled “Children and the Law of Wills and Intestate Succession.” Write a brief paper setting out the results of your research.

4. Locate your state’s slayer statute and summarize its contents.


After his death, relati ves f iled a petition to annul the will. The petition alleged that the will was invalid because it was not in a form that was allowed under state law. After a hear-ing that included testimony from the witnesses and notar y public, the trial cour t ruled that the will was not valid because it did not contain the required attestation clause. Was the court correct in ruling that the will was invalid because of the lack of the statu-torily required attestation clause? Would the will as written be v alid under the laws of your state? See In re Succession of Slay , 764 So.2d 102 (La.App. 3 Cir. 2000).



Vocabulary Builders

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ACROSS 1. A child born after the decedent’s death 3. A single document intended to be the will for both spouses

and which is signed by both parties 5. The legal provision granting a husband a portion of a de-

ceased wife’s property 6. Children of the birth parents 8. Lineal descendants of any degree, including children,

grandchildren 9. To pass property to the state, as is done with the assets of

a person who dies without a will and without heirs 12. A will that is executed in compliance with the laws of the

state in which it was executed 13. A will entirely written and signed by the testator in that

person’s own handwriting 14. The statutory right of a surviving spouse to elect to take a

share of the deceased spouse’s estate rather than taking what was provided for by the deceased spouse’s will

15. An oral will, usually made by the testator near death 16. The legal provision granting a wife a portion of a deceased

husband’s property 17. The statutory provision for care of family members prior to

payment of debts and regardless of what was provided for in the deceased’s will

18. A law that allows the head of household to keep the fam-ily home even against claims of creditors

DOWN 1. Children left out of a parent’s will, either intentionally or

unintentionally 2. A person entitled to receive property based on intestate

succession 4. Children born out of wedlock 7. A person adopted through the legal process of establish-

ing a relationship of parent and child when the status does not already exist

10. A statutory allowance of cash award to the surviving spouse and children

11. The passage of property following the dictates of a will

Vocabulary Builders


Chapter 1

Intestate Succession CHAPTER OBJECTIVES


• Explain how property passes when someone dies intestate.

• Explain the concept of escheat and under what circumstances property escheats to the state.

• Explain the intestate statutory rights of heirs.

• Distinguish between per capita and per stirpes.

As stated in Chapter 3, intestate succession occurs when a person dies without a valid will. Cer-tainly, few people wouldn’t take the time to have a will prepared. After all, a will is a way for the testator to provide for the testator’s loved ones in the event of the testator’s death. It is also a way to ensure that the testator’s property, no matter how insignificant it may seem to others, passes to the individuals who would appreciate it the most. So, a chapter on intestate succession is probably not one of the most important chapters of this textbook, right? Wrong! Wills are seldom near the top of people’s to-do lists. In fact, it is not even on many people’s list. The reasons and excuses given by those who have not gotten around to writing a will are many and varied. It is also some what surprising that included on the list of those who have died without writing a will are some v ery prominent, well-educated, and famous people. One of the most f amous lawyers in the history of the United States, Abraham Lincoln, died without a will. A man who was president and who was also one of the most f amous generals in U.S. history, Ulysses Grant, died without one. One of the richest and most eccentric men in the history of the United States, Howard Hughes, died without one. A man who fought for equality for all Americans, Martin Luther King, Jr., died without one. And one of the most f amous and controversial artists of the 20th century, Pablo Picasso, died without one. President Lincoln, General Grant, Mr. Hughes, Dr. King, and Picasso were just like millions of Americans today—part of the estimated 60+ percent of the population who may realize a will is a good idea but never take the time to actually write one. The reasons for this f ailure of so many people, famous or not, to prepare such an impor tant legal document will be explored in more detail in Chapter 5. For now, the focus will be on what happens in the event that someone dies without executing a valid will. This chapter introduces paralegal students to the specifics of how intestate property is passed and the impor tance of being ab le to locate state statutes to lear n how their state handles this important process.

Chapter 4

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Chapter 4 Intestate Succession 67

WHY “INTESTATE SUCCESSION” IS IMPORTANT TO THE PARALEGAL STUDENT

The reality is that many people die without a will. This is even true of many people who would be expected to have one, such as the people discussed in the introduction to this chapter. As a result, a paralegal working in a wills, tr usts, and estates law firm will often be called upon to assist in handling the estates of clients in which the property will pass by intestate succession. The parale-gal must be familiar with the laws relating to intestate succession and case law that relates to the passage of property through intestate succession. It is also important to understand which of the decedent’s heirs will take under the intestate succession laws. This chapter provides the paralegal student with an understanding of these topics.

INTESTATE SUCCESSION

The law provides a procedure for the distribution of the proper ty of the estates of those w ho die without a will. The same procedure may be used even in cases where a decedent has a will, but it does not ef fectively dispose of all the proper ty of the estate. The distribution procedure ma y or may not be consistent with the desires of the decedent, but it will be the w ay the proper ty is distributed due to the decedent’s failure to express those desires in a v alid will. While the laws relating to the passage of property of an intestate estate vary, the typical procedure is as follows:

1. Surviving spouse. The surviving spouse will receive some or all of his deceased spouse’s estate. How much the surviving spouse takes is based on (1) whether the decedent had de-scendants, (2) the descendant’s relationship to the surviving spouse, and (3) in some states, whether the decedent was survived by a parent. Many states, such as Florida, only reduce the amount received if the decedent had a lineal descendant. Others, like Montana, reduce the share of the decedent’s estate taken by the surviving spouse if the decedent is survived by a descendant or a parent.

Generally the surviving spouse could receive three different amounts: a. If there are no surviving children, the spouse receives the entire estate under many of the

state statutes. b. If there are surviving children and all of them are also children of the surviving spouse,

the surviving spouse receives a specific dollar amount from the state with the balance be-ing split between the surviving children.

c. If there are surviving children of the decedent and any of them are not children of the surviving spouse, the spouse gets 50 percent of the estate and the other 50 percent passes to the children.

The variety of approaches taken by the states for providing for the surviving spouse is an ex-cellent example of why paralegals must be aware of the specific provisions contained in the statutes of their state. These variations have developed because each state legislature has the power to establish the rules of intestate succession that will be used in its state. Some have adopted the UPC approach, although the amounts may vary even in those states. Others have adopted statutes that modified what was provided under the English common laws of dower and curtsey.

surviving spouse A spouse that lives longer than the other spouse.


Client Interview George and Cathy Wilson have been mar-ried for a number of years. It is the second marriage for both of them. Cathy has two children, Chris and Jeremy, from her previous marriage. George has a son, George Jr., from his first marriage. They also have one daughter, Amanda, from their current marriage. At the time of their marriage, Chris was 11,

Case Fact Pattern

Jeremy was 8, and George was 5. Cathy and George consid-ered all four of the children as children of their marriage. They have not drafted a will but intend for their marital property to go 100 percent to the surviving spouse, and that spouse’s estate to be divided equally among the children at his or her death.



2. Lineal descendants. The next category of persons who are possible heirs of the decedent’s estate are his lineal descendants . Descendants include the person’s children, grandchildren, great-grandchildren, etc. The property goes to the generation that is closest to the decedent and which includes a living heir. This is often the decedent’s child or children. If there are no surviving children, the search would continue down the generations to grandchildren, great-grandchildren, etc., until a surviving descendant is found. Surviving descendants will split that amount received after the deduction for the surviving spouse’s share, if any. If a spouse did not survive the decedent, the entire estate would be split between the surviving descendants.

3. Parents . Lineal ascendants are those people who are related to the decedent in the ascending line. This includes the decedent’s parents and grandparents. The next step of attempting to find an heir for the intestate estate is to go up one generation to the parents. If there is no surviving spouse or lineal descendants of the decedent, the property passes to the surviving parents or parent of the decedent. If both parents are alive, they will split the estate equally. If there is only one surviving parent, that parent will take the entire estate.

4. Brothers and sisters . In many states, the next step in trying to find an heir is to see if there are any surviving brothers or sisters of the decedent. If there are, they will share the dece-dent’s intestate estate.

5. Other kindred . Intestate statutes include a variety of other kindred as possible heirs of an intestate estate in the event that there is no surviving spouse, children, other lineal descen-dants, parents, or siblings of the decedent. The Florida intestate statute provides for the estate to be divided equally between the decedent’s paternal and maternal grandparents and, if there is no surviving grandparent, then to other kindred, such as uncles and aunts, and descendants of deceased uncles and aunts of the decedent if there are no surviving grandpar-ents, and so on. The Florida intestate statute even provides that, if there are no paternal or maternal kindred of the decedent, the entire estate goes to the kindred of the last deceased spouse! Refer to Figure 4.1 for the Florida intestate statute.

6. Escheat. It is clear that the intestate succession laws make every effort to find some heir to give the property to, no matter how far removed from the decedent. If there are no heirs of whatever type, the property of the intestate decedent will escheat to the state. Clearly, the intes-tate statutes provide for a wide range of possible heirs to take the property of the estate. But, in the relatively rare event that a person dies without any living kindred or, as in the case of the Florida Intestate Statutes, anyone related to her by affinity , the property escheats to the state. (See Figure 4.1 .)

Other Possible Heirs The search for heirs can be complicated, as w as demonstrated in the earlier re view of the intestate succession procedure. There are additional people w ho may fall into the cate gory of loved ones whose right varies depending on how they are related to the decedent. These include: Adopted children. Adopted children generall y inherit as natural children of their adopted parent’s estate.

kindred Those related by blood to the decedent.

kindred Those related by blood to the decedent.

affinity Relationship by marriage. affinity Relationship by marriage.

lineal descendants Persons who are related in a descending line— children, grandchildren, great-grandchildren, etc.

lineal ascendants Persons who are related in an ascending line—grandparents, great-grandparents, etc.

Solicitation is the act of an attorney actively seeking out prospective clients. Traditionally, the legal community has maintained that it was unprofessional for an attorney to recommend himself for employment. Paralegals should also exercise care when discussing the need for

legal representation with members of the general public. A paralegal should consult with her supervising attorney to determine how to handle situations that arise when she meets someone who may need legal help, such as the drafting of a will.

Ethics Alert

CASE BRIEF

ASSIGNMENT

Read and brief the In re Estate of McFarland case on page 70. (See Appendix A for information on how to brief cases.)



FIGURE 4.1 Florida Intestate Statutes

732.101 Intestate estate.—

(1) Any part of the estate of a decedent not effectively disposed of by will passes to the decedent’s heirs as prescribed in the following sections of this code.

(2) The decedent’s death is the event that vests the heirs’ right to the decedent’s intestate property.

732.102 Spouse’s share of intestate estate.—The intestate share of the surviving spouse is:

(1) If there is no surviving lineal descendant of the decedent, the entire intestate estate.(2) If there are surviving lineal descendants of the decedent, all of whom are also lineal

descendants of the surviving spouse, the first $60,000 of the intestate estate, plus one-half of the balance of the intestate estate. Property allocated to the surviving spouse to satisfy the $60,000 shall be valued at the fair market value on the date of distribution.

(3) If there are surviving lineal descendants, one or more of whom are not lineal descendants of the surviving spouse, one-half of the intestate estate.

732.103 Share of other heirs.—The part of the intestate estate not passing to the surviving spouse under s. 732.102, or the entire intestate estate if there is no surviving spouse, descends as follows:

(1) To the lineal descendants of the decedent.(2) If there is no lineal descendant, to the decedent’s father and mother equally, or to the

survivor of them.(3) If there is none of the foregoing, to the decedent’s brothers and sisters and the descendants

of deceased brothers and sisters.(4) If there is none of the foregoing, the estate shall be divided, one-half of which shall go

to the decedent’s paternal, and the other half to the decedent’s maternal, kindred in the following order:

(a) To the grandfather and grandmother equally, or to the survivor of them. (b) If there is no grandfather or grandmother, to uncles and aunts and descendants of

deceased uncles and aunts of the decedent. (c) If there is either no paternal kindred or no maternal kindred, the estate shall go to the

other kindred who survive, in the order stated above.

(5) If there is no kindred of either part, the whole of the property shall go to the kindred of the last deceased spouse of the decedent as if the deceased spouse had survived the decedent and then died intestate entitled to the estate.

(6) If none of the foregoing, and if any of the descendants of the decedent’s great-grandparents were Holocaust victims as defined in s. 626.9543(3)(b), including such victims in countries cooperating with the discriminatory policies of Nazi Germany, then to the lineal descendants of the great-grandparents. The court shall allow any such descendant to meet a reasonable, not unduly restrictive, standard of proof to substantiate his or her lineage. This subsection only applies to escheated property and shall cease to be effective for proceedings filed after December 31, 2004.

732.104 Inheritance per stirpes.—Descent shall be per stirpes, whether to lineal descendants or to collateral heirs.

Stepchildren. Stepchildren of the decedent who have not been adopted by the decedent gener-ally do not take a share of the decedent’s intestate estate. After-born heirs. After-born heirs are ones who are conceived before the death of the dece-dent but born after the decedent’s death. They receive a child’s share of the intestate estate.

Children born out of wedlock (nonmarital children). A child born out of wedlock is usu-ally treated as a lineal descendant of the deceased’ s mother, and a natural kindred to the mother’s family. The child is treated as a lineal descendant of the f ather if (1) the natural parents attempted to marry before the birth but the marriage was void, (2) the paternity of the parent is judicially established after the father’s death, or (3) the father acknowledges the pa-ternity in writing. The rules relating to children born out of wedlock developed over centuries of common law. While establishing who was the mother of the child was usually very easy to do, proving who was the father was more difficult. DNA testing has changed all that, and it is now possible to establish paternity with a great degree of accuracy. DNA can now be used

stepchildren A spouse’s children from a former relationship.



CASE IN POINT

PARTIALLY INTESTACY

IN THE SUPREME COURT OF TENNESSEE AT KNOXVILLE I N RE ESTATE OF McFARLAND

No. E2003-01833-SC-R9-CV Filed July 7, 2005

We granted review in this case to determine the appropriate manner of distributing lapsed residuary gifts in a will. Specifically, we are confronted with a holographic will containing a residu-ary clause which devised percentages of the testatrix’s estate to certain named beneficiaries. Three of these beneficiaries prede-ceased the testatrix, causing their gifts to lapse. Because these beneficiaries also died without issue, the Tennessee anti-lapse statute is not applicable. Thus, the question presented is whether the lapsed residuary gifts are to be divided among the remain-ing residuary beneficiaries or pass through intestate succession to the testatrix’s heirs at law. The probate court concluded that the lapsed gifts created a partial intestacy, and the lapsed gifts passed to the heirs at law. The Court of Appeals affirmed. Upon review, we affirm the judgment of the Court of Appeals. Tenn. Rule App. P. 11 Appeal by Permission; Judgment of the Court of Appeals Affirmed.

OPINION

Facts On November 14, 1994, Ms. Merle Jeffers McFarland executed a holographic will. In this will, Ms. McFarland named an administrator for her estate, gave directions regarding her burial, set aside two percent of her estate to provide funds for funeral expenses, and also devised a specific bequest of three thousand dollars to the Tieke-McCullough Cemetery bank fund. The will further directed that the remainder of her estate was to be divided among eighteen named individuals and entities. Specifically, Ms. McFarland provided in her will that “[t]he rest of the estate I wish to be divided to the following.” She then listed the following beneficiaries along with the percentages of her estate devised to each. Her two brothers, Willie Lee Jeffers and Minnis Rankin Jeffers, were each to receive a ten percent share of the residuary estate. Clarence Lee McFarland, Mary Louise McFarland, and Evelyn B. McFarland McCulley were each also devised a ten percent share. Another ten percent share was to be divided equally between the three sons of Clyde E. McFarland. The First United Methodist Church of Bulls Gap received a five percent share. Larry and Virginia Carpenter were to divide a five percent share. A two percent share was devised to the city of Bulls Gap. Another two percent share went to the Tieke-McCullough Cemetery for “mowing and up keep of the cemetery.” The Thompson Cancer Center in Knoxville was devised a ten percent share to be used for research, and the University of Tennessee was also to receive ten percent “for scholarships or what they need most.” Ms. McFarland granted one percent shares to the Bulls Gap Masonic Lodge and Eastern Star Lodge. Finally, the United Way Fund or any other “worthy charity fund” was devised a two percent share. On October 12, 2001, seven years after making the will, Ms. McFarland passed away at the age of eighty-four. An administrator

was appointed by the trial court, and the will was admitted to pro-bate. However, the administrator subsequently filed a declaratory judgment action seeking the court’s guidance as to how the proceeds of the estate were to be distributed. This action was necessitated due to the fact that three of the residuary beneficia-ries named in the will, Minnis Rankin Jeffers, Willie Lee Jeffers, and Mary Louise McFarland, had predeceased the testatrix, Ms. McFarland. Also, none of these predeceased beneficiaries had left a surviving spouse or issue. It was therefore uncertain as to how these individuals’ shares were to be distributed. The chancery court, exercising probate jurisdiction, determined that the gifts to each of the three predeceasing ben-eficiaries had lapsed. Because each had died without leaving surviving issue, Tennessee’s anti-lapse statute, Tennessee Code Annotated section 32-3-105 (2001), did not apply. The probate court concluded that these circumstances resulted in a partial intestacy in Ms. Farland’s estate. The chancellor also acknowl-edged that the long-standing common law rule, as announced in Ford v. Ford, 31 Tenn. 431 (1852), was that lapsed residuary gifts do not remain as part of the residue of the will to be dis-tributed to remaining beneficiaries, but instead pass by intestate succession to the testator’s next of kin. Therefore, the chancellor directed that those shares of the estate devised to the prede-ceased beneficiaries were to be distributed to Ms. McFarland’s heirs at law, rather than being divided among the remaining residuary beneficiaries. The estate administrator filed an interlocutory appeal in the Court of Appeals, where the decision of the probate court was subsequently affirmed. We then granted review. The issue presented is whether the lapsed residuary gifts pass to the testa-trix’s heirs at law or to the remaining residuary beneficiaries. The estate administrator, along with the remaining residuary benefi-ciaries, argue that the lapsed gifts should be divided among the remaining residuary beneficiaries in proportion to their interests granted in the will. In opposition, the surviving heirs argue that the lapsed gifts pass by intestate succession.

Standard of Review

When this Court is called upon to construe a will, and there is no dispute in the evidence as to any material fact, then the question on appeal is one of law. In re Estate of Vincent, 98 S.W.3d 146, 148 (Tenn. 2003). Accordingly, our review is de novo with no presumption of correctness accompanying the lower courts’ conclusions of law. Id. (citation omitted).

Analysis I. Principles of Will Construction

In construing a will, the cardinal rule is that the Court must attempt to ascertain the intent of the testator and to give

CASE IN POINT

7070



effect to that intent unless prohibited by a rule of law or public policy. Id. at 150; see Winningham v. Winningham, 966 S.W.2d 48, 50 (Tenn. 1998). Holographic wills drawn by unskilled drafters are given a liberal construction. See Garner v. Becton, 212 S.W.2d 890, 891 (Tenn. 1948). Nevertheless, the intention of the testator must be ascertained, if at all possible, from the particu-lar words used in the will and from the context, general scope, and purpose of the instrument. Daugherty v. Daugherty, 784 S.W.2d 650, 653 (Tenn. 1990). The Court “cannot determine the devolution of estates based upon the mere surmise as to the testator’s intention.” Pinkerton v. Turman, 268 S.W.2d 347, 350 (Tenn. 1954). The administrator of the estate argues that Ms. McFar-land’s will manifested a clear preference for those specified beneficiaries rather than for the heirs at law. He argues that Ms. McFarland clearly intended the residuary beneficiaries to re-ceive the remainder of her estate, in its entirety, and to the exclu-sion of all other persons, including her heirs. The administrator also correctly notes that when a person makes a will there is a presumption that the person did not intend to die intestate as to any part of his or her property. See Tenn. Code Ann. § 32-3-101 (2001); In re Walker, 849 S.W.2d 766, 768 (Tenn. 1993). On the other hand, the law requires us to read a will as if it had been executed immediately prior to the testator’s death. Tenn. Code Ann. § 32-3-101 (2001); see also Bell v. Shannon, 367 S.W.2d 761, 766 (Tenn. 1963). Furthermore, a person is presumed to be acquainted with applicable rules of law when executing a will. McCarley v. McCarley, 360 S.W.2d 27, 29 (Tenn. 1962). We must presume, therefore, that Ms. McFarland, prior to her death, knew that several of the beneficiaries had predeceased her, and we can further presume that she knew these lapsed gifts would pass by intestate succession to her heirs. Also, there is no evidence in the record that she attempted to redraft or revise her will to provide for an alternative distribution of the lapsed gifts. Faced with a lack of any clear evidence concerning the testatrix’s intent on this point, we are left to apply the general rules governing residuary clauses and lapsed gifts.

II. General Rules of Property Descent and Distribution

A gift or devise in a will which fails because the beneficiary predeceases the testator is said to lapse. White v. Kane, 159 S.W.2d 92, 94 (Tenn. 1942). To avoid this problem, Tennessee, like many other states, has enacted an “anti-lapse” statute which works to save lapsed gifts for the representatives of the predeceased beneficiary. Id. The Tennessee anti-lapse statute provides, in part:

(a) Whenever the devisee or legatee or any member of a class to which an immediate devise or bequest is made, dies before the testator, or is dead at the mak-ing of the will, leaving issue which survives the testator , the issue shall take the estate or interest devised or be-queathed which the devisee or legatee or the member of the class, as the case may be, would have taken, had that person survived the testator, unless a different dis-position thereof is made or required by the will.

Tenn. Code Ann. § 32-3-105 (2001) (emphasis added). This statute attempts to further the presumed intent of the testator in the absence of any contrary intent expressed through the will. Weiss v. Broadway Nat’l Bank, 322 S.W.2d 427, 432 (Tenn. 1959). However, the anti-lapse statute saves the gift only if the predeceased beneficiary has left issue surviving the testator;

otherwise, the statute has no application, and the gift lapses. See Cox v. Sullins, 183 S.W.2d 865, 866 (Tenn. 1944). Another manner of disposing of lapsed gifts is through a will’s residuary clause. If the will contains specific gifts or devises of property which lapse, these are deemed to fall into the residue and are disposed of through the provisions of the residuary clause, unless the testator has manifested a contrary intention. Milligan v. Greeneville Coll., 2 S.W.2d 90, 93 (Tenn. 1928). Yet a particular problem arises when, as in the present case, the anti-lapse statute is inapplicable, and the gift which has lapsed is already a part of the residue. Under such circumstances, the traditional rule, derived from the English common law, is that the lapsed gift falls out of the terms of the will and passes by intes-tate succession to the testator’s heirs at law. See, e.g., Corbett v. Skaggs, 207 P. 819, 820 (Kan. 1922); In re Frolich Estate, 295 A.2d 448, 450 (N.H. 1972). This rule has, in fact, been the law in Tennessee for the past 153 years, having been adopted in Ford v. Ford, 31 Tenn. 431 (1852). This Court held in Ford that when “a bequest to several be of the residue, and it fail as to part by reason of lapse, partial revocation, or other cause before stated, such part cannot fall into the remaining residue, but will be un-disposed of and go to the next of kin.” Id. at 435. Despite its stability in our state, this rule has been much criti-cized in other jurisdictions and by legal commentators, with the main argument being that the rule defeats the most probable intent of the testator in this situation. Due in part to this criticism, the Uniform Probate Code adopts an alternative rule, often called the “modern” rule, which directs that “if the residue is devised to two or more persons and the share of one of the residuary devisees fails for any reason, his share passes to the other residu-ary devisee, or to other residuary devisees in proportion to their interests in the residue.” Unif. Probate Code § 2-606 (1974). The UPC rule has gained wide-spread support, having been adopted, either by statute or through case law, in the vast majority of other states. By contrast, the common-law or Ford rule remains in ef-fect in only a minority of states, including Tennessee. Nevertheless, although widely abandoned in other juris-dictions, the Ford rule cannot fairly be termed either incorrect or illogical. The reasons supporting the modern UPC rule are generally that it more closely comports with the probable intent of the testator and that it avoids partial intestacy. See In re Slack Trust, 220 A.2d at 473-74; Corbett, 207 P. at 822. However, in our view, it is just as likely that a person would consider the implications of the traditional or Ford rule when executing his or her will and thus implicitly intend that lapsed gifts should pass to the heirs, rather than to the remaining residuary beneficiaries. Therefore, neither of the rules is more logically correct than the other. The two divergent rules simply represent two competing schools of thought as to what a testator would most probably desire to happen when a residuary gift lapses. The Ford rule does not result in any obvious injustice or unfairness, and cannot be said to frustrate the intent of the testator. For instance, in the present case, the testratrix devised certain percentages of her residuary estate to eighteen specified parties, and three of these gifts subsequently lapsed. The will gives no indication of how the testatrix preferred these lapsed gifts to be distributed. However, application of the Ford rule results in the testatrix’s stated intentions being carried out precisely as she directed with respect to fifteen of the eighteen beneficiaries. Further, the lapsed gifts pass to the most natural objects of her bounty—her heirs, which is a disposition favored under the law. See Furchtgott v. Young, 487 S.W.2d 301, 304 (Tenn. 1972)



( holding that in the absence of an expressed intention to the contrary, “‘a construction will be favored which conforms most nearly to the general laws of inheritance and which will prefer those of the blood of the testator to strangers or to persons not so closely related to the testator’”) (quoting Davis v. Mitchell 178 S.W.2d 889, 913 (Tenn. Ct. App. 1944)). Conversely, application of the modern UPC rule would work to completely redraft the terms of the will, with none of the eighteen bequests being fulfilled exactly as directed by the testatrix. Although we do not know how the testatrix would have preferred the lapsed gifts to be distributed, she clearly gave considerable thought to the specific percentages of her estate which she allotted to each beneficiary. To enlarge those percentages now, without any evidence that the testatrix intended such an outcome, would, in our opinion, totally frustrate her intentions as stated in the will. Faced with the choice between these two options, we conclude that the Ford rule secures the result which most closely comports with the testatrix’s stated intentions and is the most just, natural, and reasonable disposi-tion of the property. See Davis, 178 S.W.2d at 913 (stating that “such construction will be adopted if possible that will dispose of the property in a just, natural or reasonable manner”).

III. Principle of Stare Decisis

Further supporting retention of the common-law Ford rule is the principle that whenever a judicial decision, such as Ford, “has been submitted to and for some time, acted under, and is not manifestly repugnant to some rule of law of vital importance in the system, it should not lightly be departed from, nor for purposes which are not of the highest value to the community.” Hall v. Skidmore, 171 S.W.2d 274, 276 (Tenn. 1943) (internal quotations omitted) overruled on other grounds by Graves v. Sawyer, 588 S.W.2d 542 (Tenn. 1979). In urging us to abandon the Ford rule, the appellants cite a general trend toward adoption of the more modern UPC rule, and also argue that the testatrix probably intended for her estate to be divided among the named residuary beneficiaries, to the exclusion of her heirs. Neither argument is sufficiently persuasive or compelling to support overriding a rule of law that has been in effect in this state for

far more than a century. The doctrine of stare decisis is “one of commanding importance, giving, as it does, firmness and stability to principles of law.” J.T. Fargason Co. v. Ball, 159 S.W. 221, 222 (Tenn. 1913). Stability in the law allows individuals to plan their affairs and to “safely judge of their legal rights.” Id. Generally, well-settled rules of law will be overturned only when there is obvious error or unreasonableness in the precedent, changes in conditions which render the precedent obsolete, the likelihood that adherence to precedence would cause greater harm to the community than would disregarding stare decisis, or an inconsis-tency between precedent and a constitutional provision. None of these reasons are evident in the present case. The power of this Court to overrule former decisions “is very sparingly exercised and only when the reason is compelling.” Edingbourgh v. Sears, Roebuck & Co., 337 S.W.2d 13, 14 (Tenn. 1960). Radical changes in the law are best made by the legislature. J.T. Fargason Co., 159 S.W. at 222. In our view, if our General Assembly determines that the UPC or “modern” rule would better serve the public interest, then it is within its power to adopt it into law, as have many other states. For the time being, we see no compelling reason in the case now before us to overrule the long-standing precedent established in Ford. There-fore, we agree with the probate court and the Court of Appeals that the Ford rule governs this case, and the lapsed residuary gifts in Ms. McFarland’s will pass to her heirs under the laws of intestate succession.

Conclusion

In summary, we hold that the lapsed residuary gifts at issue in this case are not to be divided among the remaining residuary beneficiaries. Rather, the lapsed gifts result in a partial intestacy and therefore pass under the laws of intestate succession to the testatrix’s heirs at law. Costs of this appeal are taxed to the appellant, Stephen D. McFarland, administrator C.T.A. of the estate of Merle Jef-fers McFarland, or his sureties, for which execution may issue if necessary.

WILLIAM M. BARKER, JUSTICE

in judicial proceedings to prove who the father was and enable the child to make a claim on his father’s estate. Half-bloods. Persons related because they share one common parent but not both are known as half-bloods. Examples are half-brothers and half-sisters. Many states provide that when prop-erty descends to the collateral kindred of the intestate and part of the collateral kindred are of the whole-blood to the intestate and the other part are of the half-blood, those of the half-blood shall inherit only half as much as those of the w hole-blood; but if all are of the half-b lood, they shall have whole parts. See, for example, § 732.105, Florida Statutes. Other states pro vide that half-blood kindred take the same as whole-blood kindred. “Significant others” and unmarried couples. It is no longer uncommon for couples to li ve together without getting married. Whether it is a heterosexual couple or a same-sex couple, prop-erty will pass according to the intestate la ws of the state in w hich they live. Traditionally those statutes have not provided for a share to the sur viving partner. This is still tr ue today in most states. Executing a will and/or other estate planning documents is one way to avoid the possibility of the surviving partner receiving nothing from the intestate estate. P aralegals should keep up with the laws of their state concerning this issue as a number of states are adopting statutes that give a domestic partner certain rights in the event of the other partner’s death.

half-blood The relationship between two people who share one common parent but not both.

CASE BRIEF

ASSIGNMENT

Read and brief the Byrd v. Trennor case on page 73. (See Appendix A for information on how to brief cases.)



CASE IN POINT

IMPORTANCE OF ESTABLISHING LEGITIMIZATION UNDER ONE OF THE ACCEPTED METHODS FOR PURPOSES OF OBTAINING THE STATUS OF A “CHILD” IN PETITION TO

DETERMINE HEIRSHIP.

IN THE COURT OF APPEALS FOR CLARK COUNTY, OHIO Lorrie L. Byrd

v. Eileen Trennor, et al

C.A. Case No. 2003-CA-83 May 28, 2004

OPINION

FAIN, Presiding Judge. Plaintiff-appellant Lorrie L. Byrd appeals from a summary judgment rendered against her on her petition to determine heirship, and in favor of defendants-appellees Eileen Trennor and John Charles Fitzgiven. In her petition, Byrd alleged that she was the daughter of Daniel Fitzgiven, who died intestate. Byrd contends that the judgment denying her the right to participate in her father’s estate violates the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution. In accordance with the Ohio Supreme Court’s decision in White v. Randolph (1979), 59 Ohio St.2d 6, 13 O.O.3d 3, 391 N.E.2d 333, and Brookbank v. Gray (1996), 74 Ohio St.3d 279, 658 N.E.2d 724, we reject Byrd’s equal-protection argument. Byrd failed to establish an essential element of her claim: her legitimization under one of the accepted methods for purposes of obtaining the status of a “child” under R.C. 2105.06, and the probate court did not have jurisdiction to hear a parentage action under R.C. Chapter 3111. Consequently, we conclude that the probate court did not err in rendering summary judgment in favor of Trennor and Fitzgiven, determining that Byrd had no right to participate in her father’s estate. Therefore, the judgment of the probate court is affirmed. On May 4, 2003, Daniel Fitzgiven died intestate. A few days later, Lorrie L. Byrd filed a petition to determine heirship in the Clark County Probate Court against the surviving relatives of Daniel Fitzgiven: Eileen Trennor, his sister, and John Charles Fitzgiven, his nephew, alleging that she was the daughter of Daniel Fitzgiven. In her petition, Byrd admitted that her mother was never married to Daniel Fitzgiven. The parties stipulated to the following: “1. Lorrie Byrd was never adopted by Daniel Fitzgiven. “2. Lorrie Byrd was not acknowledged by Daniel Fitzgiven in any probate court proceeding in Clark County, Ohio, to legitimize a child; or any county at all, to anyone’s knowledge. “3. Lorrie Byrd was not designated in the probate court as an heir at law of Daniel Fitzgiven. “4. The parties do not know of a last will and testament left by Daniel Fitzgiven. “5. Pursuant to DNA testing, Lorrie Byrd is the biological child of Daniel Fitzgiven.” Trennor and Fitzgiven filed a motion for summary judgment against Byrd. The probate court rendered summary judgment in

favor of Trennor and Fitzgiven. The probate court concluded that Byrd is not entitled to inherit under the laws of descent and dis-tribution, R.C. 2105.06, because Byrd failed to show that she is a “child” within the meaning of R.C. 2105.06. The probate court found that Byrd failed to establish that she was a “child” within the meaning of R.C. 2105.06, because she did not show that she fell into one of the five categories, set forth by law, that would legitimize her. The probate court also found that although Byrd might be able to establish that she is Daniel Fitzgiven’s daughter by bringing a parentage action pursuant to R.C. 3111.04, the probate court does not have jurisdiction to establish paternity un-der R.C. Chapter 3111. From the summary judgment rendered against her, Byrd appeals. Byrd’s sole assignment of error is as follows: “The probate court erred to the prejudice of Lorrie L. Byrd when it ruled that absent an acknowledgment or legal action to determine heirship prior to the death of Daniel Fitzgiven, Lorrie L. Byrd could not participate in the estate of Daniel Fitzgiven.” We review the appropriateness of summary judgment de novo and follow the standards set forth in Civ.R. 56. Koos v. Cent. Ohio Cellular, Inc. (1994), 94 Ohio App.3d 579, 588, 641 N.E.2d 265. “Pursuant to Civ.R. 56, summary judgment is appropriate when (1) there is no genuine issue of material fact, (2) the moving party is entitled to judgment as a matter of law, and (3) reasonable minds can come to but one conclusion and that conclusion is adverse to the nonmoving party, said party being entitled to have the evidence construed most strongly in his favor.” Zivich v. Mentor Soccer Club, Inc. (1998), 82 Ohio St.3d 367, 370, 696 N.E.2d 201. Byrd contends that the probate court’s denial of her right to participate in her father’s estate is a violation of the Equal Protec-tion Clause of the Fourteenth Amendment to the United States Constitution. Byrd contends that R.C. 2105.06 is unconstitu-tional because it distinguishes between illegitimate children of deceased fathers and illegitimate children of deceased mothers, placing the two groups of illegitimate children in different cat-egories. Byrd argues that illegitimate children of deceased fathers can inherit only if they prove that they fall into one of the five categories that would legitimize them, while illegitimate children of deceased mothers can inherit without having to so prove. Byrd contends that this classification is impermissible, because modern scientific testing can conclusively determine paternity. For the same reasons, Byrd argues that it is impermissible to distinguish between illegitimate children who are allowed to inherit from the

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wrongful death of a parent under R.C. 2125.02, and illegitimate children who may not inherit from the death of a parent under R.C. 2105.06. Thus, Byrd contends that the probate court erred in its failure to consider the scientific proof of paternity. R.C. 2105.06, the statute of descent and distribution, pro-vides, in its entirety, that “[w]hen a person dies intestate having title or right to any personal property, or to any real estate or inheritance, in this state, the personal property shall be distrib-uted, and the real estate or inheritance shall descend and pass in parcenary, except as otherwise provided by law, in the following course: “(A) If there is no surviving spouse, to the children of the in-testate or their lineal descendants, per stirpes; “(B) If there is a spouse and one or more children of the dece-dent or their lineal descendants surviving, and all of the decedent’s children who survive or have lineal descendants surviving also are children of the surviving spouse, then the whole to the surviving spouse; “(C) If there is a spouse and one child of the decedent or the child’s lineal descendants surviving and the surviving spouse is not the natural or adoptive parent of the decedent’s child, the first twenty thousand dollars plus one-half of the balance of the intestate estate to the spouse and the remainder to the child or the child’s lineal descendants, per stirpes; “(D) If there is a spouse and more than one child or their lineal descendants surviving, the first sixty thousand dollars if the spouse is the natural or adoptive parent of one, but not all, of the children, or the first twenty thousand dollars if the spouse is the natural or adoptive parent of none of the children, plus one-third of the balance of the intestate estate to the spouse and the remainder to the children equally, or to the lineal descendants of any deceased child, per stirpes; “(E) If there are no children or their lineal descendants, then the whole to the surviving spouse; “(F) If there is no spouse and no children or their lineal de-scendants, to the parents of the intestate equally, or to the sur-viving parent; “(G) If there is no spouse, no children or their lineal de-scendants, and no parent surviving, to the brothers and sisters, whether of the whole or of the half blood of the intestate, or their lineal descendants, per stirpes; “(H) If there are no brothers or sisters or their lineal descendants, one-half to the paternal grandparents of the in-testate equally, or to the survivor of them, and one-half to the maternal grandparents of the intestate equally, or to the survivor of them; “(I) If there is no paternal grandparent or no maternal grand-parent, one-half to the lineal descendants of the deceased grand-parents, per stirpes; if there are no such lineal descendants, then to the surviving grandparents or their lineal descendants, per stirpes; if there are no surviving grandparents or their lineal de-scendants, then to the next of kin of the intestate, provided there shall be no representation among such next of kin; “(J) If there are no next of kin, to stepchildren or their lineal descendants, per stirpes; “(K) If there are no stepchildren or their lineal descendants, escheat to the state.” Although R.C. 2105.17 allows illegitimate children to inherit from their mothers, illegitimate children can inherit from their fa-thers under R.C. 2105.06 only if paternity is established prior to the death of the father. See In re Estate of Hicks (1993), 90 Ohio App.3d 483, 487, 629 N.E.2d 1086. Illegitimate children can inherit

from their fathers if it is shown that affirmative steps were taken by their father, which could include (1) marrying the child’s mother; (2) providing for the child in a will; (3) adopting the child; (4) acknowl-edging the child pursuant to R.C. 2105.18; or (5) designating the child as his heir at law pursuant to R.C. 2105.15. Birman v. Sproat (1988), 47 Ohio App.3d 65, 66, 546 N.E.2d 1354, citing White v. Randolph (1979), 59 Ohio St.2d 6, 13 O.O.3d 3, 391 N.E.2d 333. Where the parent-child relationship is established prior to the father’s death, no differentiation is to be made in the rights of chil-dren based upon whether they were born in or out of wedlock. Id. Byrd concedes that the parent-child relationship was not es-tablished prior to the death of her father. Byrd admits in her peti-tion that her mother and father were never married. Byrd made no showing that her father left a will providing for her and stipu-lated that, in fact, she did not know whether her father left a will. Byrd also stipulated that her father never adopted her, that her father never acknowledged her, and that her father did not designate her as an heir at law. Therefore, Byrd failed to establish that she fell into one of the five categories, set forth by law, that would legitimize her. Illegitimate children may also inherit from their fathers if they prove that they are “children,” within the meaning of R.C. 2105.06, by bringing a parentage action under R.C. 3111.04 to determine the father-child relationship. In re Estate of Hicks , 90 Ohio App.3d at 488. “R.C. Chapter 3111 does not require a par-entage action to be brought before the death of the father.” Id. at 486. Thus, the only way Byrd could affirmatively seek relief would be under the Ohio Parentage Act, R.C. Chapter 3111. However, a probate court does not have jurisdiction to hear a parentage action under R.C. Chapter 3111. Id. at 488, citing Martin v. Davidson (1990), 53 Ohio St.3d 240, 559 N.E.2d 1348. Byrd brought this action in the Clark County Probate Court. Byrd may not seek such a declaration in the probate court. In White v. Randolph (1979), 59 Ohio St.2d 6, 13 O.O.3d 3, 391 N.E.2d 333, the Ohio Supreme Court upheld the constitu-tionality of the different treatment of illegitimate children of in-testate fathers, as against an equal protection challenge, citing “the difficulty of proving paternity and the possibility of fraudu-lent assertions of paternity upon the estate of the decedent” as justifying a finding that the different treatment in the Ohio intes-tate succession statute is substantially related to the important state interest in the just and orderly disposition of property at death. Id. at 11. Byrd contends, and we tend to agree, that the efficacy of ge-netic testing has ameliorated the difficulty of proving paternity and the possibility of fraudulent assertions of paternity to the extent that these concerns may no longer justify differentiating between illegitimate children of fathers and illegitimate children of mothers. However, there is another reason for this different treatment in the context of intestate succession, to which the Ohio Supreme Court briefly alludes in Brookbank v. Gray (1996), 74 Ohio St.3d 279, 658 N.E.2d 724, a case involving the par-ticipation of illegitimate children in wrongful death awards. In its opinion, the court noted: “Also, any presumption that can be made that a father who did not legitimate his illegitimate off-spring did not intend to leave his property at death to such child is irrelevant in wrongful death cases.” Id. at 285. This touches upon the concern, in the law of both testate and intestate succession, with the intentions and wishes of the decedent in the disposition of his estate. Due to inherent biological differences between the genders, there is a significant possibility that a father of an illegitimate



child may be unaware of that child’s existence, whereas it is ex-tremely unlikely that the mother of an illegitimate child will be unaware of the child’s existence. When that father dies without having made a will, he is likely to know, generally, that his estate will pass to his surviving spouse, if any, and to his lineal descen-dants, although he may well be unaware of the exact proportions that each heir will receive. His conscious or unconscious decision not to make a will is likely to be influenced by the fact that he is content that those persons will receive his property at his death. If there were any of those persons that he did not want to receive a portion of his estate, he would presumably take the trouble to write a will disinheriting that individual. But he cannot be pre-sumed to be content that his property will pass at his death to some person whose relationship to him as his child is unknown to him during his life. By asserting the existence of the father-child relationship after the death of the father, the child deprives the father of the opportunity, during life, to make a will disinher-iting the child. In requiring that assertions of the existence of a father-child relationship be made during the life of the father, the intestate succession statute serves the important state interest of enabling the father to make the decision whether to make a will with knowledge of the consequences of that decision. Of course, it can be argued, with some force, that R.C. Chapter 3111 in fact provides for the assertion of parentage after the death of the father. This was so held in In re Estate of Hicks (1993), 90 Ohio App. 3d 483, 487. See the discussion and cases cited in Brookbank v. Gray , supra, 74 Ohio St.3d at 283. Even if R.C. 2105.06, the statute of descent and distribution, were interpreted as precluding the establishment of parentage, pursuant to R.C. Chapter 3111, by an illegitimate child after the death of the father, we conclude that this would not violate the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution in view of the important state interest that would thereby be served, which we have cited in the preceding paragraph. In Brookbank v. Gray , supra, a case involving the right of illegitimate children to participate in wrongful-death recoveries, the Ohio Supreme Court has indicated that the ability of the Ohio Statute of Descent and Distribution to withstand constitutional challenge under the Equal Protection Clause continues, even if the parentage act is deemed not to apply in those cases: “Vestiges of the common-law rule [that an illegitimate child could not inherit from the mother or father] obviously still remain

in the Statute of Descent and Distribution. Whether or not this has been changed by the enactment of the Ohio Parentage Act is inconsequential for purposes of an equal protection analysis. Even if the Parentage Act were interpreted to preclude illegitimate children from claiming inheritance rights from and through their natural fathers absent an adjudication of paternity inter vivos, it is clear that the Ohio intestate succession scheme would nevertheless be constitutional. In providing several options by which the illegitimate child may effectuate inheritance rights inter vivos, including acknowledgement, legitimation and a right of action by the child to establish paternity, Ohio law would still fall within that ‘middle ground between the extremes of complete exclusion and case-by-case determination of paternity that could allowably be included within the state legislation.’ White, supra, 59 Ohio St.2d at 9, 13 O.O.3d at 5, 391 N.E.2d at 335. See, also, Lalli v. Lalli (1978), 439 U.S. 259, 99 S.Ct. 518, 58 L.Ed.2d 503; Trimble v. Gordon (1977), 430 U.S. 762, 97 S.Ct. 1459, 52 L.Ed.2d 31; Labine v. Vincent (1971), 401 U.S. 532, 91 S.Ct. 1017, 28 L.Ed.2d 288.” Brookbank , 74 Ohio St.3d at 287-288. We conclude that the probate court’s denial of Byrd’s right to participate in her father’s estate is not a violation of the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution. Because Byrd failed to establish an essential element of her claim, the legitimization of herself under one of the accepted methods for purposes of obtaining the status of a “child” under R.C. 2105.06, and the probate court did not have jurisdiction to hear a parentage action under R.C. Chapter 3111, we conclude that the probate court did not err in rendering summary judgment in favor of Trennor and Fitzgiven, determin-ing that Byrd could not participate in the estate of Daniel Fitz-given. The fact that Daniel Fitzgiven is Byrd’s father does not establish Byrd’s right of inheritance pursuant to R.C. 2105.06. We conclude that Byrd is not entitled to inherit from her father under the laws of descent and distribution, R.C. 2105.06, be-cause Byrd failed to show that she was a “child” within the meaning of R.C. 2105.06. Byrd’s sole assignment of error is overruled. Byrd’s sole assignment of error having been overruled, we af-firm the judgment of the probate court. Judgment affirmed.

Kindred Intestate statutes that set out the manner in which an estate will be distributed are typically based on blood relationships. Kindred are those indi viduals who are related by blood, as compared to those who are related by marriage. Affinity is the term used to describe relationships by marriage. Some-times the degree of kindred is important in determining who might be an heir. This can be a factor in determining which collateral heirs will inherit from an intestate estate. Examples of collateral heirs include sisters, brothers, aunts, uncles, nieces, nephews, and cousins. Most people are familiar with the phrase family tree . It is a representation of the many family members that share a common heritage. Another name for the family tree is a genealogy chart. When degree of kindred is used to determine the heirs of an intestate estate, the heirs most closel y related to the decedent will inherit the estate. This is determined by counting the degrees the person is from the decedent. Think of a degree as a step away from the decedent. Each step away from the decedent is a degree. Figure 4.2 shows how the degrees are calculated. The surviving kindred with the lo west number inherit the estate. Kindred with higher numbers will receive nothing from the estate. The intestate succession laws give preference to some heirs. F or example, children are given preference over parents, even though they are both one degree removed from the decedent. And

degree of kindred The relationship of surviv-ing blood relatives to a deceased who dies without a will.

collateral heir An heir who is related to the deceased but is not a direct descendant or an ancestor of the deceased, such as a brother, sister, aunt, or uncle.




FIGURE 4.2 Degrees of Kindred

uncles and aunts are usually given preference over grandparents even though both are two degrees away from the decedent. These preferences come out of both tradition and practicality. It is com-monly accepted that the children of a decedent should share in her intestate estate. It is also more likely that there will be a surviving child, as compared to a surviving parent, of the decedent. The same is true with aunts and uncles versus grandparents. Aunts and uncles are in the same genera-tion as the decedent’s parents and more likely to be alive at the time of the decedent’s death.

Applying the Law of Intestate Succession When paralegals are asked to assist in the handling of an intestate succession estate, they should

1. Determine if the decedent was survived by a spouse. 2. Determine if the decedent had any lineal descendants and if all of the lineal descendants are

also descendants of the surviving spouse. 3. Determine if either or both of the decedent’s parents are alive at the time of the decedent’s death.

These three steps will provide paralegals with the information they need to determine if additional research into possible heirs is required. The location of heirs is one of the duties often assigned to the paralegal, and the gathering of this basic information will help in accomplishing this task. If there were no spouse or lineal descendants, the parale gal would have to establish whether other qualifying heirs are alive. He would do so by continuing down the sections of the statute until an heir or class of heirs can be located. P eople who fall in the later classif ications of heirs take nothing from the intestate estate. The facts in the Client Interview set out a very common situation in today’s society. Nuclear families (a family unit consisting of a mother and f ather and their children), once representing the vast majority of families in the United States, now are only one of a wide variety of house-holds. Blended families are now common. This change has impacted man y areas of the la w including wills, trusts, and estates and, more specifically, the need for a will. What would happen to the Wilson’s family estate in the e vent that either Geor ge or Cathy died? Keep in mind that their expressed desire and understanding was that 100 percent of their estate would go to the sur viving spouse and, at the death of that spouse, the estate w ould be divided between their four children. Let’s say that Geor ge dies f irst. What would happen to his estate? Applying the intestate provisions of the Florida statutes, his estate would pass as follows:

1. Cathy would receive one-half of any balance of the intestate estate, because one of George’s surviving descendants (George Jr.) is not a descendant of the surviving spouse. § 732.102(3), Florida Statutes.

nuclear family A family consisting of a mother, father, and their children.


Grandparents (2)

Grandchildren (2)

Parents (1)

Children (1)

Decedent

First cousins (6)twice removed

Uncles/aunts (3)

First cousins (5)once removed

First cousins (4)

Grandnieces/grandnephews (4)

Nieces/nephews (3)

Brothers/sister (2)



2. George Jr. and Amanda would each receive one-half of the amount remaining. § 732.103(1), Florida Statutes.

3. Chris and Jeremy would receive nothing from George’s estate because they are not George’s decedents.

This is clearly not the intent of the Wilson family. Most intestate succession statutes were cre-ated based on traditional f amily relationships and provide that proper ty pass to the decedent’s spouse and blood relatives, starting with the decedent’s children. This probably coincided with the wishes of the average person during much of history. Today, these statutes may or may not meet the desires of indi viduals and families, such as the Wilsons. The way to avoid this problem is to execute a valid will and update it as situations change.

Per Stirpes versus Per Capita Per stirpes and per capita are two terms that have caused many paralegal students to go back to their textbooks for a refresher on how they apply to the passing of proper ty by will or intestate succession. Both terms relate to how a decedent’s property is distributed, but both have dramati-cally different results in how it is distributed. They are excellent examples of how important the proper use of words is in the law. Per stirpes is usually defined as “by the roots” or “by right of representation” and per capita as “by the heads.” It is unlikely that these two traditional definitions help in clarifying the concepts or the consequences of these two legal concepts, so let’s try a different approach. While both per stirpes and per capita deal with the distribution of the decedent’s property, they start from very different points. They become important when determining the inheritance rights of grandchildren, great-grandchildren, etc. Per stirpes is a method of distributing proper ty to the closest living descendants of the dece-dent and is often the method prescribed for use in intestate statutes. For example, John dies leav-ing two children, Jennifer and Sue. If John died intestate and had no sur viving spouse, Jennifer and Sue would take an equal share of their father’s estate. Now, let’s change the facts. Jennifer and Sue predeceased their f ather. Jennifer was survived by her two children, Jane and Sara. Sue was survived by her child, Melissa. Jane and Sara would stand in place of Jennifer and di vide the amount that she w ould have received. Melissa would stand in place of her mother and recei ve the share she w ould have received. Figure 4.3 shows how the property would be distributed in this case. Per capita, on the other hand, is a method of distributing the proper ty on the number of living descendants on the same generational line, for e xample, g randchildren. When the beneficiaries are not on the same generational line, the more remo ved heirs will take by repre-sentation. Figure 4.4 shows how John’s property would be distributed by the per capita method.

SIMULTANEOUS DEATH

Intestate succession laws provide for an orderly way to distribute a decedent’s estate to the heirs that survive her. There are, however, situations in which it is difficult or impossible to determine if a decedent died before or after a potential heir . An example of this would be when a husband

per stirpes The division of assets according to rights of representation.

per capita The equal division of assets according to the number of surviving heirs with the nearest degree of kinship.

FIGURE 4.3Per Stirpes Example

Jennifer (½)(deceased)

Jane(¼)

Sara(¼)

Sue (½)(deceased)

Melissa(½)

John(deceased)



Jennifer(deceased)

Jane( )

Sara( )

Sue(deceased)

Melissa( )

John(deceased)

1 3 1 3 1 3

FIGURE 4.4 Per Capita Example

and wife w ere killed in a car accident. The vast majority of states ha ve passed the Unifor m Simultaneous Death Act, which was incorporated into the Uniform Probate Code Article II and the Uniform Act on Intestacy, Wills and Donative Transfers in 1991. The original act provided that when passage of property depends upon priority of death, and there is no sufficient evidence that the persons have died otherwise than simultaneously, the property of each person would be disposed of as if he had sur vived. Most states now provide that the death does not ha ve to be si-multaneous, allowing that, if an heir fails to survive the decedent who dies intestate by 120 hours, the heir does not take under intestate succession.

simultaneous death When it cannot be estab-lished that one person died before another.


Nebraska Cooperative Extension NF96-291: http://ianrpubs.unl.edu/homemgt/nf291.htm

CCH Financial Planning Toolkit, “Dying Without a Will”: www.finance.cch.com/text/c50s10d190.asp

Gerry W. Beyer (2005). “The Basics of Texas Intestate Succession Law”: www.professorbeyer.com/Articles/Intestacy_Texas_Basics.htm

“Property Law” (2006). Encyclopædia Britannica . Retrieved January 7, 2006, from Encyclopædia Britan-nica Premium Service: www.britannica.com/eb/article-28569

“Estate and Inheritance Law” (2006). Britannica Student Encyclopedia . Retrieved January 7, 2006, from Encyclopædia Britannica Premium Service: www.britannica.com/ebi/article-200388

CYBER TRIP

Summary Intestate succession is a common occur rence in the United States due to the lar ge number of people who do not have valid wills or wills that ef fectively dispose of all their proper ty at the time of their death. Paralegals need to understand how the intestate succession laws work and be able to identify the possible heirs to the intestate estate. While intestate succession laws vary from state to state, their purpose is the same, to provide an orderly distribution of the decedent’s estate. To this end, the statutes attempt to pro vide for those most closely related to the decedent. The surviving spouse and children are at the top of the list of heirs to the estate. If there is no sur viving spouse or children, the e state will pass in the order prescribed by statute to the other kindred of the decedent. Those surviving kindred most closely related to the decedent will inherit the estate.

Hands-on Assignment Prepare a degree of kindred chart based on your family. How would

RESEARCH THIS!

your property be distributed if you died without a will under your state’s intestate statute?



Key Terms Affinity Blended family Collateral heir Degree of kindred Half-blood Kindred Lineal ascendants

Lineal descendants Nuclear family Per capita Per stirpes Simultaneous death Stepchildren Surviving spouse

Review Questions

1. Explain why knowledge of intestate succession is important for a paralegal working in a wills, trusts, and estates law firm.

2. Describe the difference between lineal descendants and lineal ascendants. Explain why the distinction is important in the law of intestate succession.

3. Explain how the degree of kindred is determined. 4. What is the difference between per stirpes and per capita distribution of a person’s estate? 5. Explain the difference between affinity and kindred. 6. What is escheat? Why is it important in the law of wills, trusts, and estates? 7. What scientific advancement has made it easier to determine paternity? Why is it important

in the law of wills, trusts, and estates? 8. What societal change has increased the need for many people to have a will? 9. What factors affect how much a surviving spouse will receive under intestate succession

from his or her deceased spouse’s estate? 10. Who are collateral heirs? When is it a factor in determining who will inherit from an intes-

tate estate?

Other loved ones of the decedent ma y or ma y not be ab le to share in the intestate estate. They include adopted children, stepchildren, after -born children, children born out of wedlock, half-bloods, and “significant others.” Some potential heirs may forfeit their rights to the intestate estate, as w ell as cases involving wills, etc., b y their wrongful acts. There are statutes that prohibit heirs or benef iciaries from inheriting if they feloniously and intentionally kill the decedent.


Lisa Joann Sowden f iled a petition with the cour t alleging that she was the illegitimate daugh-ter of the decedent Gar y P. Greenwood. Lois A. Greenwood, the administratrix of her deceased husband’s estate, was notified that Lisa intended to claim an intestate share of the estate as Gary’s illegitimate child. Lois indicated that the only proof of paternity she would accept would be proof through blood testing. She rejected a birth certificate and affidavits of the decedent’s family and friends attesting to the fact that Gary acknowledged Lisa as his daughter as evidence. It was later discovered that samples of the decedent’ s blood were in the possession of the county coroner . Lois refused to allow the release of these blood samples for use in paternity testing. Should Lisa be allowed to access the blood samples to prove paternity in order to make a claim for an in-testate portion of Gary’s estate? Should the other proof of parentage have been sufficient to prove that Gary was Lisa’s father? See In re Estate of Greenwood, 402 Pa.Super. 536, 587 A.2d 749 (Pa.Super. 1991).

1. Locate the intestate laws of your state, and determine how the property of George Wilson from the Client Interview would be distributed under those laws.

2. Research the laws of your state, and write a paper that explains the rights of “other possible heirs” set out in those laws.

Portfolio Assignment



1 2

3

4 5

6

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9

12

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11

Vocabulary Builders



ACROSS 1. Heirs who are related to the deceased but are not a direct

descendant or an ancestor of the deceased, such as a brother, sister, aunt, or uncle

3. A family made up of one or more parents having been previously married and having children of that previous marriage

7. Those related by blood to the decedent 8. A family consisting of a mother, father, and their children 11. The division of assets according to rights of representation 13. Relationship by marriage 14. The relationship of surviving blood relatives to a deceased

who dies without a will

DOWN 2. The relationship between two people who share one com-

mon parent but not both 4. When it cannot be established that one person died

before another 5. Persons who are related in an ascending line 6. The equal division of assets according to the number of

surviving heirs with the nearest degree of kinship 9. Persons who are related in a descending line 10. A spouse that lives longer than the other spouse 12. A spouse’s children from a former relationship

Vocabulary Builders


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PlanningCHAPTER 5 Estate Planning Tools and Tax Considerations

CHAPTER 6 The Importance of Having a Will

CHAPTER 7 Drafting and Executing Wills

CHAPTER 8 Trusts

CHAPTER 9 Final Decisions

Part Two


83

Estate Planning Tools and Tax Considerations CHAPTER OBJECTIVES


• Explain the differences between various types of life insurance products.

• Discuss the role of wills, trusts, and specialized trusts in estate planning.

• Identify the advantages and disadvantages of the various tools used in estate planning.

• Identify which estate planning tool should be considered based on a given client fact situation.

• Recognize common terminology associated with estate planning.

• Explain the reasons people have for planning for the future.

• Discuss how federal estate tax impacts the estate plan.

Planning for the future is something e veryone talks about. The phrase itself, planning for the future, sounds simple. Pre vious chapters ha ve dealt with ho w to draft some of the more common estate planning tools—wills and tr usts. This chapter discusses ho w wills and tr usts, along with other tools, are available to help the client plan for the future. This chapter will also show that helping clients plan for their future is not simple. It is not simple because each client has individual needs and desires. There isn’t one estate plan that will help every client. This chapter introduces the paralegal student to many of the tools available for helping clients plan their estate. These tools include life insurance, wills, and a v ariety of trusts. Some or all of the tools may be used to develop a plan that meets the needs of the client.

WHY “ESTATE PLANNING TOOLS AND TAX CONSIDERATIONS” IS IMPORTANT TO THE PARALEGAL STUDENT

A basic understanding of the concepts of intestate succession and wills is only the start of what a paralegal needs to know when working in a wills, trusts, and estates law firm. Most clients come to an attorney not just to draft a will and/or a tr ust, but to have the attorney assist in an overall estate plan that will help ensure that the client’s desires will be accomplished and that as much of the estate’s assets will pass to those the client intended, instead of them being used to pay taxes. Chapter 5 introduces the paralegal student to a number of tools that are used b y the attorney to meet the client’s needs and some of the tax consequences considered w hen developing an estate plan. The comparison to tools in a toolbo x is a very good one. Each tool we will discuss in this chapter has specific advantages and disadvantages to its use. More than one tool might be required to successfully plan a client’s estate.

Chapter 5

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84 Part Two Planning

It is impor tant to note it is not the role of the parale gal to actually develop the plan for the client. This is done by the attorney with the assistance of other professionals, such as a cer tified public accountant (CPA). Paralegals do, however, play an impor tant part in helping the attor -ney put the plan in place. They will assist in tasks such as gathering infor mation and document preparation. Paralegals, therefore, need an understanding of the tools a vailable for use in estate planning to better perform the tasks they will be assigned.

ESTATE PLANNING

Estate planning is a term used to describe a wide variety of steps a person can take to plan for the management of her property and provide for loved ones after she dies. A simple estate plan may include just a will and documents such as a living will that express the client’s desires in case she becomes incapacitated. While the amount of property is certainly a factor in determining which of the many planning tools that are available to the attorney will be used to assist a client plan his estate, there are many other reasons why a person will seek out help in planning for his future. These include provid-ing for the sur viving spouse and children, minimizing tax es and expenses of probate to ensure the passage of the maximum amount of the estate to the benef iciaries, providing for a charity or other cause, and planning for what happens if the person becomes incapacitated. An estate plan is customized to fit the need of a client. There is no one-size-fits-all estate plan. Instead it is much like buying a suit that needs to be tailored to f it the size and shape of the cus-tomer. The attorney tailors the estate plan to fit the needs of the client. The tools discussed in this chapter are the attorney’s equivalent of the tailor’s scissors and thread. He uses the various tools that are discussed in this chapter to create the plan that “f its” the client’s needs. Figure 5.1 gives some reasons why a person may need an estate plan. Each tool has its strengths and limitations. Seldom is an y one tool used by itself. Instead the attorney will use a combination of them to meet the desired result.



Client Interview Pat Harper is a divorced parent of two children, Jack and Stephanie. Jack, age 21, has Down’s syn-drome. He currently works at a local grocery store, but has difficulty keeping track of his finances and Pat has to help him with many day-to-day life decisions. Stephanie is currently in college. She is bright, but lacks direction in life. Much to her mother’s dismay, Stephanie has never learned the value of money. She spends it in a reckless manner and consistently

seems to make bad decisions relating to her life. Pat is con-cerned about both of her children. She knows that Jack will most likely outlive her and worries about who will manage his affairs. She is concerned about leaving anything of value to Stephanie because of her inability to handle money and plan for the future. Pat has come to your firm to see what options are available for her to help plan for her family’s future.

Case Fact Pattern

FIGURE 5.1 Who Needs an Estate Plan?

• Anyone who owns property and does not want it to pass pursuant to the laws of intestate succession.

• People with children under the age of 18.

• People with loved ones with a disability that may require special care after they die.

• People who want to provide for their stepchildren.

• People who have significant assets that may subject their estate to federal and state estate taxes.

• People who want to express their desires relating to being kept alive by life-sustaining medical care when they are in a terminal condition.

• People who want to designate who will administer their estate and be guardians of their children.

• People who want to provide for a specific charitable cause, such as the American Cancer Society, an educational institution, or another nonprofit institution.

• People who own their own small business and want to provide a smooth transfer to their beneficiaries who will be continuing the operation of the business.


Chapter 5 Estate Planning Tools and Tax Considerations 85

LIFE INSURANCE

Life insurance is one of the basic tools in the estate planning toolbo x. It is a very versatile tool that can be used in planning the estate of clients, whether they have many assets or relatively few. Another good quality of life insurance is that most people have a basic understanding of what it is and how it works. While the concept of life insurance is simple, the variety of life insurance policies on the market is anything but simple. Here is a partial list of some types of life insurance that might be used.

Whole Life When people buy whole life insurance, they are actually buying and paying for two separate things—life insurance and an in vestment. P art of their premium pa yment goes to life insurance, the cost of w hich is impacted b y f actors such as the person’ s age and health. Another part of the person’s premium is an investment. Think of it as a savings account where the account g rows in value as more premium pa yments are made. The insurance company invests the investment portion of the insured’s premium, and the insured receives a return on her investment that further increases her savings account. The savings are refer red to as the cash surrender value of the policy. Whole life can be used to pay potential estate taxes when the insured dies. Whole life insurance has the benefit of being what is referred to as permanent life insurance. The policy will stay in force as long as the insured pays his premiums in a timely manner. The down side to w hole life insurance is that it is relati vely expensive and may not pay as good a return as other investments could.

Universal Life Universal life is also an insurance product that offers both a life insurance policy and an invest-ment, refer red to as an accumulation fund. Unlik e whole life, premiums can v ary during the course of policy ownership. An insured can pay as little as the amount owed for the life insurance portion of the premium and still k eep her policy in force, although this may cause much higher premiums later. And, like whole life insurance, this insurance product is e xpensive compared to others, such as term life insurance.

Term Life When a person buys term life insurance, all that person buys is insurance. Term life insurance is not intended for use as an investment. Instead, it is designed to provide the insured the maximum amount of life insurance coverage for the premium the insured can afford to pay. Since there is no investment involved in term life insurance, premiums are much lower than for either whole life or universal life insurance. Insureds purchase their policy for a set number of years (hence the name term ) and then the policy can usually be renewed. The premiums will normally increase when the policy is renewed

Visit these sites to learn more about estate planning:

Maxwell Shmerler & Co., Certified Public Accountants, “ESTATE PLANNING FOR EVERYONE” (n.d.) (accessed 01/07/06): www.msco-cpa.com/estates.htm Iowa State University Extension Service, “Estate Planning” (2005) (accessed 01/07/06): www.extension.iastate.edu/Publications/PM1463.pdf Daniel G. Parsons, “Estate Planning Concepts” (2000) (accessed 01/07/06): http://library.findlaw.com/2000/Sep/1/130981.html Bill Judge and Associates, “Estate Planning” (n.d) (accessed 01/07/06): www.legacyalive.com/pages/estate.html The State Bar of California, “Estate Planning” (accessed 3/30/06): http://calbar.ca.gov/state/calbar/calbar_generic.jsp?cid=10581&id=2206

CYBER TRIP

whole life insuranceLife insurance that is in-tended to provide coverage for the insured’s entire life. Whole life is characterized by an inclusion of an investment component that increases in value over time.

insuredA person whose life, property, health, or other interests are protected by an insurance policy.

estate taxA tax imposed on the transfer of a decedent’s property to his or her heirs.

permanent life insuranceLife insurance that can be kept for the life of the insured if premiums are paid in a timely manner. Examples of permanent life insurance are whole life insurance and universal life insurance.

universal life insuranceInsurance that is similar to whole life insurance, but with one difference being that premiums can vary during the course of policy ownership.

term life insuranceLife insurance issued to cover an insured’s life for a specific period of time.



because of the increased age of the insured. K eep in mind that a primar y factor in establishing the premium for a life insurance polic y is the insured’s age. Many insurance companies also of fer the option of allowing insureds to convert their term life insurance to whole life insurance.

WILLS

Wills are another mainstay of estate planning. It is lik ely that if most people w ere asked what estate planning involves, the answer would be executing a will. There is no question that a will is an important part of everyone’s estate plan. For some, executing their will ma y take care of most of their concer ns about providing for their loved ones after the testator dies. F or others, a will is just one tool that will be used to maximize the benefit of their estate plan. There are many advantages of having a will, but the y also have some disadvantages as an estate planning tool. These disadvantages include:

• They go into effect when the testator dies. One major purpose of estate planning is to avoid estate taxes. Many of the methods that lawyers and accountants use to aid their clients in the minimization or avoidance of estate tax involve tools that take effect when the testator is alive, such as irrevocable living trusts. A will can be part of an overall plan to save taxes, but by itself is not one of the better tools to aid in this goal. This is due to the fact the testator is retaining the right to make changes relating to the ownership of his property until his death. The most efficient estate planning tools for avoiding or reducing estate taxes are those in which the client gives up his ownership rights or rights of control over the property during his lifetime.

• Cost of probate. A will is probated after the death of the testator. The value of the estate is a key factor in how much probate will cost. Keep in mind that these costs will come out of the assets of the estate before the beneficiaries take their share of the estate as set out by the will. Costs that are affected by the size of the estate include attorney fees; personal repre-sentative fees and compensation; other fees for professional help, such as accountants; and estate taxes.

• Need to keep the will up to date. As noted previously, most people never get around to ex-ecuting a valid will. The procedures for changing a will may not be complicated, but they do increase the odds that the testator will not keep her will current. Executing a new will and executing a codicil to an existing will are two methods normally used to keep a will up to date.

TRUSTS

Trusts are one of the most commonly used tools to help clients with a wide v ariety of needs as-sociated with estate planning. Trusts can help solve unique problems, such as dealing with adult children who have trouble controlling their spending habits or to help a client a void the impact of estate taxes. Chapter 8 will deal with the concepts associated with tr usts and ho w to draft a basic trust. There are, ho wever, a wide v ariety of tr usts that can be used in estate planning. A check of the word trust in Black’s Law Dictionary, 7th ed., West Group, 1999, revealed over 120 different phrases associated with trusts, including more names of trusts than most people can imagine. This chapter will focus on how these trusts are commonly used in the law firm as part of the creation of an estate plan. There are tax considerations related to w hether a tr ust is a testamentar y trust, a revocable living trust, or an irrevocable living trust that must be considered when creating an estate plan for a client. Generally, assets passing through a testamentary trust are included in the decedent’s taxable estate and may be subject to federal and state tax. The same is tr ue of revocable living trusts. By retaining control over the assets the settlor exposes the assets to possible taxation. See Figure 5.2 for additional information on living trusts. Irrevocable living trusts are one means to reduce or eliminate estate tax. The settlor gives up his right to control the assets. This results in the assets no longer being par t of his gross estate for federal taxation purposes. The disadvantage is that he no longer has the ability to change the trust.

revocable living trust A trust created during the settlor’s lifetime and one in which the settlor reserved the right to terminate the trust and recover the trust property.

irrevocable living trust A trust created during the settlor’s lifetime and one in which the settlor did not reserve the right to terminate the trust and recover the trust property.

legal title A title that indicates legal ownership but not necessarily a beneficial interest.

precatory trust A trust based on words of recommendation rather than on an express intent of a settlor.

beneficiary A person who benefits under a document, such as a will or a life insurance policy.

revocable living trust A trust created during the settlor’s lifetime and one in which the settlor reserved the right to terminate the trust and recover the trust property.




beneficiary A person who benefits under a document, such as a will or a life insurance policy.

CYBERTRIP

Visit this site to learn more about life insurance:Federal Citizens Information Center, “What You Should Know about Buying Life Insurance” (1998) (accessed 01/07/06): www.pueblo.gsa.gov/acli/buying_insur.pdf



FIGURE 5.2 Federal Trade Com-mission Publication on Living Trusts

FTC FACTS for ConsumersLIVING TRUST OFFERS:

How to Make SureThey’re Trust-worthy

You’ve worked hard for your money, and made every attempt to be a conscientious saver. So it’s only natural that you want some control over what happens to your assets in the event of your death. At the very least, you probably want to minimize or avoid potential hassles and headaches for your loved ones.

Estate planning deals with what happens to your assets after you die. Even if you are a per-son of modest means, you have an estate—and several strategies to choose from to make sure that your assets are distributed as you wish and in a timely way. The right strategies depend on your individual circumstances. That is, what is best for your neighbor might not make the most sense for you.

Misinformation and misunderstanding bout estate taxes and the length or complexity of probate provide the perfect cover for scam artists who have created an industry out of older people’s fears that their estates could be eaten up by costs or that the distribution of their assets could be delayed for years. Some unscrupulous businesses are advertis-ing seminars on living trusts or sending post-cards inviting consumers to call for in-home appointments to learn whether a living trust is right for them. In these cases, it’s not un-common for the salesperson to exaggerate the benefits or the appropriateness of the living trust and claim—falsely—that locally-licensed lawyers will prepare the documents.

Other businesses are advertising living trust “kits”: consumers send money for these do-it-yourself products, but receive nothing in return. Still other businesses are using estate planning services to gain access to consumers’ financial information and to sell them other financial products, such as insurance annuities.

What’s a consumer to do? It’s true that for some people, a living trust can be a useful and practical tool. But for others, it can be a waste of money and time. What is a living trust, anyway, and how does it differ from a will? Who should you trust when it comes to estate planning? And how can you tell which tools and strate-gies will work best for your particular circumstances?

The Federal Trade Commission (FTC), the government agency that works to prevent fraud, deception and unfair business prac-tices in the marketplace, says that it helps to learn the terms that are used in this aspect of financial planning before you begin con-versations about it. For example:

Probate is a legal process that usually in-volves filing a deceased person’s will with the local probate court, taking an inventory and getting appraisals of the deceased’s property,

paying all legal debts, and eventually dis-tributing the remaining assets and property. This process can be costly and time-consum-ing. Many states have simplified probate for estates below a certain amount, but that amount varies among states. If an estate meets the state’s requirements for “expe-dited” or “unsupervised” probate, the process is faster and less costly.

A trust is a legal arrangement where one person (the “grantor”) gives control of his property to a trust, which is admin-istered by a “trustee” for the “benefi-ciary’s” benefit. The grantor, trustee and beneficiary may be the same person. The grantor names a successor trustee in the event of incapacitation or death, as well as successor beneficiaries.

A living trust, created while you’re alive, lets you control the distribution of your estate. You transfer ownership of your property and your assets into the trust. You can serve as the trustee or you can select a person or an institution to be the trustee. If you’re the trustee, you will have to name a successor trustee to distribute the assets at your death.

The advantage of a living trust? Properly drafted and executed, it can avoid probate because the trust owns the assets, not the deceased. Only property in the deceased’s name must go through probate. The downside? Poorly drawn or unfunded trusts can cost you money and endanger your best intentions.

A will is a legal document that dictates how to distribute your property after your death. If you don’t have a will, you die intestate, and the law of your state deter-mines what happens to your estate and your minor children. The probate court governs this process.

A living trust is different from a living will. A living will expresses your wishes



about being kept alive if you’re terminally ill or seriously injured.

And, the FTC advises, proceed with caution. Because state laws and requirements vary, “cookie-cutter” approaches to estate planning aren’t always the most efficient way to handle your affairs. Before you sign any papers to create a will, a living trust, or any other kind of trust:

• Explore all your options with an expe-rienced and licensed evstate planning attorney or financial advisor. Generally, state law requires that an attorney draft the trust.

• Avoid high-pressure sales tactics and high-speed sales pitches by anyone who is selling estate planning tools or arrangements.

• Avoid salespeople who give the impression that AARP is selling or en-dorsing their products. AARP does not endorse any living trust product.

• Do your homework. Get information about your local probate laws from the Clerk (or Register) of Wills.

• If you opt for a living trust, make sure it’s properly funded — that is, that the property has been transferred from your name to the trust. If the transfers aren’t done properly, the trust will be invalid and the state will determine who inherits your property and serves as guardian for your minor children.

• If someone tries to sell you a living trust, ask if the seller is an attorney. Some states limit the sale of living trust services to attorneys.

• Remember the Cooling Off Rule. If you buy a living trust in your home or somewhere other than the seller’s permanent place of business (say, at a hotel seminar), the seller must give you a written statement of your right to cancel the deal within three busi-ness days. The Cooling Off Rule provides that during the sales transaction, the salesperson must give you two copies of a cancellation form (one for you to keep and one to return to the company) and a copy of your contract or receipt. The contract or receipt must be dated, show the name and address of the seller, and explain your right to cancel. You can write a letter and exercise your right to cancel within three days, even if you don’t receive a cancellation

form. You do not have to give a reason for canceling. Stopping payment on your check if you do cancel in these circumstances is a good idea. If you pay by credit card and the seller does not credit your account after you cancel, you can dispute the charge with the credit card issuer.

• Check out the organization with the Better Business Bureau in your state or the state where the organization is lo-cated before you send any money for any product or service. Although this is prudent, it is not foolproof: there may be no record of complaints if an orga-nization is too new or has changed its name.

For More InformationTo learn more about estate planning strategies, talk with an experienced estate planning attorney or financial advisor, and check out the following resources.

AARP: 1-800-424-3410; www.aarp.org. Askfor a copy of Product Report: Wills & Liv-ing Trusts. AARP does not sell or endorse living trust products.

The American Bar Association, Service Center, 541 N. Fairbanks Ct., Chicago, Ill. 60611; 312-988-5522; www.abanet.org/ publiced/publicpubs.html

Council of Better Business Bureaus, Inc., 4200 Wilson Blvd., Suite 800, Arlington, Va. 22203-1838; 703-276-0100; www.bbb.org

The National Academy of Elder Law Attor-neys, Inc., 1604 North Country Club Road, Tucson, Ariz. 85716; 520-881-4005; www.naela.org

The National Consumer Law Center, Inc., 18 Tremont St., Ste. 400, Boston, Mass. 02108- 2336; 617-523-8010; www.consumerlaw.org

Where to ComplainThe FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.



Living trusts, testamentary trusts, revocable living trusts, and irrevocable living trusts are all examples of express trusts. An express trust is one that the settlor intended to create and did so either in writing or orall y. Paralegals will often be in volved in the drafting of e xpress written trusts on behalf of the clients their firm represents. The law also creates other tr usts referred to as implied tr usts. An implied trust is one that is imposed by law rather than by the intent of the settlor. Two main categories of this type of tr ust are resulting trusts and constructive trusts. A resulting trust occurs when the facts indicate that, while the legal title is in the name of one person, the intent was that the property was being held for the benefit of another person. A constructive trust is one that the law creates based on equity to prevent an unfair result. This occurs when the possession of the property was obtained through some wrongdoing, such as theft or embezzlement. While an implied tr ust may occasionally become an issue in a wills, tr usts, and estates law firm, it is not a tool that is used by the paralegal to help the client create an estate plan. A precatory trust is another type of trust that should not be a par t of the paralegal’s toolbox in preparing an estate plan. It can occur w hen words of desire, such as request or recommend, are used instead of a direct command for the creation of a tr ust. The law may recognize it as a trust despite this shortcoming. The next question is, “If it is sometimes recognized as a trust, why should it not be one of the tools used by the paralegal?” The reason is simple—a precatory trust is an improperly worded trust that could e xpose the person who drafted it to liability or at the very least result in a tr ust that the cour t will not recognize. A properly drafted trust will be f ar less likely to be challenged in court than a precatory trust.

SPECIALIZED TRUSTS

Totten trusts are pay on death accounts that get their name from a case in w hich a claim w as made for funds placed in a savings account “in trust” for another and the proceeds are not pa y-able to that person until the depositor dies. See In re Totten, 71 N.E. 748 (N.Y. 1904). The court recognized this form of trust, even though it did not meet the for mal requirements of creating a trust. The Totten trust is an easy, inexpensive way to provide for the transfer of a bank account to a specific person at the time of the depositor’s death. The beneficiary’s interest, however, does not vest until the death of the depositor . The depositor retains use of the mone y in the account and can delete the beneficiary entirely before the depositor’s death, thereby defeating any claim the beneficiary may have to the money. A marital deduction trust is a tr ust designed to tak e advantage of the unlimited marital deduction allowed under the IRS tax code. It is also refer red to as a credit shelter trust , a bypass trust, and an AB trust. AB trusts are often created as par t of each spouse’s will and are funded when the first spouse dies. Couples whose estate is large enough to be subject to federal estate tax use may find this trust helpful in their estate planning. As stated, these trusts take advantage of the unlimited marital deduction. This deduction exempts all transfers of assets betw een spouses, whether by gift or inheritance, from federal estate or gift taxes. So, a husband could have a $4,000,000 estate and leave the entire amount to his spouse with-out any payment of estate taxes. The problem is that this merely delays the possible payment of estate taxes to when the surviving spouse dies. The AB trust is a way to avoid this problem and use the unlimited marital deduction not only to avoid taxation on the estate being received by the surviving spouse but also to reduce her estate in order to eliminate or minimize the amount of taxes paid when she dies. Figure 5.3 contains a sample clause creating an AB trust in a residuary clause of a will.

CASE BRIEF

ASSIGNMENT

Read and brief the In the Matter of the Estate of Harry Albert Bolinger III case on page 90. (See Appendix A for information on how to brief cases.)

FIGURE 5.3 Sample Clause Creat-ing an AB Trust in a Residuary Clause of a Will

marital deduction trustA trust set up to take advantage of the marital deduction.

marital deductionA federal tax deduction that allows one spouse to transfer an unlimited amount of property to the other spouse without incur-ring estate or gift taxes.

credit shelter trustA trust created by married couples to reduce or elimi-nate estate taxes. Also called an AB trust, a bypass trust, or a family trust.

bypass trustSee credit shelter trust.

AB trustSee credit shelter trust.

giftVoluntary transfer of property without receiving consideration.


All the residue of my estate, of whatever type, I leave to __________ (trustee’s name and address), in trust, for the uses and purposes set forth below:

If my spouse survives me, I direct that the trust be divided into two separate trusts: “Trust A,” the marital trust, and “Trust B,” the residuary trust.1. The following shall be placed in Trust A: an amount equal to fifty percent of the adjusted

gross estate, as that term is defined by the Internal Revenue Code. I empower the trustee to fund Trust A in cash or in any kind.

2. Trust B shall be funded equally to the balance of the residue remaining after the creation of Trust A. I empower the trustee to fund Trust A in cash or any kind.



PRECATORY LANGUAGE

Supreme Court of MontanaIn the Matter of the Estate of Harry Albert Bolinger III

No. 97-113August 1, 1997

Justice James C. Nelson delivered the Opinion of the Court.BackgroundHarry Albert Bolinger, III, (Decedent), died March 23, 1995. Dece-dent’s estate was initially commenced as an intestacy proceeding with Deborah being nominated by Decedent’s three adult chil-dren (the children) and subsequently being appointed as personal representative. On July 13, 1995, however, H. A. Bolinger (Hal), father of Decedent, filed a petition for formal probate of will and a request to be appointed personal representative. The Novem-ber 15, 1984 will so offered for probate devised all Decedent’s estate to Hal, or, in the event that Hal predeceased Decedent, to Hal’s wife (Decedent’s step-mother), Marian. Specifically, the Fifth paragraph of the will, the language of which is at issue here, provides:

I intentionally give all of my property and estate to my said father, H. A. Bolinger, in the event that he shall survive me, and in the event he shall not survive me, I intentionally give all of my property and estate to my step-mother, Marian Bolinger, in the event she shall survive me, and in that event, I intentionally give nothing to my three children, namely: Harry Albert Bolinger, IV, Wyetta Bolinger and Travis Bolinger, or to any children of any child who shall not survive me. I make this provision for the reason that I feel confi-dent that any property which either my father or my step-mother, Marian Bolinger, receive from my estate will be used in the best interests of my said children as my said beneficiaries may determine in their exclusive discretion.

The will nominated Hal as personal representative with Marian as the alternate. Hal subsequently renounced his right to serve as personal representative and suggested the appointment of Marian, who petitioned to be appointed on November 6, 1995. Decedent’s children objected, contending, among other things, that the will was void as a matter of law because of undue influence or constructive fraud on the part of Hal, and, in the alternative, that the will created a trust on behalf of the children. The children moved for summary judgment. Marian filed certain deposition and discovery responses and the court took those into consideration. The court did not enter any findings or conclusions as to undue influence or constructive fraud. However, following the receipt of additional briefs as to the construction of the Fifth paragraph of the will, and, after taking into consideration (over Marian’s objection) an affidavit of John B. Folsom, Professor of English Emeritus, Montana State University, submitted by the children, the court ruled that the will, through the language in the Fifth para-

graph created an express trust in favor of Decedent’s chil-dren. Because Marian would be the trustee under the Fifth paragraph of the will and because of the admitted hostility between her and the children, the court also ruled that the trust should be terminated and the trust corpus distributed to them with Deborah continuing to act as the personal repre-sentative. On appeal from this decision, Marian raises three issues:

1. Whether the District Court erred in its legal conclusion that the Fifth paragraph of Decedent’s will created an express trust for the benefit of Decedent’s three children;

2. Whether the District Court erred in considering the affidavit of John B. Folsom;

3. Whether the District Court erred in its Findings of Fact Nos. 20 and 21 regarding an alleged partnership between Hal and Decedent.

We will address Issues 1 and 2 together. We will not ad-dress Issue 3 or the court’s findings and conclusions as to that issue as Marian states in her brief on appeal that Issue 3 is the subject of other proceedings and that she merely brings the matter to our attention here so as to avoid any later waiver argument.Standard of Review We review a district court’s grant of a mo-tion for summary judgment de novo and apply the same criteria under Rule 56, M.R.Civ.P., as did the district court. Missoula Ru-ral Fire Dist. v. City of Missoula (Mont. 1997), ___ P.2d ___, ___, 54 St. Rep. 480, 481. We review the district court’s findings of fact to determine whether they are clearly erroneous under the three-part test adopted in Interstate Production Credit v. DeSaye (1991), 250 Mont. 320, 820 P.2d 1285, and we review the court’s conclusions of law simply to determine whether the court’s interpretation of the law is correct, Matter of Estate of Dern Family Trust (Mont. 1996), 928 P.2d 123, 127, 53 St. Rep. 1087, 1089. As with the judicial interpretation and construction of any in-strument, the question of whether any particular language in a will creates an express trust, given the circumstances under which the trust was executed, is a question of law for the court to de-cide. See Klawitter v. Dettmann (1994), 268 Mont. 275, 281, 886 P.2d 416, 420. Here, accepting the facts found by the court, we conclude, nevertheless, that the District Court erred as a matter of law in its interpretation and construction of the effect of the language of the Fifth paragraph of Decedent’s will.Discussion On the basis of the discovery responses and deposi-tions provided as part of the summary judgment proceedings, the District Court found that both Hal and Marian believed that the language in the Fifth paragraph of Decedent’s will created a trust (although in a second deposition Marian contended that

CASE IN POINT

90


she was mistaken in her initial impression in this regard). The court also found that Marian believed that at the time Decedent’s will was drafted and executed, the children were minors and that Decedent used the language in the will to prevent his ex-wife from obtaining control over his estate. The court also agreed with Professor Folsom that, when read in its entirety, the Fifth paragraph of the will expressed Decedent’s intention that all of his property must be used in the best interests of his children. The court found that the subject or res of the trust was all of Decedent’s property and that the testator’s purpose in creat-ing the trust was to ensure that his assets would be used in his children’s best interests. The court then concluded that Decedent having thus manifested his intention, and, on the basis of the criteria and authorities argued by the children, an express trust for the children’s benefit was created under the Fifth paragraph of Decedent’s will. On appeal from the District Court’s decision, Marian argues that proof of an express trust requires clear and convincing evidence that the trustor intended to create a trust and that devises, bequests and gifts that do not contain any restrictions on use or disposition of the property involved do not create an express trust. She contends that the use of “precatory” words by a testator, that is words which express only a wish or recom-mendation as to the disposition of property, are not sufficient to establish an intention to create a trust. She cites, among other cases, our decision in Stapleton v. DeVries (1975), 167 Mont. 108, 535 P.2d 1267, in support of her position in this regard. Furthermore, she maintains that the trial court erred in con-sidering the affidavit of Professor Folsom because the question of whether given language in a will creates an express trust is one of law, and, as such, is not a proper subject of expert opinion. In support of the District Court’s decision, the children ar-gue that where the testator manifests his intention to create a trust, no particular form of words or conduct is necessary, and that, providing that the trustor indicates with reasonable certainty the subject, purpose and beneficiary of the trust, an express trust is created. The children contend that, under the facts here and under these criteria, the language used by Dece-dent in the Fifth paragraph of his will created an express trust in their favor. They maintain that a trust must be construed in a manner so as to implement the trustor’s intent and that, here, Decedent clearly expressed his intention that his property be used for the benefit of his children. The children cite a 1894 New York case, People v. Powers (N.Y. Sup.Ct.1894), 29 N.Y.S. 950, rev’d on other grounds, 41 N.E. 432 (N.Y. 1895), for the proposition that a testator’s expression of “confidence” that a bequest will be used to benefit another is sufficient to cre-ate a trust. Finally, as to the matter of the Folsom affidavit, Decedent’s children maintain that the professor did not express an expert opinion on the ultimate legal question, but, rather, his opinion went simply to “the factual issue of the grammati-cal construction of [the Fifth paragraph]—not on whether the language creates an express trust.” At the outset, we note that there are differences in the statutory law in effect at the time that Decedent executed his will in November 1984 and when he died in March 1995. While the parties do not take any definitive position as to which body of statutory law applies in this case as to this first issue, the District Judge cites to the law in effect at the time Decedent died and which is presently in effect, § 72-33-202, MCA. In this regard, we note that § 72-33-102, MCA, provides that after

September 30, 1989, the present “Trust Code” (Title 72, Chap-ters 33 through 36) applies to all trusts regardless of when they were created and to all proceedings concerning trusts when-ever they were commenced unless, in the opinion of the court, application of a particular provision of the Trust Code would substantially interfere with the rights of the parties and other interested persons or with the effective conduct of the proceed-ings. While no such opinion, one way or the other, explicitly appears in the trial court’s decision, as mentioned, the court did cite to the present version of the code and thus, implicitly, determined that this statutory law applied. We also note, however, that various cases cited in the briefs and in the trial court’s decision predate the Legislature’s 1989 adoption of the present Trust Code and that in certain instances those cases tend to track the statutory language in effect at the time the cases were decided instead of the present statu-tory law. See e.g., Wild West Motors, Inc. v. Lingle (1986), 224 Mont. 76, 728 P.2d 412, relied upon by the children and the court, which tracks the language of the pre-1989 statute, § 72-20-107, MCA, as to how a trust is created. Whether those prior decisions simply apply across the board to cases decided under the present Trust Code is not addressed in the briefs; it does ap-pear, however, that the parties and the trial court assumed that to be true. We will not attempt to address these collateral matters in this opinion, leaving their analysis and resolution to some future case if specifically raised, argued and briefed. Rather, in the case at bar, we will address the first issue in the context of those legal principles which, we believe, have remained historically constant regardless of the changes in the statutory law over the time period in question. In this regard, we also note that under the present Trust Code, ss. 72-33-103, MCA, provides that “[e]xcept to the extent that the common law rules govern-ing trusts are modified by statute, the common law as to trusts is the law of this state.” Taking this approach, it is clear that a trust is created only if the testator demonstrates that he or she intends that a trust be created. This rule, followed in Wild West Motors, was set forth prior to 1989 at § 72-20-107, MCA: a voluntary trust is created, as to the trustor and beneficiary, by any words or acts of the trus-tor indicating with reasonable certainty: (1) an intention on the part of the trustor to create a trust; and (2) the subject, purpose and beneficiary of the trust. Since 1989, under the Trust Code the law is that “[a] trust is created only if the trustor properly manifests an intention to create a trust.” Section 72-33-202, MCA. Moreover, in our case law, we continue to cite to the general rule that in the construction of trusts it is the trustor’s intent that controls and that to determine that intent we look to the lan-guage of the trust agreement. Hauseman v. Koski (1993), 259 Mont. 498, 501, 857 P.2d 715, 717 (citations omitted). In that regard, our rules of construction with respect to testamentary instruments are well settled: The words of the instrument are to receive an interpretation which will give some effect to every expression, rather than an interpretation which will render any of the expressions inopera-tive. The will is to be construed according to the intentions of the testator, so far as is possible to ascertain them. Words used in the instrument are to be taken in their ordinary and grammati-cal sense unless a clear intention to use them in another sense can be ascertained. In cases of uncertainty arising upon the face of the will, the testator’s intention is to be ascertained from the



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words of the instrument, taking into view the circumstances un-der which it was made, exclusive of his oral declarations.

‘The object, therefore, of a judicial interpretation of a will is to ascertain the intention of the testator, accord-ing to the meaning of the words he has used, deduced from a consideration of the whole instrument and a comparison of its various parts in the light of the situa-tion and circumstances which surrounded the testator when the instrument was framed.’

In re Strode’s Estate (1946), 118 Mont. 540, 545, 167 P.2d 579, 581-82 (quoting Blacker v. Thatcher (1944), 145 F.2d 255, 259, 158 A.L.R. 1, cert. denied 324 U.S. 848, 65 S.Ct. 686, 89 L.Ed. 1409). Accord In re Hume’s Estate (1954), 128 Mont. 223, 226, 272 P.2d 999, 1000. Furthermore, “[n]o particular form of words or conduct is necessary for the manifestation of intention to create a trust,” Restatement (Second) of Trusts § 24 (1959), and “words of trusteeship are not necessarily conclusive,” George T. Bogert, Trusts § 11 at 24 (6th ed. 1987). Nonetheless, we have held that “express trusts depend for their creation upon a clear and direct expression of intent by the trustor,” Eckart v. Hubbard (1979), 184 Mont. 320, 325, 602 P.2d 988, 991, and that the burden of proof to establish the existence of a trust is upon the party who claims it and must be founded on evidence which is unmistakable, clear, satisfactory and convincing. First Nat’l Bank v. Sant (1973), 161 Mont. 376, 386, 506 P.2d 835, 841 (citing Bender v. Bender (1965), 144 Mont. 470, 397 P.2d 957, and Platts v. Platts (1959), 134 Mont. 474, 334 P.2d 722). See also Bogert, supra § 11 at 26 ([i]t is frequently stated by courts that the evidence to establish the existence of a trust must be “clear,” “convincing,” “explicit,” and “unequivocal”), and Eckart, 602 P.2d at 991 (evidence must be “clear, convincing, and practically free from doubt”). Again, for purposes of this opinion, the parties having cited to no authority that would support a conclusion that the law would be different under the Trust Code, we will apply these foregoing legal principles. Therefore, we now turn to the language of the Fifth paragraph of Decedent’s will:

I intentionally give all of my property and estate to my said father, H. A. Bolinger, in the event that he shall survive me, and in the event he shall not survive me, I intentionally give all of my property and estate to my step-mother, Marian Bolinger, in the event she shall survive me, and in that event, I intentionally give nothing to my three children, namely: Harry Albert Bolinger, IV, Wyetta Bolinger and Travis Bolinger, or to any children of any child who shall not survive me. I make this provision for the reason that I feel confi-dent that any property which either my father or my step-mother, Marian Bolinger, receive from my estate will be used in the best interests of my said children as my said beneficiaries may determine in their exclusive discretion.

From this language it is clear that Decedent intended to ac-complish several things under this paragraph of his will. First, he “intentionally” devised outright all of his property and estate to his father, and in default of that bequest, then to his step-mother, Marian. Second, it is also clear that Decedent “intentionally” de-vised nothing to his three children. Third, Decedent desired to make some explanation as to why he disposed of his estate in the fore-

going manner. To this end, he added to the otherwise unequivocal language of the first sentence of the Fifth paragraph, a second sentence with the explanation that he made this provision because he felt “confident” that any property which either his father or his step-mother, Marian, received from his estate would [“will”] be used in the best interests of his said children as Hal or Marian may determine in their exclusive discretion. It is the language in this second sentence which is at issue and which the District Court determined created an express trust in favor of the children. The use of this latter sort of qualifying language in a will or instrument is referred to as “precatory” language. As stated in Bogert, supra § 19 at 41: Usually, if a transferor of property intends the transferee to be a trustee, he directs him to act in that capacity, but sometimes he merely expresses a wish or recommendation that the property given be used in whole or in part for the benefit of another. Words of this latter type are called “precatory” and are generally construed not to create a trust but instead to create at most an ethical obligation. In weighing the effect of precatory expressions the courts consider the entire document and the circumstances of the do-nor, his family, and other interested parties. The author of this treatise notes that the primary question in construing precatory language is whether the testator meant merely to advise or influence the discretion of the devisee, or himself control or direct the disposition intended. Bogert, supra § 19 at 42. Here, in Marian’s favor, the author notes that “the settlor must have explicitly or impliedly expressed an intent to impose obligations on the trustee and not merely to give the donee of the property an option to use if for the benefit of an-other.” Bogert, supra § 19 at 42 (emphasis added). Put another way, considering the language of the entire instrument and the situation of the alleged settlor, his family, and the supposed beneficiaries at the time the will was executed, “was it natural and probable that the donor intended the donee to be bound by an enforceable obligation or was he to be free to use his judgment and discretion?” Bogert, supra § 19 at 42 (emphasis added). Moreover, “[w]here a donor first makes an absolute gift of property, without restriction or limitation, and later inserts precatory language in a separate sentence or paragraph, the courts are apt to find that there was no intent to have a trust.” Bogert, supra § 19 at 43. We have addressed the use of such language in a prior deci-sion relied on by Marian. In Stapleton, 535 P.2d at 1268, the decedent’s will provided as follows:

I give, devise and bequeath to my beloved wife, Amanda DeVries, all the balance, residue and remain-der of my property of whatever nature, kind or charac-ter which I may own at the time of my death to have and to hold as her sole and separate property. I do this with the knowledge that she will be fair and equitable to all of my children, the issue of myself and my former wife as well as the issue of herself and myself.

When Amanda died leaving all her property to her children and nothing to the decedent’s children by his first marriage, the latter sued claiming that a constructive trust was created by de-cedent’s will in their favor. Stapleton, 535 P.2d at 1268. Revers-ing the trial court’s summary judgment in the plaintiffs’ favor, we ruled that the language was clear on its face—Amanda was given decedent’s property outright and the remaining precatory language did not create a trust for the benefit of the children by decedent’s first marriage. Stapleton, 535 P.2d at 1268.



Furthermore, in Stapleton, while rejecting as of “little value” cases cited by the parties and pointing out that precatory trust cases are fact driven, we relied on Miller v. Walker Bank & Trust Co. (1965), 17 Utah 2d 88, 404 P.2d 675, as being factually simi-lar. Stapleton, 535 P.2d at 1268-69. In Miller, the precatory lan-guage at issue was:

I give, devise and bequeath to my beloved wife, Nettie Knudsen Miller, all of my property, whether the same be real or personal or mixed, and I do this acknowledging all my children hereinafter named, and for the reason that I know that my beloved wife will care for my chil-dren from the remainder of my estate, if there be any, share alike. . . .

We quoted with approval the Utah court’s conclusion that this precatory language did not create a constructive trust, specifi-cally emphasizing that part of the court’s decision that “[w]here there is a clear and unequivocal devise, the statement of the rea-sons for doing so does not limit or restrict the testamentary gift.” Stapleton, 535 P.2d at 1269. We noted, further, that there was nothing in the Stapleton record to support any conclusion that the decedent intended to create a trust through the precatory language used. Stapleton, 535 P.2d at 1269. Similarly, in the case at bar, the language used by Decedent clearly and unambiguously makes an outright gift to his father, and in default of that gift, to his step-mother and specifically excludes his children. Then, in a separate sentence, Decedent explains the reason for this distribution, expressing his “confi-dence” that the devisees will use his estate for the children’s “best interests” in the devisees’ “exclusive discretion.” This lan-guage does not impose any sort of clear directive or obligation (other than, perhaps, a moral or ethical one) on either Hal or Marian. The purported trustee is given no direction as to how the supposed settlor intends his estate to be used to further the “best interests” of the children and neither does Decedent pro-vide any guidance as to what those best interests might include. Decedent imposes no restrictions on the purported trustee, but, rather, leaves in that person the “exclusive discretion” as to how the estate will be used for the children’s best interests, express-ing his “confidence” that will be accomplished. Decedent’s statement of reasons for devising his estate to Hal and Marian, neither limits nor restricts the gift to them any more than did the language at issue in Stapleton and in Miller limit or restrict the bequests made in those cases. Stapleton, 535 P.2d at 1269. The bottom line is that, under the precatory language used by Decedent, his devisees had complete discretion as to how to use the property given them outright. Furthermore, as in Stapleton, the facts found by the court and relied on by the children in the case at bar do not support the conclusion that Decedent intended that his expression of con-fidence in his father and step-mother would create a legally en-forceable express trust. First, the trial court and the children focus on deposition testimony of Marian that she (initially at least) and Hal believed that the will created a trust. How Marian and Hal may have construed the language is not the issue, however. The real issue is what Decedent intended when he used the language which he did. Unfortunately, neither Marian’s nor Hal’s conclu-sory interpretation of the meaning of the language in the Fifth paragraph of the will assists in divining Decedent’s intent one way or the other. Second, while Marian believed that Decedent may have been concerned that his first wife would obtain control over his estate while the children were minors, her personal belief

of what motivated Decedent is not evidence of what Decedent actually intended. Even Marian’s testimony on this point was equivocal and speculative:

Bud [Decedent] was flying around a good deal in those days because of his being an officer in the Pinsgauer [sic] Association, and I think he got worried about his kids. And by that time, his father had given him the 240 acres up south, and so he probably did not want Fae to have anything to do with it, is what my own personal feeling is. And he certainly made it clear. [Em-phasis added.]

Third, as to Professor Folsom’s affidavit, he first recites the entire Fifth paragraph of Decedent’s will. He then analyzes vari-ous words and phrases in the paragraph as parts of speech and in the context of grammar and sentence structure. Professor Folsom then reaches the conclusion that “[w]hen read in its en-tirety, the paragraph expresses the intention that the property must be used in the best interest of the children.” Regardless of whether Professor Folsom’s affidavit was admissible or not on the issue of Decedent’s intent, we conclude simply that, either on a stand-alone basis or in conjunction with Marian’s depo-sition testimony, this affidavit does not provide substantial evi-dence, much less clear and convincing evidence, of Decedent’s intent. Without belaboring the point, nothing here suggests that Decedent chose his nouns, verbs and adverb prepositional phrases with the surgical precision that Professor Folsom con-cludes adds up to an expression of intention that the property “must” (Professor Folsom’s word, not Decedent’s) be used in the best interest of the children. Arguably, had Decedent given the sort of considered thought to his choice of words that is sug-gested by the affidavit and had he clearly intended to create an express legal trust, it is more likely that he would not have used the sort of precatory language that he did. Furthermore, we note that the Third paragraph of Decedent’s will makes an unconditional, outright devise of all of Decedent’s estate to Hal and that the Fourth paragraph of the will makes an unconditional, outright devise of the same property to Mar-ian, should Hal die before Decedent. Also, we note that the Sixth paragraph of the will appoints Hal as the personal representative with Marian as the alternate, both without bond, and gives both unrestricted power to sell any or all of the estate property with-out court order at public or private sale, with or without notice. Again, Decedent’s unequivocal, outright and unrestricted gifts to Hal and alternatively to Marian, and his appointment of them as the personal representative and alternate without bond and with-out restriction on their powers, supports the conclusion that the one precatory sentence in the Fifth paragraph was advisory only and was not intended to create a legal, express trust obligation. While the children and the trial court rely upon Wild West Motors and In Re Marriage of Malquist (1988), 234 Mont. 419, 763 P.2d 1116, as generally describing the creation of a vol-untary trust, neither case is particularly helpful in resolving the specific question of Decedent’s intent and the construction of the language in his will at issue here. In the former case the existence of a trust was admitted, Wild West Motors, 728 P.2d at 415, and in the latter case the issue was whether certain real property was included in an already existing trust, Malquist, 763 P.2d at 1117. Furthermore, the children’s and the court’s citation to Pow-ers, an 1894 New York case, is not persuasive. The case is cited for the proposition that the testator’s expression of “confidence”



that a bequest will be used to benefit another is sufficient to create a trust. We conclude that, while such an expression may be considered as part of the evidence of a testator’s intention, in and of itself, the use of that word is not dispositive of this issue. Whether a trust will be found from the use of any precatory word or phrase, whether that be “desire,” “wish,” “hope,” “recom-mend,” “in confidence” or “rely,” cannot be concluded merely from the particular word or phrase used. Bogert, supra § 19 at 41–42. Importantly, and while other courts may interpret preca-tory language more liberally, our case law precedent is clear and we decline to depart from it on the facts here. Stapleton, 535 P.2d at 1268–69. In short, we conclude that, reviewing Decedent’s will as a whole, taking the words and phrases used by Decedent in their ordinary and grammatical sense and considering the facts found by the District Court, there was not the sort of “unmistakable,” “clear,” “convincing,” “explicit,” “unequivocal” and “practically free from doubt” evidence that would support a legal conclusion that Decedent clearly and directly expressed his intention to cre-ate an express trust in favor of the children through his use of precatory language in the Fifth paragraph of his will. Eckart, 602 P.2d at 991; First Nat’l Bank, 506 P.2d at 841; Platts, 334 P.2d at 727; Stapleton, 535 P.2d at 1269.

Finally, as an aside, we note that both Stapleton and Miller ad-dressed whether the precatory language at issue created a con-structive trust, as opposed to the claim in the case at bar that the trust created was an express trust. Express trusts depend upon intention and implied trusts, i.e., constructive or resulting trusts, arise by operation of the law. Platts, 334 P.2d at 727. See also §§ 72-33-201, -219 and -220, MCA. With regard to the latter trusts, intent may be presumed or implied or intent may not even be an issue. Eckart, 602 P.2d at 991. Nevertheless, for purposes of this opinion, we do not believe that this distinction as to the type of trust created is of particular importance, where the central is-sue—whether the testator’s intent is manifest from the language used and the facts found—is the same and is governed by the same principles of law. We hold that the District Court erred in its legal conclusion that the Fifth paragraph of Decedent’s will created an express trust for the benefit of Decedent’s three children. Accordingly, we reverse and remand for further proceedings consistent with this opinion.Reversed and remanded./S/ JAMES C. NELSONConcurring: J. A. TURNAGE. KARLA M. GRAY. JIM REGNIER, TERRY N. TRIEWEILERJustice W. William Leaphart and William E. Hunt, Sr., dissenting.


FIGURE 5.4What Is the Dif-ference Between Not-for-Profit and Tax-Exempt Status?Source: Internal Revenue Service, “FAQs about Ap-plying for Tax-Exemption” (n.d.), www.irs.gov/charities/article/0,,id=136195,00.html.

Non-profit status is a state law concept. Non-profit status may make an organization eligible for certain benefits, such as state sales, property, and income tax exemptions. Although most federal tax-exempt organizations are non-profit organizations, organizing as a non-profit organization at the state level does not automatically grant the organiza-tion exemption from federal income tax. To qualify as tax-exempt from federal income taxes, an organization must meet requirements set forth in the Internal Revenue Code.

Let’s say that Mr. and Mrs. Edwards had $3,500,000 in assets that the y wanted to include in the AB trust to minimize or a void any future estate tax es. They have one son, John. They use $3,500,000 to fund their AB trust. Mr. and Mrs. Edwards are the life benef iciaries. Their son, John, is listed as the f inal beneficiary. When Mr. Edwards dies, the trust is split into two parts. For our e xample, $1,750,000 w ould be put in par t A for Mrs. Edw ards. She w ould have full benefit of the tr ust, and her tr ust can be revocable. Part B will also contain $1,750,000, w hich ultimately will be John’s. However, Mrs. Edwards has the right to use the property, including the income it earns. When Mrs. Edwards dies, Part B will pass to John. The couple used the unlimited marital deduction w hen they created the initial tr ust. If Mr. Edwards died in 2007, both the A and B tr usts would be below the taxable estate level of $2,000,000. (See Figure 5.3 .) When Mrs. Edwards dies, her estate w ould only be $1,750,000 and not large enough to be subject to the estate tax, thus passing to her beneficiaries tax-free. A qualified terminal interest property (QTIP) trust provides the surviving spouse with the income from the trust during his or her lifetime. After the death of the spouse, the assets remain in the tr ust for the benef it of someone else, usuall y the settlors’ children. People who are in a second marriage with children from the first marriage often use this trust. It provides for the care and support of their cur rent spouse during his or her lifetime and ensures that the assets them-selves will ultimately pass to the benef it of the children from the f irst marriage. The QTIP trust must comply with the requirements of Internal Revenue Code § 2056 (b)(7). A charitable trust is created to benef it charitable entities. These include churches, pub lic schools, the humane society, or any other entity that the IRS recognizes as a charitable organization. These trusts are designed to take advantage of the special tax treatment given to these organizations by the IRS. The tax code allows an unlimited charitable deduction for gifts to qualif ied charities. See Figure 5.4 for a discussion of the difference between not-for-profit and tax-exempt status.

qualified terminal interest property (QTIP) trust A trust that provides a surviving spouse an income and which meets the requirements of the IRS Code.

charitable trust A trust created to benefit a specific charity that promotes educational, scientific, or other charitable purposes.

qualified terminal interest property (QTIP) trust A trust that provides a surviving spouse an income and which meets the requirements of the IRS Code.


gift taxA tax imposed when a per-son gives money or other assets without receiving adequate consideration.



Courts have consistently held that the law favors charitable trusts. In fact, unlike for other trusts the law will locate a ne w beneficiary under a charitable trust if the charity identif ied in the tr ust is no longer in existence. This is called the cy pres doctrine. Under this doctrine, in the event the specific charity that was made the benef iciary under a charitable trust no longer exists, the court will try to identify a charity that serves a similar purpose and substitute it as the beneficiary. Some states also apply the cy pres doctrine to testamentary gifts to a charity in the decedent’s will. For example, suppose there is a local animal rescue g roup that operates in Volusia County, Florida. Sam Stevens, a Volusia County resident, was so impressed with the good work the group did in helping the unw anted dogs and cats in the area that he created a charitab le trust for the organization in his will. Unfortunately, shortly after Mr. Stevens’ death, the animal rescue group ceased its operations. When the beneficiary under a private trust no longer exists, the trust ends and any property of the trust reverts to the settlor’s heirs. But, if a court finds that the settlor had a general charitable intent, as compared to a specific charitable intent to benefit only the charity specified in the trust, then the court will seek out a charity that provides a similar service to the public good. In this example, that might be the Humane Society or the American Society for the Prevention of Cruelty to Animals. A charitable remainder trust is a type of inter vivos trust in which the settlor names herself as the income beneficiary while she is alive and the trust’s assets go to the named charity benefi-ciary upon the settlor’s death. The settlor may be able to take a deduction for the gift at the time the trust is created, and the assets pass tax-free to the charity upon the settlor’s death. A life insur ance trust is an ir revocable living trust that is estab lished during the settlor’s lifetime, but which does not receive the majority of its funding until after his death. The settlor establishes the irrevocable trust, and the trustee purchases a life insurance polic y on the life of the settlor. The settlor may also assign the ownership of an existing policy to the tr ust, but the estate tax saving is lost if the settlor does not live for more than three years following the estab-lishment of the trust. The settlor contributes enough money each year to pay the premiums on the policy. To avoid possible gift tax implications relating to the settlor’s contributing money for the payment of the insurance premiums, life insurance tr usts should contain a provision that allows a benef iciary to withdraw each year the amount paid in for the premiums from the tr ust. This makes the gift eligible for the annual federal gift e xemption. This provision for a benef iciary to withdraw the life insurance premiums is refer red to as Cr ummey powers, based on the case of Crummey v. Commissioner , 397 F.2d 82 (9th Cir. 1968). The key to making a life insurance trust meet its goal of removing the proceeds for the policy from the decedent’s estate is to have him give up all incidents of ownership in the life insurance policy. Life insurance proceeds that are paid to the decedent’s estate are included as par t of the gross estate, as are life insurance proceeds paid to a named benef iciary if the decedent retained incidents of ownership. To avoid this the settlor must irrevocably give up his right to control the trust, including things like naming or changing benef iciaries, his right to cash sur render value, and other economic benefits in the policy. This type of trust can allow for the proceeds of the life insurance policy to pass to the settlor’s heirs tax-free. It can also be structured to take advantage of the annual gift tax exclusion, which will be discussed in more detail later in this chapter. Families are usually made up of people with a v ariety of personalities, skills, and dif fering values. Some may be artistic, while others have great business minds. Family members will also have different abilities when it comes to handling their financial affairs.

charitable remain-der trust An inter vivos trust in which the settlor names himself or herself as the income beneficiary during his or her lifetime, with the trust’s assets going to the named charity beneficiary upon the settlor’s death.

life insurance trust An irrevocable living trust that is established during the settlor’s lifetime, but which receives most of its funding from a life insur-ance policy payable upon the settlor’s death.

incidents of ownership An insured’s right to exercise control over a life insurance policy, such as the right to change beneficiaries and to enjoy the economic benefits of the insurance policy.

spendthrift trustA trust that restricts the voluntary or involuntary alienation of the trust property and/or income by the beneficiary.

charitable remain-der trust An inter vivos trust in which the settlor names himself or herself as the income beneficiary during his or her lifetime, with the trust’s assets going to the named charity beneficiary upon the settlor’s death.

life insurance trust An irrevocable living trust that is established during the settlor’s lifetime, but which receives most of its funding from a life insur-ance policy payable upon the settlor’s death.


spendthrift trustA trust that restricts the voluntary or involuntary alienation of the trust property and/or income by the beneficiary.

Visit these sites to learn more about life insurance trusts:

Perkins Cole, “Tax and Nontax Advantages of Irrevocable Life Insurance Trusts” (2004) (accessed 01/06/06): www.perkinscoie.com/content/ren/updates/pp/051104a.htm Yahoo Finance, “Life Insurance Trusts: A Way to Save Estate Taxes” (n.d.) (accessed 12/15/05): http://biz.yahoo.com/edu/in/iw_in17.iw.html

CYBER TRIP

cy pres doctrineIn wills and trust law, this doctrine allows a court to substitute a similar charity to benefit from a gift made in a will or trust if it is no longer possible to give it to the charity designated by the testator/settlor.



Most families include one or more people who could be called a spendthrift. A spendthrift is a person who lacks the appreciation of the value of money. They spend it freely, but not wisely. The consequences of this w ay of handling mone y can be seen in the ne ws fairly regularly. The stories often involve people who win large amounts of money in a lottery and now are filing bankruptcy. Providing for this type of f amily member takes some care and planning. Lea ving a spend-thrift a large amount of cash would probably be a mistake. A spendthrift trust protects the trust principal from the creditors of the benef iciary. The beneficiary only has the right to the income paid under the trust and cannot assign her rights to unear ned income or the tr ust principal. See Figure 5.5 for a sample spendthrift clause. A sprinkling trust can be used to give flexibility and discretion to the trustee to meet the needs of each individual benef iciary. Under the sprinkling tr ust the trustee can distribute the tr ust in-come and/or principal to the beneficiaries he deems appropriate. This could be based on any num-ber of factors, such as the need of a particular beneficiary or to minimize the tax consequences of the distribution. While this trust has some benefits, care should be exercised when deciding to use it because of the tremendous discretion that is g ranted to the trustee and the possible disharmony that may occur among the beneficiaries because of the way the distributions are made. A pour-over trust is created by the settlor during her lifetime. The trust receives funding after the death of the settlor. This is accomplished by the inclusion of a clause in her will that lea ves the residuary of her estate to the trustee of an already existing living trust. A pet trust is established by a pet owner who is concerned about the care of his pets after his death. The settlor funds a trust with enough money to care for the pets for the remainder of their lives. After the settlor’s death, the trustee pays for the caretaking of the pets. States that allow for the establishment of pet trusts include Arizona, California, Colorado, Hawaii, Missouri, Montana, New Mexico, New York, Nevada, Nor th Carolina, Ore gon, Tennessee, Utah, and Wisconsin. Figure 5.6 contains the Montana Trust for Pets Statute.

GIFTS

Most people don’t think of gifts as an estate planning tool. It may even sound a little contrary to what is usually considered the reasons gifts are given. Gifts are, however, a great tool to help clients plan the handling of their estate. One great rea-son gifts should be considered is that they allow the person to see the benef it her generosity has on those to whom the money is given. For example, she could give her daughter and son-in-law money to help them put a do wn payment on their f irst home. Or, perhaps she could gi ve her grandson enough money to pay for his college tuition. Gifts can make a huge difference in the lives of people, and the donor would benefit from seeing the impact on those she helps. There is also a more f inancially practical reason for using gifts as par t of estate planning—they are a way of reducing the client’s taxable estate. For example, a gift can be gi ven of up to $12,000 to any one donor (this figure is for the year 2006 and may be adjusted in future years for inflation) without causing the donor to have to pay a tax on the gift. In turn, it reduces the value of the donor’s property at the time of his death, thereby reducing possible state and federal estate taxes. As of 2006, the lifetime gift exemption is $1,000,000. Many people use gifts as a means of reducing their assets in order to qualify for Medicaid , rather than out of a concer n for estate taxes. Medicaid is a federal pro gram that was originally designed to help the poor recei ve health care. While it is a federal plan, it allo ws voluntary participation by the states, w hich submit plans that must compl y with requirements imposed by federal statutes and re gulations. Eligibility requirements are imposed , including limits on income, disability, and assets owned by the applicant.







donor A person who makes a gift, creates a power of appointment, or establishes a trust.

donor A person who makes a gift, creates a power of appointment, or establishes a trust.

FIGURE 5.5Sample Spendthrift Clause

The interests of beneficiaries in principal or income shall not be subject to the claims of any creditor, any spouse for alimony or support, or others, or to legal process, and may not be voluntarily or involuntarily alienated or encumbered. This provision shall not limit the exercise of any power of appointment.



In recent years the program has been increasingl y used to provide long-term nursing home care for indigent elderly (over 65) and disabled persons. Since the program is designed to help the poor, many individuals who desire to take advantage of the program’s nursing home benef it must reduce their assets to the level set out by statute. If this were not done, the expenses of long-term care would dramatically reduce the person’s estate that would be left to her heirs at death. Elder law attorneys often assist their clients in w hat is refer red to as “Medicaid planning. ” This has become more difficult since the enactment of the Def icit Reduction Act of 2006. This act allows for examination of any transfers made b y the Medicaid applicant for the f ive years before applying for benefits. A power of appointment is a tool that gi ves the estate planner both fle xibility in who will receive a decedent’s estate and the ability to minimize taxes in some circumstances. It does so by granting the power to determine who will benef it from a client’s will or trust to someone other than the decedent. This tool can be very useful to the client who is uncertain who should benefit

power of appointment The power granted in a will, trust, or other instrument to determine who will benefit from a client’s will or trust.


FIGURE 5.6Montana Trust for Pets Statute

72-2-1017. Honorary trusts—trusts for pets. (1) Subject to subsection (3), a trust may be performed by the trustee for 21 years but no

longer, whether or not the terms of the trust contemplate a longer duration if: (a) a trust is for a specific lawful noncharitable purpose or for lawful noncharitable pur-

poses to be selected by the trustee; and (b) there is no definite or definitely ascertainable beneficiary designated.(2) Subject to the provisions of subsection (3) and this subsection, a trust for the care of a

designated domestic or pet animal is valid. The trust terminates when no living animal is covered by the trust. A governing instrument must be liberally construed to bring the transfer within this subsection, to presume against the merely precatory or honorary nature of the disposition, and to carry out the general intent of the transferor. Extrinsic evidence is admissible in determining the transferor’s intent.

(3) In addition to the provisions of subsection (1) or (2), a trust covered by either of those subsections is subject to the following provisions:

(a) Except as expressly provided otherwise in the trust instrument, no portion of the principal or income may be converted to the use of the trustee or to any use other than for the trust’s purposes or for the benefit of a covered animal.

(b) Upon termination, the trustee shall transfer the unexpended trust property in the following order:

(i) as directed in the trust instrument; (ii) if the trust was created in a nonresiduary clause in the transferor’s will or in a codi-

cil to the transferor’s will, under the residuary clause in the transferor’s will; and (iii) if no taker is produced by the application of subsection (3)(b)(i) or (3)(b)(ii), to

the transferor’s heirs under 72-2-721. (c) For the purposes of 72-2-717, the residuary clause is treated as creating a future

interest under the terms of a trust. (d) The intended use of the principal or income may be enforced by an individual

designated for that purpose in the trust instrument or, if none, by an individual appointed by a court upon application to it by an individual.

(e) Except as ordered by the court or required by the trust instrument, no filing, report, registration, periodic accounting, separate maintenance of funds, appointment, or fee is required by reason of the existence of the fiduciary relationship of the trustee.

(f) A court may reduce the amount of the property transferred if it determines that that amount substantially exceeds the amount required for the intended use. The amount of the reduction, if any, passes as unexpended trust property under subsection (3)(b).

(g) If no trustee is designated or no designated trustee is willing or able to serve, a court shall name a trustee. A court may order the transfer of the property to another trustee if required to ensure that the intended use is carried out and if no successor trustee is designated in the trust instrument or if no designated successor trustee agrees to serve or is able to serve. A court may also make such other orders and determinations as are advisable to carry out the intent of the transferor and the purpose of this section.



from his estate. A power of appointment can be created in a will or trust. The person who grants the power is called the donor . The person w ho is g ranted the power is called the donee. The person who benefits from the appointment is called the appointee. There are two types of powers of appointment— general power of appointment and special (or limited) powers of appointment . A general power of appointment gi ves the holder of the power the right to determine who will receive the benefits of the decedent’s estate. It also allows the donee to appoint herself or her estate. As a result, a general power of appointment results in the property being included in the donee’s estate for federal tax purposes. A special power of appointment limits w hom the donee can appoint to recei ve the benef its of the estate and does not allo w the donee to appoint himself. F or example, a donor may limit appointment to the donor’s children or grandchildren. Special powers of appointment are gener-ally not included in the donee’ s estate for federal tax pur poses. Figure 5.7 provides additional information relating to estate planning.

Status of Estate Tax Avoidance of federal and state estate tax is one of the prime motivating reasons for clients to seek out an attorney to aid in estate planning. The federal estate tax itself has been the subject of much debate and criticism in recent years. This tax is imposed on the net value of assets owned by and transferred by the deceased at the time of her death. This includes individually owned property, jointly owned property, pensions, annuities, and insurance policies that the deceased maintained ownership interest in at the time of death. As this textbook is being written, the very existence and future of the federal estate tax is in limbo. The Economic Growth and Tax Relief Reconciliation Act of 2001 provided a phaseout of the federal estate. For example, the exempt amount on the estates the tax applies to g rows from $2 million in 2006, with the highest tax rate being 46 percent, to $3.5 million in 2009, with a highest tax rate of 45 percent, to a total elimination of the tax in 2010. The law provides, how-ever, that the tax will automatically be reinstated unless Congress votes to change it States have tied their estate tax to the federal estate tax, taking a share of the federal tax collected on large estates that was equal to the maximum credit allowed for state estate tax credit under federal estate la w. They are no w trying to deal with the loss of re venue caused as the federal estate tax is phased out. Following the lead of the federal government, many states have eliminated or are considering eliminating the estate tax altogether. It is impor tant that all parale gal students be f amiliar with the v arious estate planning tools discussed in this chapter despite the changes in the laws relating to the gift and estate taxes both on the federal and state le vels. Students should tak e advantage of sources such as the Inter nal Revenue Service’s Web site, www.irs.gov , to get up-to-date information on the status of gift and estate taxes and to find publications that deal with those topics. Paralegals also need to deter mine how their states are handling the estate tax issue. Man y states have taken some steps to protect their state’s estate tax from the changes being made b y in the federal estate tax. These states include Kansas, Illinois, Maine, Mar yland, Massachusetts, Minnesota, Nebraska, Ne w Jersey, New York, Nor th Carolina, Ohio, Ore gon, Rhode Island , Vermont, Virginia, Washington, and Wisconsin. Some have enacted their own exemption limits, but a deceased’s estate will still be subject to taxation if it exceeds that amount. The specifics of how the estate tax is derived are covered in Chapter 11.

Estate Tax and Estate Planning There are a wide variety of reasons that the planning tools discussed in this chapter will be used. One of the k ey reasons many people seek out professional help in planning their estates is to reduce the impact of taxes. Clients may be concerned about income taxes and gifts taxes when they are alive. They may also want to minimize the state and federal estate taxes that will be paid when they die. Planners must also k eep in mind the generation skipping tax, w hich is a federal tax on the transfer of property over an amount set by law to a person who is two or more genera-tions below that of the person making the transfer . The generation skipping tax is comple x and beyond the scope of this textbook. Paralegal students can get more information on the generation skipping tax at www.irs.gov . The IRS publication “Survivors, Executors, and Administrators” provides useful information on this tax.

general power of appointmentA power of appointment that gives the holder of the power the right to determine who will receive the benefits of the decedent’s estate.

special power of appointmentA power of appointment that limits whom the donee can appoint to receive the benefits of the estate and does not allow the donee from appointing himself or herself. (Also called a limited power of appointment.)

donee A recipient of a gift or power of appointment.

appointee A person who benefits from a power of appointment.



FIGURE 5.7 Federal Citizen Information CenterSource: Federal Citizen Information Center, “Planning Your Estate” (2005) (accessed 01/08/06), www.pueblo.gsa.gov/cic_text/money/estate/estate.htm.

Planning Your EstatePlanning your estate is to distribute your assets according to your wishes after your death. Successful estate planning transfers your assets to your beneficiaries quickly and usually with minimal tax consequences. The process of estate planning includes inventorying your assets and making a will and/or establishing a trust, often with an emphasis on minimizing taxes. This pamphlet provides only a general overview of estate planning. You should consult an attorney, or perhaps a CPA or tax advisor for additional guidance.

Do I Need to Worry?You may think estate planning is only for the wealthy. If your assets are worth $1,000,000 or more, estate planning may benefit your heirs. That’s because generally taxable estates worth in excess of the amounts in the chart below may be subject to federal estate taxes, with rates as high as 45% to 50% of the taxable estate.

Adding up the value of your assets can be an eye-opening experience. By the time you account for your home, investments, retirement savings and life insurance policies you own, you may find your estate in the taxable category.

Even if your estate is not likely to be subject to federal estate taxes, estate planning may be necessary to be sure your intentions for disposition of your assets are carried out.

It is also important to note that estate taxes are scheduled to be repealed in 2010. However, if Congress does not affirmatively extend the repeal, in 2011 the estate tax law will revert to the provisions in effect in 2001 including a $1,000,000 exclusion amount and a 55% high-est estate tax rate.

Taking StockThe first step in estate planning is to inventory everything you own and assign a value to each asset. Here’s a list to get you started. You may need to delete some categories or add others.

• Residence

• Other real estate

• Savings (bank accounts, CDs, money markets)

• Investments (stocks, bonds, mutual funds)

• 401(k), IRA, pension and other retirement accounts

• Life insurance policies and annuities

• Ownership interest in a business

• Motor vehicles (cars, boats, planes)

• Jewelry

• Collectibles

• Other personal property

Once you’ve estimated the value of your estate, you’re ready to do some planning. Keep in mind that estate planning is not a one-time job. There are a number of changes that may call for a review of your plan. Take a fresh look at your estate plan if:

• The value of your assets changes significantly.

• You marry, divorce or remarry.

Year Exclusion Amount Highest Estate Tax Rate

2002 $1,000,000 50%

2003 $1,500,000 49%

2004 $1,500,000 48%

2005 $1,500,000 47%

2006 $2,000,000 46%

2007 $2,000,000 45%

2008 $2,000,000 45%

2009 $3,500,000 45%



• You have a child.

• You move to a different state.

• The executor of your will or the administrator of your trust dies or becomes incapacitated, or your relationship with that person changes significantly.

• One of your heirs dies or has a permanent change in health.

• The laws affecting your estate change.

How Estates Are TaxedFederal gift and estate tax law permits each taxpayer to transfer a certain amount of as-sets free from tax during his or her lifetime or at death. (In addition, as discussed in the next section, certain gifts valued at $11,000 or less can be made that are not counted against this amount.) The amount of money that can be shielded from federal estate or gift taxes is deter-mined by the federal applicable credit. The credit is used during your lifetime when you make certain taxable gifts, and the balance, if any, can be used by your estate after your death.

Keep in mind that while you can plan to minimize taxes, your estate may still have to pay some federal estate taxes. What’s more, your estate may be subject to state estate or inheri-tance taxes, which are beyond the scope of this pamphlet. An estate planning professional can provide more information regarding state taxes.Minimizing Estate TaxationThere are a number of estate planning methods that can be used to minimize federal taxes on your estate.Giving away assets during your lifetime. Federal tax law generally allows each individual to give up to $11,000* per year to anyone without paying gift taxes, subject to certain restric-tions. That means you can transfer some of your wealth to your children or others during your lifetime to reduce your taxable estate. For example, you could give $11,000 a year to each of your children, and your spouse could do likewise (for a total of $22,000 per year to each child). You may make $11,000 annual gifts to as many people as you wish. You may also give your child or another person more than $11,000 a year without having to pay federal gift taxes, but the excess amount will count against the amount shielded from tax by your applicable credit. For example, if you gave your favorite niece $33,000 a year for the last three years, you would have reduced your applicable credit by $66,000 (a $22,000 excess gift each year). * The annual gift tax exclusion will be adjusted for inflation, as measured by the

Consumer Price Index (CPI) published by the Department of Labor. The increases will be in multiples of $1,000. This exclusion applies only to a gift of a present interest in property. Therefore, gifts made in trust generally will not qualify for this exclusion.

The marital deduction shields property transferred to a spouse from taxes. Federal tax law generally permits you to transfer assets to your spouse without incurring gift or estate taxes, regardless of the amount. This is not, however, without its drawbacks. Marital deduc-tions may increase the total combined federal estate tax liability of the spouses upon the subsequent death of the surviving spouse. To avoid this problem, many couples choose to establish a bypass trust.Bypass trusts or credit shelter trusts can give a couple the advantages of the marital deduction while utilizing the unified credit to its fullest. Let’s say, for example, that a married couple has a federal taxable estate worth $2 million (or $1,000,000 each). Using the marital deduction, if one spouse dies in 2003 the full $1,000,000 can be left to the other spouse without incurring taxes. However, when the second spouse dies in 2004 and passes his or her $2 million estate on to their children, taxes will be levied on the excess over the amount of assets shielded by the applicable credit ($2,000,000 � $1,500,000 � $500,000 subject to estate tax).

With a bypass or credit shelter trust, the first spouse to die can leave the amount shielded by the applicable credit to the trust. The trust can provide income to the surviving spouse for life, then upon the death of the surviving spouse the assets are distributed to beneficiaries, such as children. This permits the spouse who dies first to fully utilize his or her applicable credit. If the trust document is drawn properly, the assets in the trust are not included in the surviving spouse’s estate. Thus, the surviving spouse’s estate will be smaller and can also utilize the applicable credit. In the example above, the surviving spouse’s estate would not have to pay federal estate taxes. Because both partners have made use of their applicable credit, the couple is able to pass on a substantial estate tax free to their beneficiaries.Charitable gifts are not taxed as long as the contribution is made to an organization that operates for religious, charitable or educational purposes. Check to see if the organization

FIGURE 5.7(Continued)



Estate planning has taken advantage of various sections of the federal tax code to minimize the amount of tax that w ould have to be paid at the time of the client’ s death. Gifts are used to decrease the size of the client’s estate. Irrevocable living trusts and life insurance trusts are used to move assets from the control of the client, thereby removing them from the client’s gross estate for tax pur poses. Marital tr usts are used to tak e advantage of the unlimited marital deduction that exempts transfers of property between spouses from estate or gift taxes. Charitable trusts are used to take advantage of the unlimited charitab le deduction that e xempts transfer of assets to qualified charities during the person’s lifetime or after the person’s death. There are two areas of federal taxation that impact estate planning: the gift tax and the estate tax.

Gift Tax The federal tax code allows individuals to make gifts to individuals tax-free up to a cer tain an-nual and lifetime amount. Unlike the estate tax, there has been no mo ve to eliminate the tax on gifts. Currently the lifetime exemption is $345,000. Gifts are a very easy way to transfer a client’s assets to reduce the client’s estate and thereby reduce the possibility of imposition of estate taxes when the client dies. Paralegals are not e xpected to be tax e xperts. They should, however, be familiar with some basic concepts that apply to estate planning and how gifts can be part of that plan. Four concepts of taxation that apply to gift taxes are:

1. Unified tax credit. A unified tax credit is a federal tax credit that can be used to reduce or eliminate the amount of taxes on assets that were transferred as a gift during the donor’s life-time or at his or her death. It is referred to as unified because the federal estate and gift taxes were combined into a single tax system a number of years ago.

Under prior law, the same credit was used for both estate tax and gift purposes. This is no longer the case. Currently the unified credit amount for gifts is $345,800. The unified tax credit for estate tax purposes for the years 2006–2009 is $780,800. Unlike the unified tax credit for the estate tax, which increases until its elimination in 2010, the unified tax credit remains set at its current rate through 2011.

For more on the unified tax credit see IRS publication 950, “Introduction to Estate and Gifts Taxes.”

2. Annual exclusion amount. A donor can make a gift up to $12,000 (the annual exclusion amount for 2006—the amount is indexed annually for inflation and may increase) per person without subjecting the transfer to gift tax. Donors can give to as many individuals as they want as long as the amount does not exceed $12,000 per donee. Married couples can take advantage of a procedure known as gift splitting and combine their individual $12,000 in gifts and give $24,000 to an individual. Transfers made within these amounts have no tax consequences: the gift giver’s lifetime unified credit is not affected, and the gift recipient pays no tax. Married couples may have to file IRS Form 709 to report the gift splitting. IRS Form 709 is set out in Figure 5.8 .

unified tax creditA credit to be used against possible estate and gift taxes.

unified tax creditA credit to be used against possible estate and gift taxes.

annual exclusionThe amount a donor can give per person without subjecting the transfer to gift tax.

annual exclusionThe amount a donor can give per person without subjecting the transfer to gift tax.

you want to give money to is an eligible charity in the eyes of the Internal Revenue Service. You, or your estate may be entitled to a tax deduction for contributions to a qualifying char-ity. Consult your tax advisor.Life insurance trusts can be designed to keep the proceeds of a life insurance policy out of your estate and give your estate the liquidity it needs. Generally, you can fund a life insurance trust either by transferring an existing life insurance policy or by having the trust purchase a new policy.* To avoid inclusion in your estate, such trusts must be irrevocable—meaning that you cannot dissolve the trust or change the terms of the trust if you change your mind later. With proper planning, the proceeds from life insurance held by the trust may pass to trust beneficiaries without income or estate taxes. This gives them cash which may be used to help pay estate taxes or other expenses, such as debts or funeral costs. * Transferring an existing policy may have gift tax consequences. Consult your tax

advisor.Estate planning is very complex and is subject to changing laws. This pamphlet by no

means covers all estate planning methods. Be sure to seek professional advice from a quali-fied attorney, and perhaps a CPA or estate planner. The money you spend now to plan your estate can mean more money for your beneficiaries in the long run.




FIGURE 5.8 IRS Form 709



3. Unlimited deduction. The federal government allows an unlimited deduction for transfers to the donor’s spouse and to qualified charities. Use of either the unlimited marital deduction or the unlimited charitable deduction does not affect the donor’s lifetime unified credit. The unlimited marital deduction often just moves the estate planning issues to the death of the surviving spouse. While there is no tax on the transfer to the surviving spouse, that spouse’s estate may be subject to estate tax if tools such as the marital deduction trust are not used.

4. Valuation. Gift taxes are normally based on the fair market value at the time the gift is made. Estate taxes are normally based on the fair market values at the time of the decedent’s death. The value of cash, stocks, bonds, and other liquid assets is easily determined. Care must be taken in placing a dollar value on gifts because the IRS may impose a penalty for undervalu-ing gifts of up to 40 percent of the tax underpayment.

Estate Tax The federal estate tax is imposed on the estate of an indi vidual whose adjusted gross estate is in excess of the allowable exemption. While the specifics are dealt with in Chapter 11, the key point to remember in estate planning with re gard to federal estate tax is the impor tance of reducing the gross estate of the client before his death. Figure 5.9 sets out the impact each of the planning tools discussed in this chapter has on the client’s gross estate.

A review of the legal concepts involved in this chapter will demonstrate that estate planning is a complicated process. Decisions on which es-tate planning tools to use to meet the needs of the client must be done by the attorney, with the aid of other professionals, such as CPAs.

Paralegals must avoid helping friends, relatives, or others in making estate planning decisions. Advising someone on which estate planning tool to use could constitute the unauthorized practice of law.

Ethics Alert

FIGURE 5.9Planning Tools’ Im-pact on Gross Estate

Tool Impact on Gross Estate

Charitable remainder trust Can reduce gross estate by taking advantage of unlimited charitable deduction

Charitable trust Can reduce gross estate by taking advantage of unlimited charitable deduction

Gifts Reduces gross estate by tax-free transfers during client’s lifetime if within annual/lifetime maximum.

Life insurance With client retaining incidents Included in gross estateof ownership

No retention of incidents of Not included in gross estateownership

Living trusts Revocable Included in gross estate Irrevocable Not included in gross estateTestamentary trusts Part of gross estate(noncharitable)Marital deduction trusts Use unlimited marital deduction to reduce gross estate

to the point the estate is not subject to estate tax or limits the amount of estate tax

Pet trust No impact on gross estatePour-over trusts Generally part of gross estateQTIP trust Can reduce gross estateTotten trust/Pay on death accounts Not included in gross estateWills Generally gifts made under a will are part of

the gross estate



Hands-on Assignment Make a list of the plan-ning tools you feel might be appropriate in help-ing Pat Harper from the Client Interview create

RESEARCH THIS!

an estate plan to provide for the future needs of her children. Be sure to include an explanation of the reasons each tool was selected.

POSTMORTEM PLANNING

While estate planning after the decedent’ s death may sound strange, there are situations in which decisions made after death can be used to benef it those receiving under the will and to reduce tax liabilities. Those options are, however, limited. Most estate planning tools can be used only while the client is alive and able to make key decisions about the transfer of her property. The main tool available after death is a disclaimer . A disclaimer is a written document that notifies the personal representative that the beneficiary does not want to take the gift left to him under the will. The requirements for a disclaimer are set out in Inter nal Revenue Code § 2518. The disclaimer must (1) be in writing, (2) be received within a specific period of time, and (3) be made before any benefit is received, and (4) the interest must pass without direction. Figure 5.10 contains a sample disclaimer. Disclaimers are used by a benef iciary who may not want to take the gift left in the will. This could be because the named benef iciary may not want the gift, allowing it to pass to a person who needs it. It may also be used to allow the gift to pass to someone who is in a better situation to avoid future estate taxes. An example is when an elderly man dies and is survived by his elderly wife and a 40-year-old daughter. If the surviving spouse is financially secure, it may be advisable to disclaim the gift left to her under the will so that it would pass to her daughter. Another postmortem planning tool is the QTIP trust. The election to take advantage of Inter-nal Revenue Code § 2056 (b)(7) and to treat the proper ty as qualif ied terminal interest property is not made until after the decedent dies. This allows the benef iciaries to decide what would be best in light of any changes in circumstances since the trust was originally drafted.

WHICH TOOL IS THE BEST TO USE?

If the paralegal student only learns one key concept after reading this chapter , it should be that there is no one tool that is best to use. The various planning tools that have been discussed have their own advantages and disadvantages. Some are well suited for specific beneficiaries, such as the spendthrift trust and the sprinkling trust. Others can be used to help reduce the estate tax that will be paid, such as irrevocable living trusts. The key is to determine what the goals and needs of the client are and then use the best tools available to accomplish them.

CASE BRIEF

ASSIGNMENT

Read and brief the Rieger v. Jacque case on page 105. (See Appendix A for information on how to brief cases.)

FIGURE 5.10Sample Disclaimer

I, _________, pursuant to Internal Revenue Code Section 2518, decline to take any-thing from the will of __________, deceased. I acknowledge my rights under the will and hereby disclaim my entire right and interest in the property and state that I have received no benefit from the property. I understand that the property will descend to those persons prescribed by law, free from any encumbrances of the provisions of the will naming me as a beneficiary.Dated: ___________ Signature: ______________________________________



CASE IN POINT

IN THE SUPREME COURT OF IOWA

Rieger v. JacqueNo. 183 / 96-1779

Filed September 23, 1998Appeal from the Iowa District Court for Polk County, Leo E. Oxberger, Senior Judge.

Challenge to summary judgment against plaintiff in suit alleging negligent preparation of estate plan. AFFIRMED.Alexander R. Rhoads and Robert K. DuPuy of LaMarca & Landry, P.C., West Des Moines, for appellant.

Michael A. Giudicessi, Kasey W. Kincaid, and Theresa H. Keninger of Faegre & Benson, L.L.P., Des Moines, for appellee Principal Mutual Life Insurance Company.

Gary N. Jones of Truax & Jones, Cedar Falls, for appellee Don Jacque.Considered by McGiverin, C.J., and Harris, Carter, Snell, and Andreasen, JJ.

HARRIS, Justice.

The district court correctly granted summary judgment in favor of defendants, an insurance company and its agent, in this suit alleging negligence in preparing an estate plan. Trusts recom-mended by the agent, as later created by an attorney, brought on disastrous tax consequences. Although the trial court hold-ing could perhaps be affirmed as well on two alternative bases, we rely on just one. Assuming without deciding the defendant agent owed a duty to the plaintiff regarding advice in the matter, there is no showing his negligence was a proximate cause of the claimed damages. Plaintiff Lois K. Rieger and defendant Don Jacque became acquainted while working in the same office building in Water-loo. Jacque sells insurance as an agent for defendant The Prin-cipal Mutual Life Insurance Company (Principal). During their acquaintance Rieger, a real estate broker, helped Jacque with real estate transactions, and Jacque sold Rieger insurance and annui-ties through Principal. In 1984 Jacque approached Rieger concerning her need for estate planning, especially in view of tax implications at the time of her death. Jacque suggested that an irrevocable trust would reduce her estate taxes at death, while allowing her to control her trust property and retain income during her lifetime. Jacque’s solicitation was of course meant to induce Rieger to purchase life insurance. Jacque explained that the estate planning assistance was a service offered by Principal for its customers. Rieger, with Jacque’s assistance, then prepared an inventory which was sent to Principal’s underwriting department. The inventory, which included some of Jacque’s handwritten notes, listed Rieger’s assets and recited her financial goals. Rieger rea-sonably believed Principal was doing estate planning for her and assumed Jacque would be paid for his estate services and advice by commissions on any insurance she might purchase in connec-tion with the estate plan. Principal’s underwriting team reviewed the inventory and sent a report to Jacque who then provided it to Rieger. A crucial aspect of the report was an estimate of the amount of cash needed to meet estate transfer expenses. The report went on to discuss irrevocable trusts and their purpose in es-tate planning. It concluded by recommending the purchase

of $400,000 life insurance to fund the plan. It went on to state:

It is not our suggestion that these are the most acceptable or best solutions to all the estate transfer problems confronting Lois. Recommendations regarding the use of estate planning devices and techniques, except to the extent that insurance may be involved, must originate with the estate owner’s attorney. The preparation, revision or review of legal instruments will also, of course, be the attorney’s responsibility.

The report also included the following disclaimer:

It must be kept in mind that we are not authorized to practice law and any legal services or advice a client may need must be obtained from her attorney. A copy of this report will be made available to your client’s attorney or to any of her other professional advisors upon request.

Jacque assured Rieger that she could realize her goals (the reduction in estate taxes while maintaining control of trust property and its income) by preparation of an irrevocable trust. Based on this advice and the special report, Rieger had Jacque set up a meeting with attorney Lawrence Stumme, Jr. to pre-pare a trust. Jacque attended Rieger’s first meeting with Stumme, but did not at that time contribute any advice regarding tax mat-ters. Rieger and Stumme discussed creation of an insurance trust (trust funded by life insurance), as outlined in the special report, but ultimately this kind of trust was not created. Rieger made it clear she wanted to retain control of the property which would fund the trust and to use its income. Although she never had any contact with anyone at Principal regarding the inventory, she did review and discuss Principal’s special re-port with Stumme before he began to draft the trust instru-ment. Stumme in fact did not utilize the material prepared by Principal, and never consulted with Principal. So Principal had no influence on what was to be included in the provisions of the trust instrument.

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Rieger ultimately (on December 31, 1984) executed the irre-vocable trust prepared by Stumme. The trust was funded only by farmland owned by Rieger. Rieger named herself as trustee. She later executed a family trust dated January 6, 1986. The second trust was funded by a family home so that, again, no insurance policy was used. In 1993 Rieger first learned that, because she retained control and ownership of the trust, its corpus would be considered a part of her estate at her death and subject to inheritance taxes. She wrote a letter to Jacque, questioning the effect of the trust instrument prepared by Stumme. Jacque sent the letter to Principal headquarters where the consensus of the estate planning experts was that Rieger’s objectives were indeed thwarted because she retained control of the property. Rieger then brought this negligence suit against Principal, Jacque, Stumme and a certified public accountant who assisted Stumme. Only the claims against Principal and Jacque remain at issue. The matter is before us on Rieger’s appeal from a trial court order granting summary judgment in favor of Principal and Jacque. I. We review a grant of summary judgment on error. Gerst

v. Marshall, 549 N.W.2d 810, 811 (Iowa 1996). Summary judgment may be entered if the record shows “no genu-ine issue as to any material fact and . . . the moving party is entitled to judgment as a matter of law.” Iowa R. Civ. P. 237(c). We thus “examine the record before the district court to decide whether a genuine issue of material fact exists and whether the court correctly applied the law.” Benavides v. J.C. Penney Life Ins. Co., 539 N.W.2d 352, 354 (Iowa 1995). In doing so, we view the facts in the light most favorable to the nonmoving party. Gerst, 549 N.W.2d at 812.

Although claims of negligence are seldom capable of summary adjudication, the threshold determination in any tort case is whether the defendant owes the plaintiff a duty of care. Robinson v. Poured Walls of Iowa, Inc., 553 N.W.2d 873, 875 (Iowa 1996); Hoffnagle v. McDonald’s Corp., 522 N.W.2d 808, 811 (Iowa 1994). Whether such a duty arises out of the parties’ relationship is always a matter of law for the court. Id. II. The parties vigorously dispute whether Jacque owed

Rieger any duty regarding his tax advice. We choose not to resolve this issue and instead rest our affirmance on a second defense. Jacque and Principal correctly contend that, even assuming without deciding Jacque owed Rieger a duty of care and also assuming he breached such a duty, his actions were not a proximate cause of Rieger’s injury.1 Although questions of negligence and proximate cause are ordinarily for the jury to decide, they may be decided as a matter of law in exceptional cases. Iowa R. App. P. 14(f)(10); Scoggins v. Wal-Mart Stores, Inc., 560 N.W.2d 564, 566 (Iowa 1997); Ruden v. Jenk, 543 N.W.2d 605, 607 (Iowa 1996); Beeman v. Manville Corp. Asbestos Dis-ease Comp. Fund, 496 N.W.2d 247, 254 (Iowa 1993). This is such a case.

The law does not impose liability for negligence unless the breach of a duty of care is also the actual and legal cause of the injury. Scoggins, 560 N.W.2d at 567. In exploring causation we consider two components: (1) whether the harm would not have occurred but for the negligence of the defendant; and (2) whether the negligence of the defendant was a substantial factor in bringing about the harm. Id. This

second component implicates the determination of proximate cause. Id. We have said this about the first component:

“But for” is an absolute minimum for causation because it is merely causation in fact. Any attempt to find liability absent actual causation is an attempt to connect the defendant with an injury or event that the defendant had nothing to do with. Mere logic and common sense dictates that there be some causal relationship between the defendant’s con-duct in the injury or event for which damages are sought.

Id. (quoted sources omitted). In discussing the second prong we have stated:

[U]pon looking back from the injury, the connection between the negligence and the injury appears un-natural, unreasonable, and improbable in the light of common experience, such negligence would be a remote rather than a proximate cause. If, however, by a fair consideration of the facts based upon com-mon human experience and logic, there is nothing particularly unnatural or unreasonable in connecting the injury with the negligence, a jury question would be created.

Hollingsworth v. Schminkey, 553 N.W.2d 591, 597 (Iowa 1996) (quoted sources omitted). In examining whether proximate cause exists we look at the “proximity and foreseeability of the harm flowing from the actor’s conduct, although it is not necessary that the actual consequences of a defendant’s negligence should have been foreseen.” Id. (quoting Kelly v. Sinclair Oil Corp., 476 N.W.2d 341, 349 (Iowa 1991)). When conduct or forces occur after an actor’s conduct, the actor may be relieved from liability if a court finds the later-occur-ring event breaks the chain of causal events between the actor’s negligence and the plaintiff’s injury. Kelly, 476 N.W.2d at 349. This is true even when the actor’s conduct is in fact a cause of plaintiff’s harm. Id. This break in actual causation is commonly known as a superseding or intervening cause. Id. The law consid-ers this type of intervening cause to be the effective cause, and it relieves the defendant from liability for the earlier negligent act or omission. Id. A superseding cause is defined as a third-party’s act (or other force) that intervenes to protect a defendant from liability for harm to the plaintiff even though that defendant’s antecedent negligence was a substantial factor in bringing about the injury. Hollingsworth, 553 N.W.2d at 597; see also Restatement (Sec-ond) of Torts § 440, at 465 (1965). “An intervening force is one which actively operates to produce harm to another after the actor’s negligent act or omission has been committed.” Hollings- worth, 553 N.W.2d at 597 (quoting Restatement (Second) of Torts § 441(1), at 465 (1965)). Not all intervening forces become superseding causes:

The intervention of a force which is a normal conse-quence of a situation created by the actor’s negligent conduct is not a superseding cause of harm which such conduct has been a substantial factor in bringing about.

Id. (quoting Restatement (Second) of Torts § 443, at 472 (1965)). “To relieve an individual from liability, the intervening act or force



must not have been a normal consequence of his or her acts or have been reasonably foreseeable.” Id. at 598. Put another way, an intervening force which falls squarely within the scope of the original risk will not supersede the defendant’s responsibility. Stevens v. Des Moines Indep. Community Sch. Dist., 528 N.W.2d 117, 119 (Iowa 1995). The parties cite no authority, and we find none, in which insurance agents have been found liable for their quasi-le-gal advice when an attorney subsequently handles the matter negligently. There are a handful of cases involving claims of vicarious liability when an attorney, originally acting for a cli-ent, associates in the matter with a subsequent attorney who acts negligently. Such a situation is only roughly analogous to the present one because courts would be more likely to at-tach vicarious liability to an attorney, presumably competent in the legal matter, than to an insurance agent, who would be expected to be less conversant in legal matters. Even so, cases indicate that, had Jacque been an attorney rather than an insurance agent, vicarious liability would not attach on these facts. An attorney can become liable for the negligent acts of a second one only where the two attorneys share the work or divide a fee. See Gudger v. Manton, 134 P.2d 217, 224 (Cal. 1943), overruled in part on other grounds, Albertson v. Raboff, 295 P.2d 405 (Cal. 1956) (first attorney held vi-cariously liable for second attorney’s defamation because the second attorney was being paid a percentage of the first at-torney’s fee as opposed to being paid by the client); Duggins

v. Guardianship of Washington, 632 So. 2d 420, 426 (Miss. 1993) (holding first attorney liable for second attorney’s mis-appropriation of funds because the relationship between the two attorneys was a joint venture based on the attorneys’ agreement to jointly control the case and to split the attor-ney’s fees fifty-fifty). It is clear that Jacque’s negligent tax advice was not a proximate cause of Rieger’s injury because Stumme’s acts were unquestionably an intervening cause. A lawyer must exercise independent professional judgment on behalf of a client. Ruden v. Jenk, 543 N.W.2d 605, 610-11 (Iowa 1996). Stumme personally asked Rieger about her estate planning goals and what she wished to achieve by way of the trust. He did not rely on any materials supplied by Jacque or Principal. The only document he had from the defendant, the special report, contained mere recommendations and provided no information on irrevocable trusts or report, but rather on his discussions with Rieger in determining what type of trust should be created. Because any negligence on the part of Jacque or Principal was not a proximate cause of Rieger’s injuries, the trial court correctly entered summary judgment dismissing the suit.AFFIRMED.NOTES1 In our analysis of proximate cause, it is important to note that

Rieger makes no claim that Jacque or Principal were negligent in recommending Stumme.


Summary There are man y tools a vailable that can be used to assist clients in planning their estates. Some, like wills and life insurance, are well known and fairly easy to understand. Others, like the vast array of trusts that can be used in estate planning, are more difficult to understand at first. Clients use estate planning for many reasons. It can be to provide for their loved ones, provide for a charity they wish to suppor t, provide for the care of their pets, or a void state and federal estate taxes. The paralegal must be familiar with the various ways a client’s goals can be met and use the appropriate tool to accomplish those goals.

OTHER PROFESSIONALS USED IN ESTATE PLANNING

As can be seen by the topics covered in this chapter, the tools used in estate planning are varied. To assist in creating the o verall plan, the law f irm may interact with a number of other profes-sionals. These include CPAs, tax attor neys, insurance agents, and stockbrok ers. The attorney must always be mindful, however, that she may be ultimately responsible for the final estate plan approach that is used, as the Rieger v. Jacque case demonstrates.

Key Terms AB trust Annual exclusion Appointee Beneficiary

Bypass trust Charitable remainder trust Charitable trust Credit shelter trust




Daniel and Marlene Appel were the trustees of the Appel Revocable Family Trusts. The trust was drafted by Fisch, Spiegler, Ginsburg & Ladner, a professional law corporation (Fisch). Based on the advice given to them by Fisch, the Appels quitclaimed the home in which they lived to the trust and subsequently recorded a declaration of homestead on the property. Fisch later obtained a lien against the trust and Daniel Appel and f iled an application for an order for the sale of the home. The Appels also were in default on its mortgage payment and faced foreclosure. Did the trust, as owner of the property, have the right to claim the homestead exemption? See Fisch, Spiegler, Ginsburg & Ladner v. Appel , 10 Cal.App.4th 1810, 13 Cal.Rptr.2d 471 (Cal.App. 4 Dist. 1992).

Cy pres doctrine Donee Donor Estate tax General power of appointment Gift Gift tax Incidents of ownership Insured Irrevocable living trust Legal title Life insurance trust Living will Marital deduction Marital deduction trust

Permanent life insurance Pet trust Pour-over trust Power of appointment Precatory trust Qualified terminal interest property (QTIP) trust Revocable living trust Special power of appointment Spendthrift trust Sprinkling trust Term life insurance Unified tax credit Universal life insurance Whole life insurance

Review Questions

1. What are the differences between whole life insurance and universal life insurance? What are the advantages and disadvantages of each?

2. What is term life insurance? What are its advantages and disadvantages?

3. What role does a will have in most estate plans? What are the disadvantages of a will?

4. What is a precatory trust? Why should it not be one of the tools used in estate planning?

5. What is a Totten trust?

6. How are gifts used as a tool in estate planning? How are gifts used in Medicaid planning?

7. How are gifts normally valued for gift tax purposes?

8. Why should paralegals be aware of the proposed changes in the federal estate tax?

9. What other professionals may be involved in addition to the attorney in developing an estate plan for the attorney’s client?

10. Is there one estate planning tool that is best to use in all situations? Why or why not?



1. Examine the facts set out in the Client Interview, and write a paper that includes recom-mendations on which of the various estate planning tools discussed in this chapter might be appropriate.

2. Locate your state’s Medicaid regulations and write a summary of the eligibility requirements and a discussion of how your state is applying the Deficit Reduction Act of 2006.




Vocabulary Builders

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ACROSS 1. A power of appointment that gives the holder of the

power the right to determine who will receive the benefits of the decedent’s estate

7. A tax imposed on the transfer of a decedent’s property to his or her heirs

9. A tax imposed when a person gives money or other assets without receiving adequate consideration

10. A person who benefits from a power of appointment13. A clause in a will that leaves the residuary of an estate to

the trustee of an existing trust14. An insured’s right to exercise control over a life insurance

policy, such as the right to change beneficiaries and to enjoy the economic benefits of the insurance policy

16. A person who makes a gift, creates a power of appoint-ment, or establishes a trust

17. The amount a donor can give per person without subject-ing the transfer to gift tax

20. A trust set up to take advantage of the marital deduction21. Life insurance issued to cover an insured’s life for a specific

period of time23. Voluntary transfer of property without receiving consid-

eration26. A trust created during the settlor’s lifetime and one in

which the settlor reserved the right to terminate the trust and recover the trust property

27. A trust that grants flexibility and discretion to the trustee to meet the needs of each individual beneficiary

28. A trust that restricts the voluntary or involuntary alienation of the trust property and/or income by the beneficiary

29. A trust created to benefit a specific charity that promotes educational, scientific, or other charitable purposes

DOWN 2. A trust established to care for a settlor’s pet after the settlor’s

death 3. A trust created by married couples to reduce or eliminate

estate taxes 4. A person whose life, property, health, or other interests are

protected by an insurance policy 5. A federal tax deduction that allows one spouse to transfer an

unlimited amount of property to the other spouse without incurring estate or gift taxes

6. An inter vivos trust in which the settlor names himself or herself as the income beneficiary during his or her lifetime, with the trust’s assets going to the named charity beneficiary upon the settlor’s death

8. Allows a court to substitute a similar charity to benefit from a gift made in a will at trust if it is no longer possible to give it to the charity designated by the testator/settlor

11. A credit to be used against possible estate and gift taxes12. A recipient of a gift or power of appointment15. Life insurance that is intended to provide coverage for the

insured’s entire life18. A document that expresses a person’s wish to be allowed to

die without being kept alive by artificial means19. A clause in a will that leaves the residuary of an estate to the

trustee of an existing trust22. A title that indicates legal ownership but not necessarily a

beneficial interest24. A trust created by married couples to reduce or eliminate

estate taxes (also called an AB trust or credit shelter trust)25. A person who benefits under a document, such as a will or

a life insurance policy

Vocabulary Builders


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Chapter 6

The Importance of Having a Will CHAPTER OBJECTIVES


• Identify the benefits of having a will.

• Explain why many people feel they do not need a will.

• Identify and explain the ways that property can be conveyed in a will.

• Describe the reason why not all gifts made in a will pass according to the terms of the will.

• Identify and explain how wills can be changed or revoked.

In its simplest terms, a will is a final expression of the desires of a deceased. The drafting of wills is dealt with in Chapter 7, b ut a better understanding of w hat a will is, the need for a will, and why so many people do not feel they need a will is essential before proceeding fur ther into the discussion of wills, trusts, and estates. People decide they need a will for a variety of reasons. Some are concerned about taking care of their loved ones after their death. Some w ant to acknowledge those who were important to them during their lives by leaving them a gift of some sort. Others use the will as a way to impose retribution on those who have caused them pain while they were alive. Whatever the motivating factor, it is clear that a will is a v ery important document in many people’s lives. It is a document that the paralegal must understand. Just as importantly, however, paralegals must also have an understanding of their client’s needs and desires when assisting in the preparation of the client’s will. Paralegals must make every effort to ensure that the client’s desires are accurately reflected in the f inished document. Care should be tak en to avoid use of standard form wills because they may not accurately express the client’s desires. A will is only one of many tools available to an attorney who is helping clients plan their estate. Others include testamentary trusts, inter vivos (living) trusts, life insurance, inter vivos gifts, and changing how property is titled.

WHY “THE IMPORTANCE OF HAVING A WILL” IS IMPORTANT TO THE PARALEGAL STUDENT

Paralegals play a very important role in the wills, trusts, and estates law firm. From helping with the initial client inter view to the e xecution of the client’s will, the parale gal is doing much of the work associated with getting the will ready for the client’ s signature. Chapter 6 helps para-legal students have a better understanding of the impor tance of having a will. And, perhaps just as important, it gives them an understanding of the many reasons that people have for not making a will. Understanding both the need for having one and the excuses for not making one will help paralegals better understand the needs and concerns of their clients.

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Chapter 6 The Importance of Having a Will 113

BASIC REQUIREMENTS FOR EXECUTING A WILL

While many people are under the impression that a will is a complicated legal document, the reality is that most states have relatively few formal requirements for executing a valid will. These require-ments are set out by statute, and many states only require that the will be in writing, that the testator be 18 or older and have testamentary capacity, and that the will be signed b y the testator and wit-nessed. Figure 6.1 sets out the Montana statutes containing that state’s requirement of a valid will. It is impor tant not to get fooled b y the simple requirements to draft and e xecute a valid will. While there are not many requirements, the ones set out in the statutes must be met or the will could be declared invalid. The case of Allen v. Dalk is an example of how important it is to follow the rules when executing a will.

REASONS FOR NOT HAVING A WILL

An informal survey of people, such as the students in a parale gal class, that asks how many of them have a will probably reveals that most of them have not taken the time to write a will be-cause they just do not think they need one. In fact, they are the majority. Estimates of the number of people who do not have a will range from 60 to 85 percent! Some of the most common reasons for not having a will include:

• The person really doesn’t have anything of value that necessitates a will, and only wealthier people really need one.

The major flaw in this reason for not having a will is that it focuses too much on value as monetary value. Most people, however, have many things that have sentimental value, but relatively small monetary value. Can anyone put a price on family pictures? Or, how about Great-Grandma’s wedding band? It may be just a simple band of gold, but it is far more important than its dollar value to those who loved her.

Client Interview John and Renee Stevens have been married for five years. Both John and Renee were previously married. John had one child from his previous marriage, James, who was age 5 at the time John and Renee were married. Re-nee had two children from her previous marriage, Jason and Tim, ages 8 and 6, respectively, at the time of her marriage

to John. They have one child of their marriage, Samantha, age 3. The Stevenses have decided that they will treat all of their children as if they were children of their marriage. While they have very few material possessions, they have decided to seek advice from your firm as to the necessity of having a will.

Case Fact Pattern

CASE BRIEF

ASSIGNMENT

Read and brief the Allen v. Dalk case on page 114. (See Appendix A for information on how to brief cases.)

FIGURE 6.1Montana Statutes— Formal Requirements of a Valid Will

72-2-521. Who may make a will. An individual 18 or more years of age who is of sound mind may make a will.

72-2-522. Execution—witnessed wills—holographic wills. (1) Except as provided in 72-2-523, 72-2-526, 72-253, and subsection (2) of this section, a will must be:(a) in writing;(b) signed by the testator or in the testator’s name by some other individual in the testator’s conscious presence and by the testator’s direction; and (c) signed by at least two individuals, each of whom signed within a reasonable time after having witnessed either the signing of the will as described in subsection (1)(b) or the testator’s acknowledg-ment of that signature or acknowledgment of the will.(2) A will that does not comply with subsection (1) is valid as a holographic will, whether or not witnessed, if the signature and material portions of the document are in the testator’s handwriting.(3) Intent that the document constitute the testator’s will may be established by extrinsic evidence, including, for holographic wills, portions of the document that are not in the testator’s handwriting.


CASE IN POINT

IMPORTANCE OF PROPER EXECUTION OF WILL

Supreme Court of FloridaAllen

v.Dalk

No.SC01-2August 29, 2002

QUINCE, J.We have for review a decision of the Fifth District Court of Ap-peal on the following question, which the court certified to be of great public importance:

MAY A CONSTRUCTIVE TRUST BE IMPOSED OVER THE ASSETS OF AN ESTATE IN FAVOR OF A BENEFICIARY NAMED IN AN INVALIDLY EXECUTED WILL, WHERE THE INVALIDITY IS THE RESULT OF A MISTAKE IN ITS EXECUTION, AND THE INVALID WILL EXPRESSES THE CLEAR INTENTION OF THE DECEDENT TO DISPOSE OF HER ASSETS IN THE MANNER EXPRESSED THEREIN?

Dalk v. Allen, 774 So. 2d 787, 791 (Fla. 5th DCA 2000). We have jurisdiction. See art. V, § 3(b)(4), Fla. Const. For the reasons expressed below, we answer the certified question in the negative and approve the decision of the Fifth District.

MATERIAL FACTS AND PROCEEDINGS BELOWOn May 7, 1999, Christel McPeak, a resident of Ocala, Florida, died. Prior to her death, McPeak had her attorney prepare three documents, including a will, a durable power of attorney, and a living will and designation of health care surrogate. At a meeting with her attorney, McPeak signed several documents, includ-ing four duplicate originals of the living will and designation of health care surrogate and three duplicate originals of the durable power of attorney; however, McPeak failed to sign a copy of her will. After McPeak’s death, her niece, Bonnie Allen (petitioner), and her half-sister, Margarete Dalk (respondent), filed separate petitions for administration with the circuit court.

After a hearing, the circuit court entered an order which ad-mitted the will to probate and appointed a personal representa-tive. The court found that the decedent’s failure to sign the will did not impose a bar to probate. The circuit court reasoned that the decedent ratified the typed signature contemporaneously with the signatures of the witnesses to the document. Alterna-tively, the court ruled that as a matter of law, a constructive trust should be imposed in favor of petitioner in the event that the will was not admitted to probate. The Fifth District Court of Appeal reversed the circuit court’s decision. The Fifth District acknowledged that the decedent probably intended to sign the will, but found that there was no evidence to support the finding that the decedent intended the typewritten name below the signature line to be the signature. Since the will was improperly executed, a constructive trust could not be imposed because it would have had the effect of validating an invalid will. However, the Fifth District, in order to determine the scope of our decision in In re Estate of Tolin, 622 So. 2d 988 (Fla. 1993), certified the question referred to above as being one of great public importance.

LAW AND ANALYSISThe primary consideration in construing a will is the intent of the testator. See Elliott v. Krause, 531 So. 2d 74, 75 (Fla. 1987). Therefore, “[i]f possible, and when consistent with law and pub-lic policy, the testamentary intent of the testatrix is to be effectu-ated.” See id. However, when testamentary intent is contained in a will, it can only be effectuated if the will has been validly ex-ecuted. The requirements for a validly executed will are detailed

• Wills cost too much . As was previously noted, wills can be very simple documents and there are many ways for

individuals to have their wills done inexpensively or they can write their own. This latter option, however, should be used as a last resort because there is a danger that the will may not meet the state’s requirements for a valid will.

• The family member has already identified who gets what from her estate. For example, she placed a sticker on the back of each item stating who gets what.

Many families have such an arrangement with elderly family members. It seems like a simple, inexpensive alternative to a will. This alternative does have many shortcomings, the main one being human nature. Too often it is the first person who gets to the deceased’s house who seems to get the most. Or, perhaps the person whose name is on the item does not want it or has died first. Who gets the property then? These are issues that family members should not have to deal with at the time they are also dealing with the loss of a loved one. Also, as a general rule,

114


in section 732.502, Florida Statutes (2000), which provides in relevant part:

Every will must be in writing and executed as follows:

(1) (a) Testator’s signature. 1. The testator must sign the will at the end; or 2. The testator’s name must be subscribed at

the end of the will by some other person in the testator’s presence and by his or her di-rection.

(b) Witnesses. The testator’s: 1. Signing, or 2. Acknowledgment: a. That he or she has previously signed the

will, or b. That another person has subscribed the

testator’s name to it, must be in the pres-ence of at least two attesting witnesses.

(c) Witnesses’ signatures. The attesting witnesses must sign the will in the presence of the testa-tor and in the presence of each other.

A testator must strictly comply with these statutory require-ments in order to create a valid will. See In re Bancker’s Estate, 232 So. 2d 431, 433 (Fla. 4th DCA 1970), cert. denied, 238 So. 2d 111 (Fla. 1970). This Court has held that where a testator fails to sign his or her will, that document will not be admitted to probate. See In re Neil’s Estate, 39 So. 2d 801(Fla. 1949). The signatures of both the testator and witnesses are needed to have a properly executed will. See In re Estate of Williams, 182 So. 2d 10, 13 (Fla. 1965). In In re Estate of Olson, 181 So. 2d 642, 643 (Fla. 1966), we held that an unattested will should not be admitted to probate because “[t]he obvious intent of the statute requiring the attestation of a will by at least two witnesses . . . is to assure its authenticity and to avoid fraud and imposition.” See Manson v. Hayes, 539 So. 2d 27, 28 n.2 (Fla. 3d DCA 1989) (noting that “[t]he purpose of the statute is to assure not only that the signature on the will is that of the testator, but to provide reasonable assurance of the circumstances under which the signature was affixed to the document.”). Petitioner concedes that the decedent did not comply with the formal requirements of the will statutes. However, she argues that based on the reasoning of this Court in In re Estate of Tolin,

622 So. 2d 988 (Fla. 1993), the Fifth District erred by reversing the circuit court’s order imposing a constructive trust in favor of the beneficiaries named in the invalid will. In Tolin, the decedent executed a valid will leaving the residue of his estate to a friend. Later, Tolin executed a codicil to his will which changed the re-siduary beneficiary from his friend to the Broward Art Guild. Approximately six months before his death, Tolin attempted to reinstate his friend as the residuary beneficiary by tearing up the codicil to the will. After Tolin’s death it was discovered that the original codicil had not been destroyed, only a high quality exact copy. This Court held that the attempted revocation was not effective, because the original codicil had not been destroyed. However, the Court found that under the “unique and undis-puted facts” of the case it was clear that Tolin intended to revoke the codicil and the Broward Art Guild would benefit from the mistake at the expense of the third party. Therefore, this Court held that a constructive trust should be imposed in favor of the original residual beneficiary. Petitioner herein argues that since both the execution and re-vocation of a will require strict compliance with the statutory re-quirements in order to be valid, and because a mistake prevented the decedent from expressing her clear testamentary intent, the holding of Tolin is applicable in the instant case. We disagree and decline the invitation to extend Tolin beyond its facts. This case dif-fers greatly from the factual situation presented by Tolin, because in Tolin it was clear that the decedent attempted to comply with the statutory requirements for revocation by a physical act. Tolin’s attempted revocation was frustrated only by the high quality of the copy of the original codicil. By contrast, the major requirement for a validly executed will under section 732.502, Florida Statutes, was not met in the instant case. Here, the decedent failed to sign or to direct someone to sign her will. While it is probable that the decedent read the will and intended to sign her name, this Court has no way of knowing why she did not do so, nor do we know that the will properly reflects her testamentary intent. Furthermore, we agree with the Fifth District that there is no evidence to support the finding that the decedent intended the typewritten name below the signature line to serve as her signature. An order imposing a constructive trust under these facts would only serve to validate an invalid will. Accordingly, we answer the certified question in the negative and approve the decision of the Fifth District. It is so ordered.


promises to make a devise of a particular item, or to make a will, must be in writing and be supported by consideration. See, for example, Section 732.701, Florida Statutes. Promises alone are not enough to ensure the deceased’s intent will be carried out.

• Some simply do not want to deal with a will because they do not want to acknowledge the possibility of death.

This may seem like a ridiculous reason for not having a will, but it is surprising how many people do not want to deal with matters relating to death. Younger people do not see the need because death is a long way off. Some older people just don’t want to acknowledge the reality of death.

• Their family gets along far too well to ever get in an argument over who gets what when a loved one dies without a will.

Anyone who has worked with families as they try to plan for the future has heard this reason for not needing a will, or at least not a complicated will. Those who work in this area of the law also can give numerous examples of what happens to an otherwise loving family when disputes arise over even small items.

consideration The basis of the bargained for exchange between the parties to a contract that is of legal value.




Visit these sites to see examples of what famous people have done in their wills:

“Famous Wills” (accessed 12/15/05): www.doyourownwill.com/famouswills.asp

The National Archives of England, Wales and the United Kingdom, “Famous Wills in PROB 1” (accessed 12/29/05): www.nationalarchives.gov.uk/documentsonline/PROB1wills.asp

Channel 4, “Wills of the Rich and Famous” (accessed 01/05/05): www.channel4.com/4money/funnymoney/features/wills_of_the_rich_and_famous_page1.html

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FIGURE 6.2 Some Reasons Why People Don’t Have Wills

Reason Response

“I don’t have anything of value.” Many things that are important have relatively little monetary value, such as family pictures or Grandma’s simple gold wedding ring.

“A will costs too much.” Wills can be very simple documents and there are many ways for individuals to have their wills done inexpensively.

“My parents have already told each of the adult children what he or she will get when they die.”

Promises alone are not enough to ensure the deceased’s intent will be carried out.

“I just don’t want to think about death.” Death is a reality that even young people must acknowledge.

“My family gets along too well to ever argue over who gets what when a family member dies.”

The death of a loved one is very stressful and causes otherwise reasonable people to act unreasonably.

The scenario is a simple one. As the family members arrive after the deceased’s passing, someone takes an item that the deceased said she could have. This upsets another family member because the deceased also promised that item to him and he decides to take something else in its place. It does not take long for hard feelings to develop that may last for years.

Many of these reasons may seem silly, but the reality is that otherwise bright, intelligent people believe them or at least use them as an e xcuse not to have a will. Figure 6.2 contains some of the common reasons people use for explaining why they do not have a will and responses to those reasons.

THE REASONS FOR HAVING A WILL

The reasons to have a will are obvious for some, such as those w ho have many material assets, resulting in a need to use the will as a part of an overall estate plan. The need for a will for others is not as ob vious. An examination of the f acts set out in the Client Interview for this chapter reveals just such a situation. John and Renee Stevens have a blended family that is made up of children and stepchildren and spouses and ex-spouses. To say nothing of ex-in-laws! They have made a decision to treat all of their children the same for inheritance purposes in the event that they both die. Each of the four children would receive an equal share of their estate. But would this happen if they do not have a will? Not under the intestate laws of most, if not all, of the states. For example, in Florida under Sections 732.102 and 732.103, Florida Statutes, if John died first, Renee would inherit 50 percent from his estate. Samantha and James would split the balance of the estate, and Jason and Tim would receive nothing. Clearly this is not what the Stevenses desired, but some similar distribution would occur in the law of most states.



A will is a very important tool to be used in assisting f amilies such as the Stevenses to plan for the future. By changing the Client Inter view facts another situation can be created w hich demonstrates a need for a will. Assume that the Ste venses are in their 50s and f airly well off. Their children from previous marriages are in their 20s, and they have no children of their marriage. Under this setting it is very possible that John and Renee w ould want to provide for the surviving spouse, if one of them died, but might also want to ensure that their own children will receive more than just that provided for under the intestate statute. A will would be one way for them to accomplish these goals. Again, the key is that the client’s desires be carried out and that the right combination of tools, such as a will or a trust, be used to accomplish those desires. A partial list of reasons why almost everyone needs a will includes the following:

• Expression of the testator’s intent. A will is the last opportunity for the testator to express his desires as to what should happen to

his property, provide for his surviving spouse, and provide for the care of any minor children. The testator is in the best position of knowing who is best deserving of receiving something from the estate and those who are not. These beneficiaries may be very different from those who would receive from the deceased’s estate if the deceased died intestate.

Again, the value of the items devised in a will is not the key. The testator is more likely to know who will appreciate certain items. The family photos are an example of this type of devise. The testator is in the best position to determine who will be most likely to cherish and protect the pictures and most likely to share them with other family members.

The will is often used to express positive thoughts and emotions, for example, letting their family and friends know of the testator’s love and affection for them.

Other times a will is used to express negative feelings toward certain surviving family members. It is often a good practice to discourage clients from using the will for this purpose or to impose some retribution on family members. The survivors will remember these words for many years, and the testator will never have the opportunity to change that. Of course, in the end, it is the testator’s decision as to what should, or should not, be included in his will.

• Removing the stress from the testator’s family. The death of a loved one is a stressful and upsetting event for the family members of the

deceased. A will is one way to remove additional stress on them by setting out the testator’s wishes, thereby reducing the squabbling that can take place when there is no will. A will eliminates the issue of who gets Grandma’s wedding ring and lets the testator decide who receives this important family memento.

• Appointment of personal representative . The personal representative plays a vital role in carrying out the desires of the testator as

expressed in the will. It is, therefore, important for the testator to consider who is best suited for this position. Responsibility, integrity, and willingness to carry out the desires of the testator are characteristics of a good personal representative. The testator is in the best posi-tion to know who would best carry out the responsibilities of the personal representative. If a person does not have a will, or a testator does not appoint a personal representative in the will, the court will be required to select one based on criteria set out by statute.

• Appointment of guardian . Perhaps one of the most important reasons parents may have for executing a will is to express

their views as to who should be guardian of their minor children in the event of the death of both parents. In fact, there are two issues involved with the appointment of a guardian—who will be guardian of the person (the minor) and who will be guardian of the minor’s property. One person can be the guardian of both the minor and the minor’s property, or the two types of guardianships can be placed with two different people.

It is important to note that the testator does not always have the final say about who is the guardian of the person of her minor children. For example, a divorced parent, who has primary physical custody of the minor children of the marriage, may want to exclude the ex-spouse from being appointed guardian of the children when she dies. Courts will nor-mally give preference to the surviving natural parent, even if it is contrary to the desires expressed in the will. In situations where the testator has concern over the ex-spouse being

personalrepresentative A person who manages the affairs of a deceased’s estate.

personalrepresentative A person who manages the affairs of a deceased’s estate.

guardian A person who has legal authority and duty to care for another.




FIGURE 6.3Benef ts of Having a Will

A will is a means for testators to express their desires as to what should happen to their property, provide for their sur-viving spouse, and provide for the care of any minor children.

A will removes additional stress on the testator’s family by setting out the testator’s wishes, thereby reducing the squab-bling that can take place when there is no will.

The personal representative plays a vital role in carrying out the desires of the testator as expressed in the will, and the testator is in the best position to select the best person for the job. A will gives testators a means to express their desires on who should be their personal representative.

A will enables a married couple to express their views as to who should be guardian of their minor children in the event of the death of both parents.

Most wills are probated. Probate provides a method of taking care of the testator’s debts and ensuring that the property left in a will is given to the correct beneficiaries.

A will can be a valuable tool in estate planning and can include things like special trust provisions or charitable gifts that may reduce the impact of state and federal estate taxes.

Expression of the testator’s intent.

Removing the stress from the testator’s family.

Appointment of personal representative.

Appointment of guardian.

System for payment of creditors.

Tax savings

Visit these sites to learn more about the reasons to have a will:

Robin S. Gnatowsky, “Why Do I Need a Will?” (2000): http://library.findlaw.com/2000/Nov/1/129755.html

Rhoades & Rhoades, “I Don’t Need a Will” (2000): http://library.findlaw.com/2000/Jun/1/129208.html

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appointed guardian, she could, and perhaps should, appoint a separate guardian of the minor’s property.

• System for payment of creditors . Most wills must be probated. Probate provides a method of taking care of the testator’s debts

and ensuring that the property left in a will is given to the correct beneficiaries. Probate is also the means by which title is transferred to the beneficiary.

• Tax savings. A will can be a valuable tool in estate planning and can include things like special trust

provisions or charitable gifts that may reduce the impact of state and federal estate taxes.

Figure 6.3 sets out some of the many benefits of having a will.

WAYS PROPERTY CAN BE CONVEYED IN A WILL

There are many benefits of having a will, and, as previously discussed, one of the greatest is the ability of the testator to deter mine what will happen to his proper ty after his death. The law has different terminology that applies to the type of gifts given in a will. While this terminology has been simplif ied in those states that ha ve adopted the UPC, man y of the ter ms listed below are still used by practitioners and writers when discussing gifts made in a will and also w hen refer-ring to specif ic clauses contained in a will. P aralegal students should be a ware of some of the basic terminology associated with types of clauses in a will to understand ho w the terminology is used in different states and by those attorneys and other professionals who still use the more traditional terms when referring to clauses in a will.

bequestA gift made in a will. Tradi-tionally referred to a gift of personal property in a will.

legacyA gift made in a will. Traditionally referred to a gift of personal property or money in a will.

specific deviseA gift of a specific piece of property by will, traditionally a specific piece of real property.

specific legacy/ bequestA gift of a specific item or class of personal property by will.

general legacyA gift of money from the general assets of the estate.



Bequest and legacy. The terms bequest and legacy traditionally referred to a gift of personal property in a will. Devise. The term devise traditionally referred to a gift of real proper ty in a will. The UPC has eliminated the distinction between whether a gift was of real or personal property. Under the UPC all gifts made under a will are called a devise. Even in states that have not adopted the UPC courts have blurred the distinction between the terms legacy, bequest, and devise. Specific devise . A specific devise is a gift of a specific piece of property by will, traditionally a specific piece of real property. Specific legacy/bequest. A specific legacy/bequest is a gift of a specif ic item of personal property or class of personal property by will. General legacy. A general legacy is a gift of a specific amount of money to be paid from the general assets of the estate. Demonstrative legacy. A demonstrative legacy is a gift made in a will of a specif ic amount of money to be paid from an identified fund or from the sale of an identified item. Residual (residuary) legacy/devise. A residual (residuary) legacy/devise is a gift of the remaining assets of the estate that were not otherwise disposed of by the will. (Also referred to as a residuary clause .) The impor tance of the cor rect use of ter minology and clarity in the writing of a will is demonstrated in the In re Estate of Pearl Garrett case.

WHEN GIFTS MAY NOT PASS AS SET OUT IN THE WILL

There are times when gifts made in a will do not pass according to the terms of the will. Some reasons that cause this to occur include: Ademption. Ademption occurs when the testator takes some affirmative act to revoke, can-cel, or otherwise satisfy a gift in a will. This can include gi ving it to the de visee prior to the testator’s death. Ademption can also occur w hen a specif ic item identif ied as a gift under the will is destroyed or transferred to another person. It applies to specific devises and not to general devises. Confusion relating to gifts that are adeemed by the testator can be avoided by executing an updated will when changes occur. Advancement. A similar concept to ademption is advancement. Advancement occurs when a person gives a gift to an heir with the intent of reducing or eliminating that heir’s right to inherit from the person’s estate. This normally occurs when a parent gives a gift to a child with the intent to reduce that child’s share of the parent’s estate that the child w ould otherwise take under the laws of intestate succession. Lapse. A lapse occurs when a gift under a will fails if the beneficiary dies before the testator. The best way for a testator to prevent this from happening is to identify an alternate beneficiary. Paralegals should make sure that the checklist that is used in interviewing a client in anticipation of drafting the client’s will contains alter nate benef iciaries so that the y can be included in the appropriate clauses.

revokeTo take back, as in to retract an offer at any time prior to it being accepted.

advancementA gift made to an heir with the intent of reducing or eliminating that heir’s right to inherit from the person’s estate

lapseThe failure of a gift made in a will because the beneficiary predeceases the testator.

CASE BRIEF

ASSIGNMENT

Read and brief the In re Estate of Pearl Garrett case on page 120. (See Appendix A for information on how to brief cases.)

Seemingly simple things can often result in the biggest problems in the law firm. Despite the fact that the requirements for executing a valid will are relatively simple in most states, the Al-len v. Dalk case shows how problems can re-sult if the rules are not followed. Attention to use of the correct terms and ensuring the clear expression of the testator’s intent should be a fundamental element of drafting a will for a cli-ent. In re Estate of Pearl Garrett demonstrates what can happen when something as basic as

Ethics Alert

clearly expressing the testator’s intent is not accomplished. Paralegals play an important role in the wills, trusts, and estates law firm. They will often be ac-tively involved in drafting clients’ wills. They will also often be involved with the execution of the wills. Paralegals must, therefore, take every step possible to understand the terminology that is used in the drafting of wills and their state’s requirements for executing a valid will. When in doubt, they should check with their supervising attorney.

demonstrative legacyA gift made in a will of a specific amount of money to be paid from an identified fund or from the sale of an identified item.

residual (residuary) legacy/deviseA gift of the remaining assets of the estate that were not otherwise disposed of by the will.

ademptionA testator’s intentional act to revoke a gift under a will or by delivering the gift to the donee prior to the testator’s death.


CASE IN POINT

IMPORTANCE OF CLARITY WHEN DRAFTING A WILL

In the Appellate Court of IllinoisThird District

In re Estate of Pearl GarrettNo. 3-01-0066

September 21, 2001

JUSTICE LYTTON delivered the opinion of the court: Petitioners, nieces and nephews of the testator, Pearl Garrett, brought this action to construe their aunt’s will. The trial court found that the estate passed as a class to the decedent’s sur-viving siblings but certified two questions to us under Supreme Court Rule 308(a) (155 Ill. 2d R. 308(a)). We hold that the estate passes per stirpes to the descendants of the testator’s deceased siblings. On June 2, 1987, Pearl Garrett executed a will that divided her estate among her 10 then-living siblings and the children of her two deceased sisters. The single dispositive paragraph provided:

“I direct the executor hereinafter named to divide my estate into twelve equal shares. I give, devise and bequeath one share to each of the following: Grace Ella Powers, Lora Geneva Bishop, Beulah Leona Jones, Coleman William Bramlett, Alma Elizabeth LeGate, Edna Alpha Ruggles, Clyde Harding Bramlett, Cecil Karl Bramlett, John Lloyd Bramlett and Claude Ted Bramlett, share and share alike or to the survivor or survivors of them; one share to the children of my deceased sister, Maude May Brown, per stripes [sic] and one share to the children of my deceased sister, Mary Belle Clouse, per stirpes.”

Garrett died November 12, 1997, survived by five siblings. Her will was admitted to probate and John L. Bramlett was appointed executor. The executor construed Garrett’s will to require that only those siblings who survived Garrett and only those children of Maude May Brown and Mary Belle Clouse who were living at Garrett’s death would inherit under the provisions of her will. The execu-tor filed a final report dividing Garrett’s estate into seven shares with one share each going to Garrett’s five surviving siblings, one share to the surviving children of Brown, and one share to the surviving children of Clouse. Petitioners, descendants of siblings who died after Gar-rett executed her will and the descendants of the predeceased children of Brown and Clouse, objected to the final report. The executor then filed a motion to construe the will and approve the final report. The trial court found that the will created a class gift which required class members to survive the testator. The court also found that the provisions providing for a bequest of a one-twelfth share “to the children *** per stirpes” of each of Garrett’s two predeceased sisters was ambiguous. Both parties filed motions to reconsider, which were denied. Petitioners then filed a “Motion For Rule 308(a) Appeal,” which the trial court granted.

DISCUSSIONThe trial court certified two questions of law for our review:

“a. Whether the provision in the will of the decedent providing for a bequest to ten named brothers and sis-ters ‘share and share alike or to the survivor or survivors of them’ creates a class gift which imposes a require-ment that the named sibling survive the testator and, thus, only those brothers and sisters who survived the testator would inherit and whether there is an ambigu-ity in that provision.

b. Whether the provision in the will providing for a bequest of 1/12 share ‘to the children . . . per stirpes’ of two of the testator’s sisters who died prior to the execution of the will, is ambiguous.”

IThe first question contains two issues: (1) Is a class gift created? and (2) Is the language ambiguous?

AFirst, we must determine whether a class gift exists. Petitioners ar-gue that the bequest was not a class gift. The executor agrees that the provision does not create a class gift. We agree with the parties. A class gift is “‘a gift of an aggregate sum to a body of per-sons uncertain in number at the time of the gift, to be ascertained at a future time, and who are all to take in equal or in some other definite proportions, the share of each being dependent for its amount upon the ultimate number of persons.’ [Volunteers of America v. Peirce, 267 Ill. 406; Levings v. Wood, 339 Ill. 11.]” Continental Illinois National Bank and Trust Company of Chicago v. Eliel, 17 Ill. 2d 332, 339, 161 N.E.2d 107 (1959). One of the essential features of a class gift is that the number of the persons who are to take the property is to be ascertained at a future time. O’Connell v. Gaffney, 23 Ill. 2d 611, 617, 179 N.E.2d 647, 650 (1962). A gift to persons who are named in the language of gift is prima facie or by initial presumption a gift to them as individu-als notwithstanding they are also designated in general terms as by relationship to the testator or others. O’Connell, 23 Ill. 2d at 617, 179 N.E.2d at 650. A gift in equal shares to the named individuals strengthens the conclusion that a class gift was not intended. O’Connell, 23 Ill. 2d at 617, 179 N.E.2d at 651. Garrett first divided her estate into 12 equal shares; she then devised one share to each named sibling. Shares were not dependent on persons to be determined in the future; the number of persons, and the share to each, was already ascertained. Further, she named her siblings individually, indicating a gift to each of them, not to a class. All of these factors indicate

120



a gift to individuals was intended. See O’Connell, 23 Ill. 2d at 617, 179 N.E.2d at 650. The trial court erred when it held that Garrett’s will created a class gift to her siblings.

BNext we address the second part of the first certified question, that is, whether the language “share and share alike or to the survivor or survivors of them” is ambiguous. Petitioners contend that the phrase is ambiguous when read in the context of the entire bequest and that, construing the will as a whole, Garrett’s intent was to provide a per stirpes distribu-tion to her siblings’ descendants. The executor, however, argues that the will is not ambiguous and survivorship is required. “The cardinal rule of will construction, to which all other rules yield, is the ascertainment of a testator’s intention from the will itself.” In re Estate of Kirchwehm, 211 Ill. App. 3d 1015, 1018, 570 N.E. 2d 851, 854 (1991). Since wills are not always alike, results in other will cases are seldom of controlling importance in determining a testator’s intent. Stites v. Gray, 4 Ill. 2d 510, 513, 123 N.E. 2d 483, 487 (1954). The intention of the testator is es-tablished by examining the will as a whole to determine whether an ambiguity exists. See In re Estate of Carlson, 39 Ill. App. 3d 281, 284-85, 350 N.E.2d 306 309 (1976). Whether an ambigu-ity exists is determined by applying established principles of law to the will. Binger v. Ackerman, 15 Ill. App. 2d 35, 40-41, 145 N.E.2d 277, 281 (1957). If the meaning of the will’s language is unclear after the application of established principles of law, an ambiguity is present and a question of construction remains for the court. Binger, 15 Ill. App. 2d at 41, 145 N.E.2d at 281. Generally, the use of the word “survivor” in a will is con-strued to mean the person who lives the longest out of a group of named individuals. Carlson, 39 Ill. App. 3d at 284-85, 350 N.E.2d at 309. However, a different interpretation may be ap-propriate if the traditional definition creates a result contrary to the testator’s intent. See Carlson, 39 Ill. App. 3d at 284-85, 350 N.E.2d at 309. We must review the entire will to determine if the language “share and share alike or to the survivor or survivors of them” is ambiguous. As stated above, in the one dispositional clause of the will, Garrett left 12 equal shares of her estate to her then-living siblings and the children of her two predeceased sisters. From this bequest, we can infer that Garrett wished to treat her brothers and sisters and their descendants equally. Though the executor argues that the word “survivor” is unambiguous, citing Carlson and Kirchwehm, he appears to rely on the holdings in those cases while disregarding their rationale. Indeed, the analy-sis in those cases is the same as ours, i.e., the court must examine the whole will to determine the intent of the testator. See Carlson, 39 Ill. App. 3d at 284-85, 350 N.E.2d at 309; Kirchwehm, 211 Ill. App. 3d at 1018, 570 N.E. 2d at 854. Since her use of the word “survivor” is not consistent with the rest of the dispositive clause, we find the will to be ambiguous. Once a will is determined to be ambiguous, a question of construction remains for the court. Binger, 15 Ill. App. 2d at 41, 145 N.E.2d at 281. When construing an ambiguity in a will, we will apply the presumption that testators intend property to go in accordance with the laws of descent and distribution. Dahmer v. Wensler, 350 Ill. 23, 28, 182 N.E. 799, 801 (1932). Illinois law has consistently favored per stirpes distribution in the absence of a contrary intention. Schroeder v. Benz, 9 Ill. 2d 589, 592, 138 N.E.2d 496, 500 (1956). To disinherit heirs, a testator must clearly indicate his intention to do so. Harris Trust & Savings Bank

v. Donovan, 145 Ill. 2d 166, 173, 582 N.E.2d 120, 123 (1991). To determine the testator’s intent, we must examine the will as a whole. See Carlson, 39 Ill. App. 3d at 284-85, 350 N.E.2d at 309. Applying these rules of construction to Garrett’s will, we conclude that a per stirpes distribution is appropriate here. No other construction can be ascertained from reading the will in its entirety. Thus, we hold that Garrett intended a per stirpes distribution.

IIThe second question certified to us is whether the bequests of a one-twelfth share each “‘to the children . . . per stirpes’ of two of the testator’s sisters who died prior to the execution of the will, is ambiguous.” Petitioners argue that the words “per stirpes” apply to all the descendants of the two sisters, Maude May Brown and Mary Belle Clouse. The executor responds that only the surviving children of Brown and Clouse take under the will, citing Goodwine State Bank v. Mullins, 253 Ill. App. 3d 980, 625 N.E.2d 1056 (1993). “Per stirpes” is a term used to specify the method of distribu-tion of property. Goodwine, 253 Ill. App. 3d at 1006, 625 N.E.2d at 1076. The words “per stirpes” indicate a taking by right of representation of that which an ancestor would take if living. Goodwine, 253 Ill. App. at 1006, 625 N.E.2d at 1076. Ordinarily the words “per stirpes” denote substitution in case of the death of the primary legatee. Mercantile Trust & Savings Bank v. Rogers, 5 Ill. App. 2d 162, 169, 124 N.E.2d 683, 687 (1955). In Goodwine, the testator gave his son a life estate in all his real estate. The testator provided that upon the death of his son, the real estate would go to “the then[-]living descendants of [his] son *** per stirpes and not per capita.” Goodwine, 253 Ill. App. 3d at 1003, 625 N.E.2d at 1074. The court held that sur-vivorship was required by the use of the phrase “then[-]living descendants,” and the per stirpes distribution only applied to the shares of the remaindermen. Goodwine, 253 Ill. App. 3d at 1005-06, 625 N.E.2d at 1076. We do not find the provision in Garrett’s will ambiguous. There is no limiting language similar to “then living descen-dants” as there was in the Goodwine will. The primary legatees are the children of Garrett’s deceased sisters, who were to take “per stirpes.” The heirs of the children of Garrett’s sisters take by substitution in the event of the death of a primary legatee. See Rogers, 5 Ill. App. 2d at 169, 124 N.E.2d at 687. Thus, if any of the sisters’ children predeceased Garrett, the deceased child’s descendants receive their share by right of representation. Furthermore, if the language were considered ambiguous, we would determine the intent of the testator by giving effect and meaning to each and every clause of the will, if possible. Stites, 4 Ill. 2d at 513, 123 N.E. 2d at 486-87. If Garrett had devised one share each to the “children” of Brown and Clouse without the words “per stirpes,” she would have created a class gift requir-ing survivorship. Under the executor’s interpretation, the words “per stirpes” become superfluous, rendering them meaningless. We must conclude that Garrett intended that all of the children of Brown and Clouse were to take their shares of the estate per stirpes. The certified questions of the circuit court of Knox County are answered. Certified questions answered. HOMER, P.J., and BRESLIN, J., concur.



Anti-lapse statute. Many states have statutes intended to reduce or eliminate the number of gifts under wills that lapse. State statutes v ary on the specif ics of how this is done. Many states provide that the heirs of the deceased devisee take the gift. Some states’ anti-lapse statutes apply only to members of the testator’s family. In states that have adopted the UPC, it applies in situa-tions where the devisee is a grandparent or a lineal descendant of a grandparent. See Figure 6.4 for an example of an anti-lapse statute. Abatement. Sometimes there are not enough assets in an estate for the payment of debts of the estate, such as creditors, taxes, and other expenses. Some gifts made under the will may have to be sold to satisfy them. Abatement is the process of determining the order in which gifts left in the will shall be used to pay those obligations. Testators may set out their wishes in their will, or the procedure set out by statute will be followed. Prenuptial agreements. These are agreements that are entered into in anticipation of marriage. Simply put, a prenuptial agreement is a contract. These agreements are usually entered into to set out the couple’s understanding of what will happen to marital assets in the event they get divorced. They are also used to w aive rights that one spouse has w hen the other spouse dies. As noted in Chapter 4, most states provide the surviving spouse with the right to take an elective share of the deceased spouse’s estate if she does not like what was provided her in the will. This makes it very

anti-lapse statuteA statute that prevents the lapse of a bequest in a will if the person receiving the bequest dies before the testator by allowing the heirs of the beneficiary to receive the bequest.

abatementThe process of determining the order in which gifts made in a will should be ap-plied to pay the debts, taxes, and expenses of the estate.

§72-2-613 (2) If a devisee fails to survive the testator and is a grandparent, a descendant of a grand-parent, or a stepchild of either the testator or the donor of a power of appointment exercised by the testator’s will, the following apply:(a) Except as provided in subsection (2)(d), if the devise is not in the form of a class gift and the deceased devisee leaves surviving descendants, a substitute gift is created in the devisee’s surviv-ing descendants. They take by representation the property to which the devisee would have been entitled had the devisee survived the testator. (b) Except as provided in subsection (2)(d), if the devise is in the form of a class gift, other than a de-vise to “issue”, “descendants”, “heirs of the body”, “heirs”, “next of kin”, “relatives”, or “family” or a class described by language of similar import, a substitute gift is created in the surviving descen-dants of any deceased devisee. The property to which the devisees would have been entitled had all of them survived the testator passes to the surviving devisees and the surviving descendants of the deceased devisees. Each surviving devisee takes the share to which the devisee would have been en-titled had the deceased devisees survived the testator. Each deceased devisee’s surviving descendants who are substituted for the deceased devisee take by representation the share to which the deceased devisee would have been entitled had the deceased devisee survived the testator. For purposes of this subsection (b), “deceased devisee” means a class member who failed to survive the testator and left one or more surviving descendants.(c) For purposes of 72-2-611, words of survivorship, such as in a devise to an individual “if the individual survives me” or in a devise to “my surviving children”, are not, in the absence of additional evidence, a sufficient indication of an intent contrary to the application of this section. (d) If the will creates an alternative devise with respect to a devise for which a substitute gift is cre-ated by subsection (2)(a) or (2)(b), the substitute gift is superseded by the alternative devise only if an expressly designated devisee of the alternative devise is entitled to take under the will. (e) Unless the language creating a power of appointment expressly excludes the substitution of the descendants of an appointee for the appointee, a surviving descendant of a deceased appointee of a power of appointment may be substituted for the appointee under this section, whether or not the descendant is an object of the power.

FIGURE 6.4Montana Anti-lapse Statute

Hands-on Assignment Locate your state’s statute that sets out the order in which funds or property disposed of by a will shall be used to pay the estate’s debts and obligations. What debts

RESEARCH THIS!

and obligations are included in the abatement statute? In what order will the funds and prop-erty of the estate be used to pay those debts and obligations?



difficult for the testator to disinherit her spouse. The way this can be done, however, is to execute a prenuptial agreement, whereby one or both of the spouses waive their right to the elective share. Prenuptial agreements usually were viewed as something only wealthy people needed. In today’s society, many people mar ry more than once and often ha ve children from a pre vious marriage. This has resulted in the use of prenuptial ag reements as a part of many people’s estates to ensure that their assets go to their children of a previous marriage, who are often adults themselves, rather than to the current spouse.

HOW WILLS ARE CHANGED OR REVOKED

Wills are generally ambulatory, meaning they are subject to change or re vocation. This is due to the fact that people’s lives change and their wills must change to reflect that fact. It could be a change in their family, perhaps the birth of a new child. It could be the death of one of the people named as a benef iciary under the will. These and other changes in one’ s life or one’s desires necessitate that a will be changeable. Wills can be changed or revoked in a variety of ways. The testator can revoke a will by physi-cal act, such as tearing it up, bur ning the will, or crossing through all clauses of the will. A will can be revoked by operation of law, such as when the testator gets mar ried or divorced after the execution of the will. Some states provide that the will is revoked in those situations, while others just provide the will is amended to reflect the change. F or example, if a person is mar ried after the will has been executed, many states do not state that the will is revoked but instead allow the spouse to take an intestate share of the testator’s estate. In a divorce case, most states revoke all provisions relating to the former spouse, but the rest of the will remains valid. A subsequent writing that is executed with the same formalities as is required of executing a will can also revoke a will. In fact, the execution of a new will revokes prior wills. Some states, however, require that the new will specif ically revokes the earlier one or shows an intent by the testator for the new will to be the means for the total disposition of his estate. In those states, if such a provision is not included, the will only revokes inconsistent provisions of the earlier will. Figure 6.5 sets out the Montana statutes relating to the manner in which a will can be revoked in that state. A codicil is one w ay that a will can be changed without e xecuting an entirely new will. A codicil is a written document that alters a will. States generally require that they be executed with the same formalities as a will. Some states also require that the codicil mak e specific reference to the will that it is altering. They are often used for relatively minor changes in a will.

ambulatorySubject to change or revocation.

ambulatorySubject to change or revocation.

§72-2-527. Revocation by writing or act. (1) A will or any part of a will is revoked:(a) by executing a subsequent will that revokes the previous will or part expressly or by inconsistency; or(b) by performing a revocatory act on the will if the testator performed the act with the intent and for the purpose of revoking the will or part of the will or if another individual performed the act in the testator’s conscious presence and by the testator’s direction. For purposes of this subsection (b), “revocatory act on the will” includes burning, tearing, canceling, obliterating, or destroying the will or any part of it. A burning, tearing, or canceling is a revocatory act on the will, whether or not the burn, tear, or cancellation touched any of the words on the will.(2) If a subsequent will does not expressly revoke a previous will, the execution of the subsequent will wholly revokes the previous will by inconsistency if the testator intended the subsequent will to replace rather than supplement the previous will. (3) The testator is presumed to have intended a subsequent will to replace rather than supplement a previous will if the subsequent will makes a complete disposition of the testator’s estate. If this presumption arises and is not rebutted by clear and convincing evidence, the previous will is revoked and only the subsequent will is operative on the testator’s death.(4) The testator is presumed to have intended a subsequent will to supplement rather than replace a previous will if the subsequent will does not make a complete disposition of the testator’s estate. If this presumption arises and is not rebutted by clear and convincing evidence, the subsequent will revokes the previous will only to the extent the subsequent will is inconsistent with the previous will and each will is fully operative on the testator’s death to the extent they are not inconsistent.

FIGURE 6.5Montana Statutes—Revocation of Will



Codicils should be used sparingly, especially in the computer age where the client’s old will may be saved on the computer making updates easy. The ease of drafting an updated will, com-bined with the f act most states require that codicils be e xecuted with the same for malities as a will, reduces the desirability of using codicils in many situations.

IMPORTANCE OF KEEPING WILLS UP TO DATE

Statistics demonstrate how difficult it is for people to get around to making a will. It must be if 60+ percent still die without having one. Now, think of the odds of getting people to update a will they finally got around to executing! Keeping a will up to date is just as impor tant as having one in the f irst place. People’s lives change quickly. There are deaths and births that have an impact on the lives of others. Parents are thrilled at the birth of their new baby, but may not think of what kind of changes will be needed in their will and other estate documents. Wives and husbands grieve the loss of their spouse, but may not think of the f act the death may require a change in his or her will. P eople move from state to state, but do not worry about whether their wills will be valid in their new home state. All of these changes, and man y more, are reasons that a person should re view his will and amend it as needed. It is a relati vely simple and inexpensive process and one that is much less expensive than trying to fix the problems created after the testator’s death.

Summary Law offices that deal with wills, tr usts, and estates have to assist their clients in taking care of their property and their loved ones. Wills are an important tool in helping accomplish this goal. While many people feel that the y do not need a will, the reality is that most people w ould benefit from having a will. Wills allow testators a say over who will take from their estate and allow them to select who will aid in the handling of their estate, b y appointment of the personal representative, and of their minor children, by appointment of a guardian. Many families who have children from pre vious marriages may also f ind that a will is an invaluable aid in providing for their natural children and stepchildren. Paralegals play an important role of assisting the attorney in helping the client understand the importance of a will and making sure that the testator’s intent is clearly worded in her will.

Key Terms Abatement Ademption Advancement Ambulatory Anti-lapse statute Bequest Consideration Demonstrative legacy General legacy

Guardian Lapse Legacy Personal representative Residual (residuary) legacy/devise Revoke Specific devise Specific legacy/bequest

ReviewQuestions

1. List the reasons why some people feel they do not need a will. 2. What are some of the terms used to describe how property can be conveyed in a will, and

how has the UPC changed the terminology associated with gifts made in a will? 3. Explain the following terms, with an emphasis on how they are different: ademption, lapse,

and abatement. 4. What is the purpose of anti-lapse statutes? 5. What is a codicil? When should a codicil be used? 6. Why is it important to keep your will up to date?



7. List and discuss the benefits of having a valid will. 8. What are the two types of guardianship discussed in this chapter? 9. Explain the meaning of the term ambulatory, and discuss its importance in the law of wills. 10. Discuss the ways in which a will can be revoked.

Real WorldDiscussionTopic

Crane Day, Howard Day, and Tom Day were the sons and only heirs at law of their father, B.H. Day. In 1979 B.H. Day executed a will and evidence indicated that the will was placed in B.H.’s safety deposit box. Two of the sons, Crane and Ho ward, had access to the bo x. Tom did not. In 1985, B.H. executed a codicil which, combined with the will, was more favorable to Crane and Howard than to Tom. The codicil was never in B.H.’s possession but kept by his attorney. In 1986, B.H. executed a living trust to which he transfer red most of his assets. The living trust did not invalidate the 1979 will. After B.H. died, the safety deposit box was opened but was empty. The will was not produced and no explanation was given for what happened to it. The trial court applied the legal presumption that the proof of a codicil to a will establishes the will without further proof, if the codicil specifically refers to the will. It allowed the admission of an unsigned copy of the will pursuant to the state’s statute relating to list wills. The appellate cour t noted that the trial cour t should ha ve f irst addressed the question of whether there was a presumption that the will w as revoked by B.H. No evidence was submitted that rebutted the presumption that the will had been revoked by B.H. since the will was not found in the safe deposit box. The court held that the trial cour t had improperly used the existence of the codicil, which was intended to modify the will rather than being an independent addition to the will, to overcome the presumption of revocation. How does this case demonstrate the problems that can be created by using a codicil to alter a will rather than the execution of a new will to reflect the desired changes? What are the possible reasons for a state to impose a presumption that a will w as revoked in this type of f act setting? See Matter of Estate of Day , 12 Kan.App.2d 668, 753 P.2d 1296 (Kan. App., 1988).

1. Research the laws of your state, and make a list of the requirements to execute a valid will. Research the laws of two states that are adjacent to yours and include a comparison of their requirements to those of your home state.

2. Research the laws of your state and prepare a chart showing how the estate of John Stevens discussed in the section on The Reasons for Having a Will would be distributed if he died with-out a will.




Vocabulary Builders

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ACROSS 1. A gift of a specific piece of property by will, traditionally a

specific piece of real property 4. A gift of money from the general assets of the estate 5. The basis of the bargained for exchange between the

parties to a contract that is of legal value 6. A testator’s intentional act to revoke a gift under a will or by

delivering the gift to the donee prior to the testator’s death 7. Subject to change or revocation 9. The process method of determining the order in which

gifts made in a will should be applied to pay the debts, taxes, and expenses of the estate

11. A statute that prevents the lapse of a bequest in a will if the person receiving the bequest dies before the testator by allowing the heirs of the beneficiary to receive the bequest

13. A person who manages the affairs of a deceased’s estate14. A gift of the remaining assets of the estate that were not

otherwise disposed of by the will15. A gift made in a will of a specific amount of money to be

paid from an identified fund or from the sale of an identi-fied item

DOWN 1. A gift of a specific item or class of personal property by

will 2. A person who has legal authority and duty to care for

another 3. A gift made in a will. Traditionally referred to a gift of

personal property in a will 8. To take back, as in to retract an offer at any time prior to

it being accepted10. A gift made to an heir with the intent of reducing or

eliminating that heir’s right to inherit from the person’s estate

12. The failure of a gift made in a will because the beneficiary predeceases the testator

Vocabulary Builders


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Chapter 7

Drafting and Executing Wills CHAPTER OBJECTIVES


• Use checklists to obtain information from the client.

• Understand the paralegal’s role in collecting information needed to draft a will.

• Ensure that the will complies with the requirements set out in state law.

• Explain the various clauses used to draft a will and understand the purpose of each clause.

• Draft a will for review by your supervising attorney.

The information contained in this chapter will help prepare the parale gal student to assist in the preparation of one of the most impor tant documents executed by most people, their will. A will not only represents the f inal disposition of a person’s property, but is often the last communica-tion with a person’s loved ones. Drafting a will is much like preparing any other legal document. The number one concern is that the f inished product meets the requirements of the la w. The next major concern is that the finished product meets the needs of the client. To accomplish these goals, paralegals will need to be familiar with the laws of their state that set out the legal requirements for a valid will, use checklists to ensure that all per tinent information is obtained, understand the terminology associated with drafting a will, and know the necessary steps to take to execute a valid will.

WHY “DRAFTING AND EXECUTING WILLS” IS IMPORTANT TO THE PARALEGAL STUDENT

Paralegals are key players in the preparation of wills in the wills, trusts, and estates law firm. They will assist in all stages of the process, from g athering the needed information from the client to the execution of the client’s will. To fulfill their role in the will preparation process, paralegals need to understand both the technical requirements of drafting a will and the impor tance of careful drafting of it to ensure that the testator’s intent will be carried out when the will is probated.

GETTING STARTED

It is a popular misconception that wills are easy to draft. After all, many people have seen ads promis-ing to sell will kits that will help anyone draft a will valid in all 50 states. Then there is the inexpensive


Chapter 7 Drafting and Executing Wills 129

software that makes similar promises and adds the ease of creating a professional-looking will on a computer. And, we should not forget the office supply store that sells fill-in-the-blank legal forms. Will these create a valid will? Probably. As was noted in Chapter 6, the requirements for draft-ing a valid will in most states are v ery few. For example, in Florida the will must be in writing, the testator must have testamentary capacity, and the testator must sign at the end of the will in the presence of two witnesses. Pretty easy! So, what’s the prob lem? These resources provide a one-size-f its-all approach to drafting a will. The reality is that, just like one-size-fits-all clothes, this type of will f its no one very well. Wills created by use of these forms will be inadequate for most people. This does not mean that the paralegal or attorney sits down at the computer and crafts dozens of unique paragraphs to create a client’s will. That would be terribly time intensive, costly, and unnecessary. While there are times when a specialized clause will have to be drafted to meet the needs of a particular client, the paralegal will most often use for ms that are available from reliable legal publishers. Paralegal students are often confused when they see the word form when referring to drafting a legal document. There is seldom a “perfect” for m available to meet the needs of an y clients. Instead, the term form is often used in the la w office to refer to sample clauses. These clauses are selected, modified as necessary, and combined to create a finished will. The paralegal may be called upon to select the proper clauses and modify them to fit the needs of the client. In essence, the parale gal, under the super vision and direction of his attor ney, is “building” the client’s will by using the sample clauses like building blocks. The use of legal forms as a basis to create a legal document for use in the law office, such as a will, is perhaps one of the most important skills that a paralegal can develop. It is a skill that the paralegal will use in any area of the law, whether it is drafting contracts or pleadings in a dissolu-tion of a marriage case. As noted previously, paralegals draft documents like wills under the supervision of an attor-ney. How that supervision is provided varies from law firm to law firm. The key is that paralegals must be sure that they are following the directions of the supervising attorney and ask for clarifi-cation whenever there is a question about the proper execution of their assigned task.

USE OF CHECKLISTS

Checklists and client questionnaires are essential tools for anyone working in a wills, trusts, and estates law firm. Checklists are also called data sheets or planning sheets. The amount of infor-mation that must be gained from a client, as well as the number of documents, such as e xisting wills, is far too complex to leave to memory. Omission of key facts can result in a will that does not truly reflect the desires of the client. Where do you find checklists? Law firms usually have them available for use by their paralegals. Paralegals should ask their supervising attorney or paralegal about their law office’s procedures relat-ing to client interviews and for copies of the firm’s checklists. There are normally different checklists that are used for probate, will contest, and drafting of trusts. Figure 7.1 contains a sample checklist. If a f irm does not have an in-house checklist, or the ones that are a vailable are not adequate for the task, there are man y resources a vailable. Law libraries ha ve form books that contain checklists that can be used to create customized ones for your office. There are also many online resources, such as Westlaw and Lexis, and resources on CD-ROM.

checklistA tool used in law offices to ensure that adequate information is obtained from the client to properly complete the assigned task.

checklistA tool used in law offices to ensure that adequate information is obtained from the client to properly complete the assigned task.

Client Interview John Johnson, age 32, is married to Natalie, age 30. Neither John nor Natalie was previously married. They have been married for 10 years and have two children, Bella, age 8, and Brian, age 4. Their principal asset is their home, which is valued at $300,000. It has a $150,000 mortgage. They own two cars and the normal household furnishings that most

American families have. Natalie does have one item of great sentimental, if not monetary, value. It is her grandmother’s wed-ding ring, which she hopes to give to her daughter when she marries. John has a $100,000 life insurance policy on his life, but Joan has no life insurance. They have $55,000 in savings. They come to your law firm to have their will prepared.

Case Fact Pattern



FIGURE 7.1 Sample Client Interview Checklist

Sample Estate Planning Client Interview Checklist

1. Client’s full name _________________________________ Last First Middle Maiden name _________________________________________ Other names client is or has been known by _____________________________ 2. Social Security no. __________________________________ 3. Citizen of the United States? Yes___ No___ If not, country of citizenship________________________ 4. Religious affi liation ________________________________ 5. Date of birth ________ Place of birth ________________ 6. Marital status: Married__ Single__ Widowed__ Divorced__ 7. Does the client have a prenuptial agreement (or a community property agreement)? Yes________ No_________ If yes, attach a copy to this form. Check when prenuptial agreement has been attached.______ 8. Divorced: Yes*_____ No____ If yes, name of ex-spouse ________________________________________________________ If still living, his/her address _____________________________________________________ 9. If married, date/place of marriage ___________________ 10. Full name of spouse __________________________________ 11. Spouse’s Social Security no. _________________________ 12. Citizen of the United States? Yes___ No___ If not, country of spouse’s citizenship_______________ 13. Spouse’s date of birth ______ Place of birth _________ 14. Present address_______________________________________ 15. Previous address______________________________________ 16. Home telephone ___________________ Business telephone _____________ 17. Divorced? Yes†_____ No_____ If yes, name of ex-spouse ________________________________________________________ If still living, his/her address _____________________________________________________ 18. Children Child 1 Full name________________________ Date of birth_______ Address_______________________________________________ Is child from: Previous marriage _____ Adopted _____ Deceased_____ Child’s spouse____________________ Date of birth______ Child’s children and dates of birth___________________ Child 2 Full name________________________ Date of birth_______ Address_______________________________________________ Is child from: Previous marriage _____ Adopted _____Deceased_____ Child’s spouse____________________ Date of birth______ Child’s children and dates of birth___________________ 19. Does the client presently have a will or trust? Yes _____ No _____ Check when the will and/or trust has been attached.______ 20. Other information that might affect client’s estate plan, e.g., family member who has a long-term

illness, family member with a disability. __________________________________________________________________ 21. Assets Real estate (include address, value, name of record title, name of mortgagee, if any, and amount

of mortgage) ___________________________________________________________ How is the property owned? ____________________________________ Personal property (list type and value of all personal property) ___________________________________________________________ How is the property owned? ____________________________________ Cash and savings (include value and location) ___________________________________________________________ Safety deposit boxes (include content and location) ___________________________________________________________



Intangible property (list all stocks, bonds, promissory notes, and other intangible property, and include values and title name of owner)

___________________________________________________________ Insurance (include type, name of company, face value, named benefi ciary, and location of policies)

___________________________________________________________ Business interests (include information such as the names of businesses and ownership

interest) _________________________ Retirement programs (include 401(k) programs, IRAs, company retirement program, military

retirement programs, etc.) ________________________ If the client is already retired, list retirement programs that he/she is or will be benefi ting from

_______________________________ 22. Debts, mortgages, or other liabilities of client or for which client’s estate may be obligated to pay

_________________________________________________________________ 23. Benefi ciary information‡ (include names of benefi ciaries, items of real/personal property, and/or

cash to be left) _________________________________________________________________ Charities (include the name of the institution, its address, items and/or amount of cash)

______________________________________________________________ 24. Remainder of estate (indicate whom the client desires the remainder of his/her estate assets to

be distributed to)_________________________________________________ 25. Personal representative (include name, address, and relationship, if any, of the person)

__________________________________________ Alternate personal representative (include name, address, and relationship of the person the cli-

ent wishes to serve as alternate) _______________________ 26. Guardian (list the name, address, and relationship of the person client wishes to serve as the

guardian of the person of his/her minor children)_____________________________________________________________________

27. Trustee (list the name, address, and relationship of the person client wishes to serve as trustee of any inter vivos trust or testamentary trust to be created as part of estate plan) ______________________________________________________________

28. Other information that may be relevant to estate plan ________________________29. Does client have a living will or other advanced directives? Yes__ No__ Check when a copy of living will and/or other advanced directives have been attached.__

Date: ________________________

Name of person taking information: ____________________

*If the client has more than one previous spouse, information on all of them should be included in the form.†If the client’s spouse has more than one previous spouse, information on all of them should be included in the form.‡It is advisable that at least one alternate beneficiary be listed for each item, unless the client wants the property to pass through the residuary estate in the event a named beneficiary predeceases the client. If that is the client’s desire, be sure to use appropriate wording to that effect in the drafting of this clause.

Mistakes in the law office often occur not because the paralegal is not trained or knowl-edgeable. Instead, it is because the work has become routine. We all have been in that situation. You have assisted your supervising attorney in interviewing hundreds of clients and preparing hundreds of wills. It is exactly when the work becomes routine that mistakes are made. The paralegal decides not to keep the checklist up to date and forgets to ask the client to bring in earlier versions of the will. Or, the paralegal forgets to ask whether all

Ethics Alert

the children are children of the client’s current marriage. The list of little things that can be forgotten and then grow into serious problems is long. The way to prevent the dangers presented by the daily routine is to use tools such as checklists to make sure that each client is asked for the information that is required to do a quality job. Remember: Checklists and questionnaires can be modified as needed. Using them is the only requirement! The client interview question-naire is only a starting point.




The key is to locate, read, and understand these resources before conducting a client interview or attending one with your supervising attorney.

REQUIREMENTS FOR A VALID WILL

Before paralegals can begin to consider the type of clauses that might be used to draft a will, they must be thoroughly familiar with the laws of their state that set out the minimum requirements for a valid will. Using the requirements for a valid will contained in the Montana Statutes, which is set out in Figure 7.2 , as an example, it becomes apparent that it is relatively easy to draft a will that meets the state requirements. These include:

1. The testator must be 18 years of age or older. 2. The testator must be of sound mind. 3. The will must be in writing. 4. The will must be signed by the testator or in the testator’s name by someone at the testator’s

direction while in the testator’s presence. 5. The will must be signed by two individuals who witnessed the signing of the will by the testator

or by someone at the testator’s direction, or who witnessed the testator acknowledging the signature as his own or acknowledging the will.

Notice that the provisions set out in this statute, as is true with all state statutes relating to the min-imum requirements of a valid will, do not focus on the content of the will. Instead state la ws are concerned with the legal and mental capacity of the testator and that the will is executed in such a manner that the testator’s signature is witnessed. The actual content is left up to the testator. While a will, like all other legal documents, must not violate the law or public policy, it is the tes-tator’s property and the testator gets to decide what to do with the property subject to other laws relat-ing to specif ic individuals. For example, a testator generally cannot disinherit her surviving spouse because of the right of the spouse to use the elective share provisions contained in state laws. Testamentary capacity is one of the most fundamental requirements for a valid will. It includes the testator’s legal and mental capacity to execute a will. Adults are generally presumed to possess such a capacity. To have mental capacity, also refer red to as being of sound mind , the testator must understand the nature of his estate, that is, know what he owns; know who would normally receive his estate if there was no will, for example, his spouse and children; and understand that he is making a plan for the distribution of his estate. While courts recognize an individual’s right to dispose of her proper ty in any legal manner that she desires, they are often called upon to deter mine if the testator was of sound mind at the time she signed her will. There is even a concept referred to as lucid moments , also referred to as lucid intervals, that allows for people who may otherwise lack sufficient mental capacity to execute a valid will when, for the time they were executing their will, they had sufficient capacity

sound mind Having sufficient mental capacity to execute a valid will.


lucid moment (interval) A period of sanity during which an incompetent person is in sufficient control of his or her faculties to execute a valid will.


FIGURE 7.2 Montana Statutes Relating to the Execution of a Valid Will

§ 72-2-521. Who may make a will. An individual 18 or more years of age who is of sound mind may make a will.

§ 72-2-522. Execution—witnessed wills—holographic wills. (1) Except as provided in 72-2-523, 72-2-526, 72-2-533, and subsection (2) of this section, a will must be:(a) in writing;(b) signed by the testator or in the testator’s name by some other individual in the testator’s conscious presence and by the testator’s direction; and(c) signed by at least two individuals, each of whom signed within a reasonable time after having witnessed either the signing of the will as described in subsection (1)(b) or the testator’s acknowledg-ment of that signature or acknowledgment of the will.(2) A will that does not comply with subsection (1) is valid as a holographic will, whether or not wit-nessed, if the signature and material portions of the document are in the testator’s handwriting.(3) Intent that the document constitute the testator’s will may be established by extrinsic evidence, including, for holographic wills, portions of the document that are not in the testator’s handwriting.



to understand what they were doing. The testator must also intend the document being e xecuted to be her last will and testament. This is referred to as testamentary intent . Great care must be taken by the paralegal to make sure that all the statutory requirements for the drafting and execution of a valid will are followed.

DRAFTING THE WILL

Wills can be very simple, complex, or anything in between! It all depends on the needs of the client. Paralegals seldom use a form that already has all of the necessary and desired provisions. As noted earlier, there is no one-size-f its-all will for m. Instead, the paralegal will “build” the finished will by combining the necessary clauses to satisfy the needs of the client. The goal is to use clear, unambiguous language when drafting a will and avoid legalese when-ever possible. The will should be easy to read and comprehend. There are times when using the appropriate legal term or phrase is required , but every effort must be made to use these ter ms only when absolutely necessary. Other drafting tips:

• Use the same type style throughout the instrument. • Avoid leaving unnecessary space anywhere in the instrument, especially at the end of the page. • Avoid placing the name of a clause on the bottom of one page and the body of the clause on

the next page. • Number each page, for example, 1 of 10, 2 of 10, and so on.

WILL CLAUSES

Whether complex or simple, all wills share some basic clauses. This section discusses these clauses and shows how they are used to draft a f inished last will and testament. Figure 7.3 sets out a sample will containing many of the clauses discussed in this section.

testamentary intent The ability to understand and have the legal capacity to make a will.

testamentary intent The ability to understand and have the legal capacity to make a will.

legalese A complicated style used in legal documents that relies on the use of legal terms that are difficult to understand for those who are not in the legal field.

legalese A complicated style used in legal documents that relies on the use of legal terms that are difficult to understand for those who are not in the legal field.

FIGURE 7.3 Sample Will

LAST WILL AND TESTAMENTOF

SAMUEL K. JOHNSON

I, Samuel K. Johnson, a resident of Orange City, Citrus County, Florida, being of sound mind, do hereby make this to be my Last Will and Testament, hereby revoking any and all former Wills and Codicils.

Article I I direct that all my debts that I am legally responsible to pay, funeral expenses, estate taxes and costs of administration shall be paid out of the residuary estate as soon as practicable after my death.

Article II I give, devise and bequeath all of my property, whether the same be real or personal, or mixed, of which I die seized or possessed, or to which I may be entitled at my death, and wherever the same may be situated, including, without limitation, all property acquired by me after the execution of this will to my wife, Renee Johnson.

Article III In the event my wife, Renee Johnson, is not living within thirty (30) days of my death, I give, devise and bequeath all of my property, whether the same be real or personal, or mixed, of which I die seized or possessed, or to which I may be entitled at my death, and wherever the same may be situated, in-cluding, without limitation, all property acquired by me after the execution of this will to my children, Robert, James, and Cynthia, in equal shares, share and share alike, provided they survive me. If one or more of said children shall predecease me, the share such deceased child or children would have received had he, she or they survived me shall be distributed to the issue of such deceased child or children as shall survive me, per stirpes. If there are no issue of such deceased child or children surviv-ing me, then I direct that the share or shares such deceased child or children would have received had he, she or they survived me shall be distributed equally to such of my children as shall survive me, and if none of my children shall survive me, then to my issue as shall survive me, per stirpes.




Article IV I hereby nominate and appoint Robert Hess, as personal representative of my estate. Should he be unable or unwilling to serve or to continue to serve in that capacity, then I appoint Sandra David-son to serve as Personal Representatives of my estate.

Article V I direct that any personal representative nominated by me in this will shall serve without bond of any kind.

Article VI I appoint my wife, Renee Johnson, as guardian of the person and property of my children. If for any reason she is unable or unwilling to serve, I appoint my lifelong friend, Donald Baker, to serve as guardian of the person and property of my children. No guardian under this will shall be required to furnish surety on any offi cial bond.

Article VII I hereby give full power and authority to my Personal Representative, in accordance with the powers conferred by law, in his or her discretion, without any leave or order of court, or other judicial proceedings, to:(1) Sell all or any part either of the real or personal property, or both, at any time belonging to my

estate or any trust, at public or private sale, for cash or on terms.(2) Borrow money and to pledge, mortgage, or otherwise encumber all or any part of the real or

personal property, or both, belonging to my estate or any trust.(3) Carry on and manage, in all respects, any business enterprise in which I may be engaged at

the time of my death, with full power and authority to operate or join in the operation of such business enterprise as a going concern, to form or reform a general or limited partnership, to incorporate or reincorporate, and to liquidate or sell any business enterprise or any part thereof.

(4) Retain all or any part of such property that I may own at the time of my death, including any interest which I may own in any partnership, land trust, or other unincorporated business.

(5) Make distribution to the benefi ciaries named herein either in kind or otherwise, and to distribute to any benefi ciary an undivided interest in any property, real or personal.

In witness whereof, I have hereto set my hand and placed my initials in the margins of the preceding pages, in the presence of two (2) witnesses, and declare this instrument to be my Last Will and Testament on this ________ day of __________, 20___. _____________________________ Testator

The foregoing instrument was on the ____________ day of _________, 20___, signed, sealed, published, and declared by ________________, of ____ County, Florida, as and for his Last Will and Testament in the presence of us the undersigned witnesses, who at his request and in his presence and in the presence of each other have hereunto subscribed our hands as attesting witnesses thereto:______________________________ of ____________________________________________________________ of ______________________________STATE OF FLORIDA:COUNTY OF ____________________

We, ____________________, ______________________, and _______________________ the testator and the witnesses respectively, whose names are signed to the attached or foregoing instrument, having been sworn, declared to the undersigned offi cer that the testator in the presence of witnesses signed the instrument as his last will codicil, that he (signed) (or directed to another to sign for him), and that each of the witnesses, in the presence of the testator and in the presence of each other, signed the will as a witness. ____________________________ TESTATOR _____________________________ WITNESS _____________________________ WITNESSSubscribed and sworn to before me by ___________________________ the testator, and by ____________________ and __________________, the witnesses, on _____________, 20____.Sworn to and subscribed before me this ________ day of ___________, 20___.NOTARY PUBLIC, State of Florida at LargePrinted/Typed Name:Commission #:My commission expires:



A word of caution: Keep in mind that clauses need to be carefully selected to meet the needs of the client. While sample clauses, such as those discussed in this chapter , may be used b y a paralegal, the wording is not set in stone and may need to be modif ied to ensure that the client’s needs and desires are met. A clause that is perfect for one client may not be suitable for another. Each client is an individual, and his will must be drafted accordingly. In addition, since the laws relating to wills vary from state to state, paralegals should be care-ful to avoid use of a clause that might be suitable in another state but is not in the client’s state of domicile. For example, the no contest (in terrorem) clause , which provides that a benef iciary will lose any gifts she would have otherwise received under the will if she challenges the will, is recognized in some states but not in others if there were grounds to contest the will. The selection of possible clauses to use in drafting a will is only the first step of the process. Just as important is the modif ication of the clauses as needed to meet the client’s needs and to comply with the laws of the testator’s state of domicile. When in doubt, paralegals should consult with their supervising attorney to resolve any questions relating to the suitability and wording of clauses. Some of the key common clauses in a will are described in the following.

Exordium Clause The exordium clause identifies the testator, states his domicile, and announces that the document is the testator’s will. It is important that the paralegal obtain all names that the client uses or has used in the past. This would include the names used by the testator in ownership of property. For example, George Kenneth Wilson, Jr., uses George Wilson as his name on most purchases, such as his newest car, but uses his complete name, George Kenneth Wilson, Jr., on the deed to his home. To make mat-ters even more complicated, his investments, such as stocks and bonds, use George K. Wilson. Or, consider Chippela Johnson w ho was married f ive times. It may be advisable to include each of her pre vious married names, and her maiden name, in the will. Figure 7.4 contains a sample exordium clause.

Revocation Clause The revocation clause revokes all previous wills and codicils made by the testator. This is a sim-ple, but very important clause in the will because it eliminates an y confusion as to the testator’s intent relating to those earlier documents. The revocation clause is often included as par t of the exordium clause, as was the case in the sample will set out previously.

Funeral Direction Clause Wills perform a ceremonial purpose as well as a legal one. Most people have certain expectations as to what will be included in their will. After all, they have watched movies and TV shows where wills were read. The funeral direction clause is a clause that a client may expect to see. The reality is that the will is often located and read after the burial tak es place. Most people are buried rela-tively soon after death, whether for religious or health reasons. It is advisable that the client inform members of her family and her named personal representative of her wishes beforehand to ensure that the wishes are known. Figure 7.5 contains a sample funeral direction clause.

Organ Donation Clause Like the funeral direction clause, the organ donation clause is something the client e xpects to see in his will. Again, there are better w ays to ensure that the client’ s intent relating to the donation of his organs is car ried out. The reason for this is that most decisions on the use of a

no contest (in terrorem) clause A clause contained in a will which threatens exclusion of a named beneficiary from taking gifts if he or she challenges the will.


exordium clause A clause in a will which identifies the testator, states his or her domicile, and announces that the document is the testator’s will.


revocation clause A clause in a will that revokes all previous wills and codicils made by the testator.


funeral direction clause A clause in a will where the testator expresses his or her desires as to his or her funeral.


organ donation clause A clause in a will in which the testator states the desire to donate his or her body organs and/or body tissues upon death.


I, George Kenneth Wilson, Jr., also known as George Wilson, and George K. Wilson, a resident of Ponce City, Lighthouse County, Florida, being of sound mind, do hereby make this to be my Last Will and Testament, hereby revoking any and all former Wills and Codicils.

FIGURE 7.4 Sample Exordium Clause Including More than One Name for Testator

It is my desire that my funeral ceremony be held at _____________, (city), (county), (state) and that my remains be buried in my lot in the (name of cemetery), (address), (city), (county), (state).

FIGURE 7.5 Sample Funeral Direction Clause



deceased’s organs for transplant pur poses must be made v ery quickly, often immediately after death or shortly before. Figure 7.6 contains a sample organ donor clause.

Payment of Debts Clause The payment of debts clause is another traditional clause. The laws of the state in w hich the debtor dies will require the payment of debts and taxes whether this clause is present or not. The testator can, however, determine what part of the estate will be the source of payment. Figure 7.7 contains a sample payment of debts clause.

Dispositive Provisions (Specific Legacies, Specific Devises, Residuary Clauses) Dispositive provisions are the clauses in the will in w hich the testator disposes of her proper ty. A dispositive clause should identify the person who will receive the gift. It is advisable to include that person’s current address, w hich can be used as a star ting point if the person needs to be located when the will is being probated. It is also very important that every dispositive provision include at least one alternate beneficiary. This helps avoid the possibility of a lapse whereby a gift under the will cannot be distributed because the beneficiary predeceases the testator. Figure 7.8 contains a sample specific devise clause. One of the most important of the dispositive provisions of a will is the residuary clause . This clause provides for the passage of all the testator’s estate that was not otherwise disposed of by the will. This can include proper ty that was acquired after the e xecution of the will. Failure to include a residuary clause could result in proper ty not disposed of under the will to pass via the laws of intestate succession. Figure 7.9 contains a sample residuary clause.

Simultaneous Death Clause The simultaneous death clause prevents a beneficiary from taking his share of the testator’s estate when the testator and benef iciary die simultaneously. This prevents the confusion sometimes associated with establishing if the benef iciary survived the testator. The vast majority of states have passed the Unifor m Simultaneous Death Act, which was incorporated into the Unifor m Probate Code, Article II, and the Unifor m Act on Intestac y, Wills, and Donati ve Transfers in 1991. The original act provided that when passage of proper ty depends upon priority of death, and there is no sufficient evidence that the persons have died otherwise than simultaneously, the property of each person shall be disposed of as if she had survived. Most states now provide that the death does not ha ve to be simultaneous, allo wing that if a benef iciary fails to sur vive the

payment of debts clauseA clause in a will directing payment of debts and taxes. It may also direct which part of the estate will be the source of payment.

payment of debts clauseA clause in a will directing payment of debts and taxes. It may also direct which part of the estate will be the source of payment.

dispositive provisions Clauses in a will in which the testator disposes of his or her property.


residuary clause A clause in a will that disposes of all property not otherwise disposed of under the will.

residuary clause A clause in a will that disposes of all property not otherwise disposed of under the will.

simultaneous death clause A clause in a will that prevents a beneficiary from taking his or her share of the testator’s estate when the beneficiary and testator die simultaneously or the beneficiary dies shortly after the testator.


I direct that at my death the personal representative of my estate shall contact the hospital of his/her choice to offer of my body organs and/or tissue to whomever the hospital feels might benefi t from such organs and to allow the removal of such organ and/or tissue from my body as deemed appropriate.

FIGURE 7.6 Sample Organ Donor Clause

I direct that all my debts and obligations that I am legally responsible to pay, funeral expenses, estate taxes and costs of administration shall be paid out of the residuary estate as soon as practicable after my death.

FIGURE 7.7 Sample Payment of Debts Clause

I give my 1965 Corvette Stingray to my dear friend, Steve Melnikof, if he survives me. Otherwise the 1965 Corvette Stingray shall pass as part of my residuary estate pursuant to the residuary clause of this will.

FIGURE 7.8 Sample Specif c Devise Clause

I give the rest of my estate, of whatever kind and wherever located, that is not otherwise effectively disposed of by this will to my wife, Renee Johnson, if she survives me by 90 days, but if she fails to survive me for said period of time, to my children, in equal shares.

FIGURE 7.9 Sample Residuary Clause



testator by 120 hours the beneficiary does not take under the testator’s will. Figure 7.10 contains a sample simultaneous death clause. These clauses can be used to help reduce the chances that property of an estate will be probated twice in a relati vely short time, f irst in the estate of the testator and second b y the benef iciary who died soon after the testator. The clause can contain a specific number of days the beneficiary must survive the testator to take under a will, for e xample, 30 days or 180 days. Care should be taken not to make the period of time too long because it could cause a delay in the probating of the testator’s estate.

Appointment of Fiduciaries Clause, Including Personal Representative, Guardian, and Trustee An appointment of fiduciaries clause is used to appoint fiduciaries to carry out the desires of the testator as set out in the will. These include:

• Personal representative. This is the person that will administer the estate of the testator. The person identified as a personal representative in a will is often referred to as an executor, even in states that have adopted the UPC.

• Guardian. The person named in the will to care for a minor, or a handicapped or incompe-tent person, and the property of the minor. Single parents often use this clause in an attempt to have their child’s guardian be someone other than the child’s other natural parent. The surviving natural parent will, however, have a right to custody of the child unless that par-ent is unfit. While the surviving natural parent may have a right to custody, the testator has the ability to limit that parent’s access to the property of the child by establishing a trust or appointing a guardian of the child’s property.

• Trustee. The person named to administer property that is left in a testamentary trust.

The selection of w ho will ser ve as personal representati ve under a will is one of the most important the testator will make when drafting his will. Many factors should be considered by the testator when making these selections, including:

• Age. Generally the nominee should be someone younger than the testator to increase the likelihood that the nominee will not predecease the testator.

• Domicile. Many states require that the personal representative be a citizen of the state in which the will is being probated unless the person is closely related to the testator, such as a son or daughter.

• Educational and professional background. While the personal representative will use profes-sionals, such as attorneys and CPAs, to help in the administration of the estate, some familiarity with financial matters and good organizational skills are a plus.

• Availability. How busy is the person being considered to be the personal representative? Being a personal representative can be a very complicated job and one that can drag on for months, even years. It is advisable to consult with potential personal representatives to see if they would be willing to serve before including them in the will.

It is also impor tant to name an alter nate personal representative, or other f iduciaries, in the event the number one choice cannot or will not accept the position. Figure 7.11 contains a sample appointment of fiduciary clause.

appointment of fiduciaries clause A clause in a will in which the testator nominates one or more fiduciaries to carry out his or her desires as expressed in the will.


fiduciary A person who holds a position of trust and who owes a duty of utmost good faith.


I appoint my wife, Renee Johnson, as guardian of the person and property of my children. If for any reason she is unable or unwilling to serve, I appoint my lifelong friend, Donald Baker, to serve as guardian of the person and property of my children. No guardian under this will shall be required to furnish surety on any offi cial bond.

FIGURE 7.11 Sample Appointment of Fiduciary Clause

If any benefi ciary under this will and I die under circumstances in which there is insuffi cient evidence to determine which of us died fi rst, or if any benefi ciary fails to survive me by 30 days, it shall be presumed that he or she predeceased me.

FIGURE 7.10 Sample Simultaneous Death Clause



No Bond Required Clause State law generally requires that a personal representative give a bond, a written promise that she will faithfully perform her duties. A surety may also be required. A surety can be an individual with adequate funds, a bondsman, or an insurance compan y. The surety provides the f inancial backing to the promise made b y the personal representati ve when she signed the bond. Some states do not require a bond, and even those that do often allow for the bond to be waived by the testator by including this clause in the will. This clause is used to express the testator’s desire to waive the requirement of a bond for the person nominated to ser ve as personal representative. Figure 7.12 contains a sample of a no bond required clause.

Powers of Personal Representative Clause There are numerous duties perfor med by the personal representative, and state statutes gi ve him broad powers to carry out those duties. The Montana statute relating to the powers of the personal representative is set out in Figure 7.13 . Wills may also include a list of powers and duties. Examples

surety A party who assumes primary liability for the payment of another’s debt.


no bond required clause A clause in a will that states a personal repre-sentative or other fiduciary appointed in a will shall serve without bond.

no bond required clause A clause in a will that states a personal repre-sentative or other fiduciary appointed in a will shall serve without bond.

I direct that any personal representative nominated by me in this will shall serve without bond of any kind.

FIGURE 7.12 Sample No Bond Required Clause

72-3-613. Transactions authorized for personal representative. Except as restricted by this code or otherwise provided by the will or by an order in a formal proceeding and subject to the priorities stated in 72-3-901, a personal representative, acting reasonably for the benefi t of the interested persons, may properly:(1) retain assets owned by the decedent pending distribution or liquidation, including those in which the representative is per-sonally interested or which are otherwise improper for trust investment;(2) receive assets from fi duciaries or other sources;(3) perform, compromise, or refuse performance of the decedent’s contracts that continue as obligations of the estate, as the personal representative may determine under the circumstances. In performing enforceable contracts by the decedent to convey or lease land, the personal representative, among other possible courses of action, may:(a) execute and deliver a deed of conveyance for cash payment of all sums remaining due or the purchaser’s note for the sum remaining due secured by a mortgage or deed of trust on the land; or(b) deliver a deed in escrow with directions that the proceeds, when paid in accordance with the escrow agreement, be paid to the successors of the decedent, as designated in the escrow agreement;(4) satisfy written charitable pledges of the decedent irrespective of whether the pledges constituted binding obligations of the decedent or were properly presented as claims, if in the judgment of the personal representative the decedent would have wanted the pledges completed under the circumstances;(5) if funds are not needed to meet debts and expenses currently payable and are not immediately distributable, deposit or invest liquid assets of the estate, including money received from the sale of other assets, in federally insured interest-bearing accounts, readily marketable secured loan arrangements, or other prudent investments that would be reasonable for use by trustees generally. If the personal representative is authorized to invest funds in United States obligations, the personal represen-tative may invest in these obligations either directly or in the form of securities of or other interests in an open-end or closed-end management type investment company or investment trust registered under the Investment Company Act of 1940 (15 U.S.C. 80a-1 through 80a-64), as amended, if:(a) the portfolio of the investment company or investment trust is limited to United States government obligations and repur-chase agreements fully collateralized by United States government obligations; and(b) the investment company or investment trust takes delivery of the collateral for any repurchase agreement, either directly or through an authorized custodian.(6) acquire or dispose of an asset, including land in this or another state, for cash or on credit, at public or private sale and manage, develop, improve, exchange, partition, change the character of, or abandon an estate asset;(7) make ordinary or extraordinary repairs or alterations in buildings or other structures, demolish any improvements, raze existing or erect new party walls or buildings;(8) subdivide, develop, or dedicate land to public use; make or obtain the vacation of plats and adjust boundaries; adjust differences in valuation on exchange or partition by giving or receiving considerations; or dedicate easements to public use without consideration;(9) enter for any purpose into a lease as lessor or lessee, with or without option to purchase or renew, for a term within or extending beyond the period of administration;

FIGURE 7.13 Montana Statute— Powers of Personal Representative



of these powers include: to notify creditors as required b y statute, collect debts owed to the estate, pay debts owed by the estate, locate beneficiaries, locate assets of the estate, sell assets, open bank accounts, file necessary tax and Social Security forms, convey real property, commence lawsuits on behalf of the estate, defend lawsuits brought against the estate, and manage the business owned by the testator. A testator may also specifically prohibit specific powers to the personal representative. Figure 7.14 contains a sample powers of personal representative clause .

No Contest Clause Also called the in ter rorem clause, the no contest clause is a clause used b y a testator when she is concerned that cer tain benef iciaries might challenge the will. The clause provides that the beneficiary will lose any gifts he would have received under the will if he contests it after the testator’s death. In states that ha ve adopted the UPC such clauses are inef fective if there w as probable cause to contest the will. Figure 7.15 shows a sample no contest clause.

Separate Writing Clause Many states provide for the inclusion of a clause that refers to a separate writing prepared b y the testator that specifies gifts of items of tangible personal property not otherwise specifically disposed of under the will. If the testator does not take advantage of the separate writing clause, any property

powers of personal representative clause A clause in a will in which the testator sets out the powers he or she is granting to the personal representative of the will.


separate writing clause A clause in a will allowed in some states that refers to a separate writing prepared by the testator that specifies gifts of items of tangible personal property not otherwise specifically disposed of under the will.

separate writing clause A clause in a will allowed in some states that refers to a separate writing prepared by the testator that specifies gifts of items of tangible personal property not otherwise specifically disposed of under the will.

(10) enter into a lease or arrangement for exploration and removal of minerals or other natural resources or enter into a pool-ing or unitization agreement;(11) with the consent of the heirs or devisees or the court, abandon property when in the opinion of the personal representa-tive it is valueless or is so encumbered or is in condition that it is of no benefi t to the estate;(12) vote stocks or other securities in person or by general or limited proxy;(13) pay calls, assessments, and other sums chargeable or accruing against or on account of securities, unless barred by the provisions relating to claims;(14) hold a security in the name of a nominee or in other form without disclosure of the interest of the estate, but the personal representative is liable for any act of the nominee in connection with the security so held;(15) insure the assets of the estate against damage, loss, and liability and the personal representative against liability as to third persons;(16) borrow money with or without security to be repaid from the estate assets or otherwise and advance money for the pro-tection of the estate;(17) with the consent of the heirs or devisees or the court, effect a fair and reasonable compromise with any debtor or obligor or extend, renew, or in any manner modify the terms of any obligation owing to the estate. If the personal representative holds a mortgage, pledge, or other lien upon property of another person, the personal representative may, in lieu of foreclosure, ac-cept a conveyance or transfer of encumbered assets from the owner thereof in satisfaction of the indebtedness secured by lien;(18) pay taxes, assessments, compensation of the personal representative, and other expenses incident to the administration of the estate;(19) sell or exercise stock subscription or conversion rights; consent, directly or through a committee or other agent, to the reorganization, consolidation, merger, dissolution, or liquidation of a corporation or other business enterprise;(20) allocate items of income or expense to either estate income or principal, as permitted or provided by law;(21) employ persons, including attorneys, auditors, investment advisors, or agents, even if they are associated with the personal representative, to advise or assist the personal representative in the performance of the personal representative’s administrative duties; act without independent investigation upon their recommendations; and, instead of acting personally, employ one or more agents to perform any act of administration, whether or not discretionary;(22) prosecute or defend claims or proceedings in any jurisdiction for the protection of the estate and of the personal represen-tative in the performance of the personal representative’s duties;(23) sell, mortgage, or lease any real or personal property of the estate or any interest therein for cash, credit, or for part cash and part credit and with or without security for unpaid balances; provided, however, a personal representative may not, without prior court approval in a supervised proceeding, either directly or indirectly purchase any property of the estate that the personal representative represents, nor be interested in the sale. All sales must be fairly conducted and made for the best price obtainable.(24) continue any unincorporated business or venture in which the decedent was engaged at the time of death in the same business form, including a sole proprietorship, partnership, or limited liability company, unless otherwise ordered by the court in a formal proceeding initiated by an interested person on the basis that continuation of the business is not in the best interests of the estate or its benefi ciaries;(25) incorporate any business or venture in which the decedent was engaged at the time of death;(26) satisfy and settle claims and distribute the estate as provided in this code.




not specifically disposed of in her will will pass under the residuar y clause of the will. The written document is often refer red to as a memorandum of disposition of tangib le personal property. This list does not have to be executed with the same formality as a will. Instead, it can be in the testator’s handwriting and/or signed by her and describe the items being devised with reasonable certainty. The separate writing provides the testator with great flexibility in making changes to whom she wants to leave items of tangible personal property without having to amend her will or draft a ne w will. As with most matters relating to wills, the ability to include such a clause and the requirements of the separate writing if one is allowed vary by state. It is another example of the importance of paralegals becoming familiar with the laws of their state. Figure 7.16 contains a sample separate writing clause. The South Carolina statute on separate writings is set out in Figure 7.17 .

Anyone taking under this will who contests it, or any portion of it, shall take nothing under this will and the property that he or she would have otherwise taken shall pass as if he or she had predeceased me.

I may leave a written, signed and dated memorandum prepared by me setting forth the disposi-tion of specifi c items of tangible personal property that are not specifi cally disposed of under this will. This memorandum will control the disposition of the identifi ed therein. If such memorandum is not discovered within 30 days of the date of my death, it shall be assumed that I did not leave such a memorandum and any memorandum found after that time shall be given no effect as to the disposition of my estate.

SECTION 62-2-512. Separate writing identifying bequest of tangible property.A will may refer to a written statement or list to dispose of items of tangible personal property not otherwise specifi cally disposed of by the will, other than money, evidences of indebtedness, docu-ments of title (as defi ned in Section 36-1-201(15)), securities (as defi ned in Section 36-8-102(1)(A)), and property used in trade or business. To be admissible under this section as evidence of the intended disposition, the writing must either be in the handwriting of the testator or be signed by him and must describe the items and the devisees with reasonable certainty. The writing may be referred to as one to be in existence at the time of the testator’s death; it may be prepared before or after the execution of the will; it may be altered by the testator after its preparation; and it may be a writing which has no signifi cance apart from its effect upon the dispositions made by the will.

FIGURE 7.17 South Carolina—Separate Writing Statute

FIGURE 7.16 Sample Separate Writing Clause

FIGURE 7.15 Sample No Contest Clause

I hereby give full power and authority to my Personal Representative, in accordance with the powers conferred by law, in his or her discretion, without any leave or order of court, or other judicial proceedings, to: (1) Sell all or any part either of the real or personal property, or both, at any time belonging to my estate or any trust, at public or private sale, for cash or on terms. (2) Borrow money and to pledge, mortgage, or otherwise encumber all or any part of the real or personal property, or both, belonging to my estate or any trust. (3) Carry on and manage, in all respects, any business enterprise in which I may be engaged at the time of my death, with full power and authority to operate or join in the operation of such busi-ness enterprise as a going concern, to form or reform a general or limited partnership, to incorporate or reincorporate, and to liquidate or sell any business enterprise or any part thereof. (4) Retain all or any part of such property that I may own at the time of my death, including any interest which I may own in any partnership, land trust, or other unincorporated business. (5) Make distribution to the benefi ciaries named herein either in kind or otherwise, and to distrib-ute to any benefi ciary an undivided interest in any property, real or personal.

FIGURE 7.14 Sample Powers of Personal Representative Clause



Testimonium Clause The testimonium clause indicates the end of the will and provides a place for the testator to sign and date the will. Figure 7.18 contains a sample testimonium clause.

Attestation Clause The attestation clause identifies the people who witnessed the testator’s signature and states that they did testify to his signature. The witnesses sign to attest to that f act. Figure 7.19 contains a sample attestation clause.

Self-Proof Clause One problem associated with the probate of wills is the necessity of producing a witness to either testify or sign an af fidavit relating to the f acts of how the will w as executed and the testator’s competence. State requirements on what must be done vary. Some states allow for a self-proof clause to be included in the will that eliminates the need for testimon y or affidavits in order to submit the will to probate. While the self-proof clause is not a require-ment for a valid will, it is v ery important that this clause be included if state la ws allow. In those states that allow them, the statutes eliminate the need to produce a witness at the time the will is submitted to probate. Compliance with signature requirements for e xecution is conclusively presumed, and other requirements of execution are presumed to have been met, subject to rebuttal. Figure 7.20 contains the Montana self-pro ved will provision containing sample language of the clause.

Other Common Clauses Testamentary Trust Trusts are classif ied by when they are created. Inter vivos trusts are created while the settlor is alive and become operational after the trust is created. Testamentary trusts are included as part of the testator’s will, and the property passes to the trust by a gift in the will to the trustee for the benefit of the beneficiary after the testator’s death.

Disinheritance Clause The disinheritance clause is used to e xpressly disinherit any heirs not pro vided for in the will. These clauses can be used to reduce the chance that a preter mitted child or g randchild will be able to maintain that he was unintentionally left out of the will. Wills are written for many reasons. They can be expressions of love and affection for those who survive the testa-tor. They can be a means to provide for the family members. Wills can also be used to express unhappiness with those who survive the testator. Figure 7.21 shows a sample disinheritance clause.

Incorporation by Reference Clause The incorporation by reference clause makes reference to cer tain documents that are in e xis-tence at the time the will is located with the intention of making those documents part of the will. Figure 7.22 shows a sample incorporation by reference clause.

testimonium clause A clause in a will that indicates the end of the will and provides a place for the testator to sign and date the will.


attestation clause The section of the will where the witnesses observe the act of the testator signing the will.

attestation clause The section of the will where the witnesses observe the act of the testator signing the will.

self-proof clause A clause in a will allowed in some states that eliminates the need for testimony or affidavits in order to submit the will to probate.

self-proof clause A clause in a will allowed in some states that eliminates the need for testimony or affidavits in order to submit the will to probate.

testamentary trust A trust created in the settlor’s will that takes effect upon his or her death.


disinheritance clause A clause in a will used to expressly disinherit an heir not provided for in a will.


incorporation by reference clause A clause in a will that makes reference to certain docu-ments that are in existence at the time the will is located with the intention of making those documents part of the will.

incorporation by reference clause A clause in a will that makes reference to certain docu-ments that are in existence at the time the will is located with the intention of making those documents part of the will.

In witness whereof, I have hereto set my hand and placed my initials in the margins of the preced-ing pages, in the presence of two (2) witnesses, and declare this instrument to be my Last Will and Testament consisting of ___ pages on this ________ day of __________, 20___.

The foregoing instrument was on the ____________ day of _________, 20___, signed, sealed, published, and declared by ________________, of ____ County, Florida, as and for his Last Will and Testament in the presence of us the undersigned witnesses, who at (his/her) request and in (his/her) presence and in the presence of each other have hereunto subscribed our hands as attesting wit-nesses thereto:

FIGURE 7.19 Sample Attestation Clause

FIGURE 7.18 Sample Testimonium Clause



72-2-524. Self-proved will. (1) A will may be simultaneously executed, attested, and made self-proved by acknowledgment by the testator and affi davits of the witnesses, each made before an offi cer authorized to administer oaths under the laws of the state in which execution occurs and evidenced by the offi cer’s certifi cate, under offi cial seal, in substantially the following form:

I, ___________, the testator, sign my name to this instrument this _____ day of _____, 20___, and being fi rst duly sworn, do hereby declare to the undersigned authority that I sign and execute this instrument as my will, that I sign it willingly (or willingly direct another to sign for me), that I execute it as my free and voluntary act for the purposes expressed in it, and that I am 18 years of age or older, of sound mind, and under no constraint or undue infl uence.________________________Testator

We, _________, _________, the witnesses, sign our names to this instrument, being fi rst duly sworn, and do hereby declare to the undersigned authority that the testator signs and executes this instru-ment as the testator’s will, that the testator signs it willingly (or willingly directs another to sign for the testator), that each of us, in the presence and hearing of the testator, hereby signs this will as witness to the testator’s signing, and that to the best of our knowledge the testator is 18 years of age or older, of sound mind, and under no constraint or undue infl uence.____________________Witness____________________WitnessTHE STATE OF __________COUNTY OF ____

Subscribed, sworn to, and acknowledged before me by ___________, the testator, and subscribed and sworn to before me by ___________ and ___________, witnesses, this ______ day of ____, 20____(SEAL) (Signed)____________________(Offi cial capacity of offi cer)___________

(2) An attested will may be made self-proved at any time after its execution by the acknowledgment thereof by the testator and the affi davits of the witnesses, each made before an offi cer authorized to administer oaths under the laws of the state in which the acknowledgment occurs and evidenced by the offi cer’s certifi cate, under the offi cial seal, attached or annexed to the will in substantially the following form:

THE STATE OF _____COUNTY OF _____

We, ___________, ___________, and ___________, the testator and the witnesses, respectively, whose names are signed to the attached or foregoing instrument, being fi rst duly sworn, do hereby declare to the undersigned authority that the testator signed and executed the instrument as the testator’s will, that the testator signed willingly (or willingly directed another to sign for the testator), that the testator executed it as the testator’s free and voluntary act for the purposes expressed in it, that each of the witnesses, in the presence and hearing of the testator, signed the will as witness, and that to the best of the witness’s knowledge the testator was at that time 18 years of age or older, of sound mind, and under no constraint or undue infl uence.

________ Testator________ Witness________ Witness

Subscribed, sworn to, and acknowledged before me by _________, the testator, and subscribed and sworn to before me by _______ and __________, witnesses, this _______ day of _____, 20___(SEAL) (Signed) _________(Offi cial capacity of offi cer)___________________

(3) A signature affi xed to a self-proving affi davit attached to a will is considered a signature affi xed to the will if necessary to prove the will’s due execution.

FIGURE 7.20 Montana Self-Proved Will Provision Containing Sample Language of Clause



REVIEWING THE FINAL DRAFT WITH THE CLIENT

It is important that the client has the oppor tunity to review the f inal draft of the will before an appointment is set for its final execution. The client should be given time to review the entire will to make sure that all her desires are properly expressed in the final draft. Paralegals can review the will with the client. They must, as always, avoid legally interpreting the clauses of the will or giving legal advice. When in doubt, paralegals should check with their supervising attorney. Changes made to the draft should not be done with cor rection fluid or similar products. Nor should the phrases to be changed be crossed out or erased. A new draft should be printed out whenever changes are made. This may be one page or the entire document depending on the length and number of corrections and their impact on the page numbering of the will.

EXECUTION OF WILL

The execution of the will should be a solemn occasion. The client will be signing a very important document. Adequate time should be allowed for the testator to review the will before signing. When the testator indicates that he is ready to sign his will, the witnesses should be brought into the room.

It is my intention to incorporate by reference into this will a document dated _____, which is now in existence and described as follows: ____________________.

FIGURE 7.22 Sample Incorporation by Reference Clause

It is very easy for paralegals to unintentionally cross the line between helping their client and practicing law without a license. Reviewing the contents of a will with a client is commonly done by paralegals. However, interpreting clauses in the will in response to a client’s questions is allowing the client to rely on the paralegal’s legal knowledge. Such acts may

very well constitute the unauthorized practice of law. It is also important to note that it is not the accuracy of the interpretation given by the para-legal to the client that places the paralegal in jeopardy. It is the act of interpreting a clause for the client that may be viewed as the unauthor-ized practice of law.

Ethics Alert

Hands-on Assignment Draft a will that complies with the laws of your state based on the facts set out in the Client Interview. Create additional facts

RESEARCH THIS!

as necessary to draft the will. You should attempt to use as many of the clauses set out in this chap-ter as possible in your will.

Visit this site to see basic forms and clauses for all 50 states that can be used in drafting wills and other documents for estate planning: Internet Legal Research Group, “ILRG Legal Forms Archive” (n.d.) (accessed 12/15/05): www.ilrg.com/forms/index.html#estateplanning

CYBER TRIP

I have a (son/daughter/grandchild), _________, who lives at ______________, and have knowingly and intentionally made no provisions for (him/her) in this will.

FIGURE 7.21 Sample Disinheritance Clause



The paralegal should make sure that there are enough witnesses present to satisfy the statutor y re-quirement of the testator’s state of domicile. The testator should tell the witnesses that this is his will and that he will be signing the will and then ask them to witness his signature. The witnesses only need to know that the testator is signing his will and ha ve no right to know the contents of the will. The testator should then sign the will. Then the witnesses sign the will. The witnesses are actually doing two things at this point. They are attesting to the fact they saw the testator sign the will or that the testator has acknowledged to them that the signature is his. The witnesses are also subscribing the will by signing their names. The self-proof clause, if any, should also be signed at this time. States vary on who can be a witness to a will. While states require the witness to be competent to understand the role she is playing in the execution of the will, age requirements for a witness vary by state from none to the age of majority. States also vary on whether a witness can tak e under the will. Man y states require that the will be signed in front of disinterested witnesses, and failure to do so may result in the witness forfeiting his devise and the possib le voiding of the will. Others allo w those who will inherit under the will to also act as a witness. Care should be taken to comply with the laws of the state in which the will is executed when selecting witnesses to a will. The testator and witnesses should not sign copies of the will. There is only one original of the will and that is the one signed by the testator and witnesses. The testator ma y, depending on the la w of the state, initial the bottom of each page. The testator should not sign each page of the will. While the process of executing a will may seem simple, it is critical that paralegals understand the statutory requirements of their state and be sure that those requirements are follo wed. Figure 7.23 sets out a number of dos and don’ts of drafting and executing a will.

attest To acknowledge in writing that a person has witnessed the signing of a document.


subscribe To sign a will.subscribe To sign a will.

disinterested witness A person who has no interest in the document that he or she is attesting to.


Do Don’t

Pay attention to the wants and desires of every client.

Let the office routine lull you into not paying attention to the details of drafting and executing a valid will.

Use appropriate, well-written clauses to “build” a finished will.

Use form wills.

Modify sample clauses to meet the needs of the client.

Use a sample clause that is not worded to meet the needs and desires of the client.

Verify that those clauses being considered for inclusion in the will are appropriate under the laws of the testator’s state of domicile.

Use clauses that are invalid or questionable under the laws of the testator’s state of domicile.

Do appoint a personal representative who is younger than the testator if possible and one who resides in the state of domicile of the testator.

Appoint a personal representative older than the testator or one who does not live in the state of domicile of the testator.

Do use clear, unambiguous language when drafting a will.

Use legalese.

Redo the entire page where changes and corrections are necessary. If more than one page has to be changed due to corrections, care should be taken to make sure that the page numbering remains correct.

Use correction fluid or other correction methods to make additions, deletions, or corrections to the final draft of the will.

Allow the client to read the will prior to signing the will.

Rush the client into signing without providing adequate time for the client to review the will.

Have the client declare that he or she is executing his or her last will and testament in front of the witnesses.

Have the client sign the will when the witnesses are not in the room and unable to see the document signed.

Inform the witnesses that they are witnessing the signing of the client’s last will and testament.

Allow the witnesses to read the will. They are there towitness the signing, not verify the contents of the will.

Execute the will in accordance with state law. Have the testator or witnesses sign copies of the will.

FIGURE 7.23Dos and Don’ts of Drafting and Executing a Will

CASE BRIEF

ASSIGNMENT

Read and brief the Conner v. Donahoo case on page 145. (See Appendix A for information on how to brief cases.)



CASE IN POINT

145

THE MEANING OF THE PHRASE “IN THE PRESENCE OF THE TESTATOR.”

Court of Appeals of ArkansasDivision IIICONNER

v.DONAHOO CA03-433

Opinion delivered February 4, 2004

Appeal from Miller Circuit Court; John Lineberger, Judge; re-versed and remanded. C. Wayne Dowd, for appellant. Keil & Goodson, by: Matt Keil, for appellee. KAREN R. BAKER, Judge. Appellant, Mollie Conner, appeals from a judgment in the Miller County Circuit Court, Probate Division, finding that the testatrix’s will was invalid. She argues on appeal that the trial court erred in finding that the testatrix’s will was invalid due to noncompliance with Ark. Code Ann. § 28-25-103(c) and asserts that Mr. Louis Conner was in the pres-ence of the testatrix when he subscribed his name to the will as an attesting witness. We reverse and remand. On March 3, 1999, the decedent, Sibyl L. Brenneman, executed her third will. On that day, the legal assistant for her attorney and the notary public, two witnesses, Louis “Jack” Conner and Leona M. Marsden, and the testatrix’s sister, Mollie Conner, all assembled in the testatrix’s bedroom for execution of the documents. The will was read and explained to the testatrix. She reviewed it herself, executed it, and initialed each page while sitting in her bed in the presence of both witnesses and the notary public. One witness, Leona Marsden, signed the will on the testatrix’s bed. The other witness, Louis Con-ner, requested to sit down while signing the document. The notary public, both attesting witnesses, and Mollie Conner proceeded to an adjacent room that was connected by an open doorway where Louis Conner sat at a table and subscribed his name to the testatrix’s will. The notary public performed her duties and executed a self-proving will. Both witnesses signed an attestation clause and a self- proving affidavit that was notarized by the notary public. Sibyl Brenneman died on August 12, 1999. On September 17, 1999, Mollie Conner, one of two surviving siblings of the testatrix, filed a document dated March 3, 1999, purporting to be the Last Will and Testament of Sibyl L. Brenneman. An order admitting the will to probate and appointing Mollie Conner as executrix was en-tered on October 5, 1999. On January 25, 2000, Ona Lee Donahoo, a niece of the testatrix, filed a petition contesting the will of the decedent, alleging that Sibyl Brenneman was not mentally compe-tent and was under undue influence at the time the instrument was executed. On August 21, 2001, Ms. Donahoo filed an amended contest of will, alleging in addition that the will was not executed according to Arkansas law and was therefore not a valid will. After a trial, the court entered a judgment finding that the tes-tatrix was mentally competent and possessed testamentary capacity at the time the will was executed and that evidence did not support the conclusion that the testatrix was under undue influence at the time of execution. However, the trial court found that the will was invalid because it was not signed by one of the witnesses in the presence of the testator, and therefore, not attested in accordance with the law. From this ruling, comes this appeal.

Our standard of review in such cases is as follows:

On appeal, “[p]robate cases are reviewed de novo . . . [and] we will not reverse the probate judge’s findings of fact unless they are clearly erroneous. . . . A finding is clearly erroneous when, although there is evidence to support it, we are left on the entire evidence with the firm conviction that a mistake has been committed.” Snowden v. Riggins, 70 Ark. App. 1, 7-8, 13 S.W.3d 598, 602 (2000) (citations omitted); see also Ark. R. Civ. P. 52(a). Due deference will be given to the superior posi-tion of the probate judge to determine the credibility of the witnesses and the weight to be accorded their testi-mony. Wells v. Estate of Wells, 325 Ark. 16, 922 S.W.2d 715 (1996). Furthermore, “[w]hile we will not overturn the probate judge’s factual determinations unless they are clearly erroneous, we are free in a de novo review to reach a different result required by the law.” Standridge v. Standridge, 304 Ark. 364, 370, 803 S.W.2d 496, 499 (1991).

Remington v. Roberson, 81 Ark. App. 36, 39, 98 S.W.3d 44, 46 (2003). Similarly, we review issues of statutory construction de novo, as it is for this court to decide what a statute means. Burch v. Griffe, 342 Ark. 559, 29 S.W.3d 722 (2000) (citing Stephens v. Arkansas Sch. for the Blind, 341 Ark. 939, 20 S.W.3d 397 (2000); Shaw v. Shaw, 337 Ark. 530, 989 S.W.2d 919 (1999)). We are not bound by the trial court’s decision; however, in the absence of a showing that the trial court erred, its interpretation will be accepted as correct on appeal. Id. The issue in this case is the definition and meaning of the lan-guage “in the presence of the testator.” Arkansas Code Anno-tated section 28-25-103(c) states, “The attesting witnesses must sign at the request and in the presence of the testator.” Black’s Law Dictionary, Sixth Edition, 1990 at page 1183, defines the phrase “in the presence of the testator” as “the will is attested in the presence of the testator if the witnesses are within range of any of testator’s senses.” Here, after witnessing the testatrix executing her will in the bedroom of her home in the presence of both witnesses, Leona Marsden subscribed her name to the will on the bed. Louis Conner, on the other hand, requested to sit down while signing and thus subscribed his name to the will in an adjacent room, while the testatrix remained in her bedroom. We hold that under these facts, Mr. Conner was within the range of the testator’s senses while in the adjacent room. Thus, Mr. Conner was “in the presence of the testator” at the time he subscribed his name to the testatrix’s will. Accordingly, we reverse and remand. ROBBINS AND ROAF, JJ., agree.



WHERE SHOULD THE WILL BE STORED?

A will should be stored in a safe location that can be reached b y the personal representati ve shortly after the testator dies. The will can be kept in a fireproof lock box in the testator’s home, held by the law firm that drafted the will, or given to the personal representative if he has a safe place to store the document. Some states allow for the will to be filed with the clerk of the court. Many clients want to keep the original executed will in their safe deposit box, which is safe, but can create difficulties when the personal representative tries to access the safe deposit box to get the will after the testator’s death. The personal representative will most likely need to get a court order to access the safe deposit box, which delays the start of the administration of the estate and adds additional costs.

Read and brief the Jureski v. Scaduto case on page 147. (See Appendix A for information on how to brief cases.)

CASE BRIEF ASSIGNMENT

CYBERTRIP

Visit this site for more information on wills, including keeping them safe after they have been executed: Washington State Bar Associa-tion, “Wills” (2004) (accessed 01/10/06): www.wsba.org/media/ publications/pamphlets/wills.htm

LETTER OF INSTRUCTION

The time immediately after a person’s death is often chaotic and v ery stressful on the decedent’s family and loved ones. Drafting a will is one major step in reducing the stress because it sets out the testator’s desires for what will happen with her estate. The letter of instruction is an additional document that will further assist the testator’s family during this difficult time. It provides informa-tion that is needed quickly by the testator’s survivors in order to help preser ve her assets and helps ensure that the initial stages of the handling of her estate run smoothly. Letters of instruction are not legally binding documents and are not e xecuted with the same formalities as a will. They are used as a companion document to the will that pro vides critical information needed relatively quickly after the testator’s death. There is a wide variety of information that can be included in letters of instr uction. A partial list includes:

• Testator’s funeral arrangements. • Location and nature of the testator’s assets. • Location of the testator’s important personal and legal documents (including where the will

is kept). • Location of bank accounts and safe deposit boxes. • Information relating to life insurance policies. • Information on retirement plans. • List of debts, credit cards, and other financial obligations. • Information on mortgage or lease agreements. • Contact information for key people such as the testator’s personal representative, attorney, or CPA.

It is advisable that a copy of the letter of instr uction should be given to the named personal representative of the will. Other copies should be kept (1) with the testator’s important papers, (2) by the testator’s attorney, and (3) with the will. Letters of instruction are much easier to change and update because the y are informal docu-ments. It is advisable that they be updated annually or whenever there is a major change in the testator’s life, such as the death of a family member or change in financial assets.

letter of instruction A document that sets out in-formation that will be useful to the deceased’s survivors, personal representative, and/or attorney.

letter of instruction A document that sets out in-formation that will be useful to the deceased’s survivors, personal representative, and/or attorney.


147

CASE IN POINT

DETERMINING TESTATOR’S INTENT WHEN WILL CONTAINS TWO IRRECONCILABLE CLAUSES.

In the District Court of Appeal of the State of FloridaFourth District

Jureskiv.

ScadutoFiled August 25, 2004

STONE, J. Larry Jureski, as personal representative, filed a petition to construe a will. A residuary beneficiary opposed the petition, contending that the will contained two irreconcilable clauses. The trial court, in construing the self-drafted will of the testa-tor, agreed with the residuary beneficiary and concluded that the two dispository paragraphs in the will conflicted. As the conflict could not be otherwise resolved, the trial court, ap-plying settled law, determined that the latter provision must prevail over the former, as the last statement of the testator’s intent. We affirm. The applicable provisions of the will are:

[3.] All beneficiaries must survive me for 45 days to re-ceive property under this will.[4.] All personal and real property that I leave in this will shall pass subject to any encumbrances or liens placed on the property as security for the repayment of a loan or debt.[5.] If I leave property to be shared by two or more beneficiaries, it shall be shared equally by them unless this will provides otherwise.[6.] If I leave property to be shared by two or more beneficiaries, and any of them does not survive me, I leave his or her share to the others equally unless this will provides otherwise for that share.[7.] Entire estate means all property I own at my death that is subject to this will.[8.] Specific bequest refers to a gift or specifically iden-tified property that I leave in this will.[9.] Residuary estate means all property I own at my death that is subject to this will that does not pass un-der a specific bequest.[10.] I leave ten cents US funds (USDO.10) to Lawrence Scaduto.[11.] I leave any property that I may own at the time of my death to Larry Jureski and William Callahan in equal shares.[12.] I leave my residuary estate to Larry Jureski, William Callahan, Glen Craig, Regina Garrido, Susan Clohan and Elizabeth Scaduto in equal shares.

By the time of death, the testator’s estate included real prop-erty, valued at $270,000.00, as well as $46,800.00 in personal property. At a hearing on the matter, Jureski argued that he and

Callahan were entitled to all the property, both real and personal, pursuant to clause 11 of the will. Alternatively, Jureski suggested that both he and Callahan were at least entitled to all the testa-tor’s real property. Elizabeth Scaduto, residuary beneficiary, argued that clauses 11 and 12 directly conflicted, making it impossible to determine the testator’s testamentary intent. Further, Scaduto as-serted that, by accepting Jureski’s contention that he and Callahan should receive all the property in the estate, real and personal, the court would essentially void the operation of the residuary clause and fail to carry out the testator’s testamentary intent. We note that none of the parties are a spouse or child of the decedent. We further note that neither party seeks a further evi-dentiary hearing or proffers any extraneous evidence of the tes-tator’s intent; rather, each side left it to the trial court to construe intent from the four corners of the will. The trial court found that the will was not clear as to what property was intended to pass under clauses 11 and 12, rejecting both of Jureski’s interpreta-tions, and concluded that the two provisions were irreconcilable. Thus, the trial court determined that the residuary clause, as the latter provision, should prevail. The court relied on Romaniello v. Romaniello, 760 So. 2d 1083 (Fla. 5th DCA 2000), in concluding that neither Jureski nor Callahan was entitled to all of the estate property, real and personal, because the will did not contemplate a failure to fund the residuary benefi-ciaries. While the instant case is like Romaniello in that the testator’s will does not define the type of property meant to be devised, it is unlike Romaniello because the testator’s intent in using the term “property” is not apparent from the surrounding wording. We conclude that Elliot v. Krause, 531 So. 2d 74 (Fla. 1987), is even more akin to this case. There, the court recognized that, when a will contains clauses that are in conflict, the latter clause should be given effect. Elliot, 531 So. 2d at 76. In addressing Jureski’s primary contention, we find that the will does not clearly bequeath all of the real and personal prop-erty in the estate to Jureski and Callahan. First, clause 7 defines the testator’s “entire estate” to mean “all property” owned by the testator at his death. The general bequest to Jureski and Cal-lahan in clause 11, however, does not refer to the “entire estate” or “all the property;” rather, it leaves Jureski and Callahan “any property. . . .” Because the parties have provided no extrinsic evi-dence as to the meaning of the phrase “any property,” we find it impossible to distinguish which type of property the testator intended to bequeath under either clause 11 or clause 12. We further disagree with Jureski’s categorization of clause 11 as a



specific bequest. A specific bequest is “a gift by will of property which is particularly designated and which is to be satisfied only by the receipt of the particular property described.” In re Estate of Potter, 469 So. 2d 957, 959 (Fla. 4th DCA 1985) (quoting In re Parker’s Estate, 110 So. 2d 498, 500 (Fla. 1st DCA 1959)). Be-cause the disposition in clause 11 may be generally satisfied out of the testator’s estate, rather than from a specifically designated fund or object, we find the clause to be a general bequest. Id. Thus, the two clauses are irreconcilable and the residuary clause should prevail as the last statement of the testator’s intent. We note we do not find that clauses 11 and 12 are inconsis-tent merely because both include Jureski and Callahan as benefi-ciaries. First, assuming we interpret the term “others ” in clause 6 to refer to the residuary beneficiaries in clause 12, it is entirely possible that the testator intended that, should Jureski or Cal-lahan predecease the testator, the surviving beneficiary would receive both his one-half share of the entire estate and a one-fifth share of the deceased beneficiary’s one half as a residuary beneficiary. Further, the inclusion of Jureski and Callahan under both clauses 11 and 12 becomes even more practical if oper-ating under the presumption that the testator intended to be-queath either real or personal property in clause 11, rather than the entire estate, with Jureski and Callahan also sharing in the residue. In considering Jureski’s alternative argument that he and Callahan were entitled to at least all of the real property, with the residuary beneficiaries entitled only to the testator’s personal property, the trial court reasonably concluded that there was no indication of how the testator intended his real and personal property to be separately devised under clauses 11 and 12. While we acknowledge that the testator may have intended to con-vey any real property to Jureski and Callahan, we cannot make

such an assumption, as a matter of law, because to do so would ignore the holding in Elliott, 531 So. 2d at 76. Therefore, because the testator’s testamentary intent as to how the real property and the personal property should be devised under clauses 11 and 12 is undiscoverable, we cannot say that the trial court erred in concluding that clauses 11 and 12 are irreconcilable. We recognize that there is a corresponding limiting principle of construction, as set forth in Dutcher v. Estate of Dutcher, 437 So. 2d 788, 790 (Fla. 2d DCA 1983) (citing In Re McMillan’s Estate, 30 So. 2d 534, 536 (1947)), that:

If there is an irreconcilable conflict between two provi-sions in a will, the latter provision will usually prevail as being the last expression of the intention of the tes-tatrix where the provisions refer to the same subject matter. Of course, where possible, the two provisions are to be construed in such a manner as to harmonize them; if this is not possible, the first provision is re-jected only to the extent necessary to give effect to the latter provision. See In Re Rogers’ Estate, 180 So. 2d 167, 170 (Fla. 2d DCA 1965)) (emphasis added).

Here, applying the principle of rejection “only to the extent necessary,” it cannot be disputed that the testator intended some property to pass by paragraph 11 to Jureski and Callahan. We recognize that, although the court was not able to construe clause 11 to include either all property or any real property in the estate, clause 11 might, in rejecting clause 11 only to the extent necessary, be construed, simply, as passing the testator’s tangible personal property. However, as neither party has raised or re-quested that limited interpretation, we do not decide whether the will could be so construed. STEVENSON and HAZOURI, JJ., concur.


Summary The average person’s contact with attorneys is usually an unhappy event. It may involve a divorce, a lawsuit, or criminal prosecution. This is not why clients come to a wills, trusts, and estates law firm. Clients come because they want to plan for their futures. Paralegals will be the client’s main contact with the firm and also be the ones who do much of the preparation for and drafting of the will. It is not only an important role, but a solemn one. The paralegal’s ultimate responsibility is to make sure that the client’s desires are accurately included in the completed will and that the will is executed in the proper manner. The attorney and paralegal who prepared the will may never know how things turn out when the testator dies and the will is admitted to probate. But if the y took their job seriously and avoided the pitfalls of letting their work become routine, the work will benefit the testator and his loved ones.

Key Terms Appointment of fiduciaries clause Attest Attestation clause Checklist Disinheritance clause Disinterested witness Dispositive provisions Exordium clause Fiduciary

Funeral direction clause Incorporation by reference clause Legalese Letter of instruction Lucid moment (interval) No bond required clause No contest (in terrorem) clause Organ donation clause Payment of debts clause



1. Locate your state’s statutory requirements for a valid will and compare them to those con-tained in the Montana Statutes. Write a paper that discusses the differences.

2. Research the laws of your state relating to the use of no contest clauses in wills. Develop legal arguments supporting their use and opposing their use.


Powers of personal representative clause Residuary clause Revocation clause Self-proof clause Separate writing clause Simultaneous death clause

Sound mind Subscribe Surety Testamentary intent Testamentary trust Testimonium clause

Review Questions

1. Review the sample will from Figure 7.3 and identify its clauses by name, for example, exordium clause.

2. Where should the original will be stored? Where should it not be stored? 3. List the names of the more common clauses contained in wills. Describe their purposes. 4. Describe how a will should be executed. 5. What is a letter of instruction? What is its purpose? 6. What are the problems related to the use of standard form (sample) clauses in a will? What

should the paralegal do to avoid these potential problems? 7. What factors should be considered by a testator when selecting the personal representative

for his/her will? 8. What should a paralegal do if a client asks him or her to interpret a clause in a will? 9. What is a separate writing clause? Why should it be included in wills? 10. What is a self-proof clause? Why should it be included in wills in those states that allow its

usage?


A testator, who was very ill, attempted to sign his name at the end of the will but had dif ficulty in completing the signature. After numerous attempts, the testator’s attorney asked that one of the other people present assist the testator b y steadying his hand so that he could sign the will. The attorney advised him that he could only steady the testator’s hand but not sign the document for the testator. Would the laws of your state allow a person to help a testator sign a will in this manner? Would someone else be ab le to sign for the testator at his request? Did it matter that the attorney asked for the help rather than the testator? Why or why not? See Matter of Will of Bernatowicz , 233 A.D.2d 838, 649 N.Y.S.2d 625 (N.Y.A.D. 4 Dept. 1996).



Vocabulary Builders

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6 7

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ACROSS 2. A trust created in the settlor’s will that takes effect upon

his or her death 4. A clause in a will that prevents a beneficiary from taking

his or her share of the testator’s estate when the benefi-ciary and testator die simultaneously or the beneficiary dies shortly after the testator

7. Swearing to 8. Having sufficient mental capacity to execute a valid will. 9. A clause in a will which identifies the testator, states his

or her domicile, and announces that the document is the testator’s will

11. A clause in a will directing payment of debts and taxes. It may also direct which part of the estate will be the source of payment

15. A clause in a will allowed in some states that eliminates the need for testimony or affidavits in order to submit the will to probate

19. To sign a will20. Periods of sanity during which an incompetent person is

in sufficient control of his or her faculties to execute a valid will

21. A clause in a will that indicates the end of the will and provides a place for the testator to sign and date the will

22. A clause in a will that revokes all previous wills and codicils made by the testator

23. A clause in a will that disposes of all property not other-wise disposed of under the will

DOWN 1. Clauses in a will in which the testator disposes of his

property 3. The ability to understand and have the legal capacity to

make a will 5. A complicated style used in legal documents that relies on

the use of legal terms that are difficult to understand for those who are not in the legal field

6. A party who assumes primary liability for the payment of another’s debt

10. A clause in a will in which the testator states the desire to donate his or her body organs and/or body tissues upon death

12. A clause in a will used to expressly disinherit an heir not provided for in a will

13. A tool used in law offices to ensure that adequate infor-mation is obtained from the client to properly complete the assigned task

14. Documents that set out information that will be useful to the deceased’s survivors, personal representative, and/or attorney

16. A person who has no interest in the document that he/she is attesting to

17. A clause contained in a will which threatens exclusion of a named beneficiary from taking gifts if he or she challenges the will

18. A person who holds a position of trust and who owes a duty of utmost good faith

Vocabulary Builders


Chapter 8

Trusts CHAPTER OBJECTIVES


• Understand the terminology associated with trusts.

• Identify the categories of trusts.

• Identify the elements of a trust.

• Identify the parties involved in the creation of a trust.

• Explain the role played by the parties involved in the creation of a trust.

• Understand how a trust can be terminated.

Trusts are one of the most common tools used in assisting clients to plan for a v ariety of needs and circumstances. The general role of tr usts as they are used in estate planning w as explained in Chapter 5. This chapter provides the paralegal student a better understanding of w ho creates trusts, why they are created, and how trusts are drafted. Like the drafting of a will, drafting a tr ust is much like preparing any other legal document. The number one concern is that the finished product meets the requirements of the law. The next major concern is that the finished product meets the needs of the client.

WHY “TRUSTS” IS IMPORTANT TO THE PARALEGAL STUDENT

Paralegals play a vital role in the drafting of trusts that will be used by their clients. This chapter sets out information relating to trusts and how they are drafted. Trusts are one of the most com-monly used estate planning tools. This is true because they are very versatile and can help clients

Client Interview Don and Kay Ponce have had a long, happy life together. They have also been very successful over the years. John was a builder who was wise enough to purchase a large amount of property in a yet undiscovered place once called Mosquito Lagoon. The town was nestled between the warm waters of Florida’s east coast and a large inlet that led into the intercoastal waterway. Much has changed since he bought that property. The public has discovered it, and there has been a

Case Fact Pattern

tremendous demand to purchase the land to build condomini-ums and luxury homes. The sale of the property has left the couple financially comfortable. They are now concerned about the care and education of their two minor grandchildren, Tara and Adrienne. They have come to your firm to find out how they can establish a trust to provide for the college education of their granddaughters and to leave them a substantial amount of money when each reaches the age of 25.

152


Chapter 8 Trusts 153

deal with a wide range of concer ns, including the reduction of estate taxes. The paralegal must, therefore, have an understanding of the par ties that are involved in the creation of the tr ust, the role each of these parties plays, and how a trust is drafted.

USE OF CHECKLISTS

Like wills, information gathering is a v ery important part in drafting a tr ust that accomplishes the goals of the client. The paralegal should use a checklist or client interview sheet similar to the one set out in Chapter 7 to ensure that all the necessary information and documents are obtained. Care should be taken to keep track of all documents that are obtained in the process. Items that might be required include the client’s will, copies of insurance policies, tax records, and copies of any trusts that the client may have already created. Figure 8.1 is a sample checklist that can be used to ensure that the required infor mation is obtained from the client. K eep in mind that there is no “perfect” checklist. Checklists may have to be modified to fit the particular needs and desires of a law firm.

Part I Information Relating to Testator, Benefi ciaries of Trust, and Fiduciaries

1. Testator’s full name Last First Middle

Maiden name Other names client is or has been known by 2. Spouse’s full name Last First Middle

Maiden name Other names client is or has been known by 3. Name(s) of any deceased or divorced spouses 4. Children Child 1 Full name ________________________ Date of birth_______ Address_______________________________________________ Is child from: previous marriage _____adopted_____deceased_____ Child’s spouse____________________ Date of birth______ Child 2 Full name________________________ Date of birth_______ Address_______________________________________________ Is child from: previous marriage _____adopted_____deceased_____ Child’s spouse____________________ Date of birth______ 5. Grandchildren Grandchild 1 Full name________________________ Date of birth_______ Address_______________________________________________ adopted _____deceased_____ Grandchild 2 Full name________________________ Date of birth_______ Address_______________________________________________ adopted _____deceased_____ 6. Names of trustees/co-trustees Individual trustee ____ Corporate trustee _____ Address(es) 7. Terms and other trustee information: Terms relating to resignation or removal of trustee Terms relating to substitution of successor trustee Name and address of successor trustee Bond required? Yes _____ No____ Limitation of liability? Details of compensation

FIGURE 8.1 Checklist to Obtain Information for Drafting a Testamentary Trust



Part II Trust Property List type and description of the trust property.

Part III Trust Purpose List the reasons for creation of trust.

(e. g., support of benefi ciaries, providing for college education, minimize estate taxes, payment of costs of last illness and/or funeral)

Part IV Powers and Duties of Trustee

Statutory ____ Accumulation of income ____ Carry on business ____ Compromise and settlement of claims ____ Delegation of powers ____ Distribution of income ____ Distribution of principal on termination of trust ____ Improvements to realty ____ Partial distributions during trust ____ Periodic accountings ____ Pledge or mortgage of property ____ Sale of trust property ____ Use of principal for benefi t of income benefi ciaries ____ Voting of stock and giving of proxies ____ Other

Limitations, if any

Part V Benefi ciaries

Full name of income benefi ciary Address Specifi cs of time and method of payment Full name of principal benefi ciaries Address Specifi cs of time and method of payment

Part VI Other Information

Duration of trust Conditions, precedent or subsequent, affecting trust Specify how trust estate will be divided when children reach majority.

Specify how separate shares retained in trust for children will be distributed.

Specify what will happen in the event that all benefi ciaries die before full distribution. Specify how distributions and/or payments will be made to minors or incompetents.

Common disaster clause Yes____ No____ Perpetuities savings clause Yes ____ No _____ Specify how trust is to terminate and what is to happen with any remaining trust assets.

List other relevant information.




WHO NEEDS A TRUST?

There is no simple ans wer to the question of w ho needs a tr ust. There is no concise list of the people who would benefit from creating a trust as part of their estate plan. The reason for this is simple; there are many reasons why people may feel that creating a tr ust is essential to meeting their estate planning goals. Don and Kay Ponce are excellent examples of why some people want a trust. They have loved ones, in this case their g randchildren, who they want to provide for in a number of w ays. First they want to provide for their grandchildren’s education. Then they want to leave money to help them get a good start in life. Other examples of why people need a trust include:

• The settlor is concerned about possible estate taxes and wants to minimize their impact on the estate she leaves for her loved ones.

• The settlor wants to provide for a loved one with special needs, such as a disabled child. • The settlor wants to leave assets to an adult child but is concerned the child might squander

the money if it is given as a direct gift in a will. • The settlor wants to provide for her surviving spouse while he is alive but wants to make

sure that the assets of the trust are used for the benefit of her children after her spouse’s death.

Obviously, there is no single motivation for a person to create a tr ust. Perhaps that very fact demonstrates how valuable a tool the trust is in the estate planning toolbox. Because of their ver-satility, trusts can help clients solve many of the problems they are concerned about when they come to the law office.

TRUSTS—THE BASICS

While there are many categories of trusts, all express trusts have certain common elements that must be present in order to create a valid trust:

1. Settlor. The person who creates the trust. Also referred to as the trustor . 2. Trustee. The person who holds legal title of the trust property for the benefit of another. 3. Trust property. The property placed into the trust by the settlor. Trust property is also

referred to as principal, corpus, or res. 4. Beneficiaries. The people and entities, such as charities, that will benefit from the trust. 5. Trust purpose. Why the trust was created. The trust purpose could be to provide for the

education of the settlor’s grandchildren. Or, it could be to promote the arts by giving grants to promising young artists. The variety of trust purposes is vast since they can be created for any lawful purpose.

Trusts are based on a very interesting and somewhat unique legal concept, the splitting of title. The trustee holds the le gal title (ownership). The benef iciary holds the equitable (beneficial) title . Clear as mud, right?

element An essential part. element An essential part.

trustor A person who creates a trust. trustor A person who creates a trust.

trust property Property placed into a trust by a settlor.


trust purpose The reason a trust was created.


As with their role in assisting in the drafting of wills, paralegals assisting in the drafting of trusts owe their clients an ethical duty to complete the jobs they are assigned in a professional manner. Paralegals must not just keep the legal require-ments of drafting a trust in mind when perform-

Ethics Alert

ing their duties. They also need to remember that the foremost goal must be creating a trust that will accomplish the client’s trust purpose. Para-legals should notify their supervising attorney if they feels that something in the trust that is being drafted does not fulfill the client’s desires.

equitable (beneficial) title A title that shows a benefi-cial interest in property.



The concept of how property is held in tr ust is sometimes difficult for paralegal students to grasp because it is contrary to most people’s understanding of ownership. After all, if John owns a DVD player, he owns the legal title and the equitab le title. Put more directly, he has the right to possess it, sell it, and so on (the le gal title), and he has the right to use it for his o wn benefit, playing DVDs (the equitable title). The law recognizes there are times w hen it is benef icial to have someone hold and control property, not for his own benefit, but for the benefit of another, such as a minor or an incompe-tent individual. There are also times when the owner of property may want to dictate how cer-tain property will be used by a benef iciary, rather than making an outright gift. To accomplish these things the law allows for the creation of a tr ust, where the trustees hold and control the property, not for their own benefit, but for the benefit of another. Trusts are categorized in a number of ways. These include:

• Inter vivos trusts. Trusts that are created while the settlor is alive. • Testamentary trusts. Trusts that are created as part of the settlor’s will. • Revocable inter vivos trusts. Trusts in which the settlor retains the right to change or termi-

nate the trust. • Irrevocable inter vivos trusts. Trusts in which the settlor gives up her right to revoke the trust

after its creation. These trusts are often used because of possible tax advantages afforded them by the IRS.

• Private trusts . Trusts that are created for the benefit of individuals rather than some public benefit.

• Charitable trusts. Trusts that are created to benefit the public good and have recognition as a charity by the IRS.

• Express trusts. Trusts that a settlor intentionally creates. • Implied trusts. Trusts created by operation of law. See Chapter 6 for more information on

implied trusts.

private trust A trust created for the benefit of individuals rather than for some public or charitable purpose.


The use of trusts has increased in recent years. This increase in use, combined with the need for more comprehensive trust laws and uniformity between the states, has resulted in the development of the Uniform Trust Code (UTC) by the National Conference of Commissioners on Uniform State Laws. Like the Uniform Probate Code, the UTC only becomes law when enacted by the state. (See Table 7.1 .) For more information on the purpose of the UTC and for states that have adopted it, visit www.nccusl.org/Update/uniformact_factsheets/uniformacts-fs-utc2000.asp . To view the text of the UTC, visit www.law.upenn.edu/bll/ulc/uta/2001final.htm .

CYBER TRIP

TABLE 8.1 Uniform Trust Code

The following states have adopted the UTC:

Alabama Nebraska Pennsylvania Arkansas New Hampshire South Carolina District of Columbia New Mexico Tennessee Florida North Carolina Utah Kansas Ohio Virginia Maine Oregon Wyoming Missouri

Other states are considering its adoption.



THE PARTICIPANTS IN THE TRUST ARRANGEMENT

There are three key participants in a tr ust: the settlor, the trustee, and the benef iciary. A closer examination of each of these participants will aid in the understanding of how a trust is created.

Settlor Who can be a settlor ? While most people think of a settlor as being a natural person (an indi-vidual), any legal entity can create a trust. This includes entities such as corporations and partner-ships. For example, many corporations have established charitable trusts. What are the requirements to be a settlor ? Individuals who are settlors must be of legal age and be of sound mind. The same test for determining if a person is capable of making a will or entering into a valid contract is normally applied in determining whether a settlor can establish a trust.

Trustee The settlor may appoint more than one trustee , in which case they are referred to as co-trustees. Trustees are compensated for their w ork. The amount of compensation should be included in the trust instrument . States generally allow for adjustment of the amount pro vided in the tr ust instrument under certain circumstances, such as if the duties change substantially from what was originally anticipated or where the provisions made in the trust would be inequitable. States also allow for reasonable compensation if no amount is included in the trust instrument. What are the requirements to be a tr ustee? A trustee can be a natural person or a le gal entity such as a corporation or partnership. A trustee must be a person or entity that can own property. Minors, mentally ill persons, persons under guardianship, or persons with another legal disability cannot, as a general rule, act as trustees. While technically a minor can be a trustee, it is not ad-visable to appoint a minor because contracts that are entered into by them before they reach legal age must be ratif ied when they reach 18, which creates many complications for the handling of the trust. Note: A sole tr ustee cannot be the sole benef iciary of a tr ust. If this occurs, the le gal and equitable titles merge and the trust ceases to exist. It is possible for a trustee to be a benef iciary of the trust if there is more than one trustee or more than one beneficiary. Figure 8.2 sets out the Montana statute on the exception to the doctrine of merger.

Duties of the Trustee The trustee owes a fiduciary duty , often referred to as the highest duty of honesty and good faith imposed by law, to the beneficiary. While the legality of the matter is that the trustee controls the property, he must do so in a way that is best for the beneficiary. The law also imposes other, more specific duties on the trustee. These duties may include:

• Duty to administer trust. • Duty of loyalty. • Duty to avoid conflict of interest. • Duty not to undertake adverse trust. • Duty to take control of and preserve trust property.

settlorThe person who creates a trust.

settlorThe person who creates a trust.



fiduciary duty The highest duty of care imposed by law.


72-33-210. Exception to doctrine of merger. If a trust provides for one or more successor benefi ciaries after the death of the trustor, the trust is not invalid, merged, or terminated in either of the following circumstances: (1) where there is one trustor who is the sole trustee and the sole benefi ciary during the trustor’s lifetime; or (2) where there are two or more trustors, one or more of whom are trustees, and the benefi cial interest in the trust is in one or more of the trustors during the lifetime of the trustors.

FIGURE 8.2 Montana Statute on Exception to the Doctrine of Merger



• Duty to make trust property productive. • Duty to dispose of improper investments. • Duty to keep trust property separate and identified. • Duty to enforce claims. • Duty to defend actions. • Duty not to delegate entire administration of trust. • Duty to use ordinary skill and prudence to accomplish the purposes of the trust. • Duty with respect to co-trustees. • Duty to report information to beneficiaries. • Duty to report information about trust on request. • Duty to provide annual statement to income beneficiaries.

The John R. Boyce Family Trust v. Snyder case on page 160 discusses the fiduciary duty.

Powers of the Trustee Many states set out the po wers of a tr ustee in their statutes but also allo w for the settlor to specify additional po wers, or to limit those set out b y statute, in the tr ust ag reement. Trust agreements often include express grants of power to the trustee. These powers are often broadly stated and give the trustee great discretion to meet the intended goal of the tr ust. Examples of trustee powers include: the right to sell or rent proper ty, carry on a business, lend or bor row money, bring or defend lawsuits, or any act that would be consistent with what any legal owner of property can do.

Beneficiary The beneficiary is the person or entity that receives the benefit of the trust.

REQUIREMENTS FOR A VALID TRUST

As has been previously discussed, a trust can be created in a number of w ays, for example, as a trust created in the settlor’s lifetime or as part of his will. The general requirements for what must be present to create a trust include:

• The settlor properly manifests an intention to create a trust. • The trust must have assets. This requirement can be satisfied if the trust (or its trustee) is

designated to be beneficiary of the proceeds of an insurance contract, an annuity contract, an employee benefit plan, an individual retirement account, or a similar device, even though the designation may be revoked.

• The trust must be created for a legal purpose and not be against public policy. • The trust must identify a beneficiary or beneficiaries. Note: State law usually excludes

charitable trusts from this requirement. • The trust must be established by a written document or by operation of law. A written docu-

ment signed by the settlor and/or the trustee will satisfy this requirement. A trust created by operation of law would include implied and constructive trusts.

Figure 8.3 sets out the Montana statutes that contain requirements for the creation of a trust in that state.

TRUST INSTRUMENT

The trust instrument is the written document that creates the trust. Documents that can be sued to create a trust include:

• Wills. A trust created within a will and which goes into effect when the testator dies. This form of trust is relatively easy to create and is often used as part of the estate plan for individuals

trust instrument A written document that creates a trust and sets out its terms.


beneficiary The person named in a will to receive the testator’s assets.



FIGURE 8.3 Montana State Statutes in Trust Creation

CASE BRIEF

ASSIGNMENT

Read and brief the John R. Boyce Family Trust v. Snyder case on page 160. (See Appendix A for information on how to brief cases.)

and families of even modest means. The will of Joe DiMaggio, provided in Appendix B, is an example of a will that contains a testamentary trust.

• Trust agreements . A trust agreement is a contract entered into between the settlor and the trustee. A trust agreement can be used to create either a revocable inter vivos trust or an irrevocable trust.

• Declaration of trusts. A declaration of trust is a written document creating a trust in which the settlor is also the trustee. The settlor acknowledges that the property belongs to the trust but retains legal title.

trust agreement A contract entered into between the settlor and the trustee to create a trust.


declaration of trust A written document creat-ing a trust in which the settlor is also the trustee.

declaration of trust A written document creat-ing a trust in which the settlor is also the trustee.

72-33-201. Methods of creating trust. Subject to other provisions of this chapter, a trust may be created by any of the following methods: (1) a declaration by the owner of property that the owner holds the property as trustee; (2) a transfer of property by the owner during the owner’s lifetime to another person as trustee; (3) a testamentary transfer of property by the owner to another person as trustee; (4) an exercise of a power of appointment to another person as trustee; or (5) an enforceable promise to create a trust.

72-33-202. Intention to create trust. A trust is created only if the trustor properly manifests an intention to create a trust.

72-33-203. Trust property. (1) A trust is created only if there is trust property. (2) The requirement of subsection (1) may be satisfi ed if the trust (or its trustee) is designated to be benefi ciary of the proceeds of an insurance contract, an annuity contract, an employee benefi t plan, an individual retirement account, or similar device, even though the designation may be revoked.

72-33-204. Trust purpose. A trust may be created for any purpose that is not illegal or against public policy.

72-33-205. Trust for indefi nite or general purposes. A trust created for an indefi nite or general purpose is not invalid for that reason if it can be determined with reasonable certainty that a particular use of the trust property comes within that purpose.

72-33-206. Designation of benefi ciary. (1) A trust, other than a charitable trust, is created only if there is a benefi ciary. (2) The requirement of subsection (1) is satisfi ed if the trust instrument provides for either of the following: (a) a benefi ciary or class of benefi ciaries that is ascertainable with reasonable certainty or that is suffi ciently described so it can be determined that some person meets the description or is within the class; or (b) a grant of power to the trustee or some other person to select the benefi ciaries based on a standard or in the discretion of the trustee or other person.

72-33-207. Designation of trust or trustee as benefi ciary. (1) A trust or trustee may be designated as the benefi ciary of the proceeds of an insurance contract, an annuity contract, an employee benefi t plan, an individual retirement account, or similar device if the designation is made in accordance with the contract, plan, account, or device. (2) Subsection (1) applies even though the trust or trustee is named or to be named by will or trust and whether or not the will or trust is in existence at the time of the designation.

72-33-208. Statute of frauds. A trust is not valid unless evidenced by one of the following methods: (1) by a written instrument signed by the trustee, or by the trustee’s agent if authorized in writing to do so; (2) by a written instrument signed by the trustor, or by the trustor’s agent if authorized in writing to do so; or (3) by operation of law.

72-33-209. Consideration. Consideration is not required to create a trust, but a promise to create a trust in the future is enforceable only if the requirements for an enforceable contract are satisfi ed.


CASE IN POINT

DUTY OF TRUSTEE

Missouri Court of Appeals Eastern Division

John R. Boyce Family Trust v.

Snyder No. ED 82749. March 2, 2004.

William H. Crandall, Jr., Judge Defendant, Robert B. Snyder, appeals from the judgment, en-tered in a court-tried case, in favor of plaintiffs, the John R. Boyce Family Trust, John R. Boyce, Mary Ann Boyce, Daniel P. Boyce, M. Elizabeth Boyce, Emily Ann Boyce, and Stephen Pallen Boyce, in their action for removal of the trustee and for damages for the trustee’s breach of fiduciary duty. We affirm in part and reverse in part. In a court-tried case, the judgment of the trial court will be affirmed unless there is no substantial evidence to support the judgment, it is against the weight of the evidence, or it errone-ously declares or applies the law. Murphy v. Carron , 536 S.W.2d 30, 32 (Mo. banc 1976). We accept all evidence and inferences fa-vorable to the judgment, and disregard all contrary evidence and inferences. Central Dist. Alarm, Inc. v. Hal-Tuc, Inc ., 886 S.W.2d 210, 211 (Mo. App. E.D. 1994). The trial court is in the best posi-tion to judge the credibility of the witnesses. VanBooven v. Smull , 938 S.W.2d 324, 327 (Mo. App. W.D. 1997). The evidence established that the John R. Boyce Family Trust (hereinafter “family trust”) was created by the Henrietta Boyce Revocable Living Trust upon the death of Henrietta Boyce in Feb-ruary 1994. The beneficiaries of the trust were John R. Boyce, Henrietta’s son; Mary Ann Boyce, Boyce’s wife; and their four children, Daniel P. Boyce, M. Elizabeth Boyce, Emily Ann Boyce, and Stephen Pallen Boyce. Henrietta named Anthony Ribaudo as trustee of the family trust; and in the event Ribaudo resigned, designated defendant, Snyder, as successor trustee. For years, plaintiff, Boyce, and defendant, Snyder, were close personal friends and business associates; and Boyce, an attorney, represented Snyder in legal matters. Snyder began working in the family grocery store as a teenager. In 1962, at the age of 22, he acquired his first ownership interest in a grocery store. He later formed Arnold Discount Foods, Inc. (hereinafter “ADF”), a cor-poration that owned and operated several small grocery stores. He converted the stores to Save-a-Lot stores, which were part of a chain of discount grocery stores. He also bought grocery stores which had failed or were failing. In 1983, he acquired a store in Eureka, Missouri, forming a second corporation, Eureka Discount Foods, Inc. (hereinafter “EDF”), to own and operate the store as a Save-a-Lot store (hereinafter “Eureka store”). After 1983, Sny-der opened additional Save-a-Lot stores and placed them in ADF corporation. Snyder was also an owner and director of First Exchange Bank (hereinafter “the bank”), which failed and was taken over by the FDIC. At Snyder’s urging, Boyce had placed several loans with the bank. After the bank’s failure, the FDIC called Boyce’s loans.

When Boyce was unable to obtain financing elsewhere, the FDIC obtained a judgment against him. In the fall of 1994, Boyce met with Snyder several times to discuss Boyce’s financial problems. During the meetings, Boyce learned that Snyder was interested in selling the Eureka store. Snyder’s reasons for selling the Eureka store, as stated by him, were that he wanted to lessen his workload, to reduce the num-ber of stores he owned, and to work with his son under only one corporation, ADF. Boyce expressed an interest in purchasing the Eureka store not only as an investment opportunity for the family trust but also as a way of providing a job for his son, Daniel. Boyce expressed concern to Snyder, however, that neither he nor Daniel had any experience in the grocery business. Snyder assured Boyce that Daniel could be trained to operate the store. Snyder and Boyce were both aware that a Wal-Mart super center was planning to open in Eureka. Snyder provided Boyce with the past financial records for the Eureka store and introduced him to Save-a-Lot executives. The Save-a-Lot representatives told Boyce that the stores were so easy to run that a “chimpanzee could run one.” On the basis of their experience, they predicted that the opening of the Wal-Mart su-per center would cause an initial drop in sales of ten to 15 per-cent, but that the Eureka store would recover the loss within six months. Snyder concurred in that opinion. Boyce determined that the family trust should purchase the Eureka store and agreed with Snyder on a purchase price of $403,000.00. The sale was structured as a sale of the common stock of EDF, so that Snyder could offset the capital gain from the sale of the store against the capital loss he incurred when the bank failed. No date was set for closing. Boyce agreed to close when Snyder felt that Daniel was sufficiently trained to operate the Eureka store successfully. In January 1995, Daniel began working at one of Snyder’s stores located in Fenton, Missouri. Snyder told his general man-ager to train Daniel to take over the Eureka store. The Fenton store manager started Daniel at an entry level position and af-ter two months moved him into a management trainee program when he became aware that he was training Daniel to take over the management of the Eureka store. In May 1995, Daniel con-tinued his training at the Eureka store under Bob Heaton, the manager of the Eureka store who had been interested in purchas-ing the Eureka store but had decided against it. Snyder’s general manager continued to monitor Daniel’s training several times per week and told Daniel to contact her whenever necessary. Daniel was also free to contact the manager of the Fenton store for

160


guidance. Heaton and Daniel, however, did not get along. Hea-ton eventually left employment at the Eureka store at Daniel’s request. Daniel was left to manage the Eureka store on his own, with occasional help from Snyder and his two managers. Snyder’s own store managers had years of experience in the grocery busi-ness before they were promoted to store manager. The Wal-Mart super center was scheduled to open in the mid-summer of 1995. Snyder was anxious to close on the sale of the Eureka store. In May 1995, Snyder told Boyce that Daniel was ready to manage the Eureka store. Boyce relied on Snyder’s rep-resentation in deciding to proceed with the closing. When the purchase of the Eureka store was proposed to the trustee of the family trust, Anthony Ribaudo, he resigned as trustee because he did not have any experience in the grocery business. As the designated successor trustee, Snyder agreed to serve as trustee. On May 30, 1995, Snyder signed documents accepting the trustee position. On May 31, 1995, the closing on the sale of the Eureka store took place. Boyce drafted the terms of the purchase agreement, which provided as follows: $265.00 to purchase one share of EDF from Snyder and $265,000.00 to redeem the re-maining shares from Snyder, with the result that the family trust owned the only share of EDF corporation; $13,000.00 to Snyder for ADF corporation to provide consulting to EDF corporation, payable in monthly installments; $125,000.00 to Snyder for a non-compete agreement to prohibit him from owning or oper-ating a grocery store within 10 miles of the Eureka store for a period of five years, payable in monthly installments. The fam-ily trust guaranteed EDF’s loan of $175,000.00 from Rockwood Bank and loaned EDF an additional $75,000.00. Snyder signed the documents for the sale and financing on his own behalf and as successor trustee of the family trust. For the first fiscal year the Eureka store was in business, after the opening of the Wal-Mart super center, the figures reflected an average decline in sales of 17 percent per week. In addition, shortly after closing, the Eureka store’s refrigeration equipment needed extensive repairs and in some cases replacement. In the fall of 1995, Snyder acquired an interest in real property within a ten-mile radius of the Eureka store, with the intent of opening another grocery store with his son. Snyder and his son formed a new limited liability company to operate the new store and opened the store in May 1998. Rockwood Bank renewed EDF’s loan in August 1997, August 2000, and August 2001. At the time of trial, the family trust remained liable on its guaranty of the EDF loan; and the family trust’s loan to EDF remained unpaid and had increased to $160,676.27. In 2000, plaintiffs brought the present action against Snyder. Their petition against Snyder was in six counts: Count I for his re-moval as trustee; Count II for breach of his fiduciary duty; Count III for his ultra vires acts; Count IV for avoidance of the ultra vires acts; Count V for fraudulent misrepresentation; and Count VI for imposition of a constructive trust. In their action, they sought money damages, a rescission of the sale of the Eureka store, and the imposition of a constructive trust on the proceeds of the sale of the Eureka store for the benefit of the family trust. Plaintiffs also brought one count for negligent misrepresentation (Count VII) against Moran Foods, Inc. d/b/a Save-a-Lot, Ltd.; but dismissed that count without prejudice before trial. Snyder coun-terclaimed, seeking indemnification from the family trust for his attorney’s fees and a declaratory judgment that he was entitled to indemnification. During the pendency of this action, Snyder resigned as trustee and the court appointed Daniel as interim trustee.

After a bench trial, the court entered judgment in favor of plaintiffs and against Snyder on Count I for the removal of Sny-der as trustee. On Count II for breach of fiduciary duty, the court awarded total damages of $285,000.00: $185,000.00 for the family trust’s purchase of the Eureka store; and $100,000.00 for the monies loaned by the family trust, which the trial court de-termined was a total loss. On Count VI, the court imposed a con-structive trust in the amount of $285,000.00 on the proceeds of the sale of the Eureka store. The court dismissed as moot plain-tiffs’ claims in Counts III, IV, and V and entered judgment in favor of plaintiffs on Snyder’s counterclaims. Snyder appeals from that judgment. In his first point, Snyder contends that the trial court erred in entering judgment in favor of plaintiffs because his challenged conduct did not amount to misrepresentations, but were merely expressions of opinion or predictions. In addition, he argues that the conduct occurred prior to his assuming the role of trustee and that he became trustee only after the deal was fully negoti-ated and set for closing. A trustee is a fiduciary of the highest order and is required to exercise a high standard of conduct and loyalty in administra-tion of the trust. Ramsey v. Boatmen’s First Nat’l Bank of K.C., N.A. , 914 S.W.2d 384, 387 (Mo. App. W.D. 1996). Although the trustee has many duties emanating from the fiduciary relation-ship, the most fundamental is the duty of loyalty. Id . As part of this duty, the trustee is to administer the trust solely in the inter-est of the beneficiary. Id . This duty precludes self-dealing, which under most circumstances is a breach of the fiduciary duty. Id . Here, Snyder’s argument that he merely expressed opinions and predictions in lieu of misrepresentations is without merit. He was very familiar with the grocery business, having worked in the business for well over 40 years in varying capacities. During that time, he had negotiated for and purchased several failed or failing grocery stores. There was evidence that Snyder had no personal experience regarding the impact a Wal-Mart super center would have on the sales of the Eureka store, although he admitted at trial that he was concerned about the competi-tion from a Wal-Mart super center. Yet, he assured Boyce that the decline in store sales would be minimal and would be re-covered six months after the opening of the Wal-Mart super center. He also was anxious to close on the Eureka store and pushed for closing, presumably because he was worried about the increased competition from the Wal-Mart super center. At trial, he was unable to explain his eagerness to close the sale of the Eureka store. He withheld information from Boyce about the true value of the store, especially as it faced competition from a Wal-Mart super center. Knowledge of the value of the Eureka store was particularly within his province, in light of his experience in purchasing grocery stores experiencing financial difficulty. Snyder was under a duty to inform the beneficiaries of all facts known by him so that they could make an informed decision about whether to proceed with the purchase of the Eureka store. In addition, Snyder represented to Boyce that Daniel was ready to assume management of the Eureka store. He did this, despite the fact that Daniel did not have any prior grocery store experience and had been in a management-trainee program for less than six months. Further, his own store managers had many years of experience in the grocery business before he promoted them to managerial positions. Finally, Snyder misrepresented his reasons for selling the Eureka store, as evidenced by his subsequent conduct. His stated



motives for selling were his desire to lessen his workload, to reduce the number of stores he owned, and to work with his son under one corporation. Yet, after selling the Eureka store, he opened an additional store in violation of the non-compete agreement and even formed a new business entity to operate that store. The trial court was not obligated to believe Snyder’s proffered reasons for selling the Eureka store. Nor was the court required to believe Snyder about what facts were known to him at the time of closing. In a court-tried case, the court is free to disbe-lieve the testimony of a witness. See Ford Motor Credit Co. v. Freihaut , 871 S.W.2d 129, 131 (Mo. App. E.D. 1994). Boyce testified that, had Snyder apprised him of Daniel’s lack of readiness to manage the Eureka store successfully and of Snyder’s true reasons for wanting to sell the Eureka store, Boyce would not have recommended that the family trust purchase the store. Snyder’s argument that the transaction was for all practical purposes completed prior to his assuming the position of trustee draws a distinction without a difference. Snyder was acting in his capacity as trustee at the time of closing the sale of the Eureka store. At that time, he had the duty not only to disclose any in-formation relevant to the sale but also to avoid engaging in a financial transaction beneficial to his interests and detrimental to the interests of the family trust. The trial court did not err in find-ing that Snyder breached his fiduciary duty to the family trust. Snyder’s first point is denied. In his second point, Snyder asserts that the trial court erred in entering judgment in favor of plaintiffs because they not only consented to the transaction prior to closing but also ratified the transaction after the fact by operating the Eureka store for five years before filing the present action. When a competent beneficiary who has full knowledge of the facts and of his legal rights consents to a transaction, he can-not thereafter seek redress against the trustee even though the transaction would otherwise be a breach of trust. Ramsey , 914 S.W.2d at 387. The consent of the beneficiary, however, does not preclude him from holding the trustee liable for a breach of trust, (1) if when he gave his consent, the beneficiary did not know of his rights and of the material facts which the trustee knew or should have known and which the trustee did not reasonably be-lieve that the beneficiary knew or (2) if the consent of the benefi-ciary was induced by improper conduct of the trustee. Id . (citing Section 216 Restatement (Second) of Trusts). When a transaction involves a trustee, it must be fair and open, and consent must be informed with all parties holding equal knowledge of material facts and rights and otherwise free of influence. Ramsey , 914 S.W.2d at 388. Here, as discussed above, Boyce did not have full knowledge of all of the material facts and did not have knowledge equal to Snyder’s. Boyce had never been involved in the grocery business, unlike Snyder who had been in the business for over 40 years. Boyce relied on Snyder’s estimate of the impact of the Wal-Mart super center on the Eureka store’s sales. Boyce relied on Snyder’s representations that Daniel was ready to assume management of the Eureka store. Snyder was aware that his knowledge regard-ing the sale of the Eureka store was superior to Boyce’s, yet he induced Boyce to proceed with the sale by representing that Dan-iel was ready to manage the store. Under these circumstances, Snyder breached his fiduciary duty to the trust. Further, Snyder’s argument that the plaintiffs’ continuing to op-erate the Eureka store was tantamount to a ratification of the sale after the fact is specious. Plaintiffs, once they purchased the Eureka

store, had no choice but to continue to operate it to protect their investment as much as possible. That conduct did not amount to ratification of the sale. Snyder’s second point is denied. In his third point, Snyder contends that the trial court erred in imposing a constructive trust on the proceeds of the sale of the Eureka store. He first argues that there was no underlying breach of fiduciary duty to warrant the imposition of a constructive trust. His second argument is that there was no evidence that there were identifiable proceeds remaining on which to impose a con-structive trust. We only discuss Snyder’s second claim, because it is dispositive of this point on appeal. A constructive trust is a device employed by a court of equity to provide a remedy in cases of actual or constructive fraud or unjust enrichment. U.S. Fidelity and Guarantee Co. v. Hiles , 670 S.W.2d 134, 137 (Mo. App. 1984). It may be imposed where, as the result of the violation of confidence or faith reposed in another, or fraud-ulent act or conduct of such other, the plaintiff has been deprived wrongfully of, or has lost, some title, right, equity, interest, expec-tancy, or benefit, in the property which, otherwise and but for such fraudulent or wrongful act or conduct, he would have had. Id . The plaintiff may seek to impose the constructive trust on the specific property after it has left the wrongdoer’s hands, until it reaches the hands of a bona fide purchaser. Id . The plaintiff may also seek to impose the constructive trust on, or to trace his property into, the proceeds of the property which are in the hands of the wrongdoer. Id . In this latter event, the plaintiff may recover any profit or increase in value that has accrued. Id . The plaintiff is limited, however, to a proportionate interest in the proceeds, if other separate property is commingled with wrongfully taken property to produce the price paid for the proceeds. Id. The plaintiff must prove his claim, both the fact of wrongful taking and any tracing, by clear, cogent and convincing evidence. Id . Snyder posits that the essence of a constructive trust is the iden-tification of specific property or fund as the res upon which the trust may be attached. See Blue Cross Health Services, Inc. v. Sauer , 800 S.W.2d 72, 76 (Mo. App. 1990). Plaintiffs did not allege and did not establish that any such identifiable property or fund existed to which the proceeds from the sale of the Eureka store could be traced. The appropriate action to enforce a constructive trust is an ac-tion for money had and received. Campbell v. Webb , 258 S.W.2d 595, 602 (Mo. 1953). Notwithstanding the fact that plaintiffs prayed for the equitable remedy of a constructive trust and for an accounting for all the proceeds of the sale, in the absence of any allegation of the existence of specific property or fund constitut-ing the res upon which the trust might be imposed, their petition failed to invoke equity jurisdiction. See Blue Cross , 800 S.W.2d at 76. Nothing in the record shows that plaintiffs are entitled to more than a money judgment. The trial court erred in imposing a constructive trust on the proceeds of the sale. Under the circumstances of this case, however, it does not follow that Snyder is entitled to a new trial because of this error. See i d . The case was fully tried with ample opportunity for all parties to present evidence on all issues framed by the pleading. There was sufficient evidence that plaintiffs are entitled to have Snyder removed as trustee and to be awarded an amount which represented the money wrongfully taken by Snyder as a result of his breach of his fiduciary duty to the family trust. The second part of Snyder’s third point is granted. In his fourth point, Snyder asserts that the trial court erred in entering judgment for plaintiffs for money damages, because plaintiffs lacked standing to assert those claims, which could only be brought by the successor trustee.



The beneficiaries have standing to bring the equitable actions for removal of the trustee, disqualification of the successor trust, and for an accounting. Deutsch v. Wolff , 994 S.W.2d 561, 566 (Mo. banc 1999) (citing Restatement (Second) of Trusts, section 177, 197–199). The trustee, however, should bring the claims for money damages. Deutsch , 994 S.W.2d at 566. In Deutsch , the Missouri Supreme Court recognized that several factors justified an excep-tion to the general rule. Id. In the instant action, there are factors similar, although not identical, to those in Deutsch that mitigate against the application of the rule requiring the successor trustee to bring the present action. See id. First, Snyder was actively involved in administering the family trust during the pendency of this action. Although he resigned as successor trustee, he did so 13 months after the action began. In addition, the court required the interim trustee, who was appointed to serve during the litigation, to submit monthly income and expense reports to Snyder and any withdraw-als had to be submitted to Snyder five days in advance of the pro-posed withdrawal. Second, Snyder denied that his conduct justified removal. Plaintiffs were required to prove their right to removal by establishing that Snyder had breached his fiduciary duty to the fam-ily trust and that the trust had been damaged. Thus, the fact issues on the legal and equitable claims were identical. Third, Snyder did not make any claim before the trial court that the proper party to assert the claim was the successor trustee, but instead undertook a defense of the legal claims on their merits, including raising af-firmative defenses and pleading counterclaims. Fourth, in addition to all the beneficiaries, the family trust itself was a party-plaintiff. Fifth, the pleading alleged a breach of Snyder’s fiduciary duty to the trust. Sixth, the money judgment was entered in favor of all plaintiffs, which included the family trust itself. To allow actions at law to be prosecuted with the equitable actions is also consistent with the doctrine that once equity acquires jurisdiction, it will retain

it so as to afford complete justice between the parties. Id . at 567. Thus, under the facts of this case, the beneficiaries had standing to bring this action. Snyder’s fourth point is denied. In his fifth point, Snyder challenges the award of damages of $285,000.00, because the award was not supported by the evidence. The trial court’s findings relating to actual damages are en-titled to great weight on appeal and will not be disturbed unless the damages awarded are clearly wrong, could not have been reasonably determined, or were excessive. Williams v. Williams , 99 S.W.3d 552, 557 (Mo. App. W.D. 2003). If an award of dam-ages is within the range of the evidence, an award of a particular amount may be considered responsive even though it does not correspond precisely with the amount claimed. Id . Here, Boyce testified that the actual value of the Eureka store at the time of sale was about $150,000.00. The measure of damages for misrepresentation is the difference between the ac-tual value of the thing sold and the value as represented. Smith v. Tracy , 372 S.W.2d 925, 938 (Mo. 1963). The difference be-tween the purchase price of $403,000.00 and actual value was $253,000.00. The court’s award of $185,000.00 for this element of damages was within the range of the evidence. Plaintiffs also claimed damages for the money the family trust loaned in conjunction with the Eureka store. The evidence was that at closing the family trust loaned $75,000.00 of the purchase price and throughout the years of operation the family trust loaned ad-ditional monies, with the result that the amount loaned increased to $160,767.27. The court’s award of $100,000.00 for this ele-ment of damages was within the range of the evidence. The trial court did not err in awarding damages. Snyder’s fifth point is de-nied. That part of the judgment imposing a constructive trust on the proceeds of the sale of the Eureka store is reversed. In all other respects, the judgment of the trial court is affirmed.


DRAFTING A TRUST

Certainly many trusts, such as the one set out in Mr . DiMaggio’s will (Appendix B), are compli-cated. However, a review of the legal requirements discussed in this chapter will show that a trust does not have to be v ery complicated in order to be v alid. In f act many trusts, such as f amily trusts, are relatively simple to create. Figure 8.4 contains a sample tr ust agreement that creates an irrevocable trust. The following are some basic points on drafting trusts:

• Drafting a trust is much like drafting a will. You use clauses to build a trust that meets the needs of your client. The client’s needs may allow for a relatively simple trust, such as that set out in the sample irrevocable inter vivos trust in Figure 8.4 , or a more complicated trust, such as that set out in Mr. DiMaggio’s will.

• Trusts generally contains clauses that:

Identify the settlor. This may also include the naming of the trust. Trusts do not have to be named, but clients may expect the trust to be named. It is also a way to identify the legal document as a trust.

Appoint the trustee. This should include the name of the trustee and if the trustee is not an institution, such as a bank or corporation, a successor trustee should also be named.

Identify the purpose of the trust.



Trust Agreement The Samsung Trust

I, George Samsung, of Casa del Sol, Sun County, Florida, hereinafter referred to as Trustor, make this agreement with First National Bank of Ponce, of Ponce, Inlet County, Florida, hereinafter referred to as Trustee, this 20th day of December, 2005. I hereby transfer and deliver 500 (fi ve hundred) shares of stock issued by Google, Inc., as is more specifi cally described in the attached schedule, to the Trustee. That property and all investments and reinvestments thereof and additions thereto are herein collectively referred to as the “trust property” and shall be held, administered, and distributed to the benefi ciaries as provided herein.

Article 1 Division

The Trustee shall immediately divide the trust estate into equal trusts to create one trust for each of my children, Amanda Samsung, and John Samsung, hereinafter referred to as benefi ciaries. Each trust shall be held and, after deducting all necessary expenses incident to the administration of the trusts, disposed of as follows.

Article 2 Income and Principal

The Trustee may pay to or for the benefi t of a child of mine so much or all of the income and princi-pal of his or her trust as the Trustee deems necessary or advisable from time to time for his or her health, maintenance in reasonable comfort, education (including postgraduate) and best interests, adding to principal any income not so paid, except that after the child has reached the age of 21 years, the Trustee shall pay the entire net income of the trust, quarter annually, to the benefi ciaries of the trust.

Article 3 Right to Withdraw at Age 21

After a child has reached the age of 21 years, the child may withdraw any part or all of his or her trust at any time by delivering a written request to the Trustee.

Article 4 Successor Benefi ciaries

If any of the benefi ciaries shall die before attaining the age of 21 years, the trust for his or her benefi t shall cease, and the corpus, together with any undistributed income, shall be paid to the other benefi cia-ries if living. Any part of the child’s trust not effectively disposed of by the foregoing shall be distributed to my heirs-at-law. The heirs-at-law and the proportions that they shall respectively take to be determined according to the present laws of descent of the State of Florida as if I had died at that time and were unmarried.

Article 5 Default

Upon the death of a child, any part of his or her trust not effectively appointed shall be distributed per stirpes to his or her then living descendants, subject to postponement of possession as provided below, except that each portion otherwise distributable to a descendant of mine for whom a trust is then held hereunder shall be added to that trust. Any part of the child’s trust not effectively disposed of by the foregoing shall be distributed to my heirs-at-law. The heirs-at-law and the proportions that they shall respectively take to be determined according to the present laws of descent of the State of Florida as if I had died at that time and were unmarried.

Section 6 Spend Thrift

The interests of benefi ciaries in principal or income shall not be subject to the claims of any credi-tor, any spouse for alimony or support, or others, or to legal process, and may not be voluntarily or involuntarily alienated or encumbered. This provision shall not limit the exercise of any power of appointment.

Section 7 Powers

The Trustee shall have all the powers conferred by the statutes of Florida upon the Trustee of a Florida trust, all of which shall be exercised in the fi duciary capacity, primarily in the interest of the benefi ciaries.

FIGURE 8.4 Sample Irrevocable Trust



Identify the property that will be held in trust. Set out the duties of the trustee. Grant powers to the trustee. Name the beneficiaries of the trust and successor beneficiaries. Provide for the termination of the trust. Provide for the signature and attestation, which may include notarization .

RULE AGAINST PERPETUITIES

The rule against perpetuities must be kept in mind because it limits how long a future interest in property can be held in trust before it vests. It is a term that causes fear, not only in the hearts of paralegal and law students, but also in their professors! It is based on the principle that the la w likes to know who owns property. Much of our legal system is set up to protect property and deal with issues relating to the ownership of property. For this reason, the law does not want the ownership of property to be uncertain for any longer than is required. This is true of property that is included in trusts and wills.

Hands-on Assignment Draft a simple trust that might accommodate the needs of the

RESEARCH THIS!

Ponces from the Client Interview. Create addi-tional facts needed to complete the trust.

Section 8 Accounts and Compensation

The Trustee shall render an account of trust receipts and disbursements and a statement of assets at least annually to each adult benefi ciary then entitled to receive or have the benefi t of the income from the trust. The Trustee shall tie reimbursed for all reasonable expenses incurred in the manage-ment and protection of the trust, and any corporate Trustee shall receive compensation for its services in accordance with its schedule of fees in effect from time to time. The Trustee’s regular compensa-tion, if any, shall be charged half against income and half against principal, except that the Trustee shall have full discretion at any time or times to charge a larger portion or all against income.

Section 8 Legal Obligations

The benefi ts of this agreement are in addition to and not in substitution for any legal obligation of any person to a benefi ciary, and the Trustee may not use trust property to satisfy her legal obligations.

Article 9 Governing Law

The Laws of the State of Florida shall govern this agreement and the trust hereby created.

Article 10 Agreement Irrevocable

This agreement shall not be subject to amendment or revocation. IN WITNESS WHEREOF I, ____________, and __________ have signed this agreement the day and year fi rst above written. _____________________________ Printed Name _____________________________ Printed Name




The common law rule against per petuities requires that all interests in proper ty must v est within 21 years of the life of someone w ho is alive at the time of the creation of that interest. It ensures that someone will o wn the proper ty within a reasonab le period of time. The rule does not, however, apply to charitable trusts. Figure 8.5 contains the Montana statute dealing with the rule against perpetuities. Suppose Sam Johnson, who is married but has no children, decides it would be a good idea to create a trust to care for his yet to be born children and grandchildren. This trust would violate the rule against perpetuities because there is no benef iciary of the tr ust alive at the time of its creation. Some states have modified the rule or abolished it altogether. Paralegals should check to see what the law is in their state as it relates to the rule against perpetuities. Trusts often contain a rule against perpetuities saving clause. A sample of this clause is con-tained in Figure 8.6 .

FIGURE 8.5 Montana Statutory Rule Against Perpetuities

72-2-1002. Statutory rule against perpetuities. (1) A nonvested property interest is invalid unless: (a) when the interest is created, it is certain to vest or terminate no later than 21 years after the death of an individual then alive; or (b) the interest either vests or terminates within 90 years after its creation. (2) A general power of appointment not presently exercisable because of a condition precedent is invalid unless: (a) when the power is created, the condition precedent is certain to be satisfi ed or become im-possible to satisfy no later than 21 years after the death of an individual then alive; or (b) the condition precedent either is satisfi ed or becomes impossible to satisfy within 90 years after its creation. (3) A nongeneral power of appointment or a general testamentary power of appointment is invalid unless: (a) when the power is created, it is certain to be irrevocably exercised or otherwise to terminate no later than 21 years after the death of an individual then alive; or (b) the power is irrevocably exercised or otherwise terminates within 90 years after its creation. (4) In determining whether a nonvested property interest or a power of appointment is valid under subsection (1)(a), (2)(a), or (3)(a), the possibility that a child will be born to an individual after the individual’s death is disregarded. (5) If, in measuring a period from the creation of a trust or other property arrangement, a clause in a governing instrument purports to postpone the vesting or termination of any interest or trust until, purports to disallow the vesting or termination of any interest or trust beyond, purports to re-quire all interests or trusts to vest or terminate no later than, or operates in any similar fashion upon the later of: (a) the expiration of a period of time that exceeds 21 years or that exceeds or might exceed 21 years after the death of the survivor of lives in being at the creation of the trust or other property arrangement; or (b) the death of, or the expiration of a period not exceeding 21 years after the death of, the survivor of specifi ed lives in being at the creation of the trust or other property arrangement, then the portion of the clause pertaining to the period of time that exceeds 21 years or that exceeds or might exceed 21 years after the death of the survivor of lives in being at the creation of the trust or other property arrangement must be disregarded, and the clause operates upon the death of, or upon the expiration of the period not exceeding 21 years after the death of, the survivor of the specifi ed lives in being at the creation of the trust or other property arrangement.

FIGURE 8.6 Sample Rule against Perpetuities Saving Clause

All trust created by this document must vest within twenty one (21) years (or statutory time limit) of my death and decedent’s living when this trust was created and becomes irrevocable. If, for whatever reason, the trust does not fully vest within that time period, it will terminate as of the maximum vesting date and the assets of the trust will be distributed to each of the trust’s benefi -ciaries alive at that time.



Visit these sites to learn more about estate planning and trust:

Lawrence A. Frolik, “Overview of Estate Planning Issues” (1992) (accessed 12/20/05): www.nichcy.org/pubs/outprint/nd18txt.htm

Montana State University Extension Service, “Estate Planning for Families with Minor Children” (2004) (accessed 12/20/05): www.montana.edu/wwwpb/pubs/mt9117.html

State Bar of South Dakota, “Estate Planning for Families with Minor Children” (n.d.) (accessed 12/20/05): http://agbiopubs.sdstate.edu/text.cfm?Item=FS928e-2&id=1230

Maryland Developmental Disability Council, “A Futures and Estate Planning Guide for Parents of Children and Adults with Developmental Disabilities” (2003): www.md-council.org/publications/TEXT%20VERSION%20FOR%20WEB/Planning%20Now.doc

Dennis Kennedy, “Estate Planning Links” (n.d.) (accessed 12/20/05): www.estateplanninglinks.com/

Oregon State Bar, “Revocable Living Trusts” (n.d.) (accessed 12/20/05): www.osbar.org/public/pamphlets/revocable.html

New Jersey Judiciary, “Wills and Probate” (n.d.): www.judiciary.state.nj.us/will.htm#top

CYBER TRIP

TERMINATION OF TRUSTS

There are a number of ways that a trust can be terminated. They include: • The terms of the trust require termination after a specific time or completion of some task. • The trust’s purpose is fulfilled. • The same person holds ownership of legal title and equitable title. • The settlor revokes the trust, if this is allowed under the terms of the trust. • At the request of beneficiaries because there remains no express purpose of the trust that

requires its termination.

Summary Trusts are a valuable tool in helping meet the estate planning needs of the client. There are also a variety of trusts, thereby giving the law firm great flexibility in being able to select a trust, or combination of trusts, that is best suited for the client. Some, such as ir revocable living trusts, may have tax benef its for the client. Others, lik e testamentary trusts, can be used to ensure the needs of their lo ved ones are met in the future. Still others can ser ve a g reater good, such as charitable trusts. Paralegals should be aware of how each of the trusts discussed in this chapter is used so that they can better serve the needs of their clients.

Key Terms Beneficiary Declaration of trust Element Equitable (beneficial) title Fiduciary duty Private trust Settlor

Trust agreement Trust instrument Trust property Trust purpose Trustee Trustor



Review Questions

1. Why is it important to use a checklist when gathering information to draft a trust? 2. Why is it difficult to answer the question, “Who needs a trust?” 3. What are some of the reasons that people may need to include a trust as part of their estate

plan? 4. What are the essential elements to the creation of trusts? 5. Who are the three key participants in a trust? 6. What is the rule against perpetuities? Why is it important when drafting a trust? 7. What is the primary duty of the trustee? 8. What is the difference between legal title and equitable title? 9. What is the meaning of the phrase trust purpose ? Why is it important when drafting a trust? 10. Discuss the differences between private trusts and charitable trusts.


Will C. Taliaferro created a personal revocable inter vivos trust. He was also the income benef i-ciary of this trust during his lifetime. After his death, the successor tr ustee was to distribute the accrued income and cor pus among the benef iciaries. Taliaferro never transferred any property to the trust. Was this a valid trust? Why? Why not? Is additional infor mation needed to deter mine the validity of the trust? See Taliaferro v. Taliaferro , 260 Kan. 573, 921 P.2d 803 (1996).

1. Research the laws of your state as they relate to the creation of trusts, the duties of the trustee, and the powers of the trustee. Write a brief summary of your findings.

2. Review the facts contained in the Client Interview. What type of trust would you recommend to the Ponces? What clauses could you include in the trust? How would your answers change if the value of their assets exceeded $2,000,000?

3. Research the laws of your state relating to the rule against perpetuities. Is it the same as the common law time limitation? If not, how does it differ?




Vocabulary Builders

1

4

8

6

7

10

9

5

2 3

ACROSS 1. A written document creating a trust in which the settlor is

also the trustee 6. A title that shows a beneficial interest in property 8. The person who creates a trust10. Property placed into a trust by a settlor

DOWN 2. An essential part 3. A written document that creates a trust and sets out its

terms 4. A trust created for the benefit of individuals rather than

for some public or charitable purpose 5. The highest duty of care imposed by law 7. The reason a trust was created 9. A contract entered into between the settlor and the trustee

to create a trust


Chapter 9

Final Decisions CHAPTER OBJECTIVES


• Identify common types of advance directives.

• Explain the purpose of advance directives such as living wills and designation of health care surrogate and durable power of attorney.

• Explain the purpose of anatomical gifts and what instrument should be used to accom-plish an anatomical gift.

• Explain the benefits of advance funeral arrangements.

There are few legal topics that create as much controversy as do decisions relating to e xtending a person’s life through use of extraordinary medical procedures. The right to die raises many of the same issues presented in the debate o ver abortions and often pits the same g roups against each other. States have now recognized the rights of individuals to make their desires known as to what health care procedures should be followed in the event they are unable to make them due to some form of incapacitation. Chapter 9 deals with this increasingl y important area of the la w. It introduces the parale gal student to many of the for ms normally used to assist a client to e xpress his desires and also to statutory and case law that are important to an overall understanding of this topic.

WHY “FINAL DECISIONS” IS IMPORTANT TO THE PARALEGAL STUDENT

This textbook, as is true of most, deals primarily with traditional issues relating to planning on how to provide for loved ones and ensure that our property is disposed of according to our wishes after our death. In fact, if you look at textbooks written in previous decades, you would see little, if any, discussion of the topics that will be dealt with in this chapter. In recent years, society and the legal system have come to realize that there are many impor-tant f inal decisions that everyone should be ab le to make relating to health care. These funda-mental decisions include: anatomical gifts , the right to choose to receive or not to receive health care, and the right to die. These are perhaps the most personal decisions people will make about the end of their life. They are also ones that are greatly impacted by one’s religious faith and have created a great public debate and pressure on the legal system. Paralegals must be very careful not to let their personal vie ws on advance directives and the issues relating to the right to die af fect the perfor mance of their job w hile working in a wills, trusts, and estates law firm. Professional ethics require paralegals to put the client’s best interests and desires ahead of any personal or religious views that they may have. This can be very diffi-cult at times, but paralegals must always keep their professional ethics foremost in their mind. A

anatomical gift A gift of a person’s tissue and/or bodily parts upon death.


170


Chapter 9 Final Decisions 171

review of the facts set out in the Client Interview will reveal the problems that can result when a professional does not follow the expressed desires of a person, such as a patient or client, because of the professional’s own personal beliefs. Chapter 9 introduces parale gal students to these topics and e xplains some of the w ays that they may be called upon to assist their law firm’s clients and ensure that their final decisions are legal and will be followed.

ADVANCE DIRECTIVES

Advance directives is a broad ter m that includes man y documents that will be discussed in this chapter. It should be noted that adv ance directives do not have to be prepared b y an attorney. A variety of sources, including state statutes, hospitals, and seniors groups, provide free forms that are intended to be completed by the individual. Paralegals are, however, often called upon to complete these for ms for clients w hen their law f irm is preparing wills and other estate documents. While the terminology used for advance directives varies by state, they all relate to helping people ensure that their desires as to future medical care will be car ried out w hen they may be unable to e xpress those desires because of their medical condition. The decisions that are expressed in advance directives are not just impor tant decisions; they are literally life-ending decisions. They are decisions each person should mak e, and they should not be left to f amily members. Figure 9.1 sets out the state statutes relating to living wills.

advance directives A term used to describe a variety of legal documents that allow people to express their desires about end-of-life care ahead of time, including a living will, durable power of attorney, and health care proxy.


While advance directives do not have to be drafted by an attorney, it is very common for an attorney to prepare them for a client at the same time as she prepares the client’s will. This can present an ethical dilemma for a paralegal who objects to some of the provisions relating to ending life that are included in most advance directives. Some paralegals, like many people, have religious and moral objections to not tak-ing all possible steps to keep a person alive, even if it means the use of artificial or extraordinary

Ethics Alert

efforts and the person is in a terminal condition or a persistent vegetative state. Paralegals must remember that, as a legal professional, they must carry out the desires of the client, even if it may conflict with their own moral code. Paralegals should avoid attempt-ing to influence the client because of their own personal beliefs. It is the client who must make these very important and difficult decisions, after being informed of his legal rights by the attorney.

Client Interview Joe Simpson recently had a terrible experi-ence while caring for his Aunt Florence during the last days of her life. Florence was an elderly woman who was very ec-centric in many ways. While she talked many times of making out her own living will and other advance directives, she never got around to completing them. Her health began to fail, and Joe had to place her in an assisted living facility. With her health and mental capabilities rapidly failing, Joe finally was able to convince Florence to execute a living will and durable power of attorney. Joe was named as the person who was responsible for making decisions for Florence if she became incapable to do so herself. Shortly thereafter, she had a heart

attack and was rushed to a nearby hospital. Joe provided the hospital with the living will and completed forms required by the hospital to prevent resuscitation in the event that Flor-ence suffered another heart attack. Late one evening, she did suffer a massive heart attack. Ignoring the living will and other documents filed with the hospital relating to Florence’s desires, the nurse on duty ordered that Florence be resusci-tated and put on life support. Florence remained alive but in a vegetative state. Joe has come to your firm to see what he did wrong in trying to carry out his aunt’s desires in this case and to understand how the hospital was able to ignore the advance directives of his aunt.

Case Fact Pattern




FIGURE 9.1 States Laws–Living WillsSource: Retrieved from www.dgcenter.org/acp/pdf/psda.pdf#search=%22patient%20self-determination%20act%22 on 9/05/06.

The federal government has also enacted legislation concerning advance directives. In 1990 the United States Congress passed the Patient Self-Determination Act, which became effective in 1991. The Act requires that all Medicare and Medicaid health care providers do the following:

1. Provide written information to patients concerning their rights under state law relating to ac-cepting or refusing medical treatment and the written policies of the provider or organization respecting the implementation of such rights.

2. Indicate in the individual’s medical record whether or not the individual has executed ad-vance directives.

3. Not condition the provision of health care on whether or not the individual has or has not executed advance directives.

4. Take steps to ensure compliance with state law regarding advance directives. 5. Provide education to employees relating to the providers’ procedures on advance directives. 6. Provide community education regarding issues relating to advance directives.

Figure 9.2 contains the regulations adopted to implement the Patient Self-Determination Act.

Alabama Ala. Code § 22-8A-1, et seq.

Alaska Alaska Stat. § 13.52

Arizona Ariz. Rev. Stat. Ann. § 36-3221, et seq.

Arkansas Ark. Code Ann. § 20-17-104, Ark. Code Ann. § 20-17-201, et seq.

California Cal. Code § 4700, et seq.

Colorado Colo. Rev. Stat. § 15-18-101, et seq.

Connecticut Con. Gen. Stat. § 19a-570, et seq.

Delaware Del. Code Ann. tit. 16 §2501-§2518

District of Columbia D.C. Code Ann. § 7-621, et seq.

Florida Fla. Stat. § 765.302, et seq.

Georgia Ga. Code Ann. § 31-32-1, et seq.

Hawaii Hawaii Rev. Stat. § 327-1, et seq.

Idaho Idaho Code § 39-4501, et seq.

Illinois Ill. Rev. Stat. ch. 755 para. 35, et seq.

Indiana Ind. Code § 16-36-4, et seq.

Iowa Iowa Code § 144A.3, et seq.

Kansas Kan. Stat. Ann. § 65-28,101, et seq.

Kentucky Ky. Rev. Stat. Ann. § 311.621, et seq.

Louisiana La. Rev. Stat. Ann. tit. 40 §1299.58.1, et seq.

Maine Me. Rev. Stat. Ann. tit. 18, § 5-801, et seq.

Maryland Md. Code Ann. Health—Gen., Title 5 §5-601, et seq.

Massachusetts Mass. Gen. Law Ann. ch. 201D, § 1, et seq. (health care proxies)

Michigan No statutory provision for living wills

Minnesota Minn. Stat. § 145B.01

Mississippi Miss. Code Ann. § 44-41-201, et seq.

Missouri Mo. Rev. Stat. § 459.010, et seq.

Montana Mont. Code Ann. § 50-9-101, et seq.

Nebraska Neb. Rev. Stat. § 20-401

Nevada Nev. Rev. Stat. § 449.535, et seq.

New Hampshire N.H. Rev. Stat. Ann. § 137-H1, et seq.

New Jersey N.J. Rev. Stat. § 26:2H-53, et seq.

New Mexico N.M. Stat. Ann. § 24-7A, et seq.

New York N.Y Article 29B.2964, et seq.

North Carolina N.C. Gen. Stat. § 90-320, et seq.

North Dakota N.D. Cent. Code § 23-06.5-01, et seq.

Ohio Ohio Rev. Stat. Ann. § 2133.01, et seq.

Oklahoma Okla. Stat. tit. 63 Ch. 60 § 3101.1, et seq.

Oregon Or. Rev. Stat. § 127.005, et seq.

Pennsylvania Pa. Code § 5401, et seq.

Rhode Island R.I. Gen Laws § 23-4.11-1, et seq.

South Carolina S.C. Code Ann. § 44-77-10, et seq.

South Dakota S.D. Codifi ed Laws § 34-12D-1, et seq.

Tennessee Tenn. Code Ann. § 32-11-101

Texas Tex. Code Ann. § 166.031, et seq.

Utah Utah Code Ann. § 75-2-1101, et seq.

Vermont Vt. Stat. Ann. tit. 18, Health: Part 10, Health Care and Decision Making Chapter 231 § 9700

Virginia Va. Code Ann. § 54.1-2981, et seq.

Washington Wash. Rev. Code § 70.122.010, et seq.

West Virginia W.Va. Code § 16-30-1. et seq.

Wisconsin Wis. Stat. § 154.01, et seq.

Wyoming Wyo. Stat. § 35-22-201, et seq.



FIGURE 9.2 Federal Patient Self-Determination Act RegulationsSource: Retrieved from www.dgcenter.org/acp/pdf/psda.pdf#search=%22patient%20self-determination%20act%22 on 9/05/06.

PART 489 PROVIDER AND SUPPLER AGREEMENTSThe authority citation for part 489 continues to read as follows:Authority: Secs. 1102,1861. 1864. 1866. 1867, and 1871 of the Social Security Act (42 U.S.C. 1302.1395x. 1395aa. 1395cc. 1395dd. and 1395hh) and sec. 602 (k) of Pub. L. 9621 (42 U.S.C 1395ww note).

Subpart 1 Advance Directives

Section 489.100 Defi nitionsFor the purposes of this part “advance directive” means a written instruction, such as a living will or du-rable power of attorney for health care, recognized under state law (whether statutory or as recognized by the courts of the State), relating to the provision of health care when the individual is incapacitated.

Section 489.102 Requirements for providers(a) Hospitals, rural primary care hospitals, skilled nursing facilities, nursing facilities, home health agencies, providers of home health-care (and for Medicaid purposes, providers of personal care services), and hospices must maintain written policies and procedures concerning advance direc-tives with respect to all adult individuals receiving medical care by or through the provider and are required to:(1) Provide written information to such individuals concerning—(i) An individual’s rights under State law (whether statutory or recognized by courts of the State) to make decisions concerning such medical care, including the right to accept or refuse medical or surgical treatment and the right to formulate, at the individual’s option, advance directives. Providers are permitted to contract with other entities to furnish this information but are still legally responsi-ble for ensuring that the requirements of this section are met. Providers are to update and dissemi-nate amended information as soon as possible, but no later than 90 days from the effective date of the changes to State law; and(ii) The written policies of the provider or organization respecting the implementation of such rights, including a clear and precise statement of limitation if the provider cannot implement an advance directive on the basis of conscience. At a minimum, a provider’s statement of limitation should:(A) Clarify any differences between institution wide conscience objections and those that may be raised by individual physicians.(B) Identify the state legal authority permitting such objections.(C) Describe the range of medical conditions or procedures affected by the conscientious objection.(2) Document in the individual’s medical record whether or not the individual has executed an advance directive.(3) Not condition the provision of care or otherwise discriminate against an individual based on whether or not the individual has executed an advance directive.(4) Ensure compliance with requirements of State law (whether statutory or recognized by the courts of the State) regarding advance directives. The provider must inform individuals that complaints concerning the advance directive requirements may be fi led with the State survey and certifi cation agency.(5) Provide education for staff concerning its policies and procedures on advance directive; and,(6) Provide for community education regarding issues concerning advance directives that may include material required in paragraph (a)(1) of this section, either directly or in concert with other providers and organizations. Separate community education materials may be developed and used, at the discretion of providers. The same written materials do not have to be provided in all settings, but the material should defi ne what constitutes an advance directive, emphasizing that an advance directive is designed to enhance an incapacitated individual’s control over medical treatment, and describe applicable State law concerning advance directives. A provider must be able to document its community education efforts.(b) The information specifi ed in paragraph (a) of this section is furnished:(1) In the case of a hospital, at the time of the individual’s admission as an inpatient.(2) In the case of a skilled nursing facility, at the time of the individual’s admission as a resident.(3)(i) In the case of a home health agency, in advance of the individual coming under the care of the agency. HHA may furnish advance directives information to a patient at the time of the fi rst home visit, as long as the information is furnished before care is provided.(ii) In the case of personal care services, in advance of the individual coming under the care of the personal care services provider. The personal care provider may furnish advance directives informa-tion to a patient at the time of the fi rst home visit, as long as the information is furnished before care is provided.(4) In the case of a hospice program, at the time of initial receipt of hospice care by the individual in the program.



CASE BRIEF

ASSIGNMENT

Read and brief the In Re: Guardianship of Schiavo case on page 175. (See Appendix A for information on how to brief cases.)

Use the following resources to learn more about the Schiavo case:

Kathy Cerminara and Kenneth Goodman, “Key Events in the Case of Theresa Marie Schiavo” (2005) (accessed 01/09/06): www.miami.edu/ethics2/schiavo/timeline.htm University of Miami, “Schiavo Case Resources” (n.d.) (accessed 01/09/06): www.miami.edu/ethics2/schiavo_project.htm New York Times Editorial, “Theresa Marie Schiavo” (2005) (accessed 01/09/06): www.nytimes.com/2005/04/01/opinion/01fri1.html Elaine Cassel, “The Terri Schiavo Case: Congress Rushes in Where Only Courts Should Travel” (2005) (accessed 01/06/06): http://writ.corporate.findlaw.com/cassel/20050324.html Findlaw, “Terri Schiavo Case: Legal Issues Involving Healthcare Directives, Death, and Dying” (n.d) (accessed 12/15/05): http://news.findlaw.com/legalnews/lit/schiavo/

CYBER TRIP

Care should be tak en to avoid conflicting for ms of advance directives by the same person. For example, a conflict may arise if the desires expressed in a living will are different from those expressed in a durable power of attorney. The age of the person is not a f actor in needing advance directives. While the elderly usually recognize the need for these documents, anyone of legal age should consider executing them. The importance of making these decisions early, even if someone is relatively young, can be seen by reading the In Re: Guardianship of Schiavo case. This case involved a young woman who, at age 26, suffered severe brain damage when her heart stopped for five minutes. She had not executed any advance directives, such as a li ving will or health care sur rogate form. The court was put in the very difficult position of determining what her wishes would be relating to remaining on continued life support, despite being in what doctors testified as a persistent vegetative state. The case drew national attention and even caused the President, the U.S. Congress, and the governor of Florida to become involved. This was a tragic case for all in volved, including Mrs. Schiavo, her husband, and her family. No matter what views a person has on this case, it is a dramatic ex-ample of the need to use advance directives to express desires and remove some of the pain that will be faced by loved ones if they are left to make them.

(c) The providers listed in paragraph (a) of this section—(1) Are not required to provide care that confl icts with an advance directive.(2) Are not required to implement an advance directive if, as a matter of conscience, the provider cannot implement an advance directive and State law allows any health care provider or any agent of such provider to conscientiously object.(d) Prepaid or eligible organizations (as specifi ed in sections 1883 (a)(1)(A) and 1876 (b) of the Act) must meet the requirements specifi ed in ‘ 417.436 of this chapter.**(e) If an adult individual is incapacitated at the time of admission or at the start of care and is unable to receive information (due to the incapacitating conditions or a mental disorder) or ar-ticulate whether or not he or she has executed an advance directive, then the provider may give advance directive information to the individual’s family or surrogate in the same manner that it issues other material about policies and procedures to the family of the incapacitated individual or to a surrogate or other concerned persons in accordance with State law. The provider is not relieved of its obligation to provide this information to the individual once he or she is no longer incapacitated or unable to receive such information. Follow up procedures must be in place to provide the information to the individual directly at the appropriate time.

**The Regulations governing prepaid organizations (HMOs) mirror this part. Information is to be provided to

individuals at the time of enrollment.

Federal Register Citations:Final Revisions: Vol. 60, No. 123, Tuesday. June 27, 1995, page 33294 forward Interim Final Rule: Vol. 57, No. 45, Friday March 6, 1992, pages 8194–8204



CASE IN POINT

ALTENBERND, Judge. Robert and Mary Schindler, the parents of Theresa Marie Schi-avo, appeal the trial court’s order authorizing the discontinuance of artificial life support to their adult daughter. Michael Schiavo, Theresa’s husband and guardian, petitioned the trial court in May 1998 for entry of this order. We have carefully reviewed the record. The trial court made a difficult decision after considering all of the evidence and the applicable law. We conclude that the trial court’s decision is supported by competent, substantial evidence and that it correctly applies the law. Accordingly, we affirm the decision. Theresa Marie Schindler was born on December 3, 1963, and lived with or near her parents in Pennsylvania until she married Michael Schiavo on November 10, 1984. Michael and Theresa moved to Florida in 1986. They were happily married and both were employed. They had no children. On February 25, 1990, their lives changed. Theresa, age 27, suffered a cardiac arrest as a result of a potassium imbalance. Michael called 911, and Theresa was rushed to the hospital. She never regained consciousness. Since 1990, Theresa has lived in nursing homes with constant care. She is fed and hydrated by tubes. The staff changes her dia-pers regularly. She has had numerous health problems, but none have been life threatening. The evidence is overwhelming that Theresa is in a permanent or persistent vegetative state. It is important to understand that a persistent vegetative state is not simply a coma. She is not asleep. She has cycles of apparent wakefulness and apparent sleep without any cognition or awareness. As she breathes, she often makes moaning sounds. Theresa has severe contractures of her hands, elbows, knees, and feet. Over the span of this last decade, Theresa’s brain has deterio-rated because of the lack of oxygen it suffered at the time of the heart attack. By mid-1996, the CAT scans of her brain showed a severely abnormal structure. At this point, much of her cerebral cortex is simply gone and has been replaced by cerebral spinal fluid. Medicine cannot cure this condition. Unless an act of God, a true miracle, were to recreate her brain, Theresa will always remain in an unconscious, reflexive state, totally dependent upon others to feed her and care for her most private needs. She could remain in this state for many years. Theresa has been blessed with loving parents and a loving hus-band. Many patients in this condition would have been abandoned by friends and family within the first year. Michael has continued to care for her and to visit her all these years. He has never divorced her. He has become a professional respiratory therapist and works in a nearby hospital. As a guardian, he has always attempted to pro-vide optimum treatment for his wife. He has been a diligent watch guard of Theresa’s care, never hesitating to annoy the nursing staff in order to assure that she receives the proper treatment.

Theresa’s parents have continued to love her and visit her of-ten. No one questions the sincerity of their prayers for the divine miracle that now is Theresa’s only hope to regain any level of nor-mal existence. No one questions that they have filed this appeal out of love for their daughter. This lawsuit is affected by an earlier lawsuit. In the early 1990s, Michael Schiavo, as Theresa’s guardian, filed a medical malpractice lawsuit. That case resulted in a sizable award of money for Theresa. This fund remains sufficient to care for Theresa for many years. If she were to die today, her husband would inherit the money under the laws of intestacy. If Michael eventually divorced Theresa in order to have a more normal family life, the fund remaining at the end of Theresa’s life would presumably go to her parents. Since the resolution of the malpractice lawsuit, both Michael and the Schindlers have become suspicious that the other party is assess-ing Theresa’s wishes based upon their own monetary self-interest. The trial court discounted this concern, and we see no evidence in this record that either Michael or the Schindlers seek monetary gain from their actions. Michael and the Schindlers simply cannot agree on what decision Theresa would make today if she were able to as-sess her own condition and make her own decision. There has been discussion among the parties that the money remaining when Theresa dies should be given to a suitable char-ity as a lasting memorial. If anything is undeniable in this case, it is that Theresa would never wish for this money to drive a wedge between the people she loves. We have no jurisdiction over the disposition of this money, but hopefully these parties will con-sider Theresa’s desires and her memory when a decision about the money is ultimately required. This is a case to authorize the termination of life-prolonging procedures under chapter 765, Florida Statutes (1997), and un-der the constitutional guidelines enunciated in In re Guardianship of Browning, 568 So. 2d 4 (Fla. 1990). The Schindlers have raised three legal issues that warrant brief discussion. First, the Schindlers maintain that the trial court was required to appoint a guardian ad litem for this proceeding because Michael stands to inherit under the laws of intestacy. When a living will or other advance directive does not exist, it stands to reason that the surrogate decision-maker will be a person who is close to the pa-tient and thereby likely to inherit from the patient. See § 765.401, Fla. Stat. (2000). Thus, the fact that a surrogate decision-maker may ultimately inherit from the patient should not automatically compel the appointment of a guardian. On the other hand, there may be occasions when an inheritance could be a reason to ques-tion a surrogate’s ability to make an objective decision. In this case, however, Michael Schiavo has not been allowed to make a decision to disconnect life-support. The Schindlers have not been allowed to make a decision to maintain life-support. Each party in this case, absent their disagreement, might have

IMPORTANCE OF ADVANCED DIRECTIVES, EVEN IF SOMEONE IS RELATIVELY YOUNG

In the District Court of Appeal of Florida Second District

IN RE: GUARDIANSHIP OF SCHIAVOCase No. 2D00-1269

January 24, 2001

175


been a suitable surrogate decision-maker for Theresa. Because Michael Schiavo and the Schindlers could not agree on the proper decision and the inheritance issue created the appearance of con-flict, Michael Schiavo, as the guardian of Theresa, invoked the trial court’s jurisdiction to allow the trial court to serve as the surrogate decision-maker. In this court’s decision in In re Guardianship of Browning, 543 So. 2d 258, 273-74 (Fla. 2d DCA 1989), we described, in dicta, a method for judicial review of a surrogate’s decision. The supreme court’s decision affirming In re Guardianship of Browning did not squarely approve or reject the details of our proposed method. However, the supreme court recognized that the circuit court’s jurisdiction could be invoked in two manners:

We emphasize, as did the district court, that courts are always open to adjudicate legitimate questions pertain-ing to the written or oral instructions. First, the sur-rogate or proxy may choose to present the question to the court for resolution. Second, interested parties may challenge the decision of the proxy or surrogate.

In re Guardianship of Browning, 568 So. 2d at 16 (footnote omitted). In this case, Michael Schiavo used the first approach. Under these circumstances, the two parties, as adversaries, present their evidence to the trial court. The trial court determines whether the evidence is sufficient to allow it to make the decision for the ward to discontinue life support. In this context, the trial court es-sentially serves as the ward’s guardian. Although we do not rule out the occasional need for a guardian in this type of proceeding, a guardian ad litem would tend to duplicate the function of the judge, would add little of value to this process, and might cause the process to be influenced by hearsay or matters outside the record. Accordingly, we affirm the trial court’s discretionary deci-sion in this case to proceed without a guardian ad litem. Second, the Schindlers argue that the trial court should not have heard evidence from Beverly Tyler, the executive director of Georgia Health Decisions. Although it is doubtful that this issue is preserved for appeal, we have reviewed the issue as if it were. Ms. Tyler has studied American values, opinions, and attitudes about the decision to discontinue life-support systems. As a result, she has some spe-cial expertise concerning the words and expressions that Americans often use in discussing these difficult issues. She also has knowl-edge about trends within American attitudes on this subject. We have considerable doubt that Ms. Tyler’s testimony pro-vided much in the way of relevant evidence. She testified about some social science surveys. Apparently most people, even those who favor initial life-supporting medical treatment, indicate that

they would not wish this treatment to continue indefinitely once their medical condition presented no reasonable basis for a cure. There is some risk that a trial judge could rely upon this type of survey evidence to make a “best interests” decision for the ward. In this case, however, we are convinced that the trial judge did not give undue weight to this evidence and that the court made a proper surrogate decision rather than a best interests decision. Finally, the Schindlers argue that the testimony, which was con-flicting, was insufficient to support the trial court’s decision by clear and convincing evidence. We have reviewed that testimony and conclude that the trial court had sufficient evidence to make this decision. The clear and convincing standard of proof, while very high, permits a decision in the face of inconsistent or conflicting evidence. See In re Guardianship of Browning, 543 So. 2d at 273. In Browning, we stated:

In making this difficult decision, a surrogate decision-maker should err on the side of life. . . . In cases of doubt, we must assume that a patient would choose to defend life in exercising his or her right of privacy.

In re Guardianship of Browning, 543 So. 2d at 273. We re-confirm today that a court’s default position must favor life. The testimony in this case establishes that Theresa was very young and very healthy when this tragedy struck. Like many young people without children, she had not prepared a will, much less a living will. She had been raised in the Catholic faith, but did not regularly attend mass or have a religious advisor who could as-sist the court in weighing her religious attitudes about life-support methods. Her statements to her friends and family about the dying process were few and they were oral. Nevertheless, those state-ments, along with other evidence about Theresa, gave the trial court a sufficient basis to make this decision for her. In the final analysis, the difficult question that faced the trial court was whether Theresa Marie Schindler Schiavo, not after a few weeks in a coma, but after ten years in a persistent vegetative state that has robbed her of most of her cerebrum and all but the most instinctive of neurological functions, with no hope of a medi-cal cure but with sufficient money and strength of body to live indefinitely, would choose to continue the constant nursing care and the supporting tubes in hopes that a miracle would somehow recreate her missing brain tissue, or whether she would wish to permit a natural death process to take its course and for her family members and loved ones to be free to continue their lives. After due consideration, we conclude that the trial judge had clear and convincing evidence to answer this question as he did. Affirmed. PARKER, A.C.J., and BLUE, J., Concur.


LIVING WILLS

The term living will causes some confusion. They are not wills in the w ay that the word is nor-mally used when discussing wills, tr usts, and estates. When most people think of a will, the y think of a last will and testament , something that takes effect when the testator dies. A living will, on the other hand, is an expression of a person’s desires as they relate to having her life prolonged by use of ar tificial or extraordinary efforts if she is in a ter minal condition, end-state condition, and/or a persistent v egetative state. The living will then is a document that sets out how or if cer tain medical treatment will be perfor med. These can include directions on whether life-prolonging procedures be withheld or withdrawn—including whether hydration and/or nutrition will be withheld.



There is a similarity in how a will is used, as used in last will and testament, and the way it is used in a living will. They both express the will and desires of the person who executes them. In both cases, the paralegal is helping the client to do whatever is reasonably possible to ensure that the client’s desires, whether they relate to medical care or the disposition of their proper ty when they die, are carried out. All 50 states now have laws relating to living wills and other advance directives. What docu-ments are required vary by state, as does the requirement for ho w the documents are executed. Figure 9.3 contains the Montana statute on declarations relating to use of life-sustaining treatment. Figure 9.4 sets out a sample living will form contained in the Florida Statutes.

50-9-103. Declaration relating to use of life-sustaining treatment—designee. (1) An individual of sound mind and 18 years of age or older may execute at any time a declaration governing the withhold-ing or withdrawal of life-sustaining treatment. The declarant may designate another individual of sound mind and 18 years of age or older to make decisions governing the withholding or withdrawal of life-sus-taining treatment. The declaration must be signed by the declarant or another at the declarant’s direction and must be witnessed by two individuals. A health care provider may presume, in the absence of actual notice to the contrary, that the declaration complies with this chapter and is valid. (2) A declaration directing a physician or advanced practice registered nurse to withhold or withdraw life-sustaining treatment may, but need not, be in the following form:

DECLARATION

If I should have an incurable or irreversible condition that, without the administration of life-sustaining treatment, will, in the opinion of my attending physician or attending advanced practice registered nurse, cause my death within a relatively short time and I am no longer able to make decisions regarding my medical treatment, I direct my attending physician or attending advanced practice registered nurse, pursu-ant to the Montana Rights of the Terminally Ill Act, to withhold or withdraw treatment that only prolongs the process of dying and is not necessary to my comfort or to alleviate pain.

Signed this ____ day of _________, ____. Signature _____________ City, County, and State of Residence ____________________ The declarant voluntarily signed this document in my presence. Witness__________________________________ Address__________________________________ Witness__________________________________ Address__________________________________ (3) A declaration that designates another individual to make decisions governing the withholding or withdrawal of life-sustaining treatment may, but need not, be in the following form:

DECLARATION

If I should have an incurable and irreversible condition that, without the administration of life-sustaining treatment, will, in the opinion of my attending physician or attending advanced practice registered nurse, cause my death within a relatively short time and I am no longer able to make decisions regarding my medical treatment, I appoint __________ or, if he or she is not reasonably available or is unwilling to serve, __________, to make decisions on my behalf regarding withholding or withdrawal of treatment that only prolongs the process of dying and is not necessary for my comfort or to alleviate pain, pursuant to the Montana Rights of the Terminally Ill Act. If the individual I have appointed is not reasonably available or is unwilling to serve, I direct my attending physician or attending advanced practice registered nurse, pursuant to the Montana Rights of the Terminally Ill Act, to withhold or withdraw treatment that only prolongs the process of dying and is not necessary for my comfort or to alleviate pain.

Signed this ____ day of _________, ____. Signature____________________________ City, County, and State of Residence______________________ The declarant voluntarily signed this document in my presence. Witness Address

FIGURE 9.3 Montana Declaration Relating to Use of Life Sustaining Treatment



§ 765.303, Florida Statutes

Living Will

Declaration made this _____ day of _____, (year) , I, __________, willfully and voluntarily make known my desire that my dying not be artifi cially prolonged under the circumstances set forth below, and I do hereby declare that, if at any time I am incapacitated and

(initial) I have a terminal condition

or (initial) I have an end-stage condition

or (initial) I am in a persistent vegetative state

and if my attending or treating physician and another consulting physician have determined that there is no reasonable medical probability of my recovery from such condition, I direct that life-pro-longing procedures be withheld or withdrawn when the application of such procedures would serve only to prolong artifi cially the process of dying, and that I be permitted to die naturally with only the administration of medication or the performance of any medical procedure deemed necessary to provide me with comfort care or to alleviate pain.

It is my intention that this declaration be honored by my family and physician as the fi nal expression of my legal right to refuse medical or surgical treatment and to accept the consequences for such refusal.

In the event that I have been determined to be unable to provide express and informed consent regarding the withholding, withdrawal, or continuation of life-prolonging procedures, I wish to desig-nate, as my surrogate to carry out the provisions of this declaration:

Name:Address:____________________________________ Zip Code:__________Phone:____________________

I understand the full import of this declaration, and I am emotionally and mentally competent to make this declaration.

Additional Instructions (optional):__________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

(Signed)

Witness

Address

Phone

Witness

Address

Phone

FIGURE 9.4 Suggested Form for Living Will

CASE BRIEF

ASSIGNMENT

Read and brief the In the Matter of Biersack case on page 179. (See Appendix A for information on how to brief cases.)

Witness Address Name and address of designee. Name Address (4) If the designation of an attorney-in-fact pursuant to 72-5-501 and 72-5-502, or the judicial ap-pointment of an individual, contains written authorization to make decisions regarding the withholding or withdrawal of life-sustaining treatment, that designation or appointment constitutes, for the purposes of this part, a declaration designating another individual to act for the declarant pursuant to subsection (1). (5) A health care provider who is furnished a copy of the declaration shall make it a part of the declarant’s medical record and, if unwilling to comply with the declaration, shall advise the declarant and any individual designated to act for the declarant promptly.



CASE IN POINT

179

DIFFICULTIES CAN ARISE WHEN A PERSON FAILS TO HAVE ADVANCED DIRECTIVES

In The Court of Appeals Third Appellate DistrictIn the Matter of Biersack

No. 10-04-03.Dec. 6, 2004

PER CURIAM. The co-guardians of Christine Biersack (hereinafter “Biersack”) appeal the judgment of the Mercer County Court of Common Pleas, denying their motion for a court order allowing the attend-ing physician to withdraw nutrition and hydration from their ward pursuant to the authority and procedure of R.C. 2133.09. On March 3, 1994, Biersack, then forty-three years old, was involved in an automobile accident. As a result of the accident, Biersack’s husband and one of her nine children were killed. Bier-sack suffered extreme injuries which rendered her a quadriplegic. She never regained consciousness and was confined to a nursing home. Following the accident, a feeding tube was inserted to pro-vide nutrition and hydration to Biersack. She does not, otherwise, rely on life support devices. On or about May 24, 1994, Biersack’s oldest child, Gregory Biersack, together with Biersack’s father, Carl Henneman, were appointed as her co-guardians. Biersack’s condition has not improved since 1994. She continues to be in a comatose state. On October 8, 2003, after consulting with Biersack’s physicians and family members, the co-guardians filed a motion to allow the withdrawal of life-sustaining treatment. All of Biersack’s seven surviving adult children filed their written con-sent to the withdrawal with the court. A hearing was held on the motion on December 1, 2003. No one appeared to oppose the mo-tion. In its decision on the motion, the trial court found that Biersack had never expressed her wishes regarding nutrition and hydration during the time she was able to make informed decisions. The trial court, therefore, found that the co-guardians had not established, by clear and convincing evidence, that the removal of the feeding tube would have been Biersack’s choice and denied the motion. It is from this decision that the co-guardians appeal, setting forth two assignments of error for our review. This case, which presents questions as to the interpretation and application of R.C. Chapter 2133, is a matter of first impression with this court.

ASSIGNMENT OF ERROR NO. I

The lower court erred when it concluded that in an informal verbal declaration, the matters of life sustaining treatment and the withdrawal of nutrition and hydration are two inde-pendent matters that must be addressed separately.

ASSIGNMENT OF ERROR NO. II

The lower court erred in not properly applying the clear and convincing standard to its analysis of Ohio Revised Code Section 2133.09. For clarity of analysis, we will address the two assignments of error together.

Biersack’s co-guardians argue that the trial court erred by hold-ing Biersack’s informal verbal declaration of her wishes regarding life sustaining treatment to the strict standard of formal, written living wills. In using that standard, the co-guardians argue that it was error for the trial court to determine that nutrition and hydration must be addressed separately in an informal verbal declaration. Fur-ther, the co-guardians maintain that they had produced clear and convincing evidence sufficient for the trial court to determine that Biersack’s expressed wishes regarding life sustaining treatment also encompassed her desire not to be kept alive by a feeding tube. We recognize that a decision on withdrawal of life support which involves a family member the parties love and care deeply about is a sensitive matter laden with conflicting emotional and spiritual concerns. One of the intense desires a party undoubtedly has is that the circumstances were different and that there would be no need for such a decision to be made. To both guide and to oversee decision-making in this sensitive area, the Ohio General Assembly, in 1991, passed a form of the Modified Uniform Rights of the Terminally Ill Act. R.C. Chapter 2133 sets forth the guidelines for removal of life support, includ-ing nutrition and hydration, for adults who have a living will and for those who do not. In re Co-guardianship of Myers (1993), 62 Ohio Misc.2d 763, 771. R.C. 2133.09 sets forth the procedure for removal of nutrition and hydration. In the event a patient has not made an advance di-rective, R.C. 2133.09 provides that consent to withdraw nutrition and hydration may be given by a guardian. A consenting guard-ian, however, must apply to the probate court for the issuance of an authorizing order permitting the attending physician to ac-tually withdraw nutrition and hydration. R.C. 2133.09(C)(1). The trial court, in this regard, exercises an essential oversight function. Before the court may issue an order authorizing the withdrawal of nutrition and hydration, the evidence before the court must affirmatively demonstrate the existence of all of the statutory re-quirements of R.C. 2133.09. Pursuant to R.C. 2133.09 (C)(2) the guardian must establish by clear and convincing evidence, to a reasonable degree of medical certainty, all of the following:

A. The patient currently is and or at least the immediately preceding twelve months has been in a permanently unconscious state.

B. The patient no longer is able to make informed deci-sions regarding the administration of life-sustaining treatment.

C. There is no reasonable possibility that the patient will regain the capacity to make informed deci-sions regarding the administration of life-sustaining treatment.


D. The conditions specified in divisions (A)(1) to (4) of this section have been satisfied.

E. The decision to withhold or withdraw nutrition and hy-dration in connection with the patient is consistent with the previously expressed intention of the patient * * * or is consistent with the type of informed consent deci-sion that the patient would have made if he previously had expressed his intention with respect to the use or continuation, or the withholding or withdrawal, of nutrition and hydration * * *”

R.C. 2133.09 (C)(2). Emphasis added. Divisions (A)(1) to (4) of R.C. 2133.09 require that written consent must have been given by the appropriate specified per-sons, that a probate court must not have reversed the consent of those persons to the withdrawal of nutrition and hydration, that the written consent must be given to the attending physician, and that the attending physician and a consulting physician must determine “in good faith, to a reasonable degree of medical cer-tainty, and in accordance with reasonable medical standards, that nutrition and hydration will not or no longer will provide comfort or alleviate pain in connection with the patient.” The statute also sets out qualifications of the consulting physician that must be met and requirements for the consulting physician to follow. The consulting physician must be a physi-cian who has examined the patient and who is qualified, by virtue of advanced education or training, limited practice, expe-rience, or certification as a specialist to determine whether the patient currently is and for at least the immediately preceding twelve months has been in a permanently unconscious state. R.C. 2133.08(A)(2). The trial court found through witness testimony that the coguardians had established by clear and convincing evidence that the requirements of R.C. 2133.09(C)(2)(a) through (d) had been met. Timothy Heinrichs, Biersack’s doctor, testified that Biersack suffered severe head trauma as a result of the acci-dent which resulted in extensive brain damage and has been in a vegetative state since the automobile accident in 1994. Dr. Heinrichs stated that Biersack’s condition is gradually de-clining, her body is slowly breaking down, and Biersack is not able to make informed decisions. Dr. Heinrichs testified that the Biersack’s ability to recover and regain consciousness is nonexistent. Dr. Heinrichs opined that Biersack feels no pain and removing the feeding tube that is providing her nutri-tion and hydration would not cause her pain. Dr. Heinrichs also stated that Dr. Phillip Masser, the consulting physician, concurred with his opinions regarding Biersack’s condition. Three of Biersack’s children, Gregory, Todd and Matthew, testified at the hearing regarding Biersack’s previously expressed intentions and the standard imposed by R.C. 2133.09(C)(2)(e). Gregory testified that his mother once stated that she would never want to be “kept alive by machine or any type of life sup-port.” Gregory stated he knew withdrawing the feeding tube would be something that Biersack would want. Todd also testi-fied that removing the feeding tube was the right thing to do. Matthew testified that once he and Biersack were watching a television program about a woman who was in a vegetative state and that his mother commented that she would never want to live in that type of condition. Matthew further testified that, in his opinion, his mother would not want to be kept alive by arti-ficial means and that if she had the choice, she would decide to remove the feeding tube.

The trial court interpreted R.C. 2133.09(C)(2)(e) as requiring Biersack to have specifically stated her intentions regarding nutri-tion and hydration. Therefore, since no testimony was presented that Biersack ever specifically referred to a feeding tube or the continuation or discontinuation of nutrition and hydration, the trial court found that the co-guardians had not presented suf-ficient evidence to meet R.C. 2133.09(C)(2)(e). Our analysis of an appeal from the trial court’s construction of a statute is conducted under a de novo standard of review since statutory interpretation is a matter of law. State v. Wemer (1996), 112 Ohio App.3d 100, 103. Therefore, we review the decision independently and without deference to the trial court’s interpre-tation. Additionally, in order for an appellate court to be able to review whether the judgment of the trial court is in conformity with the statutory requirements, the evidence must expressly ap-pear in the record. After a review of R.C. Chapter 2133, we find that “nutrition and hydration” and “life sustaining treatment” are addressed sepa-rately and, for the purposes of a living will, each must be referred to specifically. However, the statutory framework also provides a pro-cedure for consent to be given under certain circumstances where a patient has not made an advance directive or prepared a living will. In that instance, R.C. 2133.09(C)(2)(e) specifies that the trial court shall issue an order withdrawing nutrition and hydration if it finds that the withdrawal is consistent with the previously ex-pressed intention of the patient or “is consistent with the type of informed consent decision that the patient would have made if he previously had expressed his intention with respect to the use or continuation, or the withholding or withdrawal, of nutrition and hydration.” Emphasis added. Therefore, in the case of an informal verbal declaration where a patient has not previously expressed his intention regarding nutrition and hydration, it would be contrary to the clear requirements of R.C. 2133.09(C)(2)(e) to require a guard-ian to establish that the patient specifically referred to nutrition, hydration or a feeding tube. Pursuant to the statute, then, the co-guardians had the burden to establish, by clear and convincing evidence, that the withdrawal or withholding of nutrition and hydration would be what Biersack would have desired. This is made evident by R.C. 2133.09(B)(3) which provides that a patient’s wishes can be “in-ferred from the lifestyle and character of the patient, and from any other evidence of the desires of the patient, prior to his be-coming no longer able to make informed decisions regarding the administration of nutrition and hydration.” Emphasis added. We, therefore, find that the trial court erred in interpreting R.C. 2133.09 (C)(2)(e) to require Biersack to have specifically declared her wishes regarding nutrition and hydration absent a written living will declaration. Accordingly, based on the uncontradicted testimony of Bier-sack’s children who testified that Biersack had expressed an intent never to be “kept alive by machine or any type of life support” and stated that she would not want to live in a vegetative state, we hold that clear and convincing evidence existed pursuant to R.C. 2133.09(C)(2)(e) to support an inference that withdrawing nutrition and hydration is consistent with Biersack’s wishes. The co-guardians’ first and second assignments of error are, therefore, sustained. This determination does not end our inquiry, however. Upon the review and interpretation of R.C. 2133.09, we are unable to find that the consulting physician’s qualifications and his medical opinion, as required by statute, have been adequately presented to the trial court.



DESIGNATION OF HEALTH CARE SURROGATE (PROXY)

The designation of health care surrogate (proxy) form allows a person to designate who will be able to make certain health care decisions in the e vent that he is incapacitated and unab le to make the decisions. A designee should be named along with an alternate designee to provide for the possibility the person is unwilling or unab le to accept the position of health care sur rogate. These forms usually grant the designee the power to make health care decisions and to provide, withhold, or withdraw consent for medical treatment. Figure 9.5 contains the Florida Designation of Health Care Surrogate.

DURABLE POWER OF ATTORNEY

A power of attorney is used to appoint someone to act as an agent of another. This can include the power to perfor m a specif ic act or numerous acts on behalf of the principal (the person granting the power). Generally the power granted under this document ceases when the principal becomes incapacitated. To overcome this, states allow for a durable power of attorney , one that will allow the agent to exercise the powers granted under the power of attorney despite the prin-cipal’s incapacitation. The word durable must be included in the instr ument to create this type of power of attorney, along with an indication that it will not ter minate if the principal becomes

designation of health care surrogate (proxy)A form that allows a person to designate who will be able to make certain health care decisions in the event that he or she is incapacitated and unable to make the decisions.

designation of health care surrogate (proxy)A form that allows a person to designate who will be able to make certain health care decisions in the event that he or she is incapacitated and unable to make the decisions.

The evidence required to be provided by physicians in cases arising under R.C. 2133.09 is of fundamental importance. A phy-sician’s specialized knowledge is essential to the trial court’s fact finding and to the rendering of a proper decision. Due to their importance, we find that the opinions and conclusions of a physi-cian should be presented by personal in-court testimony when, in a case such as this, the action is not adversarial and the usual scrutiny occasioned by an opposing party is lacking. This practice will better permit the court to properly exercise its oversight func-tion in cases of this nature. To be clear and convincing, the testimony of each physician must, at least, encompass the following: the physician’s educa-tion, training, and experience; the physician’s history and expe-rience with the patient; the fact that the physician personally examined the patient; and, the opinions required by the statute. See R.C. 2133.08(A)(2); 2133.09(A)(3). Ordinarily, each physician should also testify to his opinion that the other physician in the matter is qualified, by reason of advanced education or training in one of the three categories prescribed by statute, to make the findings and provide the opinions about the patient which are required by the statute. Moreover, the requirement of R.C. 2133.09(A)(3) that two physicians come to the same conclusion regarding the patient’s medical condition and prognosis evinces a legislative intent that the consulting physician’s opinion should be more than a con-clusory adoption of the attending physician’s opinion. Rather, it should be independently stated and, ideally, should include the reasons upon which it is based. Dr. Phillip Masser was the consulting physician in the case sub judice. At the hearing, Dr. Heinrichs, the attending physician, tes-tified that Dr. Masser was a general practitioner who had been in practice since 1982. No testimony was provided regarding any advanced education or training of Dr. Masser. Dr. Heinrichs stated that Dr. Masser had examined Biersack and that he con-curred completely with Dr. Heinrichs’ opinion. However, the only evidence from Dr. Masser himself is a brief unsworn statement typed onto the bottom of the affidavit of Dr. Heinrichs that was

submitted with the filing of the original Motion to Withdraw Nu-trition and Hydration. Masser’s statement, in its entirety, states:

“I, Phillip R. Masser, M.D., 724 E. Wayne Street, Celina, Ohio 45822, have made an independent examination of Christine B. Biersack as a consulting physician and concur in the diagnosis and prognosis of Dr. Timothy A. Heinrichs as stated above.”

We find that Dr. Masser’s opinion is not in conformity with the statutory requirements of R.C. 2133.09(A)(3). First, it is not sworn testimony and, therefore, is hearsay. See Evid.R. 801(C). Second, it is not altogether clear whether Dr. Masser’s indepen-dent examination of Biersack was a physical examination of the patient herself, an independent review of Biersack’s medical re-cords, or both. Third, there is no evidence of Masser’s educa-tion, training and experience to demonstrate conformity with the specific statutory requirement that the consulting physician be “* * * by virtue of advanced education or training * * * qualified to determine whether the patient * * *” is, and for the imme-diately preceding 12 months has been, in a permanently uncon-scious state.” R.C. 2133.08(A)(3). Fourth, Masser’s statement does not specifically set out his opinion as a separate expression of his own. Rather, it is merely a one sentence affirmation of the attending physician’s opinion. In light of our understanding of the statutory requirements, we hold that Dr. Masser’s consulting opinion is inadequate as presented to the trial court. Having found error prejudicial to appellants herein, in the par-ticulars assigned and argued, we reverse the judgment of the trial court regarding the trial court’s findings as to Biersack’s de-sires regarding the withdrawal of nutrition and hydration pursu-ant to R.C. 2133.09(C)(2)(e) and, in light of our analysis of R.C. 2133.09(A)(3), remand the matter for further proceedings to per-mit the appellants the opportunity to supplement the testimony of Dr. Masser so that the trial court may adequately evaluate his qualifications and opinions in accordance with this opinion.Judgment reversed and remanded for further proceedings.SHAW, CUPP and ROGERS, J.J., concur.

power of attorneyA document used to appoint someone to act as an agent of another.

agentA person who acts on behalf of another.




disabled or incapacitated. The durable power of attorney may also state that it will onl y go into effect if the principal is incapacitated and/or disab led. Elderly people often use a durable power of attorney to make sure that day-to-day matters, such as writing checks and pa ying bills, will continue to be done in the event they become disabled or incapacitated. Sometime the phrase “durable power of attorney for health care” is used. This is not the same kind of durable power of attorney that was previously discussed. Instead, it is a designation of a person as a health care advocate to make decisions relating to custody and medical treatment in the e vent the principal becomes incapacitated. Figure 9.6 contains a sample durable power of attorney for health care. More than one of these documents ma y be required to ensure that the desires are car ried out and to comply with the statutory requirements for advance directives.

FIGURE 9.5 Florida Designation of Health Care SurrrogateSource: Retrieved from http://www.ocms.org/HealthCareSurrog.pdf (01/09/06).

principalThe person granting power to an agent.

durable power of attorneyA power of attorney that allows the agent to exer-cise the powers granted under the power of attor-ney despite the principal’s incapacitation.



FIGURE 9.6Durable Power of Attorney for Health Care Source: Retrieved from www.med.umich.edu/1libr/aha/umlegal02.htm .

DURABLE POWER OF ATTORNEYFOR HEALTH CARE

I, ___________________________________________________, (Print or type your full name)am of sound mind, and I voluntarily make this designation.I designate _________________________________________, (insert name of patient advocate) my _________________________________________________ , (Spouse, child, friend . . . ) living at ______________________________________________________________________________________(Address of patient advocate)

as my patient advocate to make care, custody and medical treatment decisions for me in the event I become unable to participate in medical treatment decisions. If my fi rst choice cannot serve, I designate ______________________________________________________________________________________(Name of successor)living at _______________________________________________________________________________(Address of successor)to serve as patient advocate.

The determination of when I am unable to participate in medical treatment decisions shall be made by my attending physician and another physician or licensed psychologist.

In making decisions for me, my patient advocate shall follow my wishes of which he or she is aware, whether expressed orally, in a living will, or in this designation.

My patient advocate has authority to consent to or refuse treatment on my behalf, to arrange medical services for me, including admission to a hospital or nursing care facility, and to pay for such services with my funds. My patient advocate shall have access to any of my medical records to which I have a right.

OPTIONAL

I expressly authorize my patient advocate to make decisions to withhold or withdraw treatment which would allow me to die and I acknowledge such decisions could or would allow my death.

_____________________________________________________________________________________

(Sign your name here if you wish to give your patient advocate this authority.)

My specifi c wishes concerning health care are the following: (if none, write “none”)________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

I may change my mind at any time by communicating in any manner that this designation does not refl ect my wishes.

It is my intent that my family, the medical facility, and any doctors, nurses and other medical person-nel involved in my care shall have no civil or criminal liability for honoring my wishes as expressed in this designation or for implementing the decisions of my patient advocate.

Photostatic copies of this document, after it is signed and witnessed, shall have the same legal force as the original document.

I sign this document after careful consideration. I understand its meaning and I accept its consequences.

Signed: _______________________________ Date: _____________Address: ___________________________________________________________________

NOTICE REGARDING WITNESSES

You must have two adult witnesses who will not receive your assets when you die (whether you die with or without a will), and who are not your spouse, child, grandchild, brother or sister, an employ-ee of a company through which you have life or health insurance, or an employee at the health care facility where you are a patient.

STATEMENT OF WITNESSES

We sign below as witnesses. This declaration was signed in our presence. The declarant appears to be of sound mind, and to be making this designation voluntarily, without duress, fraud or undue infl uence.



Signed by witness: ______________________________________ _____________________________________ (Print or type full name)Address: _____________________________________________ __________________________________________Signed by witness: ______________________________________ _____________________________________ (Print or type full name)Address: _____________________________________________ __________________________________________

ACCEPTANCE BY PATIENT ADVOCATE(A) This designation shall not become effective unless the patient is unable to participate in treat-ment decisions.

(B) A patient advocate shall not exercise powers concerning the patient’s care, custody and medi-cal treatment that the patient, if the patient were able to participate in the decision, could not have exercised in his or her own behalf.

(C) This designation cannot be used to make a medical treatment decision to withhold or withdraw treatment from a patient who is pregnant that would result in the pregnant patient’s death.

(D) A patient advocate may make a decision to withhold or withdraw treatment which would allow a patient to die only if the patient has expressed in a clear and convincing manner that the patient advocate is authorized to make such a decision, and that the patient acknowledges that such a deci-sion could or would allow the patient’s death.

(E) A patient advocate shall not receive compensation for the performance of his or her authority, rights, and responsibilities, but a patient advocate may be reimbursed for actual and necessary expenses incurred in the performance of his or her authority, rights, and responsibilities.

(F) A patient advocate shall act in accordance with the standards of care applicable to fi duciaries when acting for the patient and shall act consistent with the patient’s best interests. The known desires of the patient expressed or evidenced while the patient is able to participate in medical treat-ment decisions are presumed to be in the patient’s best interests.

(G) A patient may revoke his or her designation at any time or in any manner suffi cient to communi-cate an intent to revoke.

(H) A patient advocate may revoke his or her acceptance to the designation at any time and in any manner suffi cient to communicate an intent to revoke.

(I) A patient admitted to a health facility or agency has the rights enumerated in Section 20201 of the Public Health Code, Act No. 368 of the Public Acts of 1978, being section 333.20201 of the Michigan Compiled Laws.

I understand the above conditions and I accept the designation aspatient advocate for ______________________________________Dated: __________ Signed: ________________________________

Hands-on Assignment Locate your state’s statute dealing with anatomical gifts. Write a brief description of how a person can express

RESEARCH THIS!

his or her desires relating to anatomical gifts pursuant to that statute

do not resuscitate orderA document that expresses a person’s desire not to have CPR performed if the person’s heart stops beating or the person stops breathing. (Also called a non-resuscitation order.)

DO NOT RESUSCITATE ORDERS Sometimes referred to as a non-resuscitation order, a do not resuscitate order expresses a per-son’s desire not to ha ve CPR perfor med if her hear t stops beating or she stops breathing. A patient normally signs the order at the time she is admitted to the hospital or nursing home. Increasingly, states are providing methods to allow a person to e xpress his desire not to be re-suscitated outside of the hospital or nursing home. Some states allo w individuals to wear bracelets




DO-NOT-RESUSCITATE ORDER

I have discussed my health status with my physician, ______________________________. I request that in the event my heart and breathing should stop, no person shall attempt to resuscitate me.

This order is effective until it is revoked by me.

Being of sound mind, I voluntarily execute this order, and I understand its full import.

_________________________________________ _________________ (Declarant’s signature and Date)_________________________________________ _________________ (Type or print declarant’s full name and Date)_________________________________________ _________________(Signature of person who signed for declarant, if applicable, and Date)___________________________________ (Type or print full name)_________________________________________ _____________ (Physician’s signature and Date)___________________________________ (Type or print physician’s full name)

ATTESTATION OF WITNESSES

The individual who has executed this order appears to be of sound mind, and under no duress, fraud, or undue infl uence. Upon executing this order, the individual has (has not) received an identifi cation bracelet._________________________________ (Witness signature and Date)_________________________________ (Type or print witness’s name)_________________________________ (Witness signature and Date)_________________________________ (Type or print witness’s name)

THIS FORM WAS PREPARED PERSUANT TO, AND IN COMPLIANCE WITH, THE MICHIGAN DO-NOT-RESUSCITATE PROCEDURE ACT.

FIGURE 9.7Michigan Do Not Resuscitate OrderSource: Retrieved from www.med.umich.edu/1libr/aha/umlegal03.htm.

expressing their desires that a physician’s order to withhold CPR be honored b y emergency per-sonnel. Some states also allo w a person to e xpress his desires if his hear t stops beating or his breathing stops in a home setting. The form set out in Figure 9.7 is an example of one that can be used for that purpose in Michigan. The form requires that the individual’s attending physician sign it, but Michigan law also provides for a form that does not include the ph ysician’s signature if a person has objections to the care by a physician for religious or other reasons.

ANATOMICAL GIFTS Another important decision that a person must make relates to anatomical gifts. Anatomical gifts include donations of or gans and tissues. There are many personal and religious aspects to this decision, just as there are in other advance directives, but an increasing number of people desire to donate their organs and tissues in the e vent of their death. If that is the person’ s desire, it is important that it be expressed early. How this can be done varies. The Uniform Anatomical Gift Act allows a person to express his desire to be an organ donor on his driver’s license or by execu-tion of a Uniform Donor Card. The one place that should not be used to express a desire to be an organ donor is in the person’s will. A person’s status as an organ donor needs to be estab lished very quickly after death, sometimes even while the person is still alive, but in a terminal condi-tion. Figure 9.8 contains an example of an organ donor card. All 50 states have now adopted some version of the Uniform Anatomical Gift Act. Figure 9.9 contains the Montana statute on making anatomical gifts.



FIGURE 9.8Sample Organ/Tissue Donor CardSource: Retrieved from http://seniorhealth.about.com/gi/dynamic/offsite.htm?site=http://www.organdonor.gov/signup1.html.

72-17-201. Making, amending, revoking, and refusing to make anatomical gifts by individual. (1) An individual who is at least 18 years of age may: (a) make an anatomical gift for any of the purposes stated in 72-17-202; or (b) limit an anatomical gift to one or more of those purposes. (2) An anatomical gift may be made only by a document of gift signed by the donor. If the donor cannot sign, the document of gift must be signed by another individual and by two witnesses, all of whom have signed at the direction and in the presence of the donor and of each other, and must state that it has been signed. (3) If a document of gift is attached to or imprinted on a donor’s motor vehicle operator’s license, the document of gift must comply with subsection (2). Revocation, suspension, expiration, or cancel-lation of the license does not invalidate the anatomical gift. (4) A document of gift may designate a particular physician or surgeon to carry out the appropri-ate procedures. In the absence of a designation or if the designee is not available, the donee or other person authorized to accept the anatomical gift may employ or authorize any physician, surgeon, technician, or enucleator to carry out the appropriate procedures. (5) An anatomical gift by will takes effect upon the death of the testator, whether or not the will is probated. If, after the testator’s death, the will is declared invalid for testamentary pur-poses, the validity of the anatomical gift is unaffected. A gift made in accordance with this section is suffi cient legal authority for procurement without additional authority from the donor or the donor’s family or estate. (6) (a) A donor may amend or revoke an anatomical gift not made by will only by: (i) a signed statement; (ii) an oral statement made in the presence of two individuals; (iii) any form of communication during a terminal illness or injury addressed to a physician or surgeon; or (iv) the delivery of a signed statement to a specifi ed donee to whom a document of gift had been delivered. (b) A donor shall notify the federally designated organ procurement organization of the destruc-tion, cancellation, or mutilation of the document for the purpose of removing the person’s name from the organ and tissue donation registry created in 72-17-105 and 72-17-106. (7) The donor of an anatomical gift made by will may amend or revoke the gift in the manner provided for amendment or revocation of wills or as provided in subsection (6). (8) An anatomical gift that is not revoked by the donor before death is irrevocable and does not require the consent or concurrence of any person after the donor’s death. The donor’s family or health care provider may not refuse to honor the gift or thwart the procurement of the donation. (9) (a) An individual may refuse to make an anatomical gift of the individual’s body or part by: (i) a writing signed in the same manner as a document of gift; (ii) a statement attached to or imprinted on a donor’s motor vehicle operator’s license; or (iii) any other writing used to identify the individual as refusing to make an anatomical gift. (b) During a terminal illness or injury, the refusal may be an oral statement or other form of com-munication. (10) In the absence of contrary indications by the donor, an anatomical gift of a part is neither a refusal to give other parts nor a limitation on an anatomical gift under 72-17-214 or on a removal or release of other parts under 72-17-215. (11) In the absence of contrary indications by the donor, a revocation or amendment of an a natomical gift is not a refusal to make another anatomical gift. If the donor intends a revocation to be a refusal to make an anatomical gift, the donor shall make the refusal pursuant to subsection (9).

FIGURE 9.9Montana Statute on Making Anatomical Gifts



ADVANCE FUNERAL ARRANGEMENTS While funeral ar rangements are not an adv ance directive, they are something that, if tak en care of before death, remo ves one of the least desirab le jobs the decedent’s family will be called upon to perform. Prearranged funerals are often not on the list of people who are trying to plan for the unpleasantries associated with death. But many people do have specific desires for how their funeral should be handled. Again, the one place that these desires should not be expressed is in the will. Many clients expect to see a funeral clause in the will, but the real-ity is that they will often be buried before the will is e ver found and read. The person could avoid this problem by giving a copy of the will to the designated personal representative, but the making of ar rangements after the death of a loved one is difficult even when the desires of the deceased are known. Advance funeral arrangements can alleviate these problems, help ensure that the person’ s desires will be followed, and remove the burden of making the ar rangements after the person’s death from the person’s loved ones. Preplanning can also reduce the expense of the funeral. Some clients may want to have their remains cremated and will state this desire in their will. Making adv ance ar rangements for this request is also recommended. States v ary on

advance funeral arrangements Funeral arrangements made prior to death.


FIGURE 9.10Opinion of State of New York Insurance DepartmentSource: Retrieved from www.ins.state.ny.us/rg009151.htm.

STATE OF NEW YORKINSURANCE DEPARTMENT

25 BEAVER STREET

NEW YORK, NEW YORK 10004

The Offi ce of General Counsel issued the following informal opinion on September 15, 2000, repre-senting the position of the New York State Insurance Department.

RE: Prearranged Funeral Program

Question Presented:Is the offering of a prearranged funeral program that uses an irrevocable trust, whereby the owner of a life insurance policy assigns the ownership rights to the policy’s cash values to a trust, which will use the proceeds to pay for the owner’s funeral expenses upon the owner’s death, violative of the New York Insurance Law?

Conclusion:The offering of such a prearranged funeral program that uses an irrevocable trust is violative of N.Y. Ins. Law § 4224 (McKinney 1985 & Supp. 2000).

Facts:ABC Corp. submitted an irrevocable assignment form and a consumer disclosure form that were drafted for use with a prearranged funeral program. ABC Corp. stated that the forms would be used to meet Medicare/Medicaid requirements, which ABC Corp. asserted have to be satisfi ed for citizens of this state “to transfer their assets to meet Medicare/Medicaid fi nancial qualifi cations for assistance.”ABC Corp. also stated that:

“The cash values of a life insurance policy are considered assets of the individual, and if the individual is the owner of a life insurance policy with cash values, those cash values must be included in calculating the total assets available to the individual. To remove the cash value assets out of the individual’s estate for qualifi cation purposes, the life insurance industry serving the prearranged and preneed funeral market has traditionally used a trust for the purpose of assigning to the trust the ownership rights of a cash value life insurance policy. The assignment of ownership rights is irrevocable and cannot be reversed once the irrevocable assignment is accepted by the trust.”

Analysis:The threshold issue to be addressed is whether this program, as described above, may be offered at all. In proposing to offer the prearranged funeral program through the use of an irrevocable trust, the compo-nent of the approved program that permits the benefi ciary to choose not to use the insurance proceeds for funeral benefi ts is removed. The use of an irrevocable trust negates this element. As represented, the program violates the prohibition against “tie-in” sales contained in N.Y. Ins. Law § 4224 (McKinney 1985 & Supp. 2000). Consequently, this program, as currently articulated, may not be offered.



Visit these sites to learn more about the topics covered in Chapter 9:

Shae Irving, “J.D. Health Care Declarations and Powers of Attorney for Health Care: How They Work” (2005) (accessed 12/15/05): http://estate.findlaw.com/estate-planning/living-wills/healthcare-declaration-poa-how.html

Hospice net (accessed 12/15/05): www.hospicenet.org/

American Bar Association, “Consumer’s Tool Kit for Health Care Advance Planning” (n.d.) (accessed 12/15/05): www.abanet.org/aging/toolkit/home.html

Probate and Estate Planning Section of the State Bar of Michigan, “The Durable Power of Attorney” (2001) (accessed 12/15/05): http://courts.co.calhoun.mi.us/book023.htm

Legal Services of Missouri, “Legal Aspects of Anatomical Gifts” (n.d.) (accessed 12/15/05): www.mobar.org/legalser/pamphlet/anatom.htm

Senior Health, “Don’t Take It With You” (n.d) (accessed 01/09/06): http://seniorhealth.about.com/library/weekly/aa070801a.htm

Waco Tribune Herald, “How to Choose a Prearranged Funeral” (n.d) (accessed 01/09/06): www.waco-trib.com/hp/content/special_sections/howtoguide/stories/funeral.html

CYBER TRIP

Summary There are more than wills and trusts involved in helping a client plan for the future. Increasingly, people are not just concerned about planning for what will happen to their material assets when they die, they are also concerned about planning for the final choices that they may have to make. Advance directives are ways for people to express their desires about medical treatment and other matters relating to their death. Advance directives include living wills, designation of health care sur rogate (proxy), durable power of attorney, and anatomical gifts. The terminology used to identify these instruments var-ies by state, but the y all share the same goal of allo wing the individual to express his desires before he is not capable of doing so.

Key Terms Advance directivesAdvance funeral arrangementsAgentAnatomical giftDesignation of health care surrogate (pro xy)

Do not resuscitate orderDurable power of attorneyLiving willPower of attorneyPrincipal

whether a mere expression in the testator’s will of her desire to be cremated is binding on the personal representative. Clients should, therefore, not only make advance arrangements for cremation but also discuss the matter with the likely personal representative to ensure he will follow the testator’s wishes. Care must be taken when selecting these plans because there has been a histor y of abuse by some unscrupulous funeral homes. Most states now have regulations regarding the sale of prear-ranged funeral packages. Figure 9.10 contains an opinion from the state of Ne w York Insurance Department in which a prear ranged funeral program that was tied to the use of an ir revocable trust was found to violate New York’s prohibition against “tie-in” sales.



Review Questions

1. What are advance directives? 2. What age group usually is concerned about having a living will? Should all age groups be

concerned? If so, why? 3. Does an individual usually need an attorney to help her complete a living will? If not, why

would a paralegal need to be familiar with advance directives? 4. Discuss the purpose of a living will, a durable power of attorney, and a designation of

health care surrogate. 5. How is a durable power of attorney different from a power of attorney? Why is that

difference important? 6. What are the advantages of a person making advance funeral arrangements? Why should

care be taken when selecting advance funeral arrangements? 7. What is an anatomical gift? How are they made? 8. What is the name of the federal statute dealing with advanced directives? Why is it impor-

tant? Which health care providers must comply with the statute? 9. How many states have laws relating to living wills and other advance directives?10. What ethical dilemmas might a paralegal face when drafting advance directives as part of

his duties in a wills, trusts, and estates law firm?


On October 14, 1993, Ellen Haymes attempted to commit suicide. Haymes’s sister called the 911 emergency telephone number. After an initial administration of treatment by the responding emer-gency crew, she was transported to the hospital. The hospital performed emergency surgery and respiratory ventilation. The sister allegedly presented a living will signed by Haymes to hospital personnel and demanded that Ha ymes be removed from the v entilator. The hospital personnel refused. Haymes remained on the ventilator for six more days and did recover except that she was totally blind as a result of her self-inflicted wounds. Should the hospital have respected the living will? Does Haymes have a basis to sue the hospital for its refusal to remove her from the respirator? Would it matter if the living will did not comply with statutory requirements? See Haymes v. Brookdale Hosp. Medical Center , 287 A.D.2d 486, 731 N.Y.S.2d 215 (N.Y.A.D. 2 Dept., 2001).

1. Review the facts of the Client Interview. Did Joe do anything wrong in trying to ensure that Florence’s desires were followed? Did the hospital do anything wrong? What basis could Joe have to sue the hospital? Research the laws of your state to determine what Joe needs to do next. For an interesting case on this point, see Allore v. Flower Hosp., 121 Ohio App.3d 229, 699 N.E.2d 560 (Ohio App. 6 Dist. 1997)

2. Locate a living will that can be used in your state. Complete the instrument using facts from your own life or for the life of a hypothetical person.




Vocabulary Builders

1

4

8

6

7

10

9

5

2

3

ACROSS 3. A form that allows a person to designate who will be able

to make certain health care decisions in the event that he or she is incapacitated and unable to make the decisions

7. A document that expresses a person’s desire not to have CPR performed if the person’s heart stops beating or the person stops breathing (also called a non-resuscitation order)

9. A document that expresses a person’s wish to be allowed to die without being kept alive by artificial means. It is not a will, but rather an expression of a person’s desires

10. A power of attorney that allows the agent to exercise the powers granted under the power of attorney despite the principal’s incapacitation

DOWN 1. A term used to describe a variety of legal documents that

allow people to express their desires about end-of-life care ahead of time, including a living will, durable power of at-torney, and health care proxy

2. A person who acts on behalf of another 4. Funeral arrangements made prior to death 5. The person granting power to an agent 6. A gift of a person’s tissue and/or bodily parts upon death 8. A document used to appoint someone to act as an agent

of another


191

Part Three

Probate and AdministrationCHAPTER 10 Probate

CHAPTER 11 Tax Matters Associated with Probating an Estate

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ProbateCHAPTER OBJECTIVES


• Explain the purpose of probate.

• Be able to determine when an estate needs to go through formal probate or the alternatives provided for small estates.

• Understand the steps in the probate process.

• Understand the terminology used in probate.

Up to this point, the focus of the topics that ha ve been covered has been on ways to help clients plan for the future, including what happens when they die. Chapter 10 introduces the parale gal student to what happens after the decedent’s passing. Probate is the f inal step in handling the estate of the deceased. It pro vides an orderly way for the pa yment of the decedent’s f inancial obligations and the passage of his property. The exact procedure that is followed varies depending on a number of factors. These include: whether the decedent died testate or intestate, ho w large the estate is, and whether the decedent owned property in states other than where he was domiciled at the time of his death. State la ws also vary, and paralegals must be aware of the laws of their state relating to probate.

WHY “PROBATE” IS IMPORTANT TO THE PARALEGAL STUDENT

One reality of the death of a decedent, whether she dies testate or intestate, is that her heirs will most likely need the assistance of an attor ney to comply with the probate of the estate. Most states require that a personal representati ve hire an attor ney for the estate during the probate process. The key phrase in that sentence is “attorney for the estate.” In many states, the estate is treated as a separate entity and the attorney represents the estate, not the person who is serving as personal representative or the heirs of the testate. In other states, the attorney works solely for the personal representative. In either situation, the reality is that e ven in cases where a person never got around to having an attorney draft her will, her estate or her personal representati ve will need an attorney. Paralegals are key players in the probate process. They are actively involved in every step of the process from the time the attor ney accepts the case until the f inal discharge of the probate proceedings. They are often called upon to collect the required infor mation relating to the pro-bate and assist in the gathering and protecting of assets. They are expected to complete many of the forms that will be submitted to the court, provide notice to interested parties and creditors, set up a tickler system to make sure all work is being completed in a timely manner, and field many of the telephone calls from the personal representative.

Chapter 10

192


Chapter 10 Probate 193

WHAT IS PROBATE?

The word probate has a v ery formal and solemn sound to it. Visions of g rey-haired attorneys sitting in the chambers of a b lack-robed judge having conversations full of Latin terms come to mind. Paralegals approach the topic with some trepidation, fearing the comple xities involved in the probate process. In this chapter the procedure will be broken down by steps, and along the way new terminology will be introduced to bring this topic into perspective. Let’s start with the word itself—probate. Its most basic meaning is submitting the will for proof by a court. However, the term is more often used to refer to the entire procedure of administering a decedent’s estate. Probate is certainly a solemn procedure. Many of the people who are nominated to ser ve as personal representative of an estate are closely related to the deceased. They are being asked to perform many unfamiliar duties shortly after they have suffered the loss of a loved one. Parale-gals and all members of the le gal staff must be very sensitive to the feelings of those w ho seek out their assistance in the probating of an estate. Probate is also complex, at least as it relates to the number of steps that ma y be involved in handling the case from be ginning to end. That’s the bad news. The good news is that once the paralegal learns those steps, future cases will become fairly routine unless complications, such as a will contest, arise. Figure 10.1 contains the Montana statute on the necessity of probate.

PURPOSES OF PROBATE

When a person dies, he lea ves behind many things—loved ones, heirs, proper ty, debts, and taxes. Probate provides for the orderl y wrapping up of the testator’ s affairs. It protects the assets of the decedent b y requiring the personal representati ve to collect and in ventory the property. It provides for the pa yment of the decedent’s bills and tax es and for the transfer of title to the proper ty left to the heirs. Probate protects heirs at la w, those who would take under intestate succession, who may have been left out of the will b y giving them notice of the proceedings and an opportunity to contest the will if they feel there is a valid reason, such as undue influence.

Client Interview Alice Camden died in a small rural county in Georgia on July 4, 2006. She had lived in the county’s big-gest town, Elizabethtown, all her life. Alice’s husband had died many years before, and Alice had lived alone in their family home since his death. Her health had been failing in recent years, and she had to depend on the help of friends from her church. Increasingly, she had hired help to assist in perform-ing her everyday activities like bathing and food preparation. Only three relatives survived Alice: her sister, Jane, who lived in Atlanta, and her two nieces, Ann and Fran, both daughters of her deceased brother, Frank. Ann lived in Florida, and Jan in New York. Only Ann made the trip to Elizabethtown to

attend the funeral and assist in any way she could to help in handling Alice’s estate. She was accompanied by her hus-band, Will. Ann arrived to a chaotic scene. Alice’s house was full of people. There were neighbors, friends from the church, and various caregivers who had worked for Alice in the past. The contents of the house were turned upside down. All the drawers and cabinets had been gone through, and people were taking things from the house, saying that Alice had wanted them to have the item. The will was not found until days later because it had been kept in Alice’s safe deposit box. The will nominated Linda St. Johns, one of Alice’s neighbors, as personal representative.

Case Fact Pattern

FIGURE 10.1 Montana Statute—Necessity of Probate

72-3-102. Necessity of probate of will. Except as provided in 72-3-1101, to be effective to prove the transfer of any property or to nominate an executor, a will must be declared to be valid by an order of informal probate by the clerk or an adjudication of probate by the court.


194 Part Three Probate and Administration

JURISDICTION AND VENUE

Jurisdiction and venue are two basic legal principles that need to be discussed before mo ving on to how an estate is probated. Jurisdiction is the po wer of a cour t to hear and r ule on a case. The jurisdiction of state cour ts is set out in the state’s constitution or statutes. Many states have granted jurisdiction over probate matters to separate cour ts called probate cour ts. These courts are sometimes also referred to as courts of chancery, surrogate courts, or orphan’s courts. Some states have not created separate courts that just handle probate. In those states, cour ts of general jurisdiction, such as county cour ts, circuit cour ts, and district cour ts, handle probate matters. Some courts may have a probate division. Paralegals need to check their state’s law to determine which courts have jurisdiction over probate matters. Probate is generally commenced in the state in which the decedent was domiciled at the time of her death. Sometimes, ho wever, an ancillary administration must be commenced in another state because property of the decedent was in that state at the time of death. While jurisdiction deals with the power a court has to hear and resolve a case, venue is geographi-cal in nature. For example, in Florida, jurisdiction for probate is g ranted to the circuit courts. Every circuit court in the state has the power to handle probate matters. Which circuit court is the appropri-ate one for a particular estate to be probated raises the issue of proper venue. The proper venue is the circuit court of the circuit that includes the county in w hich the deceased was domiciled at the time of his death. Figure 10.2 contains the Montana statute on venue for estate proceedings.

FORMAL PROBATE VERSUS INFORMAL PROBATE

The UPC provides for two categories of probate: for mal and infor mal. Formal probate is con-ducted before a judge, and notice is gi ven to interested persons. F ormal probate is refer red to as probate in solemn form in some states. The steps for formal probate are listed in the next section. Informal probate is, as its name implies, a simpler procedure, and notice to interested parties may not be required. Informal probate is called different things in different states including: sum-mary administration, unsupervised administration, independent probate, and probate in common form. This procedure is available for relatively small estates and requires far less paperwork and expense than formal probate. Figure 10.3 contains a checklist used b y the Clerk of the Circuit Cour t of Mar tin County, Florida, to be used in deter mining if all necessary documents have been f iled with the court. It is also a valuable tool to use in the law office to ensure completeness of documents that will be filed with the court.

THE PROCEDURE

This section will lay out the basic steps in volved in probating an estate. K eep in mind that the procedures followed vary from state to state and these steps are intended to familiarize paralegal students with the procedure in a general w ay. Paralegals must always become familiar with the statutes and rules of court that govern the probate procedure in their state. F igure 10.4 provides information on state statutes relating to probate.

jurisdictionThe power of the court to hear and rule on a case.

venueThe proper place where a case should be heard.

jurisdictionThe power of the court to hear and rule on a case.

venueThe proper place where a case should be heard.

formal probateProbate under the supervision of a judge. (Also referred to as probate in solemn form.)

Probate in solemn formSee formal probate.

informal probateA simplified probate proce-dure used for smaller estates.

formal probateProbate under the supervision of a judge. (Also referred to as probate in solemn form.)

Probate in solemn formSee formal probate.

informal probateA simplified probate proce-dure used for smaller estates.

FIGURE 10.2 Montana Statute on Venue

72-3-112. Venue for estate proceedings. (1) Venue for the fi rst informal or formal testacy or appointment proceedings after a decedent’s death is: (a) in the county where the decedent had his domicile at the time of his death; or (b) if the decedent was not domiciled in this state, in any county where property of the decedent was located at the time of his death. (2) Venue for all subsequent proceedings within the exclusive jurisdiction of the court is in the place where the initial proceeding occurred unless the initial proceeding has been transferred as provided in 72-1-203 or subsection (3) of this section. (3) If the fi rst proceeding was informal, on application of an interested person and after notice to the proponent in the fi rst proceeding, the court, upon fi nding that venue is elsewhere, may transfer the proceeding and the fi le to the other court.



FIGURE 10.3 Formal Probate ChecklistSource: Retrieved from: http://clerk-web.martin.fl.us/ClerkWeb/menu_text.htm.

CLERK OF CIRCUIT COURT

IN RE: The Estate of Case No.:______________ ________________________ Section:_______________ Deceased

CHECKLIST FOR FORMAL ADMINISTRATION

PETITION FOR FORMAL ADMINISTRATION F.S.733.202 and Rule 5.200

_____ A statement of the interest to the petitioner, the petitioner’s name and address and name and offi ce address of the petitioner’s Attorney. (FPR 5.200(a))

_____ The name, last known address, social security number, and date and place of death of the decedent and the state and county of the decedent’s domicile. (FPR 5.200(b))

_____ The death certifi cate corresponds with the Petition for the following: _____ Decedent’s name _____ Last known address _____ Place of death _____ Date of death _____ Social Security number _____ State and county of the decedent’s domicile_____ Names and addresses of benefi ciaries listed in the Will, Codicil or Separate Writing, or

heirs, their relationship to the decedent and the dates of birth of any Who are minors. (FPR 5.200(c))

_____ Statement showing venue. (FPR 5.200(d)) _____ Court requirement: if death certifi cate refl ects incorrect residence, proof of Residence

is requested, ie: Voter’s I.D.; homestead exemption._____ Certifi ed death certifi cate has been fi led for decedent (FPR 5.205, FPR 5.171, F.S. 731.103) or _____ Court requirement: temporary proof of death, i.e.: obituary, affi davit, until death

certifi cate can be obtained._____ If the decedent was a nonresident of this state, a statement whether domiciliary or principal

proceedings are pending in another state or country, if known, and, if so, the name and ad-dress of the foreign personal representative and the court issuing letters. (FPR 5.200(f))

_____ The priority under the code of the person whose appointment as the personal representa-tive is sought and a statement that the person is qualifi ed to serve under laws of Florida. (F.S.733.301(1), FPR 5.200(e))

_____ Facts/proof showing why the personal representative(s) indicated in the decedent’s will are not being appointed; ie: copy of death certifi cate.

_____ Waiver and consents from the majority of interest have been fi led, if applicable (F.S. 733.203(2), F.S. 733.301(a)(2), F.S. 733.301(b)(2), FPR 5.201)

_____ If applicable, Proof of Service of Formal Notice to all persons qualifi ed to act as personal representative and entitled to preference equal to or greater than the applicant (F.S. 733.203(2))

_____ A statement of the approximate value and nature of the assets (FPR 5.200(g)) _____ Court requirement: Distinguish between liquid and real property in order for the Court

to determine bond based on the amount of the liquid assets.

Liquid ________________________________ Non-Liquid ________________________________

_____ A petition for a lost or stolen will may be necessary pursuant to F.S. 733.207 and FPR 5.510._____ A Caveat by heir is on fi le; proof of formal notice is required (FPR 5.260(f))_____ Signature of attorney, attorney’s address, phone number and Florida Bar Number (Rules of

Judicial Administration 2.060)_____ Petition is verifi ed and signed by the petitioner(s). (FPR 5.200))

INTESTATE ESTATE—FPR 5.200(H)_____ Statement that after the exercise of reasonable diligence the petitioner is unaware of any

unrevoked wills or codicils or_____ If the petitioner is aware of any unrevoked wills or codicils a statement why the wills or codi-

cils are not being probated, or otherwise a statement of the facts concerning any such will or codicil

ANCILLARY ADMINISTRATION—F.S. 734.102; FPR 5.470:_____ An authenticated copy of probate proceedings from another jurisdiction accompanies the

petition.



TESTATE ESTATE—FPR 5.200(i):_____ Date of Will ____________________________ Benefi ciaries named in the Will, Codicil or Separate Writing or heirs and relationship to

decedent (FPR 5.200 (c)) Name Relationship ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ _____________________________________________________________________________________ Witnesses to the Will and/or Codicil. (Clerk to verify names with respect to proposed orders) ________________________________________________________________________________ _____________________________________________________________________________________ Statement identifying all unrevoked wills and codicils being presented for probate

(FPR 5.200(i))_____ Statement that the petitioner is unaware of any other unrevoked will or codicil or, if the peti-

tioner is aware of any other unrevoked will or codicil, why the other will or codicil is not being probated (FPR 5.200(i))

_____ Statement that original of decedent’s Last Will is in possession of the Court (FPR 5.200 (j)) _____ Or accompanies the petition or _____ An authenticated copy of a will probated in another jurisdiction accompanies the petition._____ Execution of the will and/or codicil conforms with statute formalities required by F.S. 732.502._____ Self-proved Will or Codicil is executed in conformity with F.S. 732.503 and complies with

Florida notary laws (F.S. Ch. 117). _____ If not self-proved, an Oath of Witness has been executed before a Circuit Judge or Clerk

in Florida or commissioner appointed by the Court (F.S. 733.201 (2), FPR 5.210) OR _____ If applicable, an Oath of the personal representative nominated by the Will has been

executed before a Circuit Judge or Clerk in Florida or Commissioner appointed by the Court or the oath of any person having no interest in the estate under the Will stating that he believes the writing to be the true last will of the decedent has been fi led. (F.S. 733.201 (3), F.S. 733.201 (2)).

_____ If applicable, the date of the will or codicil on the Oath of Witness to Will or Codicil is the same as the will or codicil.

OATH OF PERSONAL REPRESENTATIVE, DESIGNATION OF RESIDENT AGENT AND ACCEPTANCE—FPR 5.320; FPR 5.110:

May be incorporated in other pleadings (FPR 5.320 and FPR 5.110(e))._____ Before the granting of letters the personal representative has fi led an oath to faithfully

administer the estate (FPR 5.320)._____ Before letters are issued, the personal representative has fi led a designation of its residence

street address and mailing address (FPR 5.110(a))._____ The designation contains the name, residence street address, and mailing address of the

resident agent (A Florida offi ce street address and mailing address for the attorney as resident agent may be designated in lieu of a residence address) (FPR 5.110(b))

_____ The resident agent resides in the county where proceedings are pending or, if resident agent is a member of the Florida Bar, he/she resides in Florida. A designation of resident agent is not required if—(1) a PR is a corporate fi duciary having an offi ce in Florida, or (2) a Florida Bar Member who is a resident of and has an offi ce in Florida (FPR 5.110(b))

_____ The acceptance of the Resident Agent is signed and dated._____ The notary portion of the oath of PR is in conformity with the formalities required by Ch. 117

of the Florida Statutes.

ORDER ADMITTING WILL TO PROBATE AND/OR APPOINTING PERSONAL REPRESENTATIVES—F.S. 733.402; F.S. 733.403; FPR 5.235:

_____ The proposed Order Admitting the Will and/or Codicil and/or Appointing the Personal Representative has been fi led.




_____ The proposed Order Admitting Will and/or Codicil to Probate refl ects the correct names of the witnesses to the Will and/or Codicil and applicable language as to proof of Will or Codicil.

_____ The names of the decedent and the personal representative are refl ected correctly on the order._____ Provision for bond has been provided._____ The correct court jurisdiction (county/circuit) is on order._____ Provision for the court’s signature and date has been provided._____ The order contains a certifi cate of service to all interested parties along with the appropriate

number of copies and addressed, stamped envelopes.

BOND—F.S. 733.402; FPR 5.235:_____ The bond as required by the court has been submitted._____ The bond contains the correct names for the personal representative and/or the decedent._____ The bond amount, as required by the court, is correct._____ The bond is payable to the Governor and the Governor’s successors in offi ce conditioned on

the performance of all duties as PR. The bond is joint and several._____ Signature(s) of the personal representative(s) is on bond._____ Signature of the insurance agent is on bond. The bond must be signed by the Florida Resident

Agent of the surety company._____ The power of attorney has been submitted._____ The insurance company’s seal or embosser appears on the bond._____ The agent who signed the bond is refl ected on the power of attorney._____ The power of attorney covers the amount of bond set by the court._____ Pasco County Court requirement: The local agency’s name, address and phone number are

required to be located on the face of the bond.

PROPOSED LETTERS OF ADMINISTRATION—F.S. 733.401; FPR 5.235:_____ Court requirement: If applicable, a Notice of Trust has been fi led with the court. (FS 737.308(1))_____ The proposed Letters of Administration have been fi led._____ The proposed Letters of Administration refl ect the correct name for the decedent and the

personal representative._____ The correct Court jurisdiction (county/circuit) have been indicated._____ Provision for the Court’s signature and date has been provided.

OTHER:

The probate process can be intimidating to para-legals at first, but, like most skills, it becomes easier with time. Checklists and the tickler system are two important tools for both the inexperienced probate paralegal and one who has handled hundreds of probate files. The checklist helps the new paralegal make sure that all relevant information and documents have been col-lected, filed, or otherwise appropriately dealt with. The checklist helps experienced paralegals keep track of the same important information and also helps them avoid the problems that can arise from relying on memory when deal-ing with a lot of detailed information. Some of the biggest problems in a probate law firm occur not because of a lack of knowledge but because of paralegals becoming complacent about their duties. Paralegals may have been in-volved with dozens of probate proceedings and get lax about keeping their checklists current.

This creates the possibility of missing an impor-tant piece of information or document. Tickler systems are also critical to paralegals properly performing their duties in a probate firm, whether the paralegals are new to the field or very experienced. A review of this chapter will show that there are many documents to be filed, some of which are very time sensitive. In addition, the probate procedure includes many court dates that must be scheduled for and at-tended by the attorney. Memory alone is not enough to keep track of these important mat-ters. Using a tickler system will help ensure that all documents are filed in a timely manner and that the appropriate people in the probate firm are aware of upcoming court dates. The use of checklists and a tickler system are two important tools that paralegals must use to make sure that they meet their ethical duty to their clients of handling their cases in a professional manner.

Ethics Alert




FIGURE 10.4 State Laws Relating to Probate

Alabama Ala. Code tit. 43 ch. 2, Administration of Estates Ala. Code tit. 43 ch. 8, Probate Code Internet access to all Alabama statutes: http://alisdb.legislature.state.al.us/acas/

ACASLogin.asp

Alaska Alaska Stat. tit. 13, Decedents’ Estates, Guardianships, Transfers and Trusts Alaska Stat. tit. 13 ch. 16, Probate of Wills and Administration Internet access to all Alaska statutes: www.legis.state.ak.us/folhome.htm

Arizona Ariz. Rev. Stat. Ann. tit. 14, Trusts, Estates and Protective Proceedings Internet access to all Arizona state statutes: www.azleg.state.az.us/

ArizonaRevisedStatutes.asp

Arkansas Ark. Code Ann. tit. 28, Wills, Estates and Fiduciary Relationships Internet access to all Arkansas statutes: www.arkleg.state.ar.us/data/ar_code.asp

California California Probate Code Internet access to California statutes: www.leginfo.ca.gov/calaw.html

Colorado Colo. Rev. Stat. tit. 15, Probate, Trusts and Fiduciaries Internet access to all Colorado statutes: http://198.187.128.12/colorado/lpext.

dll?f=templates&fn=fs-main.htm&2.0

Connecticut Conn. Gen. Stat. tit. 45, Probate Courts and Procedure Internet access to all Connecticut statutes: www.cga.ct.gov/2005/pub/titles.htm

Delaware Del. Code Ann. tit. 12, Decedent’s Estates and Fiduciary Relations Internet access to all Delaware statutes: www.delcode.state.de.us/

District of D.C. Code Ann. Div. III, Decedent’s Estates and Fiduciary RelationsColumbia Internet access to all D.C. statutes: http://government.westlaw.com/linkedslice/

default.asp?SP=DCC-1000

Florida Fla. Stat. ch. XLII, Estates and Trusts Internet access to all Florida statutes: www.leg.state.fl.us/Statutes/

index.cfm?Mode=View%20Statutes&Submenu=1&Tab=statutes

Georgia Ga. Code Ann. tit. 53, Wills, Trusts and Administration of Estates Internet access to all Georgia statutes: www.legis.state.ga.us/cgi-bin/

gl_codes_detail.pl?code=1-1-1

Hawaii Haw. Rev. Stat. tit. 30, A Uniform Probate Code Internet access to all Hawaii statutes: www.capitol.hawaii.gov/site1/docs/

docs.asp?press1=docs

Idaho Idaho Code tit. 15, Uniform Probate Code Internet access to all Idaho statutes: www3.state.id.us/idstat/TOC/idstTOC.html

Illinois Ill. Rev. Stat. ch. 755, Estates Ill. Rev. Stat. ch. 760, Trust and Fiduciaries Internet access to all Illinois statutes: www.ilga.gov/legislation/ilcs/ilcs.asp

Indiana Ind. Code tit. 29, Probate Ind. Code tit. 30, Trusts and Fiduciaries Internet access to all Indiana statutes: www.ai.org/legislative/ic/code/

Iowa Iowa Code tit. XV subtitle 4, Probate—Fiduciaries Internet access to all Iowa statutes: www2.legis.state.ia.us/IACODE/

Kansas Kan. Stat. Ann ch. 59, Probate Code Internet access to all Kansas statutes: www.kslegislature.org/legsrv-statutes/ index.do

Kentucky Ky. Rev. Stat. Ann. ch. 40, Inheritance and Estate Taxes Ky. Rev. Stat. tit. XXXIII, Administration of Trusts and Estates Internet access to all Kentucky statutes: www.lrc.state.ky.us/statrev/frontpg.htm

Louisiana La. Rev. Ann. §9:2421, et seq., Uniform Probate Law Internet access to all Louisiana statutes: www.legis.state.la.us/lss/tsrssearch.htm

Maine Me. Rev. Stat. Ann. tit. 18, Decedent’s Estates and Fiduciary Relations Me. Rev. Stat. Ann. tit. 18, A Probate Code Internet access to all Maine statutes: http://janus.state.me.us/legis/statutes/



Maryland Md. Code Ann. tit. 1–16, Estates and Trusts Internet access to all Maryland statutes: http://mlis.state.md.us/#stat

Massachusetts Mass. Gen. L. pt. II, tit. II, Descent and Distribution Internet access to all Massachusetts statutes: www.mass.gov/legis/laws/mgl/index.htm

Michigan Mich. Comp. Laws chs. 701–713, Probate Code Internet access to all Michigan statutes: www.legislature.mi.gov/

(uuyu1x55xso43wahdwzwvqnb)/mileg.aspx?page=mclbasicsearch

Minnesota Minn. Stat. chs. 524–532, Estates of Decedents: Guardianships Internet access to all Minnesota statutes: www.leg.state.mn.us/leg/statutes.asp

Mississippi Miss. Code Ann. tit. 91, Trusts and Estates Internet access to all Mississippi statutes: www.sos.state.ms.us/ed_pubs/mscode/

Missouri Mo. Rev. Stat. tit. XXXI, Trusts and Estates of Decedents Internet access to all Missouri statutes: www.moga.state.mo.us/

STATUTES/STATUTES.HTM

Montana Mont. Code Ann. tit. 72, Estates, Trusts and Fiduciary Relationships Internet access to all Montana statutes: http://data.opi.state.mt.us/bills/

mca_toc/index.htm

Nebraska Neb. Rev. Stat. ch. 30, Decedent’s Estates Internet access to all Nebraska statutes: www.unicam.state.ne.us/laws/index.htm

Nevada Nev. Rev. Stat. tit. 12, Wills and Estates of Deceased Persons Nev. Rev. Stat. tit. 13, Guardianships; Conservatorships; Trusts Internet access to all Nevada statutes: www.leg.state.nv.us/law1.cfm

New Hampshire N.H. Rev. Stat. Ann. tit. LVI, Probate Courts and Decedents’ Estates Internet access to all New Hampshire statutes: www.gencourt.state.nh.us/

rsa/html/indexes/default.html

New Jersey N.J. Rev. Stat. tit. 3A and 3B, Administration of Estates Internet access to all New Jersey statutes: www.njleg.state.nj.us/Default.asp

New Mexico N.M. Stat. Ann. ch. 45, Uniform Probate Code N.M. Stat. Ann. ch. 46, Fiduciaries and Trusts N.M. Stat. Ann. ch. 45A, Uniform Trust Code Internet access to all New Mexico statutes: http://legis.state.nm.us/lcs/

New York N.Y. Estate Powers and Trusts Law Internet access to all New York statutes: http://public.leginfo.state.ny.us/

menugetf.cgi?COMMONQUERY=LAWS

North Carolina N.C. Gen. Stat. ch. 41, Estates N.C. Gen. Stat. ch. 47, Probate and Registration Internet access to all North Carolina statutes: www.ncleg.net/gascripts/

Statutes/Statutes.asp

North Dakota N.D. Cent. Code tit. 30.1, Uniform Probate Code Internet access to all North Dakota statutes: www.legis.nd.gov/information/

statutes/cent-code.html

Ohio Ohio Rev. Code Ann. tit. XXI, Courts Probate—Juvenile Internet access to all Ohio statutes: http://onlinedocs.andersonpublishing.com/

oh/lpExt.dll?f=templates&fn=main-h.htm&cp=PORC

Oklahoma Okla. Stat. tit. 58, Probate Procedure Okla. Stat. tit. 84, Wills and Succession Internet access to all Oklahoma statutes: www.lsb.state.ok.us/osstatuestitle.html

Oregon Or. Rev. Stat. ch. 111, Probate Law Or. Rev. Stat. ch. 112, Intestate Succession and Wills Or. Rev. Stat. ch. 113, Initiation of Estate Proceedings Or. Rev. Stat. ch. 114, Administration of Estates Or. Rev. Stat. ch. 115, Claims, Actions and Suits against Estates Internet access to all Oregon statutes: www.leg.state.or.us/ors/

Pennsylvania tit. 20, Decedents, Estates and Fiduciaries Internet access to all Pennsylvania statutes: http://members.aol.com/StatutesPa/Index.html




The following steps include infor mation primarily on testate estates. Notations are added relating to intestate estates where appropriate.

Step 1—DeathPrevious chapters have dealt with the planning and preparation stages that a person goes through in order to develop and implement an estate plan. The plan might have been as simple as the cli-ent executing a will or as complex as preparing a will, trusts, and tools available to meet a client’s individual needs. The death of the person is what sets into motion the probate procedure. For most families, the beginning of the process star ts without the assistance of an attor ney. A family member or some other lo ved one will be making the initial decisions such as funeral arrangements and notifying other family members and loved ones of the death. These activities

Rhode Island tit. 33, Probate Practice and Procedure Internet access to all Rhode Island statutes: www.rilin.state.ri.us/

Statutes/Statutes.html

South Carolina S.C. Code Ann. tit. 21, Estates, Trusts, Guardians and Fiduciaries S.C. Code Ann. tit. 62, Probate Code Internet access to all South Carolina statutes: www.scstatehouse.net/

code/statmast.htm

South Dakota S.D. Codified Laws Ann. tit. 29A, Uniform Probate Code S.D. Codified Law Ann. tit. 55, Fiduciaries and Trusts Internet access to all South Dakota statutes: http://legis.state.sd.us/statutes/

index.aspx

Tennessee Tenn. Code Ann. tit. 30, Administration of Estates Tenn. Code Ann. tit. 31, Decent and Distribution Tenn. Code Ann. tit. 32, Wills Tenn. Code Ann. tit. 35, Fiduciaries and Trusts Estates Internet access to all Tennessee statutes: www.tennesseeanytime.org/

laws/laws.html

Texas Uniform Probate Code Internet access to all Texas statutes: www.capitol.state.tx.us/statutes/

statutes.html

Utah Utah Code Ann. tit. 22, Fiduciaries and Trusts Utah Code Ann. tit. 75, Uniform Probate Code Internet access to all Utah statutes: www.le.state.ut.us/~code/code.htm

Vermont Vt. Stat. Ann. tit. 14, Decedents’ Estates and Fiduciary Relations Internet access to all Vermont statutes: www.leg.state.vt.us/statutes/statutes2.htm

Virginia VA Code Ann. tit. 64.1, Wills and Decedents’ Estates Internet access to all Virginia statutes: http://leg1.state.va.us/000/src.htm

Washington Wash. Rev. Code tit. 11, Probate and Trust Law Internet access to all Washington statutes: http://apps.leg.wa.gov/rcw/default.aspx

West Virginia W.Va. Code ch. 41, Wills Chapter 42, Descent and Distribution Chapter 44, Administration of Estates and Trusts Internet access to all West Washington statutes: www.legis.state.wv.us/WVCODE/

masterfrm3Banner.cfm

Wisconsin Wis. Stat. ch. 701, Trusts Wis. Stat. ch. 853, Wills Wis. Stat. chs. 851–882, Probate Internet access to all Wisconsin statutes: www.legis.state.wi.us/rsb/stats.html

Wyoming Wyo. Stat. tit. 2, Wills, Decedents’ Estates and Trust Internet access to all Wyoming statutes: http://legisweb.state.wy.us/titles/

statutes.htm




take the focus of f some of the impor tant legal matters that must be attended to as quickl y as possible. These include:

• Locating the will. The will is important at this early stage because there is a need to identify who the testator selected to act as personal representative of her estate.

This was not the case in the facts set out in the Client Interview at the beginning of this chapter. Alice’s will could not be obtained until days after her death because it was kept in her safe deposit box. Accessing a safe deposit box usually requires a court order, which takes time. This will also be an added expense to the administration of Alice’s estate.

• Securing the assets of the estate. The assets of the estate must be secured as quickly as pos-sible to ensure that they will be used in a manner consistent with the terms of the will and state law. The facts set out in the Client Interview are not unusual. There is a lot of confusion after someone’s death. Anyone who has worked in a law firm that deals with estates and probate will have countless stories about how property is taken before the probate process even begins. While there are procedures for the personal representative, once appointed by the court, to recover these items, it is often difficult because of the confusion surrounding the days right after the decedent’s death.

Steps should be taken immediately to reduce the potential for this problem. Valuable items should be inventoried and placed in a secure place. It should be ascertained if the items are adequately insured, and, if not, insurance should be obtained. In situations like the one in the Client Interview, the locks on the house should be changed to prevent those who had been given keys in the past from accessing the house.

• Obtaining death certificates. A death certificate is often available through the funeral home that is performing the funeral. Copies can also be obtained from the appropriate state agencies, such as the Department of Health or the Department of Vital Statistics. Many people and institutions will require one, such as the court, insurance companies, and banks.

• Depositing of the will with the clerk of the court. State law often requires that the person in custody of the will deposit it with the clerk of the court within 10 days of receiving information about the death of the testator. A will containing a self-proving provision can be admitted for probate without any further proof. If the will does not have a self-proving provision, some states require that the will be accompanied by an oath of an attesting witness. Other states may require that a hearing be scheduled to take the testimony of an attesting witness. States also provide procedures for probating lost wills. For example, § 733.207, Florida Statutes, allows any interested person to establish the contents of a lost or destroyed will by the testimony of two disinterested witnesses and by one witness in the case where a correct copy is provided.

Step 2—Hiring Legal CounselWith few exceptions, all but the smallest estates will require the assistance of an attor ney li-censed in the state in which the will is being probated. If there is no will, the attor ney should be licensed in the state in which the decedent was domiciled at the time of death. The first step the attorney will facilitate is having the client appointed as personal representative of the estate. In most states, the attorney is actually representing the estate and helping guide the personal representative through the probate procedure. Care should always be taken to avoid possible ethi-cal issues that may develop when the personal representative’s interests are contrary to those of the estate. Heirs and other interested par ties should be made aware that the attorney represents the estate.

Step 3—Petition for ProbateA petition is a written request of a cour t to take some action. The petition f iled to commence probate is called the petition for administration and may include an identif ication of whether the estate is testate or intestate, for example, petition for administration without will. Other states use the phrase petition for administration for intestate estates and probate petition for testate estates. Figure 10.5 contains an example of a petition for administration with will.

death certificateDocument issued by a state or governmental agency that gives details of a person’s death, such as the time, date, and cause of death.

death certificateDocument issued by a state or governmental agency that gives details of a person’s death, such as the time, date, and cause of death.

petitionA written request of a court to take some action.

petitionA written request of a court to take some action.

probate petitionIn some states, the name for the petition filed to commence probate in a testate estate.

probate petitionIn some states, the name for the petition filed to commence probate in a testate estate.

petition for administrationA petition filed to commence probate. The petition may include identification of whether it is a testate or intestate estate, such as petition for administration with will or petition for administration without will.

petition for administrationA petition filed to commence probate. The petition may include identification of whether it is a testate or intestate estate, such as petition for administration with will or petition for administration without will.



FIGURE 10.5 Sample Petition for Administration with Will

IN THE CIRCUIT COURT OF THE SEVENTHJUDICIAL CIRCUIT, IN AND FOR VOLUSIA

COUNTY, FLORIDAPROBATE DIVISION File #____________

IN RE: THE ESTATE OF JOHN CLARK

Deceased.

PETITION FOR ADMINISTRATION

With WillPetitioner alleges:1. Petitioner has an interest in the above estate as the person nominated to serve as personal representative in deceased’s will. Petitioner’s name and address Jane Thompson 1800 International Speedway Blvd. Daytona Beach, Volusia County, Florida 32114. The name and offi ce address of petitioner’s attorney are set forth at the end of this petition.2. Decedent, John Clark, whose last known address was 149 Willow Way Deland, Volusia County, Florida 32724, whose age was 62, and whose social security number is XXX-XX-XXXX, died on 12/31/05, and on the date of death decedent was domiciled in Volusia County, Florida.3. So far as is known, the names and addresses, of the benefi ciaries, the decedent’s surviving spouse, if any, and the dates of birth of any who are minors, are:

Name Address Relationship Birth DateMargaret Clark 149 Willow Way surviving spouse Deland, FL 32724 James Clark 101 S. Broad St. Deland, FL 32724Jane Thomson 1800 International Speedway Blvd. daughter Daytona Beach Volusia County, Florida 32114

4. Venue of this proceeding is in this county because decedent was domiciled in Volusia County at the time of his death.5. Jane Thompson, whose address is 1800 International Speedway Blvd. Daytona Beach, Volusia County, Florida 32114, and who is qualifi ed under the laws of the State of Florida to serve as personal representative of the decedent’s estate is entitled to preference in appointment as personal representative because she is nominated to serve as personal representative in decedent’s will.6. The approximate value and nature of the assets in this estate are as follows: See Attachment A.7. This estate will not be required to fi le a federal estate tax return.8. The original of the decedent’s last will, dated January 30, 1999, is in the possession of the court and accompanies this petition.9. Petitioner is not aware of any unrevoked will or codicil of decedent other than as set forth in paragraph 8. Petitioner requests that the decedent’s will be admitted to probate and that Jane Thomson be appointed personal representative of the Florida estate of the decedent. Under penalties of perjury I declare that I have read the foregoing and the facts alleged are true to the best of my knowledge and belief.

Executed January 15, 2005.

__________________________ Petitioner

_______________________Attorney for Petitioner:Mike Nixon1200 Easy WayDaytona Beach, FL 32114Phone: (383) 555-1111Florida Bar No. 074987



The following is a list of some of the typical information that must be included in the petition:

1. The name and address of the petitioner. 2. The name and address of the petitioner’s attorney. 3. The name and domicile of the decedent. Some states also require the decedent’s Social

Security number. 4. The decedent’s date of death and age. 5. The name and addresses of the surviving spouse, if any. 6. The names, address, and relationship to the decedent of other possible beneficiaries. 7. A statement showing venue and jurisdiction. 8. The priority, based on state statute, of the person whose appointment as the personal

representative is being sought, and a statement that the person is qualified to serve under the laws of the state.

9. A statement of the approximate value of the estate.10. A statement that the last will and testament of the decedent has been submitted to the court.11. If there is no will, a statement that a diligent search has been conducted to locate a will

without success.

A notice of probate and an oath of personal representative may also need to be filed. Figure 10.6 sets out the Montana statute concer ning notice of hearing on petition for for mal testacy proceedings.

Step 4—NoticeA notice must be mailed to all interested parties. This would include beneficiaries under the will and all legal heirs of the decedent. Many states allow for the next of kin to waive his or her right of actual notice of probate proceedings. It may also be required under state statute to send a no-tice to all persons who may have a preference for appointment as personal representative. Notices should be mailed in a manner that requires the recipient to sign for the mail. This can be accom-plished by certified mail with a return receipt requested, which is a very common method, or by overnight services, such as FedEx, which require that the recipient sign for the package. Man y states also allow for service by publication in some circumstances. Figure 10.7 is an example of a formal notice. Figure 10.8 contains a sample consent and waiver of notice.

Step 5—HearingA hearing will be held to deter mine the validity of the will, if needed , and to appoint the personal representative. If there are no objections, the cour t will sign an order admitting the will to probate and appointing the personal representative. If intestate, the court issues only an order appointing the personal representative. Many states require that a bond be posted, and perhaps a surety be provided, before the judge will sign the order appointing the personal representati ve. Some states do not re-quire a bond if the will contains a provision waiving such a requirement. After the order appointing the personal representative has been signed, the clerk then issues letters of administration.

noticeInforming someone that an act has been taken.

noticeInforming someone that an act has been taken.

FIGURE 10.6 Montana Statute—Notice of Hearing on Petition for Formal Testacy Proceeding

72-3-305. Notice of hearing on petition for formal testacy proceeding. (1) Upon commence-ment of a formal testacy proceeding, the court or clerk shall fi x a time and place of hearing. (2) Notice shall be given in the manner prescribed by 72-1-301 by the petitioner to the persons herein enumerated and to any additional person who has fi led a demand for notice under 72-3-106 of this code. Notice shall be given to the following persons: (a) the surviving spouse, children, and other heirs of the decedent; (b) the devisees and executors named in any will that is being or has been probated or offered for informal or formal probate in the county or that is known by the petitioner to have been probated or offered for informal or formal probate elsewhere; and (c) any personal representative of the decedent whose appointment has not been terminated. (3) In addition, the petitioner shall give notice by publication to all unknown persons and to all known persons whose addresses are unknown who have any interest in the matters being litigated. (4) Notice may be given to other persons.



As with other matters discussed in this chapter , state laws vary on the type of hearing that is required. For example, Pennsylvania provides for a less formal procedure that is conducted by the Register of Wills Office. Note: Some states refer to the document used to appoint a personal representati ve in a testate estate as letters testamentary and in an intestate estate as letters of administration. Figure 10.9 is an example of an order admitting the will to probate. F igure 10.10 is an example of letters of administration.

Step 6—Notice to CreditorsThe laws relating to the manner in w hich notice is given to creditors were dramatically changed when the Supreme Cour t handed down its decision in Tulsa Professional Collection Services v. Pope, which follows. Traditionally state laws required that a personal representative give notice to creditors by publication in a newspaper that he was appointed personal representative, giving his address and setting out a specif ic time period in w hich to submit claims ag ainst the estate. The Supreme Court’s ruling stated that actual notice, for example, by mail, must be given to all known

letters testamentaryA document used to appoint a personal representative in a testate estate.

letters testamentaryA document used to appoint a personal representative in a testate estate.

letters of administrationA document used to appoint a personal representative in an intestate estate.

letters of administrationA document used to appoint a personal representative in an intestate estate.

FIGURE 10.7 Sample Formal Notice


COUNTY, FLORIDA

PROBATE DIVISION File #____________

IN RE: THE ESTATE OF JOHN CLARKDeceased.

FORMAL NOTICEYOU ARE NOTIFIED that a Petition for Formal Administration has been fi led for the above estate, a true copy of which accompanies this notice, along with a copy of the Will proposed to be admit-ted to probate. You are required to serve written defenses on the undersigned within 20 days after service of this notice, exclusive of the day of service, and to fi le the original of the written defenses with the clerk of the above court either before service or immediately thereafter. Failure to serve and fi le written defenses as required may result in a judgment or order for the relief demanded in the pleading or motion, without further notice.

Dated _____________, 20___. ________________________ Mike Nixon 1200 Easy Way Daytona Beach, FL 32114 Phone: (383) 555-1111 Florida Bar No. 074987

FIGURE 10.8 Sample Waiver of Notice


COUNTY, FLORIDA



CONSENT AND WAIVER OF NOTICEThe undersigned, whose name and address are James Clark, 101 S. Broad St., Deland, FL, 32724, and who has an interest in the above estate as a benefi ciary under decedent’s will, acknowledges receipt of a copy of the Petition for Administration previously fi led in this proceeding, hereby waives hearing and notice of hearing thereon, and consents to an entry of an order granting the relief requested in the petition without notice or hearing.

Signed on _______________, 20___. ________________________ James Clark



Hands-on Assignment Locate your state laws relating to the issuance of letters testamentary or letters of administration. Who determines

RESEARCH THIS!

the validity of a will that is being submitted for probate? Who issues the letters testamentary or letters of administration?

CASE BRIEF

ASSIGNMENT

Read and brief the Tulsa Professional Collection Services v. Pope case on page 206. (See Appendix A for information on how to brief cases.)

FIGURE 10.9 Sample Order Admitting Will to Probate


COUNTY, FLORIDA



ORDER ADMITTING WILL TO PROBATEAND APPOINTING PERSONAL REPRESENTATIVE

The document presented to this court as the last will of John Clark, deceased, having been executed in compliance with the law of the State of Florida, and made self-proved by the acknowledgment of the decedent and the affi davits of the witnesses, made before an offi cer authorized to administer oaths and evidenced by the offi cer’s certifi cate attached to or following the will in the form required by law, and no objection having been made to its probate, and the court fi nding that the dece-dent died on December 31, 2005, and that Jane Thompson is entitled and qualifi ed to be personal representative, it is ADJUDGED that the will dated January 31, 1999, and attested by Sandra James and Margie Mills as subscribing and attesting witnesses, is admitted to probate according to law as the last will of the decedent, and it is further ADJUDGED that Jane Thompson is appointed personal representative of the estate of the decedent, and that upon taking the prescribed oath, fi ling desig-nation and acceptance of resident agent, and entering into bond in the sum of $100,000 letters of administration shall be issued. ORDERED on February 25, 2005. ________________________ Circuit Judge

FIGURE 10.10 Sample Letters of Administration


COUNTY, FLORIDA



LETTERS OF ADMINISTRATION TO ALL WHOM IT MAY CONCERN WHEREAS, John Clark, a resident of Volusia County, Florida, died on December 31, 2005, owning assets in the State of Florida, and WHEREAS, Jane Thompson has been appointed personal representative of the estate of the de-cedent and has performed all acts prerequisite to issuance of Letters of Administration in the estate, THEREFORE, I, the undersigned Circuit Judge, declare Jane Thompson, to be duly qualifi ed under the laws of the State of Florida to act as personal representative of the estate of John Clark, deceased, with full power to administer the estate according to law; to ask, demand, sue for, recover, and receive the property of the decedent; to pay the debts of the decedent as far as the assets of the estate will permit and the law directs; and to make distribution of the estate according to law. ORDERED this 19th day of March 2006. ________________________ CIRCUIT JUDGE


CASE IN POINT

ACTUAL NOTICE MUST BE GIVEN TO ALL KNOWN CREDITORS OF THE DECEDENT.

U.S. Supreme CourtTULSA PROFESSIONAL COLLECTION SERVICES

v.POPE

No. 86-1961.Argued March 2, 1988Decided April 19, 1988

206

JUSTICE O’CONNOR delivered the opinion of the Court. This case involves a provision of Oklahoma’s probate laws requiring claims “arising upon a contract” generally to be pre-sented to the executor or executrix of the estate within two months of the publication of a notice advising creditors of the commencement of probate proceedings. Okla. Stat., Tit. 58, 333 (1981). The question presented is whether this provision of no-tice solely by publication satisfies the Due Process Clause.

IOklahoma’s Probate Code requires creditors to file claims against an estate within a specified time period, and generally bars un-timely claims. Ibid. Such “nonclaim statutes” are almost univer-sally included in state probate codes. See Uniform Probate Code 3-801, 8 U. L. A. 351 (1983); Falender, Notice to Creditors in Es-tate Proceedings: What Process is Due?, 63 N.C. L. Rev. 659, 667-668 (1985). Giving creditors a limited time in which to file claims against the estate serves the State’s interest in facilitating the ad-ministration and expeditious closing of estates. See, e. g., State ex rel. Central State Griffin Memorial Hospital v. Reed, 493 P.2d 815, 818 (Okla. 1972). Nonclaim statutes come in two basic forms. Some provide a relatively short time period, generally two to six months, that begins to run after the commencement of probate proceedings. Others call for a longer period, generally one to five years, that runs from the decedent’s death. See Falender, supra, at 664-672. Most States include both types of nonclaim statutes in their probate codes, typically providing that if probate proceedings are not commenced and the shorter period therefore never is trig-gered, then claims nonetheless may be barred by the longer period. See, e. g., Ark. Code Ann. 28-50-101(a), (d) (1987) (three months if probate proceedings commenced; five years if not); Idaho Code 15-3-803(a)(1)(2) (1979) (four months; three years); Mo. Rev. Stat. 473.360(1), (3) (1986) (six months; three years). Most States also provide that creditors are to be notified of the requirement to file claims imposed by the nonclaim statutes solely by publication. See Uniform Probate Code 3-801, 8 U. L. A. 351 (1983); Falender, su-pra, at 660, n. 7 (collecting statutes). Indeed, in most jurisdictions it is the publication of notice that triggers the nonclaim statute. The Uniform Probate Code, for example, provides that creditors have four months from publication in which to file claims. Uniform Probate Code 3-801, 8 U. L. A. 351 (1983). See also, e.g., Ariz. Rev. Stat. Ann. 14-3801 (1975); Fla. Stat. 733.701 (1987); Utah Code Ann. 75-3-801 (1978). The specific nonclaim statute at issue in this case, Okla. Stat., Tit. 58, 333 (1981), provides for only a short time period and is best considered in the context of Oklahoma probate proceedings as a whole. Under Oklahoma’s Probate Code, any party interested in the estate may initiate probate proceedings by petitioning the

court to have the will proved. 22. The court is then required to set a hearing date on the petition, 25, and to mail notice of the hearing “to all heirs, legatees and devisees, at their places of resi-dence,” 25, 26. If no person appears at the hearing to contest the will, the court may admit the will to probate on the testimony of one of the subscribing witnesses to the will. 30. After the will is admitted to probate, the court must order appointment of an executor or executrix, issuing letters testamentary to the named executor or executrix if that person appears, is competent and qualified, and no objections are made. Immediately after appointment, the executor or executrix is required to “give notice to the creditors of the deceased.” Proof of compliance with this requirement must be filed with the court. This notice is to advise creditors that they must present their claims to the executor or executrix within two months of the date of the first publication. As for the method of notice, the statute requires only publication: “[S]uch notice must be published in some news-paper in [the] county once each week for two (2) consecutive weeks.” 331. A creditor’s failure to file a claim within the 2-month period generally bars it forever. 333. The nonclaim statute does provide certain exceptions, however. If the creditor is out of State, then a claim “may be presented at any time before a decree of distribution is entered.” 333. Mortgages and debts not yet due are also excepted from the 2-month time limit. This shorter type of nonclaim statute is the only one included in Oklahoma’s Probate Code. Delays in commencement of probate proceedings are dealt with not through some independent, longer period running from the decedent’s death, see, e. g., Ark. Code Ann. 28-50-101(d) (1987), but by shortening the notice period once proceedings have started. Section 331 provides that if the decedent has been dead for more than five years, then creditors have only one month after notice is published in which to file their claims. A similar 1-month period applies if the decedent was intestate.

IIH. Everett Pope, Jr., was admitted to St. John Medical Center, a hospital in Tulsa, Oklahoma, in November 1978. On April 2, 1979, while still at the hospital, he died testate. His wife, appellee JoAnne Pope, initiated probate proceedings in the District Court of Tulsa County in accordance with the statutory scheme outlined above. The court entered an order setting a hearing. Record 8. After the hearing the court entered an order admitting the will to probate and, following the designation in the will, id., at 2, named appellee as the executrix of the estate. Id., at 12. Letters testa-mentary were issued, id., at 13, and the court ordered appellee to fulfill her statutory obligation by directing that she “immediately give notice to creditors.” Id., at 14. Appellee published notice in the Tulsa Daily Legal News for two consecutive weeks beginning



July 17, 1979. The notice advised creditors that they must file any claim they had against the estate within two months of the first publication of the notice. Id., at 16. Appellant Tulsa Professional Collection Services, Inc., is a subsidiary of St. John Medical Center and the assignee of a claim for expenses connected with the decedent’s long stay at that hos-pital. Neither appellant, nor its parent company, filed a claim with appellee within the 2-month time period following publication of notice. In October 1983, however, appellant filed an Application for Order Compelling Payment of Expenses of Last Illness. Id., at 28. In making this application, appellant relied on Okla. Stat., Tit. 58, 594 (1981), which indicates that an executrix “must pay . . . the expenses of the last sickness.” Appellant argued that this specific statutory command made compliance with the 2-month deadline for filing claims unnecessary. The District Court of Tulsa County re-jected this contention, ruling that even claims pursuant to 594 fell within the general requirements of the nonclaim statute. Accord-ingly, the court denied appellant’s application. The District Court’s reading of 594’s relationship to the non-claim statute was affirmed by the Oklahoma Court of Appeals. Id., at 7. Appellant then sought rehearing, arguing for the first time that the nonclaim statute’s notice provisions violated due process. In a supplemental opinion on rehearing the Court of Ap-peals rejected the due process claim on the merits. Id., at 15. Appellant next sought review in the Supreme Court of Okla-homa. That court granted certiorari and, after review of both the 594 and due process issues, affirmed the Court of Appeals’ judgment. With respect to the federal issue, the court relied on Estate of Busch v. Ferrell-Duncan Clinic, Inc., 700 S. W. 2d 86, 88-89 (Mo. 1985), to reject appellant’s contention that our deci-sions in Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306 (1950), and Mennonite Board of Missions v. Adams, 462 U.S. 791 (1983), required more than publication notice. 733 P.2d 396 (1987). The Supreme Court reasoned that the function of notice in probate proceedings was not to “‘make a creditor a party to the proceeding’” but merely to “‘notif[y] him that he may become one if he wishes.’” Id., at 400 (quoting Estate of Busch, supra, at 88). In addition, the court distinguished probate proceedings because they do not directly adjudicate the creditor’s claims. 733 P.2d, at 400-401. Finally, the court agreed with Estate of Busch that nonclaim statutes were self-executing statutes of limitations, because they “ac[t] to cut off potential claims against the decedent’s estate by the passage of time,” and accordingly do not require actual notice. 733 P.2d, at 401. See also Gibbs v. Estate of Dolan, 146 Ill. App. 3d 203, 496 N. E. 2d 1126 (1986) (rejecting due process challenge to nonclaim statute); Gano Farms, Inc. v. Estate of Kleweno, 2 Kan. App. 2d 506, 582 P.2d 742 (1978) (same); Chalaby v. Driskell, 237 Ore. 245, 390 P.2d 632 (1964) (same); William B. Tanner Co. v. Estate of Fessler, 100 Wis. 2d 437, 302 N. W. 2d 414 (1981) (same); New York Mer-chandise Co. v. Stout, 43 Wash. 2d 825, 264 P.2d 863 (1953). This conclusion conflicted with that reached by the Nevada Supreme Court in Continental Insurance Co. v. Moseley, 100 Nev. 337, 683 P.2d 20 (1984), after our decision remanding the case for reconsideration in light of Mennonite, supra. 463 U.S. 1202 (1983). In Moseley, the Nevada Supreme Court held that in this context due process required “more than service by publication.” 100 Nev., at 338, 683 P.2d, at 21. We noted probable jurisdic-tion, 484 U.S. 813 (1987), and now reverse and remand.

IIIMullane v. Central Hanover Bank & Trust Co., supra, at 314, established that state action affecting property must generally be

accompanied by notification of that action: “An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objec-tions.” In the years since Mullane the Court has adhered to these principles, balancing the “interest of the State” and “the indi-vidual interest sought to be protected by the Fourteenth Amend-ment.” Ibid. The focus is on the reasonableness of the balance, and, as Mullane itself made clear, whether a particular method of notice is reasonable depends on the particular circumstances. The Court’s most recent decision in this area is Mennonite, su-pra, which involved the sale of real property for delinquent taxes. State law provided for tax sales in certain circumstances and for a 2-year period following any such sale during which the owner or any lienholder could redeem the property. After expiration of the redemption period, the tax sale purchaser could apply for a deed. The property owner received actual notice of the tax sale and the redemption period. All other interested parties were given notice by publication. 462 U.S., at 792–794. In Mennonite, a mortgagee of property that had been sold and on which the redemption period had run complained that the State’s failure to provide it with actual notice of these proceedings violated due process. The Court agreed, holding that “actual notice is a minimum consti-tutional precondition to a proceeding which will adversely affect the liberty or property interests of any party, whether unlettered or well versed in commercial practice, if its name and address are reasonably ascertainable.” Id., at 800 (emphasis in original). Be-cause the tax sale had “immediately and drastically diminishe[d] the value of [the mortgagee’s] interest,” id., at 798, and because the mortgagee could have been identified through “reasonably diligent efforts,” id., at 798, n. 4, the Court concluded that due process required that the mortgagee be given actual notice. Applying these principles to the case at hand leads to a similar result. Appellant’s interest is an unsecured claim, a cause of ac-tion against the estate for an unpaid bill. Little doubt remains that such an intangible interest is property protected by the Fourteenth Amendment. As we wrote in Logan v. Zimmerman Brush Co., 455 U.S. 422, 428 (1982), this question “was affir-matively settled by the Mullane case itself, where the Court held that a cause of action is a species of property protected by the Fourteenth Amendment’s Due Process Clause.” In Logan, the Court held that a cause of action under Illinois’ Fair Employment Practices Act was a protected property interest, and referred to the numerous other types of claims that the Court had previ-ously recognized as deserving due process protections. See id., at 429–431, and nn. 4-5. Appellant’s claim, therefore, is properly considered a protected property interest. The Fourteenth Amendment protects this interest, however, only from a deprivation by state action. Private use of state-sanctioned private remedies or procedures does not rise to the level of state action. See, e.g., Flagg Bros., Inc. v. Brooks, 436 U.S. 149 (1978). Nor is the State’s involvement in the mere running of a general stat-ute of limitations generally sufficient to implicate due process. See Texaco, Inc. v. Short, 454 U.S. 516 (1982). See also Flagg Bros., Inc. v. Brooks, supra, at 166. But when private parties make use of state procedures with the overt, significant assistance of state officials, state action may be found. See, e.g., Lugar v. Edmondson Oil Co., 457 U.S. 922 (1982); Sniadach v. Family Finance Corp., 395 U.S. 337 (1969). The question here is whether the State’s involvement with the nonclaim statute is substantial enough to implicate the Due Process Clause.



Appellee argues that it is not, contending that Oklahoma’s nonclaim statute is a self-executing statute of limitations. Relying on this characterization, appellee then points to Short, supra. Appellee’s reading of Short is correct—due process does not require that potential plaintiffs be given notice of the im-pending expiration of a period of limitations—but in our view, appellee’s premise is not. Oklahoma’s nonclaim statute is not a self-executing statute of limitations. It is true that nonclaim statutes generally possess some at-tributes of statutes of limitations. They provide a specific time period within which particular types of claims must be filed and they bar claims presented after expiration of that deadline. Many of the state court decisions upholding nonclaim statutes against due process challenges have relied upon these features and con-cluded that they are properly viewed as statutes of limitations. See, e. g., Estate of Busch v. Ferrell-Duncan Clinic, Inc., 700 S. W. 2d, at 89; William B. Tanner Co. v. Estate of Fessler, 100 Wis. 2d 437, 302 N. W. 2d 414 (1981). As we noted in Short, however, it is the “self-executing fea-ture” of a statute of limitations that makes Mullane and Men-nonite inapposite. See 454 U.S., at 533, 536. The State’s interest in a self-executing statute of limitations is in providing repose for potential defendants and in avoiding stale claims. The State has no role to play beyond enactment of the limitations period. While this enactment obviously is state action, the State’s limited in-volvement in the running of the time period generally falls short of constituting the type of state action required to implicate the protections of the Due Process Clause. Here, in contrast, there is significant state action. The pro-bate court is intimately involved throughout, and without that involvement the time bar is never activated. The nonclaim stat-ute becomes operative only after probate proceedings have been commenced in state court. The court must appoint the executor or executrix before notice, which triggers the time bar, can be given. Only after this court appointment is made does the stat-ute provide for any notice; 331 directs the executor or executrix to publish notice “immediately” after appointment. Indeed, in this case, the District Court reinforced the statutory command with an order expressly requiring appellee to “immediately give notice to creditors.” The form of the order indicates that such orders are routine. Record 14. Finally, copies of the notice and an affidavit of publication must be filed with the court. 332. It is only after all of these actions take place that the time period begins to run, and in every one of these actions, the court is inti-mately involved. This involvement is so pervasive and substantial that it must be considered state action subject to the restrictions of the Fourteenth Amendment. Where the legal proceedings themselves trigger the time bar, even if those proceedings do not necessarily resolve the claim on its merits, the time bar lacks the self-executing feature that Short indicated was necessary to remove any due process problem. Rather, in such circumstances, due process is directly implicated and actual notice generally is required. Cf. Mennonite, 462 U.S., at 793-794 (tax sale proceedings trigger 2-year redemption pe-riod); Logan v. Zimmerman Brush Co., supra, at 433, 437 (claim barred if no hearing held 120 days after action commenced); City of New York v. New York, N. H. & H. R. Co., 344 U.S. 293, 294 (1953) (bankruptcy proceedings trigger specific time period in which creditors’ claims must be filed). Our conclusion that the Oklahoma nonclaim statute is not a self-executing statute of limitations makes it unnecessary to consider appellant’s argument that a 2-month period is somehow unconstitutionally short. See

Tr. of Oral Arg. 22 (advocating constitutional requirement that the States provide at least one year). We also have no occasion to consider the proper characterization of nonclaim statutes that run from the date of death, and which generally provide for longer time periods, ranging from one to five years. See Falender, 63 N.C. L. Rev., at 667-669. In sum, the substantial involvement of the probate court throughout the process leaves little doubt that the running of Oklahoma’s nonclaim statute is accompanied by suf-ficient government action to implicate the Due Process Clause. Nor can there be any doubt that the nonclaim statute may “adversely affect” a protected property interest. In appellant’s case, such an adverse effect is all too clear. The entire purpose and effect of the nonclaim statute is to regulate the timeliness of such claims and to forever bar untimely claims, and by virtue of the statute, the probate proceedings themselves have com-pletely extinguished appellant’s claim. Thus, it is irrelevant that the notice seeks only to advise creditors that they may become parties rather than that they are parties, for if they do not partici-pate in the probate proceedings, the nonclaim statute terminates their property interests. It is not necessary for a proceeding to directly adjudicate the merits of a claim in order to “adversely affect” that interest. In Mennonite itself, the tax sale proceedings did not address the merits of the mortgagee’s claim. Indeed, the tax sale did not even completely extinguish that claim, it merely “diminishe[d] the value” of the interest. 462 U.S., at 798. Yet the Court held that due process required that the mortgagee be given actual notice of the tax sale. See also Memphis Light, Gas & Water Div. v. Craft, 436 U.S. 1 (1978) (termination of utility service); Schroeder v. City of New York, 371 U.S. 208 (1962) (con-demnation proceeding); City of New York v. New York, N. H. & H. R. Co., supra (Bankruptcy Code’s requirement of “reasonable notice” requires actual notice of deadline for filing claims). In assessing the propriety of actual notice in this context con-sideration should be given to the practicalities of the situation and the effect that requiring actual notice may have on impor-tant state interests. Mennonite, supra, at 798–799; Mullane, 339 U.S., at 313–314. As the Court noted in Mullane, “[c]hance alone brings to the attention of even a local resident an advertisement in small type inserted in the back pages of a newspaper.” Id., at 315. Creditors, who have a strong interest in maintaining the in-tegrity of their relationship with their debtors, are particularly un-likely to benefit from publication notice. As a class, creditors may not be aware of a debtor’s death or of the institution of probate proceedings. Moreover, the executor or executrix will often be, as is the case here, a party with a beneficial interest in the estate. This could diminish an executor’s or executrix’s inclination to call attention to the potential expiration of a creditor’s claim. There is thus a substantial practical need for actual notice in this setting. At the same time, the State undeniably has a legitimate inter-est in the expeditious resolution of probate proceedings. Death transforms the decedent’s legal relationships and a State could reasonably conclude that swift settlement of estates is so impor-tant that it calls for very short time deadlines for filing claims. As noted, the almost uniform practice is to establish such short dead-lines, and to provide only publication notice. See, e. g., Ariz. Rev. Stat. Ann. 14-3801 (1975); Ark. Code Ann. 28-50-101(a) (1987); Fla. Stat. 733.701 (1987); Idaho Code 15-3-803(a) (1979); Mo. Rev. Stat. 473.360(1) (1986); Utah Code Ann. 75-3-801 (1978). See also Uniform Probate Code 3-801, 8 U. L. A. 351 (1983); Falender, at 660, n. 7 (collecting statutes). Providing actual notice to known or reasonably ascertainable creditors, however, is not inconsistent with the goals reflected in nonclaim statutes. Actual



notice need not be inefficient or burdensome. We have repeat-edly recognized that mail service is an inexpensive and efficient mechanism that is reasonably calculated to provide actual notice. See, e. g., Mennonite, 462 U.S., at 799 , 800; Greene v. Lindsey, 456 U.S. 444, 455 (1982); Mullane, supra, at 319. In addition, Mullane disavowed any intent to require “impracticable and ex-tended searches . . . in the name of due process.” 339 U.S., at 317-318. As the Court indicated in Mennonite, all that the ex-ecutor or executrix need do is make “reasonably diligent efforts,” 462 U.S., at 798 , n. 4, to uncover the identities of creditors. For creditors who are not “reasonably ascertainable,” publication notice can suffice. Nor is everyone who may conceivably have a claim properly considered a creditor entitled to actual notice. Here, as in Mullane, it is reasonable to dispense with actual no-tice to those with mere “conjectural” claims. 339 U.S., at 317. On balance then, a requirement of actual notice to known or reasonably ascertainable creditors is not so cumbersome as to un-duly hinder the dispatch with which probate proceedings are con-ducted. Notice by mail is already routinely provided at several points in the probate process. In Oklahoma, for example, 26 requires that “heirs, legatees, and devisees” be mailed notice of the initial hear-ing on the will. Accord, Uniform Probate Code 3-403, 8 U. L. A. 274 (1983). Indeed, a few States already provide for actual notice in connection with short nonclaim statutes. See, e. g., Calif. Prob. Code Ann. 9050, 9100 (West Supp. 1988); Nev. Rev. Stat. 147.010, 155.010, 155.020 (1987); W. Va. Code 44-2-2, 44-2-4 (1982). We do not believe that requiring adherence to such a standard will be so burdensome or impracticable as to warrant reliance on publication notice alone. In analogous situations we have rejected similar arguments that a pressing need to proceed expeditiously justifies less than actual notice. For example, while we have recognized that in the bank-ruptcy context there is a need for prompt administration of claims,

United Savings Assn. of Texas v. Timbers of Inwood Forest Assoc., Ltd., 484 U.S. 365 , 375-376 (1988), we also have required actual notice in bankruptcy proceedings. Bank of Marin v. England, 385 U.S. 99 (1966); City of New York v. New York, N. H. & H. R. Co., 344 U.S. 293 (1953). See also Mullane v. Central Hanover Bank & Trust Co., supra, at 318-319 (trust proceedings). Probate proceedings are not so different in kind that a different result is required here. Whether appellant’s identity as a creditor was known or rea-sonably ascertainable by appellee cannot be answered on this record. Neither the Oklahoma Supreme Court nor the Court of Appeals nor the District Court considered the question. Appel-lee of course was aware that her husband endured a long stay at St. John Medical Center, but it is not clear that this awareness trans-lates into a knowledge of appellant’s claim. We therefore must remand the case for further proceedings to determine whether “reasonably diligent efforts,” Mennonite, supra, at 798, n. 4, would have identified appellant and uncovered its claim. If appellant’s iden-tity was known or “reasonably ascertainable,” then termination of appellant’s claim without actual notice violated due process.

IV We hold that Oklahoma’s nonclaim statute is not a self-ex-ecuting statute of limitations. Rather, the statute operates in connection with Oklahoma’s probate proceedings to “adversely affect” appellant’s property interest. Thus, if appellant’s identity as a creditor was known or “reasonably ascertainable,” then the Due Process Clause requires that appellant be given “[n]otice by mail or other means as certain to ensure actual notice.” Menno-nite, supra, at 800. Accordingly, the judgment of the Oklahoma Supreme Court is reversed and the case is remanded for further proceedings not inconsistent with this opinion. It is so ordered. JUSTICE BLACKMUN concurs in the result. CHIEF JUSTICE REHNQUIST, dissenting.

creditors of the decedent. Now all states require that such notice be gi ven to known creditors. In fact, some states even require the personal representati ve to f ile a statement regarding creditors confirming that he made a diligent search to locate creditors of the decedent. Notice b y publica-tion is still used to put unkno wn creditors on notice of probating of the estate. It is impor tant to comply with the requirements for properly notifying creditors so that their claims will be barred if not submitted in a timely manner. Figure 10.11 provides an example of a notice by publication.

Step 7—InventoryOnce the letters of administration ha ve been issued, the personal representati ve must prepare an inventory of the assets of the estate and file it with the court. The time for filing the inventory varies but typically is within 60 days of the court’s signing of the letters of administration. The inventory is a detailed list of the assets along with an estimated f air market value for each item. Some items may be easy to put a value on, such as stocks, bonds, and bank accounts. Other items ma y be more difficult, such as antiques and collectibles. In those cases an appraiser may be required to accurately estimate the value of the estate. Identif ication of each item inventoried must also be as specif ic as possible. For example, a collection of expensive porcelain figurines would include a brief description of each figurine, its maker, and any identifying name and/or number associated with the figurine.

Step 8—Payment of Debts and TaxesPart of the probate procedure is to ensure that the decedent’s legal debts and taxes are paid. Tax considerations relating to the administration of the estate will be dealt with in Chapter 11. One job of the duties of the personal representative is to pay the debts of the estate before the probate administration can be completed and closed. This process can be delayed in situations where the assets of the estate are frozen or where the will itself is contested.

notice by publicationNotice to interested parties in a newspaper of general circulation in the location where the estate is being probated.

notice by publicationNotice to interested parties in a newspaper of general circulation in the location where the estate is being probated.

inventoryA list of the assets of an estate.

inventoryA list of the assets of an estate.



Occasionally, there are insufficient assets in the estate to pay all the decedent’s debts. In those cases, state law sets out the priority in which the claims will be paid. Basically the statutes state which category of debts will be paid f irst, second, and so forth, until the assets of the estate are depleted. Mont. Code Ann. § 72-3-807 is an example of how debts are prioritized for payment in cases where there are inadequate assets to pay all the debts. The source of the funds used to satisfy the estate’s debts is also an issue that must be consid-ered. The testator can set out a specific fund for payment of the debts, such as from her residuary estate or the funds from a life insurance polic y that is payable to the estate. If she does not do so, state law will control the order in which the devises under the will shall be used for payment. Payment is divided equally by members of each group of beneficiaries. While states vary on the exact sequence, many states use the following order in which assets will abate:

1. Property that is not disposed of by the will.2. Property contained in the residuary estate.3. Property that was not specifically or demonstratively devised.4. Proper ty that was specifically or demonstratively devised.

Figure 10.12 contains the Montana statute that sets out the priority of payment in that state.

Step 9—Final Accounting and Petition for DischargeUpon completion of the payments of debts and taxes, the personal representative files a final ac-counting and a petition for discharge with the court. The final accounting includes information such as: a full accounting of all the estate’s receipts and disbursements; a statement that all claims have been paid, settled, or disposed of; a statement that all retur ns have been f iled and all taxes paid; a statement that all expenses of administration of the estate have been paid; and a plan of the proposed distribution of the estate. Beneficiaries may be allowed to submit a waiver, receipt, and consent form with the court. Figure 10.13 provides an example of a petition for discharge.

petition for dischargeA request by the personal representative to be discharged as the personal representative of the estate and for release of surety on any bond.

petition for dischargeA request by the personal representative to be discharged as the personal representative of the estate and for release of surety on any bond.

FIGURE 10.11 Sample Notice by Publication


COUNTY, FLORIDA

PROBATE DIVISIONFile #____________


NOTICE OF ACTION

TO: All unknown heirs, benefi ciaries, creditors, or all others who may have an interest in the above estate:

YOU ARE NOTIFIED that a Petition for Administration has been fi led in this court. You are required to serve a copy of your written defenses, if any, on petitioner’s attorney, whose name and address is:Mike Nixon1200 Easy WayDaytona Beach, FL 32114Phone: (383) 555-1111Florida Bar No. 074987on or before June 30, 2006, and to fi le the original of the written defenses with the clerk of this court either before service or immediately thereafter. Failure to serve and fi le written defenses as required may result in a judgment or order for the relief demanded, without further notice.

Dated on February 28, 2006. _____________________________ As Clerk of the Court By ___________________________ As Deputy ClerkFirst publication on March 1, 2006.



FIGURE 10.12 Montana State Statute—Priority of Payment

FIGURE 10.13Sample Petition for Discharge


COUNTY, FLORIDAPROBATE DIVISIONFile #____________


PETITION FOR DISCHARGE Petitioner alleges:

1. Petitioner is the personal representative of the Estate of John Clark.2. The decedent, John Clark, a resident of Volusia County, Florida, died on December 31, 2005.3. Letters of Administration were issued to petitioner on March 19, 2006.4. Accompanying the petition is a Final Accounting of all receipts and distributions made since the last accounting fi led or, if none, from the commencement of administration.5. Petitioner has fully administered this estate by making payment, settlement, or other disposition of all claims and debts that were presented, and by paying or making provision for the payment of all taxes and expenses of administration.6. Petitioner has fi led all estate tax returns with the Internal Revenue Service and with the Department of Revenue of the State of Florida, and has obtained and fi led with this court evidence of the satisfaction of this estate’s obligations for both federal and Florida estate taxes, if any.7. The compensation paid or to be paid to the personal representative, attorneys, accountants, ap-praisers, or other agents employed by the personal representative is as follows: __________________________8. Petitioner has made or proposes to make distribution of the remaining assets of this estate as follows: __________________________9. The only persons, other than petitioner, having an interest in this proceeding and their respective addresses are: __________________________10. Any objections to the Petition for Discharge, the Final Accounting, the compensation paid or proposed to be paid, or the proposed distribution of assets, must be fi led and served within 30 days from the date of service of the last of the Petition for Discharge or Final Accounting. Within 90 days of fi ling an objection, a notice of hearing thereon must be served or the objection is abandoned.11. Any objections must be in writing and state with particularity the item or items to which the objection is directed and the grounds on which the objection is based.

Petitioner requests that, after satisfactory proof has been presented that distribution has been made in accordance with the schedule of distribution and that claims of creditors have been paid or otherwise disposed of, this Court enter its order discharging Petitioner as personal representative of this estate and releasing the surety on any bond which may have posted in this proceeding.

72-3-807. Classifi cation of claims as to priority of payment. (1) If the applicable assets of the estate are insuffi cient to pay all claims in full, the personal representative shall make payment in the following order: (a) costs and expenses of administration; (b) reasonable funeral expenses and reasonable and necessary medical and hospital expenses of the last illness of the decedent, including compensation of persons attending the decedent; (c) federal estate and Montana state estate taxes; (d) debt for a current support obligation and past-due support for the decedent’s children pursu-ant to a support order as defi ned in 40-5-201; (e) debts with preference under federal and Montana law; (f) other federal and Montana state taxes; (g) all other claims. (2) A preference may not be given in the payment of any claim over any other claim of the same class, and a claim due and payable may not be entitled to a preference over claims not due.



Step 10—DischargeAssuming that all the previous steps have been satisfactorily completed, the judge will sign an or-der of discharge and authorize the personal representative to distribute the property in the estate in the manner set forth in the proposed plan for distribution. These 10 steps to probating an estate should gi ve the reader a basic understanding of the pro-bate process. As noted many times, the exact procedures and terminology may vary depending on the state in which the estate is being probated. These 10 steps should, however, provide a road map that will help paralegals travel in the right direction when working on their first probate file.

COMPENSATION OF PERSONAL REPRESENTATIVE AND ATTORNEY

As can be seen by reviewing the preceding pages of this chapter, being a personal representative can be a very time consuming under taking. While personal representatives may seek the assis-tance of professionals, such as attorneys and accountants, the ultimate responsibility falls squarely on the personal representative’s shoulders. Individuals usually serve as personal representative out of respect for the request of the decedent. Man y may not want to charge for their ser vices, but state laws do provide for reasonable compensation to the personal representative. These laws generally are tied in some way to the value of the estate or established by the court based on what appears reasonable in light of the duties perfor med by the personal representative. Figure 10.14 contains the Montana statute that sets the compensation for personal representatives. Unlike individuals who serve as a personal representative, attorneys who handle the probating of an estate do not work for free. The attorney is a professional and provides valuable service to the estate. Many state statutes provide for a fee structure in a similar manner to that provided for the personal representative. Some states allow the personal representative to agree to a fee higher than the one set out by statute, but such agreements usually must be in writing. The amount of the attorney fees must be approved by the court in some states. Figure 10.15 contains the Montana statute relating to the setting of the attorney’s compensation.

Hands-on Assignment Linda St. Johns has come to your law firm seeking assistance with the handling of Alice Camden’s estate. Using

the facts contained in the Client Interview and supplementing them as needed, draft a petition for administration.

RESEARCH THIS!

Under penalties of perjury, I declare that I have read the foregoing, and the facts alleged are true, to the best of my knowledge and belief.

Executed October 30, 2006.__________________________

Petitioner_______________________Attorney for Petitioner:Mike Nixon

1200 Easy WayDaytona Beach, FL 32114Phone: (383) 555-1111Florida Bar No. 074987

I certify that a copy hereof has been furnished to all interested parties by U.S. mail this 30th day of October, 2006.

_____________________________




Higher fees ma y also be allo wed by the cour t in the case of e xtraordinary circumstances, situations that cause more w ork than is nor mally associated with the administration of an estate. Examples of extraordinary circumstances include litigation brought by the estate and will contests.

INFORMAL PROBATE

Formal probate is designed to protect the interests of many people, including heirs at law, the tes-tator, and creditors. Those are all good things, but they come at a cost. The formal probate system requires a lot of time and effort for the personal representative, requires the payment of attorney fees, requires the use of extensive paperwork, and subjects the estate to numerous other costs. Because of this, the states have come up with a variety of simpler procedures for providing for the basic needs of small estates, such as the transfer of title to the heirs of the decedent. Another procedure, summary administration, is shown in Figure 10.16, which shows the Montana statute on summary administration. Florida has two methods of handling small estates. The first is summary administration. It can be used where the value of the entire estate, subject to administration in this state, less the value of property exempt from the claims of creditors, does not exceed $75,000. See § 735.201, Florida Statutes. The second is called disposition without administration. This method can be used if the estate left only personal property that is exempt under state law or the state constitution and per-sonal property which value does not exceed the sum of the amount of preferred funeral expenses and reasonable and necessary medical and hospital expenses of the last 60 days of the last illness.

FIGURE 10.14Montana Statute Setting Compensation for Personal Representative

72-3-631. Compensation of personal representative. (1) A personal representative is entitled to reasonable compensation for services. The compensation may not exceed 3% of the fi rst $40,000 of the value of the estate as reported for federal estate tax purposes and 2% of the value of the estate in excess of $40,000 as reported for federal estate tax purposes. However, a personal representative is entitled to a minimum compensation of the lesser of $100 or the value of the gross estate. (2) In proceedings conducted for the termination of joint tenancies, the compensation of the personal representative may not exceed 2% of the interest passing. (3) In proceedings conducted for the termination of a life estate, the compensation allowed the personal representative may not exceed 2% of the value of the life estate if it is terminated in connection with a probate or joint tenancy termination. If a life estate is terminated separately, the personal representative’s compensation may not exceed 2% of the value of the estate, except that it may not be less than $100. (4) If there is more than one personal representative, only one compensation is allowed. (5) The court may allow additional compensation for extraordinary services. The additional com-pensation may not be greater than the amount that is allowed for the original compensation. (6) If the will provides for the compensation of the personal representative and there is no contract with the decedent regarding compensation, the personal representative may renounce the provision before qualifying and be entitled to compensation under the terms of this section. A personal representative also may renounce the right to all or any part of the compensation. A written renunciation of fee may be fi led with the court.

72-3-633. Compensation of attorney. (1) If the services of an attorney are engaged by the per-sonal representative, the compensation of such attorney shall not exceed 1½ times the compensation allowable to the personal representative. (2) If the services of an attorney are engaged by the personal representative to assist in the termi-nation of joint tenancies, the compensation allowed the attorney shall not exceed 3% of the interest passing. (3) If the services of an attorney are engaged in connection with the termination of a life estate, the compensation allowed the attorney shall not exceed 3% of the value of the life estate if it is termi-nated in connection with a probate or joint tenancy termination. If a life estate is terminated separately, the attorney’s compensation shall not exceed 3%, except that it shall not be less than $100. (4) If the services of more than one attorney are engaged, only one compensation shall be allowed. (5) In cases where further compensation may be allowed to an attorney, the same must be fi xed and determined by the court upon good cause shown after notice and hearing of an application therefor.

FIGURE 10.15Montana Statute Setting Compensation for Attorney



Any interested party can request the court to issue a letter or other writing under seal of the court that authorizes the payment, transfer, or disposition of the personal proper ty, tangible or intan-gible, belonging to the decedent to those persons entitled. See § 735.301, Florida Statutes. As noted, the states ha ve adopted a v ariety of w ays to provide for the settling of small estates. Paralegals must always check the la ws of their state w hen dealing with a question relating to the proper procedure to follow. While states generally do not require that interested parties be notified in informal probate, states do require the notification of creditors. Statutes may give preference to some debts of the estate, such as medical bills incurred by the testator and funeral expenses. States vary on what kinds of debts receive preference. Compliance with this requirement is impor tant to ensure that their claims will be bar red if not submitted in a timely manner.

ANCILLARY ADMINISTRATION

Ancillary administration is used when the decedent’s estate is being probated in the state of the decedent’s domicile but the decedent owns property located in another state. This is usually done for real property located out of state but may sometimes be required for personal proper ty. The testator’s will is submitted for probate in his state of domicile. It is then submitted to probate as a foreign will in the state in which the other property is located.

WILL CONTESTS

The vast majority of wills are probated in a very routine manner. Occasionally, however, disputes do occur. Sometimes these disputes relate to the activities of the personal representative, the pay-ment or nonpayment of creditors, or tax-related issues. Perhaps the most difficult of the disputes that can come up during the administration of an estate is the will contest. A will contest is a la wsuit that challenges the v alidity of a will. The person or persons w ho bring the action must have standing, which is the legal ability to make a claim or enforce a right. In will contests, those who would take if the will is held invalid have standing to bring the suit.

ancillary administrationAdditional administration that takes place in a state other than the decedent’s domicile state because he or she owned property there.

ancillary administrationAdditional administration that takes place in a state other than the decedent’s domicile state because he or she owned property there.

will contestAn objection to the validity of a will, often based on the testator’s lack of capacity or undue influence.

will contestAn objection to the validity of a will, often based on the testator’s lack of capacity or undue influence.

CASE BRIEF

ASSIGNMENT

Read and brief the Outlaw v. Danks case on page 215. (See Appendix A for information on how to brief cases.)

FIGURE 10.16Montana Statute— Summary Administration

72-3-1103. Small estates—summary administration procedure. If it appears from the inven-tory and appraisal that the value of the entire estate, less liens and encumbrances, does not exceed homestead allowance, exempt property, family allowance, costs and expenses of administration, reasonable funeral expenses, and reasonable and necessary medical and hospital expenses of the last illness of the decedent, the personal representative, without giving notice to the creditors, may immediately disburse and distribute the estate to the persons entitled thereto and fi le a closing state-ment as provided in 72-3-1104.

72-3-1104. Small estates—closing by sworn statement of personal representative. (1) Unless prohibited by order of the court and except for estates being administered by supervised personal representatives, a personal representative may close an estate administered under the summary procedures of 72-3-1103 by fi ling with the court, at any time after disbursement and distribution of the estate, a verifi ed statement stating that: (a) to the best knowledge of the personal representative, the value of the entire estate, less liens and encumbrances, did not exceed homestead allowance, exempt property, family allowance, costs and expenses of administration, reasonable funeral expenses, and reasonable, necessary medical and hospital expenses of the last illness of the decedent; (b) the personal representative has fully administered the estate by payment of estate taxes and by disbursing and distributing it to the persons entitled to it; and (c) the personal representative has sent a copy of the closing statement to all distributees of the estate and to all creditors or other claimants of whom the personal representative is aware whose claims are neither paid nor barred and has furnished a full account in writing of the administration to the distributees whose interests are affected. (2) If actions or proceedings involving the personal representative are not pending in the court 1 year after the closing statement is fi led, the appointment of the personal representative terminates. (3) A closing statement fi led under this section has the same effect as one fi led under 72-3-1004.


215

WILL CONTEST BASED ON UNDUE INFLUENCE.

IN THECOURT OF APPEALS OF INDIANA

Outlawv.

DanksNo. 82A01-0503-CV-112

August 17, 2005

BAKER, JudgeAppellant-plaintiff Shirley Outlaw (Outlaw) appeals the trial court’s judgment in favor of appellees-defendants Scott A. Danks, as personal representative of the estate of Lillian Outlaw (Lillian), and Stevie D. Tyus. Specifically, Outlaw contends that the trial court erred in ruling that Tyus had rebutted the presumption of undue influence in the execution of Lillian’s Will. Finding that Tyus produced clear and unequivocal proof that rebutted the pre-sumption, we affirm the judgment of the trial court.

FACTSLillian was eighty-four years old when she died on October 15, 2003. In the last months of her life, she suffered from diabe-tes and blindness. Tyus was Lillian’s nephew. In 1997, at the age of forty-four, Tyus was convicted of reckless homicide, and he served three and one-half years at the Indiana Department of Correction. Prior to his incarceration, Tyus had no criminal his-tory, had been employed by General Electric for thirty-seven years, had been honorably discharged from the Army, and had earned a bachelor’s degree in Human Resources. He enjoyed a close relationship with Lillian. During his incarceration, Lillian was supportive of Tyus, and they regularly communicated by letter or telephone. Upon being released from prison in March 2001, Tyus asked Lillian if he could live with her, and she agreed. Eighty-four-year-old Luella Campbell had lived in the basement of Lillian’s home since 1993. Campbell lived there rent-free, but she assisted Lillian by cooking for her and cleaning her home. Tyus took over caretaking duties when he moved into Lillian’s home. At some point, Tyus locked the door leading from the basement to the main area of the residence so that Campbell could not walk upstairs to visit. Tyus began charging Campbell rent, and she paid $350 per month for the last three months that she lived in Lillian’s basement before moving out in the summer of 2003. On February 9, 2002, Lillian executed a Durable Power of At-torney, designating Tyus as her agent and attorney in fact. The power of attorney gave Tyus general authority to handle all of Lillian’s affairs. Also in February 2002, Tyus closed Lillian’s bank accounts, placing her money into his personal accounts and de-positing her pension and Social Security checks into his personal accounts. He did so for convenience because he was responsible for taking care of the home. On July 11, 2003, Tyus and his son Twaka Tyus took Lillian to a Fifth Third Bank in Evansville so that she could execute a “form will” that Tyus had obtained from an Office Depot store and have it nota-rized. Tyus had prepared the Will by filling in its terms and deciding who would witness it. Office Manager Jamie Roberts and another

bank employee, Jennifer Ausbrooks, were present at the signing of the Will. Ausbrooks and Twaka signed the Will as witnesses. No one read the 2003 Will to Lillian prior to her signing it, and Lillian did not say anything while the Will was executed. Lillian was shaky during the time of the execution of the Will, and Tyus assisted her in signing the Will. Tyus was the sole beneficiary of the Will. Lillian died on October 15, 2003. On November 5, 2003, Out-law admitted to probate a Will that Lillian had executed on Janu-ary 30, 1987, naming Outlaw—Lillian’s sister-in-law—as the sole beneficiary. On November 13, 2003, Tyus admitted to probate the 2003 Will. Tyus was unaware of the existence of an earlier Will. On January 8, 2004, Outlaw filed a complaint contesting the validity of the 2003 Will, alleging undue execution, unsound-ness of mind, and undue influence. A bench trial was held on September 27, 2004. Both Roberts and Ausbrooks testified at the trial that Lillian was thinking clearly and was not confused about the fact that she was signing her Will. Twaka testified that Lillian made reference to the document being her Will while they were at the bank. Twaka also testified that Lillian told him that she wanted her property to go to Tyus. Roy Outlaw, Outlaw’s brother, testified that Lillian had told him that she was leaving her property to him and Tyus. On November 18, 2004, the trial court entered its ruling, which included find-ings of fact and conclusions of law issued sua sponte, finding in favor of Tyus because he had rebutted the presumption of undue influence. Outlaw now appeals.

DISCUSSION AND DECISIONOutlaw argues that the trial court erred in finding that Tyus re-butted the presumption of undue influence. Specifically, she as-serts that this is clear error because there was no evidence that Lillian knew the contents of the 2003 Will. As we consider Outlaw’s argument, we note that sua sponte findings “control only as to the issues they cover and a general judg-ment will control as to the issues upon which there are no findings. A general judgment entered with findings will be affirmed if it can be sustained on any legal theory supported by the evidence.” Estate of Skalka v. Skalka, 751 N.E.2d 769, 771 (Ind. Ct. App. 2001). In a will contest, where the plaintiff establishes that a rela-tionship of confidence and trust existed between the testator and the defendant and the defendant benefitted from the will, a presumption of undue influence arises and shifts the burden of going forward to the dominant party. Estate of Verdi ex rel. Verdi v. Toland, 733 N.E.2d 25, 28 (Ind. Ct. App. 2000). When a judgment is entered in favor of the dominant party, we review not only the question of whether the judgment is contrary to

CASE IN POINT


law, but also whether the dominant party’s evidence is sufficient to sustain the judgment that the presumption has been rebutted under the clear and unequivocal proof standard. Lucas v. Frazee, 471 N.E.2d 1163, 1167 (Ind. Ct. App. 1984). We further note that Indiana Code section 33-42-2-2 provides in pertinent part:

(a) A notary public may not do any of the following:

. . .(4) Take the acknowledgment of any person who is

blind, without first reading the instrument to the blind person.

In order for a will to be valid, the testator, in the presence of two or more attesting witnesses, must signify to the witnesses that the in-strument is the testator’s will and either sign the will, acknowledge the testator’s signature already made, or at the testator’s direction and in the testator’s presence have someone else sign the testator’s name. The attesting witnesses must also sign in the presence of the testator and each other. Ind. Code § 29-1-5-3. When examin-ing a will, the primary purpose is to determine and carry out the intent of the testator. East v. Estate of East, 785 N.E.2d 597, 601 (Ind. Ct. App. 2003). Outlaw’s argument that there is no evidence that Lillian knew of the contents of the 2003 Will inasmuch as she was blind and no one read the Will to her at its execution essen-tially attacks the requirement that the testator signify to the witnesses that the instrument was her will. We note that the purpose of publication is to ensure that the witnesses are aware that the testator knows he is about to execute a will. Arnold v. Parry, 173 Ind. App. 300, 305, 363 N.E.2d 1055, 1058 (1978). A will is sufficiently published where the testator signified it to be her will by the act of signing it after it had been referred to as her will, fulfilling the purpose of the Statute by making the

witnesses aware that the testator knew she was signing her will. Id. at 310, 1061. While it is true that Indiana Code section 33-42-2-2(a)(4) requires a notary to read to a blind person the contents of the document to be notarized, there is no requirement that a will be notarized in order to be valid. See I.C. § 29-1-5-3. Thus, Roberts’s failure to read the 2003 Will to Lillian does no more than invalidate Roberts’s signature as a notary. The Will itself remains valid be-cause all of the requirements under Indiana Code section 29-1-5-3 were present inasmuch as Twaka testified that while at the bank they discussed in Lillian’s presence the fact that they were there to execute her Will. Tr. p. 140. And Lillian signed the Will with Tyus’s help in the presence of the witnesses. Tr. p. 7. Therefore, the 2003 Will was sufficiently published. In addition, there is ample evidence that it was Lillian’s intent to leave her property to Tyus. Several witnesses testified that Tyus’s relationship with Lillian was warm and loving—comparable to a mother-son relationship. Tr. p. 93, 132, 138. And Tyus had been caring for Lillian for two years at the time that the Will was exe-cuted. Tr. p. 42, 45, 53–55, 124–25. Thus, he was a natural object of her bounty. On the day that the Will was executed, Lillian spe-cifically made a point of saying that she was leaving everything to Tyus. Tr. p. 142. Roy Outlaw also testified that Lillian told him that she wanted to leave her property to him and Tyus. Tr. p. 126. While we are concerned about the fact that no one read aloud to a blind woman the contents of her Will before it was executed and notarized, Tyus produced clear and unequivocal proof to rebut the presumption of undue influence. We stress that the better practice in such cases would be to read the Will to the blind person before it is signed, but Tyus has rebutted the presumption of undue influence in this case. The judgment of the trial court is affirmed. RILEY, J., and MATHIAS, J., concur.


This would include those w ho would take under a prior will or under the intestate succession laws. Grounds for bringing a will contest include:

• Improper execution of the will.• The testator’s lack of mental capacity.• The testator’s signature was obtained through the exertion of undue influence. The Outlaw v.

Danks case (above) is an example of a will contest based on undue influence.• The testator’s signature was obtained through fraud.• The testator’s signature was obtained thorough coercion or duress.• The will was revoked by the testator, such as by executing a will after the one submitted to

probate.

Will contests are difficult to win because courts are reluctant to overturn a testator’s will with-out clear and convincing evidence. This is demonstrated by the fact the UPC only imposes on the proponents of the will the relatively low prima facie standard of proof that the will was properly executed. Another less common basis for challenging pro visions of a will is based on breach of con-tract. Most promises by a testator to include a gift of a specific item to an individual are treated as mere promises. Failure to comply with that promise is not a basis for suing the testator’s es-tate because the law treats it as merely a promise to make a gift. There are, however, times when a testator may promise to make a gift in e xchange for some act b y the individual. A common example of this type of arrangement occurs when a daughter promises to care for her widowed,



Visit these sites to learn more about probate and other issues discussed in Chapter 10:

Superior Court of California, County of Santa Clara, “Self Service Center” (n.d.) (accessed 12/20/05): www.scselfservice.org/probate/prop/Propertyhome.htm

John Vaughan, “Missouri Estates; Wills, Trusts, Estate Planning & Probate” (n.d.) (accessed 12/20/05): www.missouriestates.com/

Liz Pulliam Weston, “Q&A: Estate Issues” (n.d.) (accessed 12/20/05): www.latimes.com/business/investing/la-estate-story6,1,5392751.story

CYBER TRIP

elderly mother so that the mother can remain in her home instead of being put in a nursing home. In return for this, the mother promises to lea ve the daughter her house. This exchange of prom-ises and the services provided by the daughter may be sufficient to create a contractual relation-ship between the mother and daughter. That in turn could be a basis for the daughter to sue her mother’s estate if she failed to leave her the house.

Summary The probate process provides an orderly way for a decedent’s affairs to be put in order after his or her death. It provides for the payments of creditors and the distribution of the estate proper ty pursuant to the decedent’s will or by intestate succession. The size of the estate is often the deter mining factor as to w hether formal probate will be required or whether one of the alternatives to formal probate can be used. The size and nature of estates that can take advantage of the simpler procedures vary by state. It is important that para-legals be familiar with the laws of their state relating to probate. Some probate procedures are inter rupted by will contests. These contests can arise for many reasons, including: improper e xecution of the will, the testator’ s lack of mental capacity , the testator’s signature was obtained through the exertion of undue influence, the testator’s signature was obtained through fraud, the testator’s signature was obtained through coercion or duress, and the will was revoked by the testator.

Key Terms Ancillary administrationDeath certificateFormal probateInformal probateInventoryJurisdictionLetters of administrationLetters testamentaryNotice

Notice by publicationPetitionPetition for administrationPetition for dischargeProbate in solemn formProbate petitionVenueWill contest

Review Questions

1. What is the purpose of probate? 2. What are the different types of probate discussed in Chapter 10? Why is there more than one

way to probate an estate? 3. Do state laws vary on matters relating to probate? Why does that matter to the paralegal work-

ing in a wills, trusts, and estates law firm? 4. What is the difference between letters of administration and letters testamentary?



1. Research the laws of your state relating to probate. Locate and review the statutes applying to formal probate, informal probate, and other methods that can be used by small estates.

2. Research the duties of a personal representative, and review the facts set out in the Client Interview. What should Ann do at this point?

3. Research the laws and, if applicable, the rules of court relating to probate and probate proce-dure. What kind of notice is required and under what circumstances? To whom must notice be given? Who is designated as a preferred creditor?


Seven brothers and sisters sur vived Louise Hatten after her death. Prior to her death, Louise was visited by one of her sisters, Antoinette. Louise showed her will to Antoinette, in which she had disinherited three family members, her brothers Louis and Geor ge and her nephew Joseph. Louise accomplished the disinheritance by giving a dollar to each of the brothers and nothing to her nephew. The will left the decedent’s property to her sister Antoinette, her sister Jeanette, her brother Anthony, plus another sister, Helen. Subsequently, Jeanette vacationed with the decedent. The decedent told Jeanette about the contents of her will. The description was the same as previously given to Antoinette, but Jeanette never actually saw the will. After Louise died, family members, including Louis, went to her home to pick out clothes in which Louise would be laid to rest. Louis was seen going through drawers and putting papers and documents into a bag and boxes. Thereafter defendant Louis Hatten f iled a petition for administration and was named the per-sonal representative of the estate. The estate was opened as an intestate estate. What should Jeanette and Antoinette do? Is there a way for them to submit evidence regarding the will they had been told about? Will they have to be notif ied of the proceedings? If so, w hy? See In re Estate of Hatten, 880 So.2d 1271 (Fla.3d DCA 2004)


5. What is a will contest? What is its impact on the probate process? 6. What is ancillary administration? When is it required? 7. What should be included in an inventory of the decedent’s estate? 8. What are some of the grounds for contesting a will? 9. What is a petition? What petitions are involved in probating an estate? 10. What is the final step in the probate process?



Vocabulary Builders

3

4

6

9

12

5

1

7

8

2

11

10

13

14

15

ACROSS 3. A request by the personal representative to be discharged

as the personal representative of the estate and for release of surety on any bond

4. A simplified probate procedure used for smaller estates 7. The proper place where a case should be heard 8. An objection to the validity of a will, often based on the

testator’s lack of capacity or undue influence 9. A written request of a court to take some action11. Informing someone that an act has been taken12. Additional administration that takes place in a state other

than the decedent’s domicile state because he or she owned property there

13. Notice to interested parties in a newspaper of general circulation in the location where the estate is being pro-bated

14. A document used to appoint a personal representative in a testate estate

15. A document used to appoint a personal representative in an intestate estate

DOWN 1. A document issued by a state or governmental agency

that gives details of a person’s death, such as the time, date, and cause of death

2. In some states, the name for the petition filed to com-mence probate in a testate estate

5. Probate under the supervision of a judge 6. A list of the assets of an estate10. The power of the court to hear and rule on a case


Tax Matters Associated with Probating an Estate CHAPTER OBJECTIVES


• Understand the role that taxes play in probating an estate.

• Identify the various tax forms that may be required to be used by estates.

• Explain when the forms discussed in this chapter would be used.

• Understand which estates would be impacted by current estate tax laws.

• Understand the changes that have been made to the federal estate tax law and how those changes affect estate planning.

Taxes are part of the probate process. Most personal representati ves have to worry about f iling at least some tax forms relating to the decedent or the estate. This typically includes f iling state and federal income taxes for the last year the decedent was alive and for the estate itself for the years it is in probate. The estate will also need a federal employer tax identif ication number and also report the creation of a f iduciary relationship to the IRS. Other professionals, such as tax attorneys and certified public accountants (CPAs), are often called upon to assist the estate in dealing with these and other tax matters. Other forms may be needed for estates with signif icant assets. State and federal estate tax es may have to be paid, and the associated tax forms filed by the estate. The current federal estate tax law is in flux, as discussed previously, and will be discussed in more detail in this chapter . Fewer estates are subject to federal and estate taxes because of an increase in the unif ied credit. In 2007 only estates with an adjusted gross value in excess of $2,000,000 will have to be concerned about federal estate taxes.

WHY “TAX MATTERS ASSOCIATED WITH PROBATING AN ESTATE” IS IMPORTANT TO THE PARALEGAL STUDENT

Paralegals in wills, trusts, and estates law f irms are actively involved in assisting the probat-ing of estates. Part of the probate process does involve taxes, and paralegals must have a basic understanding of the taxes involved and the forms they will see during the probate process. Chapter 11 introduces the parale gal student to the basic concepts of estate tax la w and how they relate to probating an estate. It is not intended as detailed training on the estate tax. Estate tax, and the forms associated with the estate tax, is v ery complex and beyond the scope of this textbook. The paralegal student will, however, have a good understanding of the basics of estate taxes after completing this chapter.

employer tax identification number An identification number issued by the IRS to individual estates and trusts.

employer tax identification number An identification number issued by the IRS to individual estates and trusts.

Chapter 11

220


Chapter 11 Tax Matters Associated with Probating an Estate 221

THE ROLE OF TAXES IN THE PROBATE PROCESS

The personal representative of an estate is called upon to complete man y tasks. One of the most important is complying with state and federal estate tax la ws. This includes f illing out the tax forms required by the Internal Revenue Service and the state Department of Revenue. Taking these steps helps to accomplish one of the k ey pur poses of the probate process: payment of debts and taxes. The personal representative, with the assistance of her attor ney and accountant, is the principal pla yer in complying with state and federal tax re gulations. Figure 11.1 provides ans wers to some of the more common questions about the role of taxation in the probate process. Some tax returns that may have to be filed include:

• Decedent’s last federal income tax return ( IRS Form 1040 —see Figure 11.5 later in the chapter) and, if there is a state income tax where the decedent lived, a state income tax return.

• Annual income tax return for the income of the estate ( IRS Form 1041 —see Figure 11.6 later in the chapter).

• Federal gift tax return. • State intangible personal property tax return, if the state in which the decedent was domi-

ciled has such a tax. • Federal estate tax return. • State estate tax return.

IRS Form 1040 The federal income tax return form.


IRS Form 1041 The form used to report an-nual income of an estate.

IRS Form 1041 The form used to report an-nual income of an estate.

FIGURE 11.1 Questions and Answers on Estate Tax from the Internal Revenue Service Source: Most of the informa-tion for this figure came from the Internal Revenue Code: Chapter 11—Estate Tax (generally Internal Revenue Code § 2000 and the following related regula-tions and other sources). Retrieved from www.irs.gov/businesses/small/article/0,,id=108143,00.html .

Estate Tax Questions

Reminder: Most relatively simple estates (cash, publicly-traded securities, small amounts of other easily-valued assets, and no special deductions or elections, or jointly-held property) with a total value under $1,000,000 do not require the fi ling of an estate tax return.

Q: What is the Estate Tax? The Estate Tax is a tax on your right to transfer property at your death. It consists of an accounting of everything you own or have certain interests in at the date of death (Refer to Form 706). The fair market value of these items is used, not necessarily what you paid for them or what their values were when you acquired them. The total of all of these items is your “Gross Estate.” The includ-ible property may consist of Cash and Securities, Real Estate, Insurance, Trusts, Annuities, Business interests and other assets.

Once you have accounted for the Gross Estate, certain deductions (and in special circum-stances, reductions to value) are allowed in arriving at your “Taxable Estate.” These deductions may include Mortgages and other Debts, Estate Administration expenses, property that passes to Surviving Spouses and Qualifi ed Charities. The value of some operating business interests or farms may be reduced for estates that qualify. After the net amount is computed, the value of lifetime taxable gifts (beginning with gifts made in 1977) is added to this number and the tax is computed. The tax is then reduced by the available unifi ed credit. Presently, the amount of this credit reduces the computed tax so that only total taxable estates and lifetime gifts that exceed $1,000,000 will actually have to pay tax. In its current form, the estate tax only affects the wealthiest 2% of all Americans.

Client Interview Becky Stevens is the personal representative of the estate of her uncle John Matlock. She is not worried about most of the duties that she will be asked to perform. She is, however, very worried about estate taxes. The last thing she wants is a problem with the IRS. Her uncle died with a

gross estate worth approximately $1,000,000. Her friends have told her the “death tax” would take a big chunk of the estate. She has retained your firm to assist in all aspects of probating her uncle’s estate.

Case Fact Pattern



Q: Where do I fi le the return? Use the below mailing address for all tax forms fi led at the Cincinnati Service Center including Estate and Gift tax returns:

Internal Revenue Service Cincinnati, OH 45999

To mail FedEx packages, please use the following street address:

Internal Revenue Service 201 W. Rivercenter Blvd Covington, KY 41011

For questions about return accounts and extensions only (no tax law questions) call: 1-866-699-4083

All tax law questions can still be answered by calling: 1-800-829-1040

Q: When is the return due? Generally, the estate tax return is due nine months after the date of death. A six month extension is available if requested prior to the due date and the estimated correct amount of tax is paid before the due date.

Q: When can I expect the Estate Tax Closing Letter? There can be some variation, but for returns that are accepted as fi led and contain no other errors or spe-cial circumstances, you should expect to wait about 4 to 6 months after the return is fi led to receive your closing letter. Returns that are selected for examination or reviewed for statistical purposes will take longer.

Q: What is included in the Estate? The Gross Estate of the decedent consists of an accounting of everything you own or have certain interests in at the date of death (Refer to Form 706). The fair market value of these items is used, not necessarily what you paid for them or what their values were when you acquired them. The total of all of these items is your “Gross Estate.” The includible property may consist of cash and securities, real estate, insurance, trusts, annuities, business interests and other assets. Keep in mind that the Gross Estate will likely include non-probate as well as probate property.

Q: I own a ½ interest in a farm (or building or business) with my brother (sister, friend, other). What is included? Depending on how your ½ interest is held and treated under state law, and how it was acquired, you would probably only include ½ of its value in your gross estate. However, many other factors infl uence this answer, so you would need to visit with a tax or legal professional to make that determination.

Q: What is excluded from the Estate? Generally, the gross estate does not include property owned solely by the decedent’s spouse or other individuals. Lifetime gifts that are complete (no powers or other control over the gifts are retained) are not included in the Gross Estate (but taxable gifts are used in the computation of the estate tax). Life estates given to the decedent by others in which the decedent has no further control or power at the date of death are not included.

Q: What deductions are available to reduce the Estate Tax? 1. Marital Deduction: One of the primary deductions for married decedents is the Marital Deduction. All property that is included in the gross estate and passes to the surviving spouse is eligible for the marital deduction. The property must pass “outright.” In some cases, certain life estates also qualify for the marital deduction. 2. Charitable Deduction: If the decedent leaves property to a qualifying charity, it is deductible from the gross estate. 3. Mortgages and Debt. 4. Administration expenses of the estate. 5. Losses during estate administration.

Q: What other information do I need to include with the return? See Form 706 and Instructions and Publication 950. Among other items listed:

1. Copies of the death certifi cate 2. Copies of the decedent’s will and/or relevant trusts 3. Copies of appraisals 4. Copies of relevant documents regarding litigation involving the estate 5. Documentation of any unusual items shown on the return (partially included assets, losses, near date of death transfers, others).




Q: What is “Fair Market Value”? Fair Market Value is defi ned as: “The fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts. The fair market value of a particular item of property includible in the decedent’s gross estate is not to be determined by a forced sale price. Nor is the fair market value of an item of property to be determined by the sale price of the item in a market other than that in which such item is most commonly sold to the public, taking into account the location of the item wherever appropriate.” Regulation §20.2031-1.

Q: What about the value of my family business/farm? Generally, the fair market value of such interests owned by the decedent are includible in the gross estate at date of death. However, for certain farms or businesses operated as a family farm or business, reductions to these amounts may be available. In the case of a qualifying Family Farm, IRC §2032A allows a reduction from value of up to $820,000. If the decedent owned an interest in a qualifying family owned business, a deduction from the gross estate in the amount of up to $1,100,000 may be available under IRC §2057.

Q: What if I do not have everything ready for fi ling by the due date? The estate’s representative may request an extension of time to fi le for up to six months from the due date of the return. However, the correct amount of tax is still due by the due date and interest is ac-crued on any amounts still owed by the due date that are not paid at that time.

Q: Who should I hire to represent me and prepare and fi le the return? The Internal Revenue Service cannot make recommendations about specifi c individuals, but there are several factors to consider:

1. How complex is the estate? By the time most estates reach $1,000,000, there is usually some complexity involved. 2. How large is the estate? 3. In what condition are the decedent’s records? 4. How many benefi ciaries are there and are they cooperative? 5. Do I need an attorney, CPA, Enrolled Agent (EA) or other professional(s)?

With these questions in mind, it is a good idea to discuss the matter with several attorneys and CPAs or EAs. Ask about how much experience they have had and ask for referrals. This process should be similar to locating a good physician. Locate other individuals that have had similar experiences and ask for recommendations. Finally, after the individual(s) are employed and begin to work on estate matters, make sure the lines of communication remain open so that there are no surprises during administration or if the estate tax return is examined. Finally, most estates engage the services of both attorneys and CPAs or EAs. The attorney usually handles probate matters and reviews the impact of documents on the estate tax return. The CPA or EA often handles the actual return preparation and some representation of the estate in matters with the IRS. However, some attorneys handle all of the work. CPAs and EAs may also handle most of the work, but cannot take care of probate matters and other situations where a law license is required. In addition, other professionals (such as appraisers, surveyors, fi nancial advisors and others) may need to be engaged during this time.

Q: Do I have to talk to the IRS during an examination? You do not have to be present during an examination unless an IRS representative needs to ask specifi c questions. Although you may represent yourself during an examination, most executors prefer that professional(s) they have employed handle this phase of administration. They may delegate authority for this by signing a designation on the Form 706 itself, or executing Form 2848 “Power of Attorney”.

Q: What if I disagree with the examination proposals? You have many rights and avenues of appeal if you disagree with any proposals made by the IRS. See Publications 1 and 5 for an explanation of these options.

Q: What happens if I sell property that I have inherited? The sale of such property is usually considered the sale of a capital asset and may be subject to capi-tal gains (or loss) treatment. However, IRC §1014 provides that the basis of property acquired from a decedent is its fair market value at the date of death, so there is usually little or no gain to account for if the sale occurs soon after the date of death. (Remember, the rules are different for determining the basis of property received as a lifetime gift).




This chapter contains samples of man y of these for ms, along with a brief description of each. Figure 11.2 contains a table of tax forms commonly associated with probate.

STATUS OF ESTATE TAX

As was noted in Chapter 5, there is much debate o ver the continuation of the federal estate tax. The tax is scheduled to be phased out entirely as of 2010. The tax will automatically be reinstated in 2011 unless Congress acts to eliminate it before that time. States also are involved in the estate tax debate. They have taken a variety of approaches in reaction to the federal re gulation. Some plan to repeal the estate tax in a manner similar to the federal government. Others ha ve taken some steps to protect their state’ s estate tax from the changes being made in the federal estate tax. Regardless of the outcome of the debate sur rounding the estate tax, a parale gal should be fa-miliar with the basic tax and reporting forms that are used during the probating of an estate. This chapter is not intended as a detailed discussion of the state and federal estate tax la ws and how they are computed. Instead it is intended to give the paralegal student a basic understanding of the common tax matters that are dealt with during probate. It is ultimately the personal representative’s duty to comply with state and federal tax requirements. As is evident from a review of Figure 11.2 , the requirements of estate tax are more complicated than the average personal representative will be able to handle without professional help. Accountants may be called upon to provide professional assistance. Help may come from tax attorneys, whether in-house or ones who work for the attorney of the estate. Whatever the source, the personal representative will be required to have this complex task completed. The paralegal will assist the personal representative with f inding professional as-sistance and also keep track of the progress made in the completion of those tasks.

FORMS, FORMS, AND MORE FORMS! FEDERAL TAX FORMS

Anyone who deals with the IRS, w hich is pretty much e veryone since most people come into contact with the IRS at least once a y ear at tax time, knows that the IRS loves forms. Paralegal students will be happy to know that the IRS has a lot of forms that may be used in the probating

FIGURE 11.2 Table of Tax Forms Commonly Associated with Probate

Federal Tax Forms Purpose

56—Notice Concerning Fiduciary Used to notify the IRS of the creation of a Relationship fiduciary relationship such as being appointed

personal representative of an estate.

SS-4 Used to obtain a federal tax identification number to be used by the estate.

1040 Used to file the testator’s income tax for the year in which the testator died. Also used to file the estate’s income tax if it earns more than $600 per year.

706 Used to report estate tax

State Forms Purpose

Intangible personal property tax Many states, including those that do not have state income taxes, tax on intangible personal property owned by individuals, fiduciaries, and others. Examples of items subject to this tax include stocks, shares or units of a mutual funds, bonds, loans, notes, and accounts receivable.

Income tax Used to file the testator’s income tax for the year in which the testator died (may be a requirement).

Estate tax return Used to report state estate tax.



of an estate. Man y of these for ms are set out in the follo wing material along with a general discussion of when they are used. The IRS Web site ( www.irs.gov ) offers instructions and other publications dealing with the follo wing forms. The great thing about the Web site is that the information is free and can be do wnloaded and/or printed directl y from the site. One w ord of caution: Be sure to go to www.irs.gov and not www.irs.com . That site is not the official IRS Web site, and the free resources provided by the IRS are not available at that location.

IRS Form 56—Notice Concerning Fiduciary Relationship The IRS needs to be notif ied of the creation of a f iduciary relationship. Completing and f iling IRS Form 56 (see Figure 11.3 ) accomplishes this. While filing this form is voluntary, filing en-sures that future correspondence with the IRS relating to the decedent will be sent to the correct person and address. The paralegal may be called upon to complete this for m for review and signing by the per-sonal representative.

IRS Form SS-4—Application for Employer Identification Number Not only does the IRS like forms, it likes numbers, including identification numbers! IRS Form SS-4 (see Figure 11.4 ) is used to obtain a federal employer identification number (FEIN). This number is used on future communications and f ilings with the IRS that are done on behalf of the estate. It is used in the same manner that indi viduals use their Social Security number when completing their personal Form 1040 when filing their taxes each year. Paralegals may be called upon to complete this for m for review and signing by the personal representative. This form should be submitted to the IRS as soon as possib le after the appoint-ment of the personal representative because it is needed to open the estate bank account and for many other steps in the probate process, such as filing state and federal tax forms.

IRS Form 56 The form used to notify the IRS of the commencement of a fiduciary relationship.

IRS Form 56 The form used to notify the IRS of the commencement of a fiduciary relationship.

IRS Form SS-4 The form used to apply for a federal employer identification number.


Estate taxes have been a topic of much debate in recent years. Dramatic changes have been made to the estate tax laws, and more changes may be coming in the near future. Why should these changes create a potential ethical dilemma for the probate paralegal? The American Bar Association, the National Association of Legal Assistants (NALA), and the National Federation of Paralegal Associations (NFPA) all stress the importance of paralegals having the training and education needed to competently perform their duties in the law firm. This includes the need for continuing edu-cation. NALA requires its members to take con-tinuing education classes in order to retain their

Ethics Alert

Certified Legal Assistant status. The NFPA pro-vides continuing legal education classes online. Guideline 10 of The ABA Model Guidelines for the Utilization of Legal Assistant Services stresses the need for paralegals to take part in continu-ing legal education. The rapid change in the estate tax law, com-bined with the positions of the ABA, NALA, and NFPA, puts the responsibility on paralegals to keep abreast of these changes to meet their eth-ical obligation to perform their duties in a pro-fessional and competent manner. This includes reading professional journals and news reports relating to the changes and taking continuing legal education courses.

Hands-on Assignment Using the information contained in the Client Interview, prepare Form 56 and Form SS-4 for Becky Stevens. Create

RESEARCH THIS!

additional facts as needed to complete the forms. Copies of both forms can be obtained at www.irs.gov .



FIGURE 11.3 IRS Form SS-4



FIGURE 11.3 (Concluded )



FIGURE 11.4 IRS Form SS-4



IRS Form 1040—U.S. Individual Income Tax Return The personal representative is required to f ile a Form 1040 (see Figure 11.5 ) on behalf of the estate for any income earned by the decedent during the year of his death. If John Johnson dies on August 8, 2006, his estate will pay taxes on any income he earned in 2006. This is done on the same form that is used for most individual tax returns—Form 1040. The paralegal may be asked to gather information needed to complete this form. The actual preparation of the for m may be the task of the parale gal, but another professional, such as an accountant or tax attor ney, often completes it. In either case, the parale gal must ensure that cer tain information is obtained and track the pro gress of the completion of the for m. Examples of information that may be needed include the decedent’s tax returns for the three years prior to his death, all W-2s (income and tax statements), all 1099s (mone y received as an independent contractor and other sources such as interest and di vidends), and receipts of the decedent that will be needed for use in the preparation of F orm 1040 (e xamples include medical expenses and interest paid on the mortgage of the decedent’s residence). The paralegal should create a f ile for the client’s Form 1040 and place all necessar y information for completion of the for m in that f ile. The f ile for the Form 1040 should be kept as part of the probate administration file.

IRS Form 1041—U.S. Income Tax Return for Estates and Trusts The estate is a separate legal entity, and it is very possible that the estate could ear n an income from investments, business interest, etc. Estates that ear n more than $600 per year must f ile an income tax return. Form 1041 (see Figure 11.6 ) is the appropriate for m to use for this pur pose and is very similar to Form 1040. What constitutes income to the estate is similar to those items that are included as income to an individual. Examples of items that might be included in income to an estate are:

• Interests on loans or bank accounts. • Dividends. • Rents received on rental property owned by the decedent that are being administered by the

personal representative during the probate process. • Gain or loss from the sale of property. • Royalties.

Many of the deductions allowed to estates are the same as those allo wed to an individual. The IRS does, however, have special rules for certain deductions that might be used by the estate. A partial list of these deductions includes:

• Amounts paid or set aside for use by recognized charitable institutions. • Administration expenses. • Attorney fees. • Accountant fees. • Appraiser fees. • Distributions made by the estate. • Expenses to preserve the assets of the estate.

IRS Form 706—Federal Estate (and Generation-Skipping) Tax Return The federal government imposes a tax on the transfer of net assets at the time of a person’ s death. Certain deductions are allowed such as attorney fees, costs associated with the admin-istration of the estate, and state estate taxes. IRS Form 706 is used to calculate this tax. It is one of the more complicated tax return forms that is prepared for use in probate proceedings. IRS Form 706 includes numerous schedules; onl y Schedule A is included in the sample of this form (see Figure 11.9 later in the chapter). The other schedules are similar and relate to other types of assets, expenses, and liabilities of the estate.

deduction An amount that can be subtracted from the gross amount on which a tax is calculated.

deduction An amount that can be subtracted from the gross amount on which a tax is calculated.

IRS Form 706 The federal estate and generations-skipping tax return.

IRS Form 706 The federal estate and generations-skipping tax return.



Form 706 is divided into five main parts:

Part 1—Decedent and Executor This part requires general information including the decedent’s Social Security number, the name of the personal representative (executor), the personal representative’s address, the personal rep-resentative’s Social Security number , the name and location of the cour t in which the estate is being probated, and the case number.

Part 2—Tax Computation This is where the tax is computed. The information contained in Part 2 is principally taken from that contained in the schedules of Form 706.

Part 3—Elections by Executor This part relates to the various tax-related elections the personal representative may select. These include special-use valuation, election to pay taxes in installments, and election to postpone part of the taxes attributable to a reversionary or remainder interest. One of the most impor tant elec-tions of Part 3 is where the personal representative has to take the alternate method of valuation. The IRS allows the valuation of assets of an estate to be established on either of two dates, with the exception of cash. The f irst date of valuation is the decedent’s date of death. The alternate date of valuation is six months from the decedent’ s date of death. The personal representative should select the valuation date that will result in the lower value. This reduces the likelihood of the imposition of estate taxes and also protects the beneficiaries from a dramatic shift in valuation of a gift under the will shortly after the decedent’s death. For example, let’s say the decedent o wned 1,000 shares of stock in General Motors (stock symbol GM) when she died on August 3, 2005. The stock sold at an average of $36.46 per share on that date. That brought the total value of the decedent’s GM stock to $36,460. On February 3, 2006, six months after the decedent’s death, GM sold at an average price of $23.47. That brought the total value of the decedent’s GM stock to $23,470, which was $12,990 lower than the value at the time of her death.

Part 4—General Information This part of the form relates to general information about the estate, including: the death cer tificate number and name of the issuing authority; the decedent’s business or occupation; the decedent’s mari-tal status; information on individuals (other than the decedent’s spouse), trusts, or other estates that will benefit from the decedent’s estate; and whether any federal gift tax returns have ever been filed.

Part 5—Recapitulation This r equires insertion of the totals for each of the schedules. The Form 706 schedules are as follows: Schedule A—Real Property. Schedule A requires that all real property owned by the decedent individually or as tenants in common at the time of his death be listed. The information required includes a description of each piece of real proper ty and the value of the property. The property is valued at its fair market price, and mortgages on the property are not subtracted. Adjustments for mortgages are made in Schedule K. Schedule B—Stocks and Bonds. Schedule B requires that all stocks and bonds o wned by the decedent at the time of her death be listed. Pub licly traded stocks and bonds are v alued at the mean trading price for the valuation date elected. Bonds are valued in the same way as stocks. Schedule C—Mortgages, Notes, and Cash. This schedule includes the value of all mortgages, notes, and cash owned by the decedent at the time of his death. The value of any cash and/or bank accounts is based on their value at the date of death. Mortgages and notes can be valued at either the date of death or the alter nate valuation date. They are valued based on what someone would pay for them at that time, even though the mortgage or note is not yet due. This is referred to as the discount rate . Schedule D—Insurance on the Decedent’s Life. This schedule requires a listing of all insurance policies receivable by or for the benefit of the estate and any insurance policy in which the decedent retained an incident of ownership (these include: the right of the insured or estate to its economic benefits; the right to change benef iciaries; the right to sur render or cancel the policy; the right to

discount rate The value of a note based on what someone would pay for it, even though it is not yet due.




assign the policy to revoke an assignment; the right to pledge the polic y for a loan; the right to obtain from the insurer a loan ag ainst the surrender value of the policy; and having a reversionary interest of more than 5 percent of the value of the policy immediately before the decedent’s death). Schedule E—Jointly Owned Property. This schedule requires the listing of all jointl y owned property of the decedent at the time of her death. The list needs to include a description of the property, the alternate value date, the alternate value, and the value at date of death. Schedule F—Other Miscellaneous Property Not Reportable under Any Other Schedule. This schedule includes a listing of all proper ty owned by the decedent not listed on an y of the other schedules. It includes a description of the proper ty, the alternate value date, the alternate value, and the value at date of death. Schedule G—Transfers During Decedent’s Life. This schedule lists all gifts or transfers, except for incidental gifts, that the decedent made without consideration for a period of three y ears before his death. Schedule H—Powers of Appointment . This schedule includes a listing of an y proper ty for which the decedent possessed a general power of appointment at the date of death and an y property for w hich she had a general po wer of appointment w hich was exercised or released before death by disposing of it in a way that if it were a transfer of property owned by the dece-dent the property would have been included in her gross estate. Generally, property over which a decedent had a power of appointment is not included in her gross estate if she released the power completely and had no interest in or control over the property. Schedule I—Annuities . This schedule lists all the decedent’s annuities that contained a provi-sion for survivor annuity payments. The following information is included in the list: a descrip-tion and value of each annuity before any exclusions, the alternate valuation date, the includable alternate value, and the includab le value at date of death. When the decedent contributes onl y part of the purchase price of the annuity, only that portion of the value of the annuity that will be received by the surviving beneficiary to which the decedent’s payments contributed is included in the gross estate. For example, if the annuity is for $100,000 and the decedent paid 75 percent of the purchase price, only $75,000 would be included in the decedent’s gross estate. Schedule J—Funeral Expenses and Expenses Incurr ed in Administrating Property Subject to Claims. All reasonable funeral expenses from the decedent’s gross estate are listed on this schedule. Schedule K—Debts of the Decedent, and Mortg ages and Liens. This schedule is where debts are listed in order for them to be deducted from the decedent’s gross estate. Schedule L—Net Losses During Administration and Expenses Incurr ed in Administering Property Not Subject to Claims. This schedule allows the deduction of losses due to thefts, fires, storms, shipwrecks, or other casualties that occur red while the estate was being probated. The details of the loss must be described , the proper ty being claimed as lost must be identif ied, an indication of whether the property was insured must be provided, and the amount collected for the loss from the insurance company must be given. Schedule M—Bequests, etc., to Surviving Spouse . This schedule is w here all transfers to the surviving spouse are deducted from the g ross value of the estate due to the unlimited marital deduction. Schedule O—Charitable, Public, and Similar Gifts and Bequests. The IRS allows for unlim-ited gifts to qualifying entities made by the decedent during his lifetime or by his will. These are listed on Schedule O . Qualifying entities include: (1) the U .S. government, a state, a political subdivision of a state (for example, cities and counties), or the District of Columbia if made for public purposes; and (2) organizations qualified under IRS regulations to receive tax-deductible contributions. A professional appraisal is usuall y required if the donation is not made in cash, such as the donation of a painting to a public art gallery. Schedule P—Credit for Foreign Death Taxes. The IRS allo ws a credit for a decedent w ho owned property in a foreign country at the time of her death and paid an estate tax to the foreign government. Schedule P is used to determine this credit. Schedule Q—Credit for Tax on Prior Transfers. The IRS r ules allow for a credit if the decedent was himself a benef iciary of another person’s estate within the 10 y ears prior to the date of his death. This credit, determined on Schedule Q, is for the amount of tax es paid by the earlier estate and is adjusted based on the number of y ears that have passed since the decedent received the property. Figure 11.7 sets out the percentage of the tax that is allo wed as a credit by year.

power of appointment The power granted in a will, trust, or other instru-ment to determine who will benefit from a client’s will or trust.

power of appointment The power granted in a will, trust, or other instru-ment to determine who will benefit from a client’s will or trust.

annuity An investment that pays a specified amount of the principal and interest for a period of time, which is often the remainder of an investor’s life.

annuity An investment that pays a specified amount of the principal and interest for a period of time, which is often the remainder of an investor’s life.



Schedule R—Generation-Skipping Transfer Tax. This schedule is used to calculate the genera-tion-skipping transfer tax that is due from the estate. This tax was designed to recover lost rev-enue caused by property being transferred to a trust to benef it individuals who are two or more generations removed from the decedent. Examples of indi viduals removed by more than tw o generations are grandchildren and great-grandchildren. Schedule U—Qualif ied Conservation Easement Exc lusion . This exclusion, provided for in Schedule U, allows for a credit to be given to those people who voluntarily elect to create an ease-ment of real property for conservation. The property must have been owned by the decedent for a period of three years before her death and must be located in the United States. To summarize, Figure 11.8 contains a chart of the Form 706 schedules. Figure 11.9 provides Form 706.

FIGURE 11.7 Chart of Applicable Percentages Allowed under Schedule Q

Years Before Death that % Allowable Property was Acquired

<2 100 %

2 to <4 80

4 to <6 60

6 to <8 40

8 to <10 20

10+ 0

FIGURE 11.8Form 706 Schedules

Form 706 Schedules Listing Assets

Schedule A—Real Property

Schedule B—Stocks and Bonds

Schedule C—Mortgages, Notes, and Cash

Schedule D—Insurance on the Decedent’s Life

Schedule E—Jointly Owned Property

Schedule F—Other Miscellaneous Property Not Reportable under Any Other Schedule

Schedule G—Transfers During Decedent’s Life

Schedule H—Powers of Appointment

Schedule I—Annuities

Form 706 Schedules Listing Deductions

Schedule J— Funeral Expenses and Expenses Incurred in Administrating Property Subject to Claims

Schedule K—Debts of the Decedent, and Mortgages and Liens

Schedule L— Net Losses during Administration and Expenses Incurred in Administering Property Not Subject to Claims

Schedule M—Bequests, etc., to Surviving Spouse

Schedule O—Charitable, Public, and Similar Gifts and Bequests

Schedule U—Qualified Conservation Easement Exclusion

Form 706 Schedules Listing Credits

Schedule P—Credit for Foreign Death Taxes

Schedule Q—Credit for Tax on Prior Transfers

Form 706 Schedules to Calculate Additional Taxes

Schedule R—Generation-Skipping Transfer Tax



EVEN MORE FORMS! STATE TAX FORMS

Just when it looks like there could not possib ly be any additional forms that could be required when probating an estate, the states add even more to the process.

• Income tax. In states that have a state income tax, tax returns similar to those set out in the preceding are also required. This may include federal and state income taxes of the decedent. Paralegals should be familiar with the tax returns that need to be filed in their state. Figure 11.10 provides a list of states that do not have a state income tax.

• State preliminary notice . Many states require notice in a manner similar to that of IRS Form 56. Florida requires that a preliminary notice be filed with the state that includes information about the decedent, who is now in possession of the decedent’s property, information about the attorney for the estate, and whether the estate will be filing a federal estate tax return. Florida’s Form 301, Preliminary Notice and Report, is set out in Figure 11.11 .

• State estate tax return. Estate tax returns must be filed with the state if the state has an estate tax. Some states require that the personal representative submit an affidavit if the estate will not be paying any state estate taxes. A sample of the estate tax return and affidavit are set out in Figure 11.12 .

TAXABLE ESTATE

Most of the for ms that have been set out in this chapter relate to the pa yment of tax es on the decedent’s estate ( taxable estate ). The starting point in determining if the estate will be required to pay any estate taxes is the determination of the decedent’s gross estate. The gross estate consists of all the proper ty that the decedent owned at the time of his death, including property that he owned an interest in, such as jointly held property. For an idea of what kind of property is included in the gross estate, review the schedules that are used with IRS Form 706. There is a separate schedule for each type of proper ty. The property’s fair market value at the time of the decedent’ s death is generall y used to estab lish the v alue of the proper ty for estate tax purposes. However, in some cases the personal representati ve may want to use the alternate valuation method . This method allows the use of the f air market value of the property not at the time of the decedent’s death but at its value six months after his death. This can be beneficial where the value of the property has substantially decreased, such as when a stock went from $50 per share to $25 per share. Next, any items that are allowed by law to be deducted are subtracted. The resulting figure is the gross estate. These deductions include: reasonable funeral expenses, expenses incurred in administering property subject to claims (e.g., le gal fees and accountant fees), decedent’s debts, losses during the time the estate w as being administered (e.g., a f ire), property left to the surviving wife (because of the unlimited marital deduction), charitab le and public gifts, credit for foreign death taxes, credit for tax on prior transfers (e.g,. when the decedent’s estate includes property that was received from another person’s estate, a credit for taxes paid at the time the decedent received the property may be given under certain circumstances), and the

taxable estate The total value of a deceased’s assets at death that is subject to taxation, less liabilities and other deductions allowed by law.


alternate valuation method A method that allows the use of the fair market value of the property not at the time of the decedent’s death but at its value six months after his or her death.


FIGURE 11.10States without a State Income Tax

Alaska

Florida

Nevada

South Dakota

Tennessee

Texas

Washington

Wyoming



FIGURE 11.11 State of Florida Preliminary Notice Form



FIGURE 11.12 State of Florida Estate Tax Return Form



generation-skipping transfer tax. Note that all the cate gories of deductions are also included as schedules for use with Form 706. Finally, the estate receives the benefit of the unif ied tax credit. In 2007, only estates with an ad-justed gross estate in excess of $2,000,000 will be subject to the federal estate tax. See Figure 11.13 for the federal estate tax exemption for years 2000–2010. See the In re Estate of Smith case that follows for a discussion of the treatment of life insurance proceeds for tax purposes.

OTHER PROFESSIONALS INVOLVED IN TAX MATTERS

Some large wills, tr usts, and estates tax f irms may handle all aspects of the probating estates in-house. Within these f irms will be tax attorneys who will deal with the f iling of the estate tax forms. These are often the same attorneys who are actively involved in the tax issues relating to estate planning. Paralegals who work in the tax departments of large firms must be familiar with the intricate workings of estate tax law. Smaller f irms will generally use professionals from outside the f irm to help in tax matters. These would include CPAs and tax attorneys. Paralegals in these smaller f irms need a basic un-derstanding of the procedures involved and when they will be called upon to interact with these other professionals.

FIGURE 11.13 Federal Estate Tax Exemption for years 2000–2010

Year Exemption

2000 $675,000

2001 $675,000

2002 $1,000,000

2003 $1,000,000

2004 $1,500,000

2005 $1,500,000

2006 $2,000,000

2007 $2,000,000

2008 $2,000,000

2009 $3,500,000

2010 Repealed

CASE BRIEF

ASSIGNMENT

Read and brief the In re Estate of Smith case on page 248. (See the Appendix for information on how to brief cases.)

Hands-on Assignment Select a date of death for decedent James Jones, and calculate the date that would be six months after his death. Next, use a Web site that provides histori-cal stock quotes, such as Big Quotes at http://bigcharts.marketwatch.com/historical/ or Yahoo! Finance at http://finance.yahoo.com/ , to find the values of the stocks listed here for each of the two dates.

RESEARCH THIS!

Stock Name Stock Symbol

Allstate Corp. ALL Disney (Walt) Co. DIS General Electric GE Motorola, Inc. MOT

Based on your findings which valuation date would be most helpful in reducing the value of Mr. Jones’s estate?



CASE IN BRIEF

SHOULD TAX LIABILITY TO THE LIFE INSURANCE BENEFICIARIES BE APPORTIONED BASED ON THE GROSS ESTATE OR THE TAXABLE ESTATE?

In The Supreme Court Of Mississippi In re Estate of Smith

No. 2003-CA-02811-SCT. J

Jan. 20, 2005.

BEFORE WALLER, P.J., GRAVES AND DICKINSON, JJ. WALLER, PRESIDING JUSTICE, FOR THE COURT:

1. When Anthony W. Smith died without a will, he had three life insurance policies in full force and effect. The aggregate value of the proceeds of these policies was $2,155,000. The beneficiaries were Raymond Smith, Anthony’s father, who received $2,000,000; Ruth Smith, Anthony’s ex-wife, who received $125,000; and Vickie Smith, Anthony’s wife at the time of his death, who received $30,000. Raymond filed a petition in the Chancery Court of DeSoto County seeking a declaratory judgment from the chancery court that: (a) the administrator of Anthony’s estate must first pay any estate taxes out of the estate; and (b) if the estate did not have enough funds to pay the taxes in full, only then could the administrator seek contributions from the three life insurance proceeds beneficiaries. W. E. Davis, as admin-istrator of Anthony’s estate, responded that the tax liability of the estate increased substantially because of the pay-out of $2,000,000 of the life insurance proceeds. He averred that the beneficiaries’ proportionate tax liability amounted to $561,354 for Raymond; and $35,085 for Ruth,1 and that

Raymond and Ruth should be ordered to interplead these amounts into the registry of the court. Davis also argued that, without the amount of the insurance proceeds added in, the estate would not have had any estate tax liability, so the entire tax liability should be paid by the insurance beneficiaries.

2. After a hearing, the chancellor found that (1) the gross value of the estate was $9,395,811, including the insur-ance proceeds; (2) at that time the estate had a tax liability of $596,439, but all of the estate’s assets had not been secured and valued; (3) the estate could recover from the insurance beneficiaries a portion of the tax liability, but it could not recover the full tax liability; (4) to impose all of the tax liability on the insurance beneficiaries would be inequitable inasmuch as other valuable, unencumbered assets of the estate would not be taken into consideration; (5) each insurance beneficiary should contribute toward the estate tax liability a percentage of the insurance pro-ceeds equal to the proportion of the insurance proceeds to the value of the gross estate, meaning Raymond must pay 21.8% of the tax liability because the insurance proceeds

248

Visit these sites to learn more about the reasons to have a will:

Fidelity Investment, “Calculate Your Federal Estate Taxes” (n.d.) (accessed 01/10/06): http://personal.fi delity.com/planning/estate/index_calc.shtml

Missouri Department of Revenue, “Phase Out of State Death Tax Credit” (n.d.) (accessed 01/10/06): www.dor.mo.gov/tax/personal/estate/forms/

Internal Revenue Service: www.irs.gov

IRS, “Form 950: Introduction to Estate and Gifts Taxes” (2004) (accessed 01/10/06): http://fi nancialplan.about.com/gi/dynamic/offsite.htm?site=http%3A%2F%2Fftp.fedworld.gov%2Fpub%2Firs-pdf%2Fp950.pdf

AOL Money and Finance, “Estate Planning: Estate Taxes” (n.d.) (accessed 01/10/06): http://pf.channel.aol.com/basics/3canvas?id=20050225133809990011

CYBER TRIP



paid to him constituted 21.8% of the gross estate, and that Ruth must pay 1.3% of the tax liability because the insurance proceeds paid to her constituted 1.3% of the gross estate; and (6) Raymond owed $130,023 (21.8% of the tax liability) and Ruth owed $7,753 (1.3% of the tax liability) to the estate.

Discussion 3. Miss. Code Ann. § 27-10-7 (Rev. 2003) provides that

estate tax liability shall be apportioned “in the proportion that the value of the interest of each person interested in the estate bears to the total value of the interests of all persons interested in the estate,” meaning that apportionment would be based on the gross estate. However, Miss. Code Ann. § 27-10-21(Rev. 2003) provides as follows:

If the liabilities of persons interested in the estate as prescribed by this chapter differ from those which re-sult under the Federal Estate Tax Law, the liabilities im-posed by the federal law will control and the balance of this chapter shall apply as if the resulting liabilities had been prescribed herein.

26 U.S.C. § 22062 provides that if an estate consists of as-sets which include, inter alia, the proceeds of life insurance policies, the beneficiaries of the proceeds are liable for “such portion of the total tax paid as the proceeds of such policies bear to the taxable estate,” meaning that apportionment would be based on the taxable estate.

4. Therefore, because federal law controls, the apportionment of the estate’s tax liability should be based on the amount of the taxable estate, not the gross estate as the chancellor held. See, e.g., Estate of Cohen v. Crown , 954 S.W.2d 409, 411-12 (Mo. Ct. App. 1997) (federal tax law controls on issue of apportionment of tax liability when life insurance proceeds are part of an estate’s assets).

5. Smith argues that equity demands that the apportionment be based on the gross estate, not the taxable estate. How-ever, courts have consistently held that under the equitable doctrine that “equity follows the law,” courts of equity cannot modify or ignore an unambiguous statutory principle in an effort to shape relief. In re Estate of Miller , 840 So. 2d 703, 708 (Miss. 2003).

Conclusion 6. We reverse the chancellor’s decision to apportion tax liability

to the life insurance beneficiaries based on the gross estate, rather than the taxable estate. We remand this matter to the chancellor to determine the amount of the taxable estate and then to apportion the tax liability according to this opinion.

7. REVERSED AND REMANDED. SMITH, C.J., COBB, P.J., CARLSON, GRAVES, DICKINSON

AND RANDOLPH, JJ., CONCUR. EASLEY, J., DISSENTS WITHOUT SEPARATE WRITTEN OPINION.

DIAZ, J., NOT PARTICIPATING.

1 The $30,000 received by Vickie was not taxable because she was the surviving spouse.2 26 U.S.C. § 2206 as provides follows:Liability of life insurance beneficiaries. Unless the decedent directs otherwise in his will, if any part of the gross estate on which tax has been paid consists of proceeds of policies of insurance on the life of the decedent receivable by a beneficiary other than the executor, the execu-tor shall be entitled to recover from such beneficiary such portion of the total tax paid as the proceeds of such policies bear to the taxable estate. If there is more than one such beneficiary, the executor shall be entitled to recover from such beneficiaries in the same ratio. In the case of such proceeds receivable by the surviving spouse of the decedent for which a deduction is allowed under section 2056 (relating to marital deduction), this section shall not apply to such proceeds except as to the amount thereof in excess of the aggregate amount of the marital deductions al-lowed under such section.

Summary While estate tax law is one of the more complicated areas of the la w, the basics of what is done during the probate process are relatively straightforward. Paralegals must be familiar with both the federal and state tax forms that may be used during this process and understand the pur pose of each form.

Key Terms Alternate valuation method Annuity Deduction Discount rate Employer tax identification number IRS Form 1040

IRS Form 1041 IRS Form 56 IRS Form 706 IRS Form SS-4 Power of appointment Taxable estate

Review Questions

1. What year will the phase-out of the federal estate tax be completed? What will happen if Congress does not act to make the elimination of the tax permanent?

2. What form is used to report the income of an estate? How much income must the estate have in order to be required to file this form?



Research the laws of your state to determine if your state has a state income tax. If it does not, lo-cate a nearby state that has an estate tax. Research the law to determine how your state is dealing with the changes in the federal estate tax laws. Is your state eliminating the tax in a manner similar to the federal government? If not, what procedure will it follow?


3. Why will it normally be necessary for an IRS Form 1040 to be filed the year after the de-ceased died?

4. What form is used to obtain a federal employer tax identification number? 5. What tax forms must most estates file? 6. What is the most difficult tax form to complete of those discussed in Chapter 11? Why? 7. What are some of the tasks that a paralegal may be called upon to complete when working

on the tax-related matters discussed in Chapter 11? 8. Why is it important for the paralegal to stay up to date on changes to the estate tax laws? 9. List five examples of items that might be included as income to an estate. 10. What is a deduction? List seven deductions that an estate may be allowed to take?


Review the facts about Becky Stevens contained in the Client Interview. Based on what you have read in this chapter and lear ned by doing additional research on the topic, w hat would you tell Becky? Should she worry? Why or why not? Were her friends right? Why or why not?



Vocabulary Builders

ACROSS 2. The form used to apply for a federal employer identifi ca-

tion number 3. A method that allows the use of the fair market value of

the property not at the time of the decedent’s death but at its value six months after his or her death

5. The form used to report annual income of an estate 7. The federal income tax return form 8. An identification number issued by the IRS to individual

estates and trusts 9. The value of a note based on what someone would pay

for it, even though it is not yet due 10. The power granted in a will, trust, or other instrument to

determine who will benefit from a client’s will or trust

DOWN 1. The federal estate and generations-skipping tax return 3. An investment that pays a specified amount of the principal

and interest for a period of time, which is often the remain-der of an investor’s life

4. An amount that can be deducted 5. The form used to notify the IRS of the commencement of a

fiduciary relationship 6. The total value of a deceased’s assets at death that is subject

to taxation, less liabilities and other deductions allowed by law

3

7

9

2

1

6

4

8

10

5


GUIDE TO LOCATING LEGAL INFORMATION ON THE WEB AND BRIEFING CASES

There are many skills that paralegal students must develop before they begin working in a law office. One of the most important is legal research. This guide is designed to give students a basic understanding of the concept of legal reasoning, an introduction to how to locate legal informa-tion via the Internet, and how to brief cases.

WHY WE RESEARCH

The foundation of the le gal profession is the la w itself: the Constitution, the constitution of each state, federal and state statutes, and case law. Judges seldom want to hear about an attorney’s opinion on a matter. What they want to know is what legal authority is controlling in resolving the matter. So, the simple answer to why we research is to find case and statutory law that provides infor-mation on an area of the law or that helps us answer a legal question. How legal research is performed has undergone a tremendous change as the le gal profession has moved into the computer age. Increasingly legal research is done by use of the computer and the Internet. This has caused many law firms to reduce the size of their in-house la w library or eliminate it altogether.

SEARCH TERMS

Key words and phrases are often used to locate legal information. These are the same words and phrases that paralegal students study in their law classes. For example, a student studying wills might use the ter m competency when trying to f ind information on the validity of a will. Lik e most skills, the best way to improve your ability to f ind legal information on the Internet is by repetition. Pick a fe w words from the v ocabulary being studied in y our current class, and use them to perform Internet searches. Start by using a source that is used b y everyone these days—Google. Visit www.google.com and perform searches for a number of k ey legal words and phrases. A vast number of sites with information will pop up. Take some time and explore the more interesting ones. While using Google is not the preferred means of f inding legal information, it is a good way to practice searching the Internet using key words and phrases. One word of caution: Always analyze the reliability of the Web sites that turn up in your search. All Web sites are not equally reliable! Many are maintained by people with no real background in the area. Others are maintained by people with a biased view on the topic being researched. Caution is the key when search engines such as Google are used because they do not screen out unreliable information. What follows is information on other Internet resources that are more appropriate for le gal research.

INTERNET LEGAL RESEARCH RESOURCES

The Internet is a tremendous resource for legal information. Many of these sources are free; these sites are the focus of this article. There are also paid sites that students may have access to in their classroom or will have access to in their future employment. Whether free or for a fee, the use of online law libraries and resources is increasingly the way legal research is done. Traditional law libraries, with hundreds of bound books, are slowly disappearing.

Appendix A

252

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Appendix A 253

Paid Sites Westlaw and Lexis are the two main providers of paid computerized le gal research. Both offer a wide variety of legal resources such as cases for all state and federal cour ts, state and federal statutes, and treatises on various areas of the law and law reviews. The advantages of both are their v ast databases and g reat search engines to help researchers find the information they need. The disadvantage is that they are relatively expensive. They are very similar services, and which one to use is largely based on personal preference rather than a substantive difference between the two. Attorneys often select the one they were more comfortable using while in law school.

Westlaw West is one of the oldest le gal publishers in the United States. It de veloped the regional case reporter system that has been the mainsta y of legal research for generations of researchers. Its many publications are available through Westlaw. To learn more about how to use Westlaw visit:

http://paralegal.westlaw.com/ http://west.thomson.com/store/product.asp?product%5Fid=Westlaw&catalog%5Fname=wgstore http://west.thomson.com/westlaw/training/paralegal/

Lexis Lexis is one of the pioneers in computer -aided legal research. The information contained in its databases is similar to that of Westlaw. To learn more about Lexis, visit:

www.lexis.com http://web.lexis.com/help/multimedia/tour.htm Lexis.com Online Tutorials: http://web.lexis.com/help/multimedia/tour.htm

Free Sites The following sites are free.

LexisOne ( www.lexisone.com ) Lexis One is a streamlined version of Lexis. The advantage is that the resources are free,

including case law decided within the last five years. Registration is required. FindLaw ( www.findlaw.com ) This is one of the great free legal resource sites. It allows you to find cases and statutes

for all 50 states and also locate other information, such as articles, to help in the research process.

Library of Congress ( www.loc.gov/law/guide/index.html ) This site is the Guide to Law Online section of the official Web site of the Library of Congress

( www.loc.gov ). It provides links to numerous sites used in legal research, both in the United States and internationally.

The Federal Judiciary ( www.uscourts.gov ) This site provides information on the federal court system and links to sites that include

opinions of the courts. The ‘Lectric Law Library ( www.lectlaw.com//ref.html ) This site provides a good legal dictionary and also information on many legal topics. Laws Online ( www.lawsonline.com ) The Laws Online site links to federal and state resources. Law Guru ( www.lawguru.com/search/lawsearch.html ) This search engine allows you to search hundreds of legal resources. Internet Legal Research Group ( www.ilrg.com ) You can access thousands of Web sites and legal documents at this resource. Cata Law ( www.catalaw.com ) This site bills itself as the “the catalog of catalogs of worldwide law on the Internet.”


254 Appendix A

Law Research ( www.lawresearch.com ) This site provides an extensive list of law directories. The Legal Writer ( http://home.earthlink.net/~thelegalwriter/ ) Articles on how to improve your legal writing are provided at this site. Barger on Legal Writing ( www.ualr.edu/~cmbarger/WritersResources.HTM ) This site provides information to aid in all phases of legal research and writing. Stetson College of Law ( www.law.stetson.edu/law/ ) Links to various legal research resources are available at this site. Legal Research and Writing ( http://comp.uark.edu/~ksampson ) On this Web site Kathryn Sampson, professor at the University of Arkansas School of Law,

provides good information on legal research and includes links to information on citation, writing, and other resources.

LEGAL REASONING

The law approaches answering legal issues in a v ery systematic manner. This is refer red to as legal reasoning. It is based on the use of authority , such as case and statutor y law, to come to a well-supported conclusion. Reading and briefing cases is one of the key ways students of the law have developed their legal reasoning skills. The IRAC method is an excellent way for students to approach le gal questions that they are trying to answer. While it is not used only for legal issues, it is very well suited for paralegal stu-dents wanting to improve their analytical skills.

IRAC Method The components of the IRAC acronym are as follows:

I � Issue . The issue is the question that is to be answered. For example, did John commit battery when he bit Carl’s ear while they were playing basketball?

R � Rule . The rule is the legal authority that applies to a given fact pattern. For discussion purposes, let’s assume the statutory definition of battery is the nonconsensual touching of another in a harmful or offensive manner.

A � Analysis . The analysis is the thought process that occurs when applying the rule to the facts of the case. In the basketball case, Carl and John were playing basketball. They both consented to a certain amount of physical contact. That is an integral part of a basketball game. Biting a player’s ear, however, is not something the average player would be consenting to when he took to the court.

C � Conclusion . The conclusion is the result of the analysis. In the example under con-sideration, the conclusion would be that John did commit battery when he bit Carl’s ear during a basketball game.

Law Nerds provides a very good discussion of the IRAC method in the Legal Reasoning section of its Web site at www.lawnerds.com .

BRIEFING CASES

A case brief is a summar y of a cour t’s opinion. There are a v ariety of reasons w hy cases are briefed. Sometimes, attorneys brief cases to summarize the law of key cases they will use in help-ing a client. Sometimes cases are briefed to submit to a court as part of a hearing on a motion or other matter before the court. Paralegal students, like law students, brief cases to learn about the law and, more importantly, to learn how to think lik e an attorney. They read the opinions to see ho w the cour t reached its conclusion. In so doing they understand how the issues of the case become important and the law the court used to reach its conclusion. There are a wide v ariety of for mats used in brief ing cases, and there is no “cor rect” form. The format to select is often related to ho w the brief will be used. A very basic format will be presented for the purposes of this discussion. Web sites providing information on other formats, along with sources that explain the case briefing process, are listed later in this chapter.


Appendix A 255

Case briefs are made up of elements, or components, that pro vide a structure to break down the key elements of a case in a systematic manner. These include:

Caption. The caption provides the reader with some very basic information, including the names of the parties and where the case can be located.

Facts. The facts of the case tell a story of how the parties ended up in court. What went wrong between them to cause a lawsuit to occur?

Issue. The issue is a legal question the court is being asked to resolve. Appellate courts do not hear arguments of fact; those arguments were made before the trial court. Instead, the appellate court is asked to resolve issues of law, something that the lower court may have done improperly.

Traditionally all issues began with the word Whether . This ensured that it would be answered with yes or no. Most people in the legal field have abandoned the use of this approach, but it is still desirable to phrase a question in such a way that it can be answered with yes or no, if at all possible.

Brief answer . The brief answer tells the reader how the court answered the question. It should be a yes or no answer followed by no more than a sentence or two of explanation.

Reasoning. Like the facts, the reasoning tells a story. The reasoning tells the story of how the court applied the law (precedent from previous cases or statutory law) to the facts of the case before it.

How to approach briefing a case:

1. Put down your pen and move away from your computer keyboard! The first thing you need to do is read the case. You should not start briefing until you have established what’s important in the court’s opinion. Start reading where the names of the judges are or at the phrase per curium. That is where the opinion actually starts.

2. Identify the issue. What is the legal question that the court was asked to answer? The issue is critical in determining what is important in the court’s decision. It will help you identify the facts and reasoning that relate.

3. Reread the case. Go through the case again, reading it carefully. Take notes on what you think is important, such as the key facts discussed by the court and the important legal prin-ciples contained in the opinion.

4. Start writing the brief.

EXAMPLE OF HOW TO BRIEF A CASE

IN THE DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA FOURTH DISTRICT JANUARY TERM 2005

CASE NO. 4D04-1300 February 23, 2005

GAVI SOLORZANO, Appellant,

v. FIRST UNION MORTGAGE

CORPORATION n/k/a WACHOVIA MORTGAGE CORPORATION, a North

Carolina corporation, Appellee.

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SILVERMAN, SCOTT J., Associate Judge. Gavi Solorzano appeals the dismissal of her amended com-plaint with prejudice for failing to state a cause of action for fraudulent nondisclosure. Solorzano contends the dismissal is contrary to the Florida Supreme Court’s decision in Johnson v. Davis , 480 So. 2d 625 (Fla. 1985). We agree. On January 21, 2004, Solorzano filed her amended complaint seeking damages against First Union Mortgage Corporation (here-inafter referred to as “Wachovia”), for fraudulent nondisclosure. The complaint alleged, in pertinent part, that:

1. In or about April 2001, Wachovia sold Solorzano residential real property;

2. That prior to the sale, Wachovia knew that the City of Lake Worth determined there were material housing code violations on the property, and that the violations materially affected the value of the property;

3. That the housing code violations were not readily observable by Solorzano at the time she purchased the property;

4. That as a result of the material nondisclosure of the then existing housing code violations, Solorzano purchased Wachovia’s real property; and

5. That the material decrease in the value of the home damaged Solorzano. Specifically, the City of Lake Worth, Florida had already levied housing code violation fines on the property in excess of $57,000.

Wachovia filed a motion to dismiss. The motion alleged, in apposite part, that Solorzano failed to state a cause of action, because Wachovia sold Solorzano the residential property “as is” and that Solorzano had “ample time and opportunity to conduct due diligence, examine title, and research the existence of any code violations before the closing.” Wachovia further stated that the code violations were “open, notorious, and readily observable.” On March 16, 2004, the trial court granted Wachovia’s mo-tion to dismiss the amended complaint with prejudice. rev. den., 725 So. 2d 1109 (Fla. 1998); Smith v. Spitale , 675 So. 2d 207 (Fla. 2d DCA 1996). The filing of a motion to dismiss tests whether a plaintiff states a cause of action. Bell v. Indian River Mem’l Hosp. , 778 So. 2d 1030, 1032 (Fla. 4th DCA 2001). When reviewing a motion to dismiss, a trial court is limited to the four corners of the complaint, and it must accept all the allegations in the complaint as true. Taylor v. City of Riviera Beach , 801 So. 2d 259, 262 (Fla. 4th DCA 2001). Since a ruling on a motion to dismiss for failure to state a cause of action is an issue of law, our standard of review is de novo. Siegle v. Progressive Consum-ers Ins. Co. , 819 So. 2d 732, 734 (Fla. 2002). In Johnson v. Davis , 480 So. 2d 625 (Fla. 1985), the Florida Supreme Court recognized for the first time a cause of action for fraudulent non disclosure in connection with real estate transactions. See Rayner v. Wise Realty Co. of Tallahassee , 504 So. 2d 1361, 1363-64 (Fla. 1st DCA 1987). In Johnson , the court stated: Accordingly, we hold that where the seller of a home knows of facts materially affecting the value of the property which are not readily observable and are not known to the buyer, the seller is under a duty to disclose them to the buyer. This duty is equally applicable to all forms of real property, new and used. Id. at 629. Johnson’s application is limited to non-commercial real property transactions. See Casey v. Cohan , 740 So. 2d 59,

62 (Fla. 4th DCA 1999), reh’g den . (1999); Green Acres, Inc. v. First Union Nat’l Bank of Fla. , 637 So.2d 363, 364 (Fla. 4th DCA 1994). Wachovia’s reliance on the “as is” provision of the sales con-tract in support of its motion to dismiss is misplaced. The inclu-sion of an “as is” clause in a contract for the sale of residential real property does not waive the duty imposed upon a seller under Johnson. Syvrud v. Today Real Estate, Inc., 858 So. 2d 1125, 1130 (Fla. 2d DCA 2003) (“An ‘as is’ clause in a contract for the sale of residential real property does not waive the duty imposed by Johnson v. Davis to disclose hidden defects in the property.”); Levy v. Creative Constr. Servs. of Broward, Inc. , 566 So. 2d 347 (Fla. 3d DCA 1990) (“[W]e discern no ‘as is’ contrac-tual exception to the duty imposed on the seller herein by the Johnson decision.”); Rayner , 504 So. 2d at 1364 (“[W]e note that generally, an “as is” clause in a contract for sale of real property cannot be relied upon to bar a claim for fraudulent misrepresentation or fraudulent nondisclosure.”); see also Frank J. Wozniak, Annotation, Construction and Effect of Provision in Contract for Sale of Realty by Which Purchaser Agrees to Take Property “As Is” or in Its Existing Condition, 8 A.L.R. 5th 312 §2a (“[I]t has generally been held or recognized that an “as is” provision in a contract for the sale of realty does not bar a vendee’s claim based on allegations of fraud, misrepresentation, or nondisclosure.”). Further, whether Solorzano readily observed the alleged hous-ing code violations or whether she had adequate time to research the alleged violations is not properly resolvable on Wachovia’s motion to dismiss. As we noted in Atkins v. Topp Telecom, Inc . , 873 So. 2d 397, 399 (Fla. 4th DCA 2004), a motion to dismiss is not a motion for summary judgment and a trial court is pre-cluded from relying on depositions, affidavits, or other proofs. Additionally, when ruling on a motion to dismiss, a trial court may not speculate whether a complaint’s allegations will ulti-mately be provable. Id.; see also Mancher v. Seminole Tribe of Fla., Inc. , 708 So. 2d 327 (Fla. 4th DCA 1998). We find that Solorzano stated a cause of action under John-son . In granting Wachovia’s motion to dismiss, the trial court incorrectly went beyond the four corners of the amended com-plaint, did not accept all the allegations as true, and mistakenly speculated on whether Solorzano will ultimately be able to prove her allegations. Accordingly, we reverse the trial court’s order dismissing the amended complaint with prejudice, and remand for further pro-ceedings consistent with this opinion. REVERSED AND REMANDED. WARNER , J., concurs. GROSS, J., concurring specially. I concur in the majority opinion. I write only to express my concern that dicta not be read to narrow the holding of Johnson v. Davis , 480 So. 2d 625 (Fla. 1985). The majority writes that “whether Solorzano readily observed the alleged housing code violations or whether she had adequate time to research the alleged violations is not properly resolvable on Wachovia’s motion to dismiss.” (Emphasis added). My con-cern is with the italicized portion of the sentence. In Johnson, the supreme court extended the reasoning of Besett v. Basnett , 389 So. 2d 995 (Fla. 1980), a case involving an “affirmative” fraudulent misrepresentation, “to the arena of nondisclosure of material facts.” M/I Schottenstein Homes, Inc. v. Azam , 813 So. 2d 91, 93 (Fla. 2002). The supreme court described Johnson’s holding as being “very clearly stated,” that “where the seller of a home knows of facts materially affecting

256 Appendix A


the value of the property which are not readily observable and are not known to the buyer, the seller is under a duty to disclose them to the buyer.” M/I Schottenstein , 813 So. 2d at 93 (quoting Johnson , 480 So. 2d at 629). A fact that is “readily observable” in a Johnson nondisclosure case is analogous to a misrepresentation in Besett , the falsity of

which is disclosed by a cursory glance; neither the nondisclosure nor the misrepresentation is actionable. Thus, I would look to Besett to define a “readily observable” fact in a Johnson nondisclosure case as one that is not obvious from a “cursory examination or in-vestigation.” M/I Scho ttenstein, 813 So. 2d at 93 (quoting Besett , 389 So. 2d at 997).

Sample Case Brief Caption: Solorzano v. First Mortgage Corporation , 896 So.2d 847 (Fla. 4th DCA 2005) Facts: Gavi Solorzano purchased residential real property from First Union Mortgage

Corporation (referred to as Wachovia). The property was sold “as is.” The residential property was in violation of several material housing code violations, which Wachovia was aware of prior to the sale. Solorzano alleged that the defects were not readily observable by her at the time of the sale and materially affected the values of the property. She filed suit alleging fraudulent nondisclosure. The trial court dismissed the lawsuit with prejudice for failure to state a cause of action. Solorzano appealed.

Issue: Whether the trial court properly dismissed Solorzano’s lawsuit for failure to state a cause of action.

Brief answer: No Reasoning: The court held that Solorzano’s lawsuit sufficiently stated a cause of action for fraud-

ulent nondisclosure. The court relied on the Florida Supreme Court’s case of Johnson v. Davis, 480 So.2d 625 (Fla. 1985) in which the court for the first time recognized this cause of action for cases involving the sale of residential property. In that case the court imposed a duty on the seller who has knowledge of defects in the property to disclose defects in the home that are not readily observable, which materially impacted the value of the home and of which the buyer was unaware. The court rejected Wachovia’s argument that the inclusion of an “as is” clause within the sales contract supported the trial court’s granting its motion to dismiss, stating that such a clause does not relieve the duty to disclose imposed by the Johnson case. The question of whether the violations were readily observable was a question of fact that could not be addressed in a motion to dismiss, in which a trail court cannot speculate whether the allegations were provable.

Reversed and Remanded: Separate opinion: Justice Gross concurred specifically to express concern that the holding

of Johnson v. Davis , 480 So.2d 625 (Fla. 1985) not be read too narrowly. He stated the definition of a “readily observable” fact in the Johnson nondisclosure case is one that is not obvious from a “cursory examination or investigation.”

Visit These Sites for More Information on How to Brief a Case Professor Byron Warnken and Professor Elizabeth Samuels, “The Need to Make Written

Case Briefs” (n.d.): www.udayton.edu/~aep/online/class/case09.htm Christopher Pyle, “How to Brief Cases,” 1982 (revised by Prof. Katherine Killoran,

Feb. 1999): www.lib.jjay.cuny.edu/research/brief.html Law Nerds, “How to Brief Cases” (n.d.): www.lawnerds.com/guide/briefing.html#

HowtoBriefaCase University of Central Florida, “Introduction to Case Briefs” (n.d.): http://reach.ucf.edu/

~pla3013/ponderx.html Criminal Justice Education, “Writing a Case Brief ” (n.d.): www.cjed.com/Write_Brief.pdf

Visit These Sites to Learn More About How to Cite Authority Peter W. Martin, “Introduction to Basic Legal Citation” (2006): www.law.cornell.edu/

citation/ Kathryn Sampson, University of Arkansas School of Law, “Citation to Authorities” (2001):

http://comp.uark.edu/~ksampson/citation.html

Appendix A 257


LAST WILL AND TESTAMENT OF JOE DIMAGGIO

I, JOSEPH P. DIMAGGIO, of the City of Hollywood, County of Broward and State of Florida, being of sound and disposing mind and memor y do hereby make, publish and declare this to be my Last Will and Testament, hereby revoking any and all Wills and Codicils by me heretofore made.

Article I Statement on Family Members I am not married, and I have one adult child and two (2) grandchildren, to wit: my son, JOSEPH PAUL DIMAGGIO, JR., and my grandchildren, KATHERINE MARIE DIMAGGIO and PAULA SUE DIMAGGIO, both of whom are adopted children of my said son.

Article II Payment of Debts, Taxes and Costs of Administration I direct that all estate, inheritance, succession and other death taxes of any nature, together with any interest and penalties thereon, which may be levied or assessed by reason of my death by the laws of any state or of the United States with respect to proper ty passing under this Will or any other property shall be considered a cost of administration of my estate, and that such taxes, together with all debts which I am le gally obligated to pay at the time of m y death, my last illness and funeral expenses and other costs of administration of my estate, shall be paid out of my residuary estate. In the event my residuary estate is insufficient to pay such debts, expenses, costs and taxes, I direct that the amount thereof in excess of residuary estate shall be paid from other assets in the order provided by law. I authorize my Personal Representative to pay any and all of my debts which it feels, in its sole judgment and discretion, to be just and reasonable without the necessity of a formal claim being filed in the cour t by the creditor; provided, however, that my Personal Representative shall f ile its sworn statement with the court as to such debts paid within the prescribed time provided by law. I authorize my Personal Representative to spend such sums for funeral e xpenses, the acquisi-tion of a burial site, the erection of a suitab le headstone or monument over my grave and for the perpetual care of my grave as he may think proper, without regard to any provisions of law limiting such expenditures.

Article III Cash Bequests I hereby give and bequeath the sum of One Hundred Thousand Dollars ($100,000) to my nephew, JOSEPH DIMAGGIO (son of my deceased brother, MIKE DIMAGGIO).

Article IV Bequest of Tangible Personal Property A. I hereby give and bequeath to my granddaughter, PAULA SUE DIMAGGIO, outright, if living,

any and all tangible personal property (excluding cash, stocks, bonds and real estate) which I may own at the time of my death. This bequest includes, but is not limited to, household furnish-ings, silver ware, china or linens, automobiles and jewelry together with all the prepaid insurance policies on the above items. If PAULA SUE DIMAGGIO shall not survive me, then I give, devise and bequeath to her surviving issue, in equal shares per stirpes, all my tangible personal property (excluding cash, stocks, bonds and real estate) which I may own at the time of my death. This bequest includes, but is not limited to, household furnishings, silverware, china or linens, automobiles and jewelry together with all prepared insurance policies on the above items.

B. Alternate Bequest . If there is no living issue of PAULA SUE DIMAGGIO, then I bequeath any and all of my tangible personal property to my granddaughter, KATHERINE MARIE DIMAGGIO, outright, if living, if not, then to her issue, in equal shares, per stirpes. My granddaughter’s issue shall divide such property among themselves amicably if able to do so;

Appendix B

258

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Appendix B 259

otherwise, my Personal Representative shall make the division in any manner deemed advisable, and the decisions of my Personal Representative shall be final and binding on all concerned.

If any benef iciary should be under the age of eighteen (18) y ears at the time distribution is required to be made to him or her under this Article of my Last Will and Testament, my Personal Representative is authorized to distribute such beneficiary’s portion of this property to any suitable person selected by them, to be free of tr ust, for distribution to such benef iciary when he or she reaches his or her majority, and a receipt of such person shall constitute a complete acquittance to my Personal Representative.

C. Any property that is not distributed under this Article because the named beneficiary does not survive me, shall pass under and be distributed as part of residuary estate.

Article V Yankee Clipper Enterprises, Inc. I hereby direct that m y Personal Representative liquidate the cor poration, YANKEE CLIPPER ENTERPRISES, INC., of w hich I o wn one hundred percent (100%) of the outstanding stock as soon after my death as possible. My Personal Representative shall have the power to appoint directors and officers of YANKEE CLIPPER ENTERPRISES, INC. to ef fectuate the necessary liquidation of the corporation. I direct that all real estate owned by the corporation be sold as soon as possible after my death. I direct that the assets of the Cor poration on liquidation be distributed to my residuary estate pursuant to the terms and conditions thereof.

Article VI Great Grandchildren’s Trusts I give, devise and bequeath the following:

(A) The sum of Two Hundred Fifty Thousand Dollars ($250,000) to my Trustees IN TRUST, for the following uses and purposes, said Trust to be known as the KENDAHL R. STEIN TRUST:

(1) Use of Income . My Trustee shall distribute all of the net income of the Trust on a monthly or more convenient basis, but at least quarterly, to or for the benefit of my great granddaughter, KENDAHL R. STEIN.

While any beneficiary is under the age of twenty-one (21), the Trustee shall use so much of the income of her fund for her reasonable support, comfort and education, as the Trustee determines to be required for these purposes. After she attains the age of twenty-one (21), the Trustee shall pay all of the current net income of her fund for her.

(2) Discretionary Distribution of Principal. In addition, my Trustee may distribute to or for the benefit of my great granddaughter, KENDAHL R. STEIN, from her Trust, so much of the principal of the Trust as may be needed for her proper maintenance, support, education, health and welfare. Said distribution shall be at the sole and ab-solute discretion of my Trustee and any such distribution made by my Trustee shall be final and binding upon all persons whomsoever, and my Trustee shall be liable only for their acts or gross negligence and willful misconduct. The decision of my Trustee shall not be questioned by any beneficiary.

(3) Mandatory Distribution of Principal. My Trustee shall distribute to my great grand-daughter, KENDAHL R. STEIN, from her separate Trust one-third (1/3) of the prin-cipal of her fund at the age of thirty (30). When my granddaughter shall have attained the age of thirty-five (35) years, the Trustee shall distribute to her one-half (1/2) of the remaining principal of her fund. When my granddaughter shall have attained the age of forty (40) years, the Trustee shall distribute to her the balance of the funds.

(4) Death of Great Grandchild. Should my great granddaughter, KENDAHL R. STEIN, die before her separate Trust has been distributed absolutely to her, the then remain-ing principal of such Trust shall be distributed to her issue, in equal shares, per stirpes, and if none, then to her brother, MITCHELL J. STEIN, if living, and if not, then to her brother’s issue, in equal shares, per stirpes. Any portion thereof so divided and set apart for any issue who is the beneficiary of a separate trust hereunder which has not yet been fully distributed shall be added to the principal of such trust and managed and distributed as a part thereof under the terms of this Article; and any portion thereof set apart for any issue who is the beneficiary of a separate trust hereunder which has been fully distributed shall be distributed absolutely to such issue.


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(B) The sum of Two Hundred Fifty Thousand Dollars ($250,000) to my Trustees, IN TRUST, for the following uses and purposes, said Trust to be known as the MITCHELL J. STEIN TRUST:

(1) Use of Income . My Trustee shall distribute all of the net income of the Trust on a monthly or more convenient basis, but at least quarterly, to or for the benefit of my great grandson, MITCHELL J. STEIN.

While any beneficiary is under the age of twenty-one (21), the Trustee shall use so much of the income of his fund for his reasonable support, comfort and education, as the Trustee determines to be required for these purposes. After he attains the age of twenty-one (21), the Trustee shall pay all of the current net income of his fund to him.

(2) Discretionary Distribution of Principal. In addition, my Trustee may distribute to or for the benefit of my great grandson, MITCHELL J. STEIN, from his Trust, so much of the principal of the Trust as may be needed for his proper maintenance, support, education, health and welfare. Said distribution shall be at the sole and ab-solute discretion of my Trustee and any such distribution made by my Trustee shall be final and binding upon all persons whomsoever, and my Trustee shall be liable only for their acts or gross negligence and willful misconduct. The decision of my Trustee shall not be questioned by any beneficiary.

(3) Mandatory Distribution of Principal. My Trustee shall distribute to my great grandson, MITCHELL J. STEIN, from his separate Trust one-third (1/3) of the principal of his fund at the age of thirty (30). When my grandson shall have attained the age of thirty-five (35) years, the Trustee shall distribute to him one-half (1/2) of the remaining principal of his fund. When my grandson shall have attained the age of forty (40) years, the Trustee shall distribute to him the balance of the funds.

(4) Death of Great Grandchild. Should my great grandson, MITCHELL J. STEIN, die before his separate Trust has been distributed absolutely to him, the then remaining principal of such Trust shall be distributed to his issue, in equal shares, per stirpes, and if none, then to his sister, KENDAHL R. STEIN, if living, and if not, then to his sister’s issue, in equal shares, per stirpes. Any portion thereof so divided and set apart for any issue who is the beneficiary of a separate trust hereunder which has not yet been fully distributed shall be added to the principal of such trust and managed and distributed as a part thereof under the terms of this Article; and any portion thereof set apart for any issue who is the beneficiary of a separate trust hereunder which has been fully distrib-uted shall be distributed absolutely to such issue.

(C) The sum of Five Hundred Thousand Dollars ($500,000) to my Trustees, IN TRUST, for the following uses and purposes, said Trust to be known as the VALERIE F. HAMRA TRUST:

(1) Use of Income. My Trustee shall distribute all of the net income of the Trust on a monthly or more convenient basis, but at least quarterly, to or for the benefit of my great granddaughter, VALERIE F. HAMRA.


(2) Discretionary Distribution of Principal. In addition, my Trustee may distribute to or for the benefit of my great granddaughter, VALERIE F. HAMRA, from her Trust, so much of the principal of the Trust as may be needed for her proper maintenance, sup-port, education, health and welfare. Said distribution shall be at the sole and absolute discretion of my Trustee and any such distribution made by my Trustee shall be final and binding upon all persons whomsoever, and my Trustee shall be liable only for their acts or gross negligence and willful misconduct. The decision of my Trustee shall not be questioned by any beneficiary.

(3) Mandatory Distribution of Principal. My Trustee shall distribute to my great grand-daughter, VALERIE F. HAMRA, from her separate Trust one-third (1/3) of the principal of her fund at the age of thirty (30). When my granddaughter shall have attained the age of thirty-five (35) years, the Trustee shall distribute to her one-half (1/2) of the remaining principal of her fund. When my granddaughter shall have attained the age of forty (40) years, the Trustee shall distribute to her the balance of the funds.


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(4) Death of Great Grandchild. Should my great granddaughter, VALERIE F. HAMRA, die before her separate Trust has been distributed absolutely to her, the then remaining principal of such Trust shall be distributed to her issue, in equal shares, per stirpes, and if none, then to her sister VANESSA S. HAMRA, if living, and if not, then to her sister’s issue, in equal shares, per stirpes. Any portion thereof so divided and set apart for any issue who is the beneficiary of a separate trust hereunder which has not yet been fully distributed shall be added to the principal of such trust and managed and distributed as a part thereof under the terms of this Article; and any portion thereof set apart for any issue who is the beneficiary of a separate trust hereunder which has been fully distributed shall be distributed absolutely to such issue.

(D) The sum of Five Hundred Thousand Dollars ($500,000) to my Trustees, IN TRUST, for the following uses and purposes, said Trust to be known as the VANESSA S. HAMRA TRUST:

(1) Use of Income. My Trustee shall distribute all of the net income of the Trust on a monthly or more convenient basis, but at least quarterly, to or for the benefit of my great granddaughter, VANESSA S. HAMRA.


(2) Discretionary Distribution of Principal. In addition, my Trustee may distribute to or for the benefit of my great granddaughter, VANESSA S. HAMRA , from her Trust, so much of the principal of the Trust as may be needed for her proper maintenance, sup-port, education, health and welfare. Said distribution shall be at the sole and absolute discretion of my Trustee and any such distribution made by my Trustee shall be final and binding upon all persons whomsoever, and my Trustee shall be liable only for their acts or gross negligence and willful misconduct. The decision of my Trustee shall not be questioned by any beneficiary.

(3) Mandatory Distribution of Principal. My Trustee shall distribute to my great grand-daughter, VANESSA S. HAMRA, from her separate Trust one-third (1/3) of the principal of her fund at the age of thirty (30). When my granddaughter shall have attained the age of thirty-five (35) years, the Trustee shall distribute to her one-half (1/2) of the remaining principal of her fund. When my granddaughter shall have attained the age of forty (40) years, the Trustee shall distribute to her the balance of the funds.

(4) Death of Great Grandchild. Should my great granddaughter, VANESSA S. HAMRA, die before her separate Trust has been distributed absolutely to her, the then remaining principal of such Trust shall be distributed to her issue, in equal shares, per stirpes, and if none, then to her sister VALERIE F. HAMRA, if living, and if not, then to her sister’s issue, in equal shares, per stirpes. Any portion thereof so divided and set apart for any issue who is the beneficiary of a separate trust hereunder which has not yet been fully distributed shall be added to the principal of such trust and managed and distributed as a part thereof under the terms of this Article; and any portion thereof set apart for any issue who is the beneficiary of a separate trust hereunder which has been fully distributed shall be distributed absolutely to such issue.

Article VII Residuary Estate All of the rest, residue and remainder of my estate of every kind, nature and sort whatsoever, real personal or mixed, legal or equitable and wheresoever situated, which I may own, possess, hold or be seized of or entitled to, or o ver which I have any power of appointment at the time of m y death, together with the income, rents, prof its, interest and increments thereof, which may arise or accrue therefrom, I give, devise and bequeath as follows:

A. Forty-five percent (45%) to the JOSEPH P AUL DIMAGGIO, JR., TRUST to be held , IN TRUST, by my Trustees hereinafter named, for the following uses and purposes:

(1) Use of Income. My Trustee shall distribute the total amount sum of Twenty Thousand Dollars ($20,000) of the net income of the Trust on a monthly or more convenient basis, but at least quarterly, to my son, JOSEPH PAUL DIMAGGIO, JR. All net income in excess of Twenty Thousand Dollars ($20,000.00) shall be accumulated


262 Appendix B

and added to the principal of the Trust. Notwithstanding the fair market value of the assets of his Trust, this provision as to the net income must be strictly adhered to.

(2) Discretionary Distribution of Principal. In addition, my Trustee may distribute to or for the benefit of my son, from his Trust, so much of the principal of the Trust as may be needed for his proper maintenance, support, health and welfare. Said distribution shall be at the sole and absolute discretion of my Trustee and any such distribution made by my Trustee shall be liable only for their acts or gross negligence and willful misconduct. The decision of my Trustee shall not be questioned by any beneficiary.

(3) General Power of Appointment. Upon the death of my son, JOSEPH P. DIMAGGIO, JR., all of the remaining principal and accumulated income of the JOSEPH P. DIMAGGIO, JR. TRUST shall be distributed as my son, JOSEPH P. DIMAGGIO, JR., may appoint by his Will and by specific reference to this Power of Appointment. The Appointment may be made only to discharge his personal legal obligations owing at his death. Any property that remains in the Trust at the death of my son that has not been appointed by his Will in accordance with the above power vested in him shall be used to pay such portion of the estate taxes payable upon his estate but not more than the difference between the amount of those taxes that would be payable upon his taxable estate exclusive of the value of this trust and the amount of the taxes payable.

(4) Distribution Upon Death of Son if Power of Appointment is Not Exercised. In the default of effective exercise of the above-referenced General Power of Appointment, the remaining principal shall be distributed as follows:

(a) Thirty percent (30%) to the KATHERINE MARIE DIMAGGIO TRUST created under this my Last Will and Testament.

(b) Seventy percent (70%) to the PAULA SUE DIMAGGIO TRUST created under this my Last Will and Testament.

B. Fifteen percent (15%) to the KATHERINE MARIE DIMAGGIO TRUST, to be held, IN TRUST, by my Trustees hereinafter named, for the following uses and purposes:

(1) Use of Income. My Trustee shall distribute all of the net income to or for the benefit of my granddaughter, KATHERINE MARIE DIMAGGIO, from her Trust on a monthly or more convenient basis, but at least quarterly.

(2) Discretionary Distribution of Principal. In addition, my Trustee may distribute to or for the benefit of my granddaughter, KATHERINE MARIE DIMAGGIO, from her Trust, so much of the principal of the Trust as may be needed for her proper maintenance, support, education, health and welfare. Said distribution shall be at the sole and absolute discretion of my Trustee and any such distribution made by my Trustee shall be final and binding upon all persons whomsoever, and my Trustee shall be liable only for their acts or gross negligence and willful misconduct. The decision of my Trustee shall not be questioned by any beneficiary.

(3) General Power of Appointment. Should my granddaughter, KATHERINE MARIE DIMAGGIO, die before her separate Trust has been distributed absolutely to her, the then remaining principal of such Trust shall be distributed, upon the death of my granddaughter as she may appoint by her Will and by specific reference to this Power of Appointment. The appointment may be made only to discharge her personal legal obligations owing at her death. Any property that remains in the Trust at the death of my granddaughter that has not been appointed by her Will in accordance with the above power vested in her shall be used to pay such portion of the estate taxes payable upon her estate as may be requested by the Personal Representative of her estate but not more than the difference between the amount of those taxes that would be payable upon her taxable estate exclusive of the value of this Trust and the amount of the taxes payable.

(4) Distribution Upon Death of Granddaughter if Power of Appointment is Not Exercised. In the default of effective exercise of the above-referenced General Power of Appointment, the remaining principal shall be distributed to her living issue, per stirpes, subject to the same terms and provisions of the Trusts created for her children’s benefits in Article VII of this, my Last Will and Testament. In the event there are no such issue then living, the then remaining principal of the separate trust of my deceased granddaughter shall be dis-tributed to the PAULA SUE DIMAGGIO TRUST. Any portion thereof so divided and set apart for any issue who is the beneficiary of a separate trust hereunder which has not yet


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been fully distributed shall be added to the principal of such trust and held in further trust and managed and distributed as a part thereof under the terms of this Article; and any portion thereof set apart for any issue who is the beneficiary of a separate trust hereunder which has been fully distributed shall be distributed absolutely to such issue.

C. Forty percent (40%) to the PAULA SUE DIMAGGIO TRUST, to be held, IN TRUST by my Trustees hereinafter named, for the following uses and purposes:

(1) Use of Income. My Trustee shall distribute all of the net income to or for the benefit of my granddaughter, PAULA SUE DIMAGGIO, from her Trust on a monthly or more convenient basis, but at least quarterly.

(2) Discretionary Distribution of Principal. In addition, my Trustee may distribute to or for the benefit of my granddaughter, PAULA SUE DIMAGGIO, from her Trust, so much of the principal of the Trust as may be needed for her proper maintenance, sup-port, education, health and welfare. Said distribution shall be at the sole and absolute discretion of my Trustee and any such distribution made by my Trustee shall be final and binding upon all persons whomsoever, and my Trustee shall be liable only for their acts or gross negligence and willful misconduct. The decision of my Trustee shall not be questioned by any beneficiary.

(3) General Power of Appointment. Should my granddaughter, PAULA SUE DIMAGGIO, die before her separate Trust has been distributed absolutely to her, the then remaining principal of such Trust shall be distributed, upon the death of my granddaughter as she may appoint by her Will and by specific reference to this Power of Appointment. The appoint-ment may be made only to discharge her personal legal obligations owing at her death. Any property that remains in the Trust at the death of my granddaughter that has not been appointed by her Will in accordance with the above power vested in her shall be used to pay such portion of the estate taxes payable upon her estate as may be requested by the Personal Representative of her estate but not more than the difference between the amount of those taxes that would be payable upon her taxable estate exclusive of the value of this Trust and the amount of the taxes payable.

(4) Distribution Upon Death of Granddaughter if Power of Appointment is Not Exercised. In the default of effective exercise of the above-referenced General Power of Appoint-ment, the remaining principal shall be distributed to her living issue, per stirpes, subject to the same terms and provisions of the Trusts created for her children’s benefit in Article VII of this, my Last Will and Testament. In the event there are no such issue then living, the then remaining principal of the separate trust of my deceased granddaughter shall be distributed to the KATHERINE MARIE DIMAGGIO TRUST. Any portion thereof so divided and set apart for any issue who is the beneficiary of a separate trust hereunder which has not yet been fully distributed shall be added to the principal of such trust and held in further trust and managed and distributed as a part thereof under the terms of this Article; and any portion thereof set apart for any issue who is the ben-eficiary of a separate trust hereunder which has been fully distributed shall be distrib-uted absolutely to such issue.

Article VIII Simultaneous Death In the event any beneficiary and I die simultaneously or under such circumstances that there is not sufficient evidence that we died other than simultaneously, said beneficiary shall be consid-ered, for the purposes of the operation of my will, to have predeceased me.

Article IX Personal Representative and Trustee A. Appointment of Personal Representative. I hereby nominate, constitute and appoint my dear

friend and attorney, MORRIS ENGELBERG, ESQ., as Personal Representative of my estate. MORRIS ENGELBERG, ESQ. may designate an individual or a bank or trust company to act as his successor in the event he ceases to act. MORRIS ENGELBERG, ESQ. shall receive no fees and/or commissions for serving as Personal Representative of my Estate. I hereby appoint MORRIS ENGELBERG, ESQ. as the attorney for my Estate.

B. Appointment of Trustee. I hereby nominate, constitute and appoint MORRIS ENGELBERG as the Trustee for each trust hereby created under this my Last Will and Testament.


264 Appendix B

MORRIS ENGELBERG may, in addition, designate an individual or a bank or trust company to act as an additional Trustee or as his successor in the event he ceased to act. I hereby grant to MORRIS ENGELBERG the po wer to change the Trustee or Trustees, in writing, at an y time during his lifetime for any reason whatsoever. I hereby grant to MORRIS ENGELBERG the power to remove the corporate Trustee, if any, at any time. If there is a sole Trustee acting as such said Trustee may, but shall not be required to, appoint an additional Trustee. Any designation may be revoked by the person making such designation at an y time prior to the qualification of the person designated. If, at any time, (i) a sole acting Trustee who is required to do so f ails to appoint an additional Trustee within thirty (30) days of the creation of a vacancy, or (ii) there is no Trustee acting and no successor named in this Article or designated as provided in this Article is available to act, then PALM BEACH NATIONAL BANK AND TRUST COMPANY and PAULA SUE DIMAGGIO shall become Co-Trustees.

Article X Miscellaneous Provisions Pertaining to Personal Representative and Trustee A. Waiver of Bond. I direct that no Personal Representative, Trustee or Guardian named in this

Will shall be required to furnish any bond or other security in any jurisdiction for the faith-ful performance of their duties as such, the same being specifically waived hereby.

B. Waiver of Registration. I hereby waive compliance by my Trustee with the provisions of the Florida Statutes as they now exist requiring registration, administration or filing of account-ings by my Trustee to any Court. I further waive compliance with any other law now or hereinafter enacted in effect requiring qualification, registration, administration or filing of accountings by my Trustee to any court.

C. Accounting by Trustee. The Trustee shall prepare an account for each taxable year of each trust and whenever a Trustee ceases to serve, an account shall be prepared from the time of the last prior account through the end of the period of service. The Trustee shall keep each account available for inspection by and shall deliver copies to the beneficiaries eligible within the period covered thereby to receive benefits from the trust which is the subject of said account. The written approval of an account by such a beneficiary is a minor or other-wise incompetent, shall be final and binding as to all matters stated therein or shown thereby upon that beneficiary and upon all persons then or thereafter claiming any interest through or under him or her in the income or principal or such trust. Failure of such beneficiary, or of his or her parent or guardian if such beneficiary is a minor or otherwise incompetent, to deliver to the Trustee written objection to an account within thirty (30) days after receipt thereof shall constitute the final and binding approval thereof by that beneficiary. If a corpo-rate Trustee is serving as Trustee or Co-Trustee of any trust pursuant to this my Last Will and Testament, the monthly principal and income statements prepared by the corporate Trustee shall satisfy the accounting requirements set forth above.

D. Compensation. The Trustee shall be entitled to reasonable compensation for services rendered hereunder. Any additional duties and responsibilities due to acquisition of additional trust property or the transfer into trust of additional property shall be considered in determining the amount, but it shall not exceed the amount allowable by law at the time compensation becomes payable.

E. Vacancy. Except as otherwise provided herein, a vacancy in the trusteeship shall be deemed to exist in the event of the death, resignation, refusal, failure or inability of any person to act as Trustee or Co-Trustee of a separate trust. Notice of a vacancy in the trusteeship shall be effective if given to the next successor Trustee by an instrument in writing signed by the resigning predecessor Trustee, a then acting Co-Trustee or a beneficiary of such a separate trust, and delivered to such successor Trustee and any one of the other then acting Co-Trustees. Immediately upon receipt of such notice the recipient shall act as Trustee (or Co-Trustee) or shall decline in writing to act.

F. Third Parties and Bond. No person dealing with the Trustee of any separate trust shall be obligated to inquire as to the powers of such Trustee or to see to the application of any money or property delivered to such Trustee. Such Trustee shall not be required to obtain


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authority from or approval of any court in the exercise of any power conferred upon him hereunder. No Trustee shall be required to make any current reports or accountings to any court nor to furnish a bond for the proper performance of the duties of the Trustee as Trustee of any separate trust; but if such bond is nevertheless required by any law, statute or rule of court, no surety shall be required thereon.

G. Trustee Liability. No Trustee of any separate trust shall be liable for any loss, liability, expense or damage to the trust estate of such trust occasioned by such Trustee’s acts or omissions in good faith in the administration of such trust (including acts of omissions in reliance on opinion of counsel) and in any event the Trustee shall be liable only for his own willful default, wrongdoing or gross negligence but not for honest errors of judgment. Except as otherwise specifically pro-vided herein the Trustee may rely upon any notice, certificate, Will, affidavit, letter, telegram or other paper or document believed by him to be sufficient, in making any payment, allocation or distribution hereunder. The Trustee shall incur no liability for any payment or distribution made in good faith and without actual notice or knowledge of a changed condition or status affecting any person’s interest in any separate trust. This Section G is intended to protect the Trustee under the stated circumstances, and is not intended to affect the rights hereunder of any person.

H. Successor Personal Representative and/or Trustee. Any successor Personal Representative or Trustee whether by consolidation, merger, transfer of trust business, conversion into a different type organization, resignation or otherwise, shall succeed as Trustee or Personal Representative with like effect as though originally named as such.

I. Appointment of Successor Corporate Trustee. In the event of the resignation, refusal to act, or removal of a Corporate Trustee as Trustee of a separate trust, a successor corporate trustee to fill the vacancy in the trusteeship so occurring shall be appointed by the beneficiary of such trust (or if there shall be more than one beneficiary of such trust, by the beneficiaries jointly and unanimously) by an instrument in writing delivered to the vacating and the successor corporate trustees; provided, however, that any successor Corporate Trustee so appointed must be a bank or trust company having a capital and surplus of not less than Five Million Dollars ($5,000,000).

J. Removal of Corporate Trustee. When a bank or trust company shall at any time be acting as Trustee or Co-Trustee of a separate trust, the beneficiary of such trust (or if there shall be more than one, the beneficiaries jointly and unanimously) may remove said Corporate Trustee with or without cause by delivering to said Corporate Trustee a written instrument, signed by said beneficiary, provided that such written instrument shall concurrently appoint a successor corporate trustee pursuant to Section I of this Article.

K. Majority Determination. Except as otherwise provided herein, in the event of a disagree-ment among the Trustees, the views of the majority shall prevail. The affirmative vote of a majority of those authorized to vote on any matter shall constitute a majority. If but two Trustees shall be authorized to vote on a matter, the affirmative vote of both shall be re-quired. Failure to obtain a majority shall be treated as if the Trustees failed to act. All votes shall be taken within thirty (30) days of the date of the event which required a decision to be made. Any Trustee who shall cast a negative vote with respect to any action or any failure to act shall in no way be liable or responsible for such action or failure to act.

Article XI General Trust Provisions The following provisions shall apply to any and all trusts created under this Will, unless herein provided otherwise:

A. Payment to or for Incompetents or Minors. My Trustee may make distributions for the benefit of any adult beneficiary hereunder directly to that beneficiary or to his or her legal guardian if he or she should be incompetent, or in direct payment of his or her expenses of the types that the Trustee is authorized hereby to meet. My Trustee may make payments for the benefit of any minor beneficiary to his or her natural guardian or to any other person having care or custody of such minor, or in direct payment of his or her expenses of the types my Trustee is authorized hereby to meet. The Trustee shall not be obligated to see to the application of funds so distributed, and the receipt of the payee shall fully protect the Trustee if the Trustee exercises due care in selecting the person paid.


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B. Notice to Trustees of Statute of Beneficiaries. Until the Trustee shall receive written notice of any birth, marriage, death or other event upon which the right to distribution of the income or principal of any trust may depend, the Trustee shall incur no liability for distributions made in good faith to persons whose interests may have been affected by that event.

C. Restraint on Alienation. No income or principal payable to or held for any beneficiary shall, while in the possession of the Trustee, be alienated, disposed of, or encumbered in any man-ner other than by Trustee action authorized hereby. Throughout the duration of each trust, no beneficiary thereof shall have the power voluntarily or involuntarily to sell, alienate, convey, assign, transfer, mortgage, pledge or otherwise dispose of or encumber any principal or income thereof or any interest whatsoever therein until physical distribution or payment is made to him or her, and no interest of any beneficiary in or claim to any trust assets or benefits shall be subject to the claims of any of his or her creditors or to judgment, levy, execution, sequestration, garnishment, attachment, bankruptcy or other insolvency proceed-ings, or any other legal or equitable process.

D. Reliance by Third Parties. No grantee, purchaser or other person dealing with the Trustee while the Trustee is purporting to act in such capacity under any power or authority granted the Trustee herein need inquire into the initial existence of facts upon which the purported power or authority depends, or into the continued existence of the power or authority of the transaction, or the proper application of the proceeds or other consideration.

E. Rule Against Perpetuities. The trusts created under this Will shall in any event terminate twenty-one (21) years after the death of the last survivor of such of the beneficiaries of the trusts created hereunder as shall be living at the time of my death, and thereupon the prop-erty held in trust shall be distributed, discharged of trust, to the then income beneficiaries thereof, in accordance with their respective interests in each particular trust.

F. Frequency of Distribution of Income. Unless otherwise specifically indicated under the terms of this Will, any distribution of income required to be made under any trust created under this Will shall be made at any times fixed by the Trustee but at least as often as quarter-annually.

Article XII Trust for Benefi ciaries Under 21 Years Except as otherwise provided in this my Last Will and Testament, if any part of my estate, other than a bequest of tangible personal property under this Will hereof, becomes distribut-able absolutely to any beneficiary who has not attained twenty-one (21) years of age at the time of distribution, then his or her share shall be distributed to my Trustees hereinafter designated, IN TRUST, and the Trustee shall use so much of the income principal of such beneficiary’s particular share necessary or desirable in the exercise of the Trustee’s discretion, for the proper health, education, support and maintenance of such beneficiary. Any income not so used shall be added to the principal of the Trust at the end of each fiscal year of the Trust. At the time such beneficiary attains the age of twenty-one (21) years, or upon his or her death, whichever occurs first, the Trust shall terminate as to such beneficiary’s particular share, and the then remaining principal thereof shall be distributed absolutely to such beneficiary, or if such beneficiary is then deceased, to his or her estate.

Article XIII Powers Any fiduciary named in this Will shall have all of the powers and protection granted to them by statute at the time of application including, but not limited to, the prudent man rule, Revised Florida Principal and Income Law, Florida Trust Administration Act, and the Florida Probate Code, and not in limitation of any common-law or statutory authority, and without application to any court, they shall have the powers and responsibilities described below, to be exercised in their absolute discretion:

A. To sell any and all real estate held as an asset of my Estate and Trusts at such times, at public or private sale, for such prices and upon such terms as it deems advisable, and to make, execute, and deliver any deed or deeds there for, conveying title hereto in fee simple absolute, or for any less estate to any purchaser or purchasers, freed and discharged or any and all Trusts hereunder.


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B. To sell, exchange, lease, encumber, option, or otherwise dispose of all of any portion of my Estate and Trusts in such manner and upon such terms and conditions as it deems advisable, and to make, execute, and deliver deeds, mortgages, leases, assignments and other docu-ments necessary to effectuate any of the powers granted (which shall specifically include the authority to grant leases which extend beyond the terms of any Trust hereunder and beyond the period authorized by law).

C. To exercise all tax-related elections, options, and choices in such manner as will achieve, in such fiduciaries’ sole judgment, the overall minimum in total combined present and reason-ably anticipated future taxes of all kinds, upon not only my estate, but also its beneficiaries, any trusts hereunder and their beneficiaries. With limitation on the generality of the foregoing, the aforesaid direction to minimize taxes shall include the following particular matters:

(1) exclusion from or inclusion in my gross estate of any assets, and all matters of valua-tion, in the first instance, for federal estate tax purposes;

(2) election as to alternative valuation dates for federal estate tax purposes; (3) allocation of such charges and costs of administration as are available for reduction

of either federal estate or income taxes; (4) election to continue, revoke, or make any consent to any election under subchapter S

of the Internal Revenue Code of 1986, as amended; (5) selection of any appropriate income tax year, timing the distributions and of payment of

deductible expenses, et cetera; and (6) retaining of competent tax counsel, for advice, the preparation of returns, et cetera. Such fiduciaries shall not be accountable to any person interested in any trust or in

my estate for the manner in which they shall carry out this direction to minimize over all taxes and, even though their discretion in this regard may result in increased tax or decreased distribution to a trust, to the estate, or to one or more beneficiaries, there shall in no event be any compensating readjustments or reimbursements between any of the trusts hereunder or any of the trust or estate accounts or beneficiaries by reason of the manner in which the fiduciaries thus carry out said direction.

D. Services of Outside Representatives. My attorney and friend, Morris Engelberg Esq., or his designated representative as so appointed by him, in writing prior to his death, shall act as the representative of my estate and all trusts created hereunder in connection with the licensing and/or use of any name, photo, likeness, image and facsimile signature or memorabilia items to include, but not limited to, baseballs, T-shirts, photographs, mugs, jerseys, bats, baseball gloves, and other memorabilia-type merchandise together with all existing contracts in effect at the time of my death.

Article XIV Defi nitions Whenever used in this will, unless the context of any passage thereof requires otherwise:

A. The term “Personal Representative” includes Executor, Executrix, Executrices, Executors, and Administrator, Administratrix, Administrators, and Administratrices, with or without the Will annexed, as well as all their substitutes and successors.

B. The term “Trustee” means the singular or multiple Trustees appointed herein, as well as their substitutes and successors.

C. The term “education” shall be construed to mean not only all levels of education in the cus-tomary sense, including private tutorials and professional and advanced education, but also spiritual education, musical instruction, and physical education, including summer camps for minor beneficiaries.

D. The term “health” shall be construed to include medical, dental, hospital, drug and nursing costs, as well as all expenses of invalidism and costs of medically prescribed equipment and travel.

E. The term “maintenance and support” shall mean the maintenance and support of the income beneficiaries in accordance with their accustomed manner of living.

F. The term “income” shall mean net income after the payment of all trust administration expenses, trustees’ fees, and taxes other than beneficiary income taxes.


268 Appendix B

G. The term “child” and “children” shall mean my son, JOSEPH PAUL DIMAGGIO Jr. H. The terms “grandchild” and “grandchildren” shall mean my two granddaughters, KATHERINE

MARIE DIMAGGIO and PAULA SUE DIMAGGIO. I. The terms “great grandchild” and “great grandchildren” shall mean my three great grand-

daughters, KENDAHL R. STEIN, VALERIE F. HAMRA, and VANESSA S. HAMRA, and my great grandson, MITCHELL J. STEIN.

J. The singular includes the plural and the plural includes the singular.

Article XV Construction of Will The headings and subheadings used throughout this Will are for convenience only and have no significance in the interpretation of the body of this Will and I direct that they be disregarded in construing the provisions of this Will. IN WITNESS WHEREOF, I ha ve hereunto subscribed m y name and af fixed my seal at Hollywood, Broward County, Florida, this 21st day of May, 1996, in the presence of the subscrib-ing witnesses whom I have requested to become attesting witnesses hereto. /s/ JOSEPH P. DIMAGGIO


269

A abatement The process of determining the order in which gifts made in a will are applied to pay the debts, taxes, and expenses of the estate.

AB trust See credit shelter trust.

ademption A testator’s intentional act to revoke a gift under a will or by delivering the gift to the donee prior to the testator’s death.

administrator A male personal representative appointed by the court to administer the estate when there is no will.

administratrix A female personal representative appointed by the court to administer the estate when there is no will

adopted child The person adopted through the legal process of establishing a relationship of parent and child when the status does not already exist. Many states treat the adopted child as the natural child of the adopted parent, rather than the child’s former natural parents, for purposes of inheritance.



advancement A gift made to an heir with the intent of reducing or eliminating that heir’s right to inherit from the person’s estate.

affinity Relationship by marriage

after-born child A child born after the decedent’s death. [Also called posthumous heir (child)(issue).]

agent A person who acts on behalf of another.


ambulatory Subject to change or revocation.


ancillary administration Additional administration that takes place in a state other than the decedent’s domicile state because he or she owned property there.

annual exclusion The amount a donor can give per person without subjecting the transfer to gift tax.

annuity An investment that pays a specified amount of principal and interest for a period of time, which is often the remainder of the investor’s life.

anti-lapse statute A statute that prevents the lapse of a bequest in a will if the person receiving the bequest dies before the testa-tor by allowing the heirs of the beneficiary to receive the bequest.

appointee A person who benefits from a power of appointment.



B beneficiary The person named in a will to receive the testator’s assets.

bequest A gift made in a will. Traditionally referred to a gift of personal property in a will.


bypass trust See credit shelter trust .

C charitable remainder trust An inter vivos trust in which the settlor names himself or herself as the income beneficiary during his or her lifetime, with the trust’s assets going to the named charity beneficiary upon the settlor’s death.


checklist A tool used in law offices to ensure that adequate information is obtained from the client to properly complete the assigned task.

codicil A provision that amends or modifies an existing will.

collateral heir An heir who is related to the deceased but is not a direct descendant or an ancestor of the deceased, such as a brother, sister, aunt, or uncle.

community property All property acquired during marriage in a community property state, owned in equal shares.

consanguinity A blood relationship.

Glossary

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270 Glossary


constructive trust A trust imposed by a court on equitable grounds against a person who has wrongfully obtained property of another.

credit shelter trust A trust created by married couples to reduce or eliminate estate taxes. (Also called an AB trust, a bypass trust, or a family trust.)

curtsey The legal provision granting a husband a portion of a deceased wife’s property. Many states have replaced curtsey with the statutory right to an elective share.

cy press doctrine In wills and trust law, this doctrine allows a court to substitute a similar charity to benefit from a gift made in a will or trust if it is no longer possible to give it to the charity designated by the testator/settler.

D death certificate A document issued by a state or governmental agency that gives details of a person’s death, such as the time, date, and cause of death.

decedent The deceased.

declaration of trust A written document creating a trust in which the settlor is also the trustee.

deduction The amount that can be deducted.

degree of kindred The relationship of surviving blood relatives to a deceased who dies without a will.

demonstrative legacy A gift made in a will of a specific amount of money to be paid from an identified fund or from the sale of an identified item.

descent The passage of real property by intestate succes-sion.

designation of health care surrogate (proxy) A form that allows a person to designate who will be able to make certain health care decisions in the event that he or she is incapacitated and unable to make the decisions.

devise A disposition of real property by will.





domicile The place where a person maintains a physical residence with the intent to permanently remain in that place; citizenship; the permanent home of the party.

donee A recipient of a gift or power of appointment.

donor The person who makes a gift, creates a power of appointment, or establishes a trust.

do not resuscitate order A document that expresses a person’s desire not to have CPR performed if the person’s heart stops beating or the person stops breathing. (Also called a nonresuscitation order.)

dower The legal provision granting a wife a portion of a deceased husband’s property. Many states have replaced dower with the statutory right to an elective share.

durable power of attorney A power of attorney that allows the agent to exercise the powers granted under the power of attorney despite the principal’s incapacitation.

duress Unreasonable and unscrupulous manipulation of a person to force him or her to agree to terms of an agreement that he or she would otherwise not agree to.

E elective share The statutory right of the surviving spouse to elect to take a share of the deceased spouse’s estate rather than taking what was provided for by the deceased spouse’s will. (Also called forced share.)

element An essential part.

employer tax identification number An identification num-ber issued by the IRS to individual estates and trusts.

equitable title A title that shows a beneficial interest in property.

escheat To pass property to the state, as is done with the assets of a person who dies without a will and without heirs.

estate Assets and liabilities of the decedent at the time of his or her death.

estate tax A tax imposed on the transfer of a decedent’s property to his or her heirs.

execution Validation of a will.

executor A male administrator of the estate.

executrix A female administrator of the estate.


express trust A trust expressly created by the settlor.

F family allowance A statutory provision for care of family members prior to payment of debts and regardless of what was provided for in the deceased’s will.

fee simple The most complete form of ownership of real property allowed by law.



fixtures Personal property that has become permanently attached or associated with the real property.


Glossary 271

forced share See elective share .

formal probate Probate under the supervision of a judge. (Also referred to as probate in solemn form.)


G general legacy A gift of money from the general assets of the estate

general power of appointment A power of appointment that gives the holder of the power the right to determine who will receive the benefits of the decedent’s estate.

gift A voluntary transfer of property without receiving consideration.

gift tax A tax imposed when a person gives money or other assets without receiving adequate consideration.

goodwill A business’s reputation, its good business name, the marketability of its products.

gross estate The total value of property owned by the decedent at the time of his or her death. The fair market value of these items is used to determine the dollar value of the gross estate.


H half-blood The relationship between two people who share one common parent, but not both.

health care proxy A document that expresses the maker’s desires as to medical care in the event that he or she is unable to do so. (Also referred to as a health care surrogate or durable medical power of attorney.)

heir A person entitled to receive property based on intestate succession.

heirs at law Heirs that would inherit if the decedent had died intestate.

holographic will A will entirely written and signed by the testator in that person’s own handwriting.

homeowners association An organization made up of home owners in a particular development that has the following primary duties: enforcing the association’s rules and regulations and maintaining the community’s common property and facilities for use by all homeowners in the development.

homestead allowance A statutory allowance of cash award to the surviving spouse and children.

homestead exemption A law that allows the head of household to keep the family home even against claims of creditors.

I implied trust A trust created by operation of law.


incorporation by reference clause A clause in a will that makes reference to certain documents that are in existence at the time the will is located with the intention of making those documents part of the will.

informal probate A simplified probate procedure used for smaller estates.

insured A person whose life, property, health, or other inter-ests are protected by an insurance policy.

intangible personal property Personal property that has no physical presence but is represented by a certificate or some other instrument, such as stocks or trademarks.

inter vivos trust See living trust.

intestate The state of having died without a will.

intestate succession The passage of a decedent’s estate as pro-vided by state laws when the decedent dies without a valid will.

inventory A list of assets of an estate.


IRS Form 56 The form used to notify the IRS of the com-mencement of a fiduciary relationship.

IRS Form 706 The federal estate and generation-skipping tax return.


IRS Form 1041 The form used to report annual income of an estate.


issue Lineal descendants of any degree, including children and grandchildren.

J joint tenants with right of survivorship (JTWROS) A form of tenancy that requires four unities: possession, interest, title, and time.

joint will A single document intended to be the will for both spouses and which is signed by both parties.

jurisdiction The power of the court to hear and rule on a case.

K kindred Those related by blood to the decedent.


272 Glossary

L lapse The failure of a gift made in a will because the beneficiary predeceases the testator.

last will and testament The phrase traditionally used as the written declaration of intended distribution of both real and personal property upon the person’s death.

legacy A gift made in a will. Traditionally referred to a gift of money made under a will.

legalese A complicated writing style used in legal documents that relies on the use of legal terms that are difficult to under-stand for those who are not in the legal field.


letter of instruction A document that sets out information that will be useful to the deceased’s survivors, personal repre-sentative, and/or attorney.

letters of administration A document used to appoint a per-sonal representative in an intestate estate.

letters testamentary A document used to appoint a personal representative in a testate estate.

life estate An ownership interest in property for a designated period of time, based on the life of another person.

life insurance trust An irrevocable living trust that is established during the settlor’s lifetime, but which receives most of its funding from a life insurance policy payable upon the settlor’s death.

lineal ascendants Persons who are related in an ascending line—grandparents, great-grandparents, etc.

lineal descendants Persons who are related in a descending line—children, grandchildren, great-grandchildren, etc.

living trust A trust created during a settlor’s lifetime. (Also called an inter vivos trust.)

living will A document that expresses a person’s wish to be allowed to die without being kept alive by artificial means. It is not a will, but rather an expression of a person’s desires.


M marital deduction A federal tax deduction that allows one spouse to transfer an unlimited amount of property to the other spouse without incurring estate or gift tax.

marital deduction trust A trust set up to take advantage of the marital deduction.

Medicaid A government program that provides medical and long-term care to those who cannot afford it and is funded by a partnership between the federal and state governments.

mutual will Joint wills executed by two or more persons.

N natural child A child of the birth parents.

no bond required clause A clause in a will that states a per-sonal representative or other fiduciary appointed in a will shall serve without bond.


nonmarital child A child born out of wedlock.

nonprobate property Property owned by the decedent at the time of his or her death that passes to a beneficiary by a means other than a will. It is not subject to probate but is included in the decedent’s gross estate.

notice Informing someone that an act has been taken.

notice by publication Notice to interested parties in a news-paper of general circulation in the location where the estate is being probated.

nuclear family A family consisting of a mother, father, and their children.

nuncupative will An oral will, usually made by the testator near death.

O organ donation Donation of organs or tissues to another person.


P partner One of two or more people who operate a business as a partnership.

payment of debts clause A clause in a will directing payment of debts and taxes. It may also direct which part of the estate will be the source of payment.

pay on death account (Totten trust) An account that is in the name of the depositor as trustee and lists another person as the beneficiary in the event the trustee dies.

per capita The equal division of assets according to the num-ber of surviving heirs with the nearest degree of kinship.

permanent life insurance Life insurance that can be kept for the life of the insured if premiums are paid in a timely manner. Examples of permanent life insurance are whole life insurance and universal life insurance.

personal property Property that is not real property or fix-tures attached to real property.

personal representative A person who manages the affairs of a deceased’s estate.


Glossary 273

per stirpes The division of assets according to rights of repre-sentation.

petition A written request of a court to take some action.

petition for administration A petition filed to com-mence probate. The petition may include identification of whether it is a testate or intestate estate, such as petition for administration with will or petition for administration without will.

petition for discharge A request by the personal representative to be discharged as the personal representative of the estate and for release of surety on any bond.

pet trust A trust established to care for a settlor’s pet after the settlor’s death.

pour-over trust A clause in a will that leaves the residuary of an estate to the trustee of an existing trust.


power of attorney A document used to appoint someone to act as an agent of another.



prenuptial agreement An agreement made by parties before marriage that controls certain aspects of the relationship, such as management and ownership of property.

pretermitted child A child left out of a parent’s will, either intentionally or unintentionally.

principal The person granting power to an agent.


probate The court process of determining will validity, set-tling estate debts, and distributing assets.

probate estate Property, both real and personal, owned by the decedent at the time of his or her death that is subject to administration.

probate in solemn form See formal probate .

probate petition In some states, the name for the petition filed to commence probate in a testate estate.

probate property Property that is owned solely by the decedent or as a tenant in common at the time of his or her death.

Q qualified terminal interest property (QTIP) trust A trust that provides a surviving spouse an income and which meets the requirements of the IRS Code.

R reciprocal will See mutual will .

residual (residuary) legacy/devise A gift of the remaining assets of the estate that were not otherwise disposed of by the will. (Also referred to as a residuary clause.)

residuary clause A clause in a will that disposes of all prop-erty not otherwise disposed of under the will.

resulting trust A trust created by a court when the facts indicate the parties did not intend for the legal owner of the property to also have a beneficial interest in the property.

revocable living trust A trust created during the settlor’s lifetime and one in which the settlor reserved the right to ter-minate the trust and recover the trust property.


revoke To take back, as in to retract an offer at any time prior to it being accepted.

S self-proof clause A clause in a will allowed in some states that eliminates the need for testimony or affidavits in order to submit the will to probate.

separate writing clause A clause in a will that refers to a separate writing prepared by the testator that specifies gifts of items of tangible personal property not otherwise specifically disposed of under the will.

settlor The person who creates a trust. Also know as a trustor.

severally Individually.

simultaneous death When it cannot be established that one person died before another.


slayer statute A statute that prohibits a person from benefit-ing from the act of killing another person. For example, the beneficiary under a will would be barred from taking under the will if he or she killed the testator.

sole proprietor A person who individually owns all assets and is personally responsible for all liabilities of a business operated as a sole proprietorship.


special power of appointment A power of appointment that limits whom the donee can appoint to receive the benefits of the estate and does not allow the donee from appointing himself or herself. (Also called a limited power of appointment.)

specific devise A gift of a specific piece of property by will, traditionally a specific piece of real property.


274 Glossary

specific legacy/bequest A gift of a specific item or class of personal property by will.

spendthrift trust A trust that restricts the voluntary or invol-untary alienation of the trust property and/or income by the beneficiary.

sprinkling trust A trust that grants flexibility and discretion to the trustee to meet the needs of each individual beneficiary.

statutory will A fill-in-the-blank will form set out in state statute.

stepchildren A spouse’s children from a former relationship.

subscribe To sign a will.



T tangible personal property Personal property that can be held or touched, such as furniture or jewelry.


tenancy in partnership A form of ownership in which property is titled in the name of the partnership. Unless other-wise provided by agreement between the partners, each partner has an equal right to use the property for partnership purposes. At the death of one partner, his or her interest passes to the surviving partners.

tenants by the entirety A joint tenancy between husband and wife, similar to JTWROS, but with the additional unity of marriage. It is not recognized in all states.

tenants in common A form of tenancy that occurs when two or more people own and possess an undivided interest in the whole property. Each tenant’s interest does not have to be equal. All tenants have a right of possession but no right of survivorship.

term life insurance Life insurance issued to cover an insured’s life for a specific period of time.

testamentary capacity The ability to understand and have the legal capacity to make a will.


testamentary intent The intent of the testator when drafting a will. Courts will look to the testamentary intent of the testator when trying to interpret and apply the terms of the will.


testate The state of having died with a valid will.

testate succession The passage of property following the dictates of a will.

testator A man who makes a will.

testatrix A woman who makes a will


tickler system A method of keeping track of important dates and filing of documents.

title Legal evidence of the person’s ownership.

tort A civil wrongful act, committed against a person or property, either intentional or negligent.

Totten trust See pay on death account .

transfer on death A form of ownership in which stocks, bonds, mutual fund shares, security accounts, and other securities pass directly to the named beneficiary upon the owner’s death.

trust A process by which ownership is split into legal and equitable title. The trustee of the trust has the legal title to the property of the trust but holds it for the beneficiary, who owns the equitable title.




trustor The person who creates a trust.



U undivided interest A title in property held by two or more people that does not specify the interest of each party.

undue influence Using a close personal or fiduciary relation-ship to one’s advantage to gain assent to terms that the party otherwise would not have agreed to.

unified tax credit A credit to be used against possible estate and gift taxes.

Uniform Probate Code A uniform law intended to modernize the laws relating to decedents’ estates and trusts.

unity A requirement for creating a joint tenancy, such as joint tenants with right of survivorship.

universal life insurance Insurance that is similar to whole life insurance, but with one difference being that premiums can vary during the course of policy ownership.

V valid will A will that is executed in compliance with the laws of the state in which it was executed.

venue The proper place where a case should be heard.


Glossary 275

W warranty deed A deed guaranteeing clear title to real property.

whole life insurance Life insurance that is intended to provide coverage for the insured’s entire life. Whole life is characterized by an inclusion of an investment component that increases in value over time.

will A document representing the formal declaration of a person’s wishes for the manner and distribution of his or her property upon death.

will contest An objection to the validity of a will, often based on the testator’s lack of capacity or undue influence.


Index

A

ABA; see American Bar AssociationAbatement (wills), 122AB trust, 89, 94Accounting, final, 210Ademption, 119Administrator, 4, 5Administratrix, 4, 5Adopted child, 53

intestate succession, 68Advance directives

conflicting requests, 174definition of, 5–6, 171designation of health care surrogate, 182designation of health care surrogate

(proxy), 181Do-Not-Resuscitate order, 184–185durable power of attorney, 181–184federal legislation, 172–173forms

Designation of Health Care Surrogate, 182

Do-Not-Resuscitate Order, 185Durable Power of Attorney for

Health Care, 183–184living wills; see Living willsnon-resuscitation order, 184–185Patient Self-Determination Act

requirements, 172–174relevance of age, 174state laws, 172, 177types of, 5–6

Advance funeral arrangements, 187–188Advancement (wills), 119Affidavit of state tax due (sample form), 246Affidavits, falsely attesting to, 16Affinity, in intestate succession, 68After-born child, 53

intestate succession, 69Agent, 181Allen v. Dalk, 114–115Allore v. Flower Hosp., 189Altenbernd, Judge, 175Alternate valuation method, 243Ambulatory (wills), 123American Bar Association

Center for Professional Responsibility, 12Model Rules of Professional Conduct,

13, 16Analysis, in legal reasoning, 254Anatomical gifts

definition, 170sample statute making anatomical

gifts, 186sample Uniform Donor Card, 186

Anatomical gifts—Cont.Uniform Anatomical Gift Act, 185Uniform Donor Card, 185, 186

Ancillary administration, 194, 215Angelus v. Pass, 50Annual exclusion (gifts), 101Annuities, 237Anti-lapse statute, 122Application for Employer Identification

Number (IRS Form SS-4), 225, 228

Appointee, 98Appointment, power of, 97–98, 237Appointment of fiduciary clause, 137Assets of client, paralegal’s responsibilities, 16Attestation clause (will), 141Attesting

to legal documents by paralegal as notary, 16

by witnesses at will execution, 144Attorneys

compensating attorney for probate, 212–213

hiring attorney for probate, 201tax attorneys, 247

Aunts, in intestate succession, 76

B

Baker, Judge, 215Baker, Judge Karen R., 145“Battlefield” wills; see Noncupative willsBeneficial title; see Equitable titleBeneficiary

definition of, 25, 158Totten trust, 89

Bequest, 118, 119Blended family, 76

definition of, 5wills for, 116–117

Breach of confidentiality, paralegal’s responsibilities, 13

Briefing cases, 254–257Brothers, in intestate succession, 68Business entities, 7Bypass trust, 89, 94, 100Byrd v. Trennor, 73–75

C

Caption of case, 255, 257Case brief, 254–257Cata Law, 253

Certified public accountants (CPAs), 247Charitable gifts, 100–101Charitable remainder trust, 95Charitable trust, 94–95, 156

rule against perpetuities, 166Children

appointment of guardian, 117–118intestate succession, 53, 55

Civil litigation, 7Cleveland Bar Assn. v. Sharp Estate Serv.,

Inc., 19Codicils, 2, 122–123Collateral heir, in intestate succession,

75–76Collinson v. Miller, 34Commingling of funds, 16Community property

characteristics of, 29, 51sample state statute, 51–52

Compensationpersonal representative, 212–213probate attorney, 212–213sample statute for personal

representative, 213sample statute for probate attorney, 213

Conclusion, in legal reasoning, 254Confidentiality, paralegal’s

responsibilities, 13Conflict of interest, 13, 16Conner v. Donahoo, 145Consideration (wills), 115Constructive trusts, 32Contract law, 6Corpus (trust property), 155Co-trustees, 157Cousins, in intestate succession, 76CPR, withholding, 184Crandall, Judge William H., Jr., 160Creditors of testator, 118

notice to, 204, 209Credit shelter trust, 89, 94, 100Criminal law, 7Crummey powers, 95Crummey v. Commissioner, 95Curtesy, 51Cyber Trips

advance directives, 188crash course in wills and trusts, 10estate planning, 10, 85, 167famous wills, 116intestate succession, 78legal ethics, 12life insurance, 86life insurance trusts, 95ownership of property, 28probate, 217

276

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Index 277

Cyber Trips—Cont.Terri Schiavo case, 174testate/intestate succession, 61trusts, 32, 167Uniform Probate Code, 4Uniform Trust Code, 156will forms and clauses, 143wills, 248

Cy pres doctrine, 95

D

Damages, as probate property, 25“Deathbed” wills; see Noncupative willsDeath certificates, 201Debts

as probate property, 25system in probate for payment, 118,

209–210Decedent, 2Declaration of trust, 159Deductions, 229Deed, warranty; see Warranty deedDeficit Reduction Act of 2006, 97Degree of kindred, 75–76Demonstrative legacy, 119Designation of Health Care Surrogate (proxy)

purpose, 182sample form, 182

Devisedefinition of, 4wills, 119

Devisee, 4Dimaggio’s (Joe) last will and testament,

258–268Discharge

petition for, 210, 211probate procedure, 212

Disclaimers (estate planning), 104Disclosure of information, paralegal’s

responsibilities, 13Discount rate, 236Disinheritance clause, 141, 143Disposition without administration, 213–214Doctrine of merger, 157Domicile, 2Donee, 98Donor, 96Do-not-resuscitate order, 184–185Dower, 51Durable power of attorney

purpose, 181–182sample form, 183–184

Duress, 7

E

Economic Growth and Tax Relief Reconciliation Act of 2001, 98

Elder law, 5–6Elective share

definition of, 6, 51sample state provision, 52

Elements (trusts), 155Employer identification number, 225, 228

Equitable title, 31definition of, 3legal title distinguished, 155

Equity, doctrine of, 32Escheat

nature of, 55, 57sample statute, 56–57

Estatedefinition of, 2, 3estate tax; see Estate taxgross estate; see Gross estateplanning; see Estate planningtaxable estate, 243, 247

Estate and Generation-Skipping Tax Return (IRS Form 706)

chart of schedules, 238credit for tax on prior transfers, 237, 238Form 706, 239–242generation-skipping transfer tax, 238

Estate planningchecklist, 130–131disclaimers, 104Federal Citizen Information Center

publication, 99–101impact on gross estate of planning tools,

103–104letter of instruction, 146life insurance, 85–86Medicaid, 96persons who need, 84postmortem planning, 104power of appointment, 97–98professionals involved in, 107role of paralegal, 84sample checklist, 130–131sample disclaimer, 104sample state preliminary notice

form, 244trusts, 86–96unified tax credit, 101wills, 86; see also Wills: drafting and

execution, and Wills: generallyEstate tax

affidavit for estate not paying estate tax (sample state form), 246

alternate valuation method, 243deductions, 229definition, 85description of Form 706 schedules,

236–238estate planning, 98–104exemption amounts for 2000–2010, 247Federal Citizen Information Center

publication, 99–101Federal Estate and Generation-Skipping

Tax Return (IRS Form 706), 229, 236–242

gifts for reduction of, 96gross estate; see Gross estateimpact of estate planning tools, 103–104IRS “questions and answers,” 221–223living trusts, 86, 89marital deduction trust, 89, 94phase-out, 98sample state tax return form, 245–246scope of, 98state estate tax return (sample form), 245

Estate tax—Cont.status of, 98, 224taxable estate, 243, 247unified tax credit, 101, 247valuation, 103whole life insurance for payment, 85will as tool for reducing, 118

Ethicsfinal decisions, 170–171importance for paralegals, 7undue influence, 12unlicensed practice of law, 12, 143wills, trusts, and estates, 11–16

Ethics Alertsadvance directives, 171checklists, 197estate planning advice, 103estate tax law, 225following testator’s intent, 119, 131neglecting checklists and

questionnaires, 131probate process, 197probate property, 26routine nature of work and mistakes, 131solicitation, 68tickler system, 197trusts, drafting, 155unauthorized practice of law, 143undue influence, 13wills, drafting or advising, 49

Exception to doctrine of merger, 157Execution of will, 8–9Executor, 4, 5Executrix, 4, 5Exemptions

gift tax exemption, 96property, 57tax-exempt status, 94

Exordium clause, 135Express trusts

definition, 32, 156examples of, 89

F

Fain, Presiding Judge, 73Falsely attesting to affidavits, 16Family law, 5Family trust, 89, 94Farmer, Judge David R., 43Federal Citizen Information Center’s estate

planning publication, 99–101Federal Trade Commission’s living trust fact

sheet, 87–88Fee simple, 27FEIN (federal employer identification

number), 225, 228Fiduciary

appointment of fiduciary clause, 137definition of, 137notification to IRS of fiduciary

relationship, 225, 226–227trustee’s duty as, 157

Fiduciary duty, 157Final accounting, 210Final decisions, 170–189FindLaw, 253


278 Index

Fisch, Spiegler, Ginsburg & Ladner v. Appel, 108

Fixtures, 23Forced share, 6, 51Formal probate procedure; see ProbateForms

Designation of Health Care Surrogate, 182

Do-Not-Resuscitate Order, 185Durable Power of Attorney for Health

Care, 183–184Estate Tax Return (state), 202IRS forms; see Internal Revenue ServicePetition for Administration with Will, 202Preliminary Notice and Report

(state), 244safe deposit box, petition and order to

open, 9Statutory Will, 46–48Warranty Deed, 9

Funds of client, paralegal’s responsibilities, 16

Funeral arrangements, advance, 187–188Funeral direction clause, 135

G

General legacy, 118, 119General powers of appointment, 98Generation-skipping tax

information from IRS on, 98IRS Form 706 (Federal Estate and

Generation-Skipping Tax Return), 229, 236–242

Giftsannual exclusion, 101bequest, 118, 119definition, 89demonstrative legacy, 119devise, 119donor, 96estate planning tool, 96–98, 101–103Federal Citizen Information Center

publication, 99–101general legacy, 118, 119legacy, 118, 119residual (residuary) devise, 119residual (residuary) legacy, 119specific bequest, 118, 119specific devise, 118, 119specific legacy, 118, 119unified tax credit, 101

Gift tax, 89, 94annual exclusion, 101Federal Citizen Information Center

publication, 99–101gift splitting, 101IRS Form 709 (Gift and Generation-

Skipping Transfer Tax Return), 102

probate process, 221unified tax credit, 101unlimited exclusion, 103valuation, 103

Glossary, 269–275Goodwill, 24Google, in legal research, 252

Grandchildren, in intestate succession, 76Grandparents, in intestate succession, 76Gross estate

calculation of, 243, 247planning tools’ impact on, 103–104relation to probate estate, 26

Guardian, appointment in will of, 117, 137

H

Half-bloods, in intestate succession, 72Haymes v. Brookdale Hosp. Medical

Center, 189Health care proxy, 6Hearings, probate, 203Heir, 4, 50Heir at law, 4, 10Holographic will

definition of, 39sample statutory provision, 39state requirements for validity, 40–42

Homeowners association, 23Homestead allowance, 57, 61

sample statute, 61Homestead exemption, 57Homicide for gain, 51, 53Husband and wife

appointment of guardian, 117–118community property, 29, 51–52gift splitting, 101marital deduction, 89, 94, 100prenuptial agreements, 122–123tenants by the entirety, 28–29trust, marital deduction, 89

I

Implied trustsdefinition, 32, 156types of, 89

Improper handling of client’s funds and assets, 16

Incidents of ownership, 95Income tax

probate filing requirements, 221states without income tax, 243U.S. Income Tax Return for Estates and

Trusts (IRS Form 1041), 221, 229U.S. Individual Income Tax Return (IRS

Form 1040), 221, 229, 230–231Incorporation by reference clause (will),

141, 143Individual ownership; see SeverallyInformal probate, 194

disposition without administration, 213–214

sample statutes for small estates, 214summary administration, 213–214

Information disclosure and breach of confidentiality, 13

In re Conduct of Morin, 18In re Devaney, 18In re Estate of Hatten, 218In re Estate of Hillyer, 34In re Estate of McFarland, 70–72In re Estate of Pearl Garrett, 120–121

In re Estate of Smith, 248–249In re Guardianship of Schiavo, 175–176In re Succession of Slay, 63In re the Estate of Greenwood, 79In re Totten, 89Insurance; see Life insuranceInsured, 85Intangible personal property, 24Internal Revenue Service

estate tax “questions and answers,” 221–223

forms commonly associated with probate, 224

Form SS-4 (Application for Employer Identification Number), 225, 228

Form 56 (Notice of Fiduciary Relationship), 225, 226–227

Form 706 (Federal Estate and Generation-Skipping Tax Return), 229, 236–242

Form 709 (Gift and Generation-Skipping Transfer Tax Return), 102

Form 1040 (U.S. Individual Income Tax Return), 221, 229, 230–231

Form 1041 (Income Tax Return for Estates and Trusts ), 221, 229, 232–235

generation-skipping tax information from, 98

gift and estate tax information from, 98gift-splitting information from, 101Web site, 225

Internet; see also Cyber Tripsbriefing cases, 257citing authority, 257Internal Revenue Service site, 225legal research and writing sites, 252–257

In terrorem clause, 135, 139sample clause, 140

Inter vivos trustsgenerally; see Living trustsirrevocable trusts; see Irrevocable living

trustsrevocable trusts; see Revocable living

trustsIntestate, 4, 49Intestate succession

adopted child, 68affinity, 68after-born child, 69applying law of, 76–77blended families, 76brothers, 68collateral heir, 75–76definition of, 24distribution priority, 67–76effect of, 49–51half-bloods, 72kindred, 68, 75–76lineal ascendants, 68lineal descendants, 68nonmarital child, 69, 72nuclear families, 76per capita distribution, 77, 78per stirpes distribution, 77prevalence of, 68–69sample statute, 69siblings, 68


Index 279

Intestate succession—Cont.“significant others,” 72simultaneous death, 77–78sisters, 68stepchildren, 69surviving spouse, 67unmarried couples, 72

In the Matter of Biersack, 179–181In the Matter of the Estate of Harry Albert

Bolinger III, 90–94Inventory of estate assets, 209IRAC case briefing method, 254Irrevocable living trusts

definition, 32, 86estate planning tool, 86–89life insurance trust, 95prearranged funeral program utilizing

trust, 187sample trust agreement, 164–165tax issues, 86

IRS; see Internal Revenue ServiceIssue

descendants, 53in legal reasoning, 254, 255, 257

J

Joe Dimaggio’s last will and testament, 258–268

John R. Boyce Family Trust v. Snyder, 160–163

Jointly owned property, 25Joint tenants with right of survivorship

(JTWROS), 25requirements for owning property, 28unities, 28

Joint will, 39JTWROS; see Joint tenants with right of

survivorship (JTWROS)Jureski v. Scaduto, 147–148Jurisdiction, 194

K

Kindreddegree of, 76intestate succession, 68, 75–76

L

Lapse (wills), 119Last will and testament

meaning of, 4sample (Joe Dimaggio’s), 258–268

Law of wills, trusts, and estatesestate; see Estate; Estate planning;

Estate taxrelated areas of law, 2–5terminology, 2–5trust; see Trustswills; see Will contest; Wills: drafting and

execution; Wills: generallyLegacy

definition of, 4, 5wills, 118, 119

Legalese in wills, 133Legal ethics; see EthicsLegal reasoning, 254Legal research and writing; see Research

and writingLegal title, 31

beneficial title distinguished, 155definition of, 3resulting trusts, 89

Letter of instruction, 146Letters of administration

purpose, 204sample letter, 205

Letters testamentary, 204Lexis, 253Library of Congress, 253Life estates, 25Life insurance

definition of, 25estate as beneficiary, 25estate planning tool, 85–86irrevocable trust, 95, 187types of, 85–86

Life insurance trust, 95, 101Lineal descendants, in intestate

succession, 68Living trusts, 25, 156

definition, 32estate planning, 86–89Federal Trade Commission fact sheet,

87–88Living wills

definition of, 5, 39, 171purpose, 176–177sample life-sustaining treatment law,

177–178state laws for, 172

Lucid moment (interval), 132Lytton, Justice, 120

M

Marital deduction, 89, 94, 100Marital deduction trust, 89, 94Marriage

appointment of guardian, 117–118community property, 29, 51–52gift splitting, 101marital deduction, 89, 94, 100prenuptial agreements, 122–123tenants by the entirety, 28–29trust, marital deduction, 89, 94

Matter of Estate of Day, 125Matter of Will of Bernatowicz, 149McKean v. Warburton, 58–60Medicaid

definition of, 6estate planning, 96–97“Medicaid planning,” 6, 97Patient Self-Determination Act

requirements, 172–174Medicare: Patient Self-Determination Act

requirements, 172–174Merritt v. Yates, 43–45Minor, as trustee, 157Model Rules of Professional Conduct,

13, 16

Model Standards and Guidelines for Utilization of Legal Assistants, 12

Mutual wills, 45

N

National Conference of Commissioners on Uniform State Laws (NCCUSL), 3–4

Natural child, 53NCCUSL; see National Conference of

Commissioners on Uniform State Laws (NCCUSL)

Nelson, Justice James C., 90Nephews, in intestate succession, 76Nieces, in intestate succession, 76No bond required clause, 138No contest clause, 135, 139

sample clause, 140Nokomis Quarry Co. v. Dietl, 35Noncupative wills

characteristics of, 42, 45states allowing, 45

Nonmarital child, 53intestate succession, 69, 72

Non-probate propertydefinition of, 25examples of, 25–26

Non-profit status, 94Non-resuscitation order, 184–185Notary publics’ responsibilities, 16Notice, 203

to creditors, 204, 209of fiduciary relationship, 225, 226–227of probate proceedings, 203

Notice by publication, 209Nuclear families, 76

O

O’Connor, Justice, 206Ohio State Bar Association v. Cohen, 11Omitted child; see Pretermitted childOral wills; see Noncupative willsOrgan donation, 5; see also Anatomical giftsOrgan donation clause, 136Outlaw v. Danks, 215–217Ownership of property

comparison of types, 29description of types, 26–31trusts; see Trusts

P

Paralegalsadvance directives, 171briefing cases, 254–257continuing education, 225estate planning role, 84estate tax matters, 225, 247ethical issues, 11–16, 49, 155final decisions, 170–171general duties, 8–10


280 Index

Paralegals—Cont.legal reasoning, 254probate process, 192, 214, 220research and writing, 6, 252tickler system, 8trust drafting role, 155will preparation role, 8–9, 49, 112,

119, 128, 129Partner, 7Passalino v. Protective Group Securities,

Inc., 28, 30–31Patient Self-Determination Act

implementing regulations, 173–174overview, 172

Payment of debts clause, 136Pay on death accounts, 25Per capita distribution, 77, 78Permanent life insurance, 85Personal property

definition of, 24fixtures distinguished, 23intangible, 24tangible, 24

Personal representativeappointment of, 203–204compensation, 212–213definition of, 4letters of administration, 204, 205letters testamentary, 204notification to IRS of fiduciary

relationship, 225, 226–227powers of (will clause), 138–139probate hearing, 203–204sample documents

letter of administration, 205order appointing personal

representative, 205will clause, 140

sample statutescompensation of personal

representative, 212–213powers of personal representative,

138–139wills, 117, 137

Per stirpes distribution, 77Petition and Order to Open Safe Deposit

Box, 9Petition for administration

sample petition with will, 202use, 201

Petition for discharge (probate), 210, 211–212

Petition for probate, 201Petitions, generally, 201Pet trusts, 96

sample statute, 97Posthumous child, 53Postmortem estate planning, 104Pour-over trusts, 96Power of appointment, 97–98, 237Power of attorney, 181Precatory trusts, 89–94Prenuptial agreements, 6, 122–123Pretermitted child, 53, 55

sample statute, 55Principal

durable power of attorney, 181trust property, 155

Private trusts, 156Probate

ancillary administration, 194, 215Application for Employer Identification

Number (IRS Form SS-4), 225, 228

checklist for formal procedure, 195–197compensating attorney or personal

representative, 212–213death certificate, 201death initiating process, 201–202debts, payment of, 118, 209–211definition of, 2, 193discharge, 212disposition without administration,

213–214estate tax; see Estate taxfinal accounting, 201formal procedure, 192–212gift tax; see Gift taxhearing on will and personal

representative, 203–204hiring attorney, 201income tax; see Income taxinformal, 194, 213–214initial actions, 200–201inventory of estate assets, 209letters of administration, 204letters testamentary, 204locating and depositing will, 201notice of probate proceedings, 203, 204notice to creditors, 204, 209personal representative; see Personal

representativepetitions

for discharge, 210, 211–212for probate/administration, 201–203

purpose, 192role of paralegal, 192sample documents

consent and waiver of notice, 204letter of administration, 205notice by publication, 210notice of petition for administration,

204order admitting will to probate/

appointing personal representative, 205

petition for administration, 202petition for discharge, 211–212priority of payment, 211

sample statutesnecessity of probate, 193notice of hearing on petition for

formal proceeding, 203small estates, 214venue for estate proceedings, 194

securing estate assets, 201small estates, 213–214state laws, 198–200state tax forms, 243–247summary administration, 213–214taxes

estate tax; see Estate taxgift tax, see Gift taxincome tax; see Income taxlist of federal and state tax forms, 224payment of, 209–210

Probate—Cont.taxes—Cont.

role in probate, 221–224state tax forms, 243–247

tickler system, 197venue, 194

Probate estate’s relation to gross estate, 26Probate in solemn form, 194Probate property

definition of, 24examples of, 25

Propertyownership; see Ownership of propertyrule against perpetuities, 165–166types of, 23–26

Q

Qualified terminal interest property (QTIP) trust, 94, 104

R

Real propertydefinition of, 23law governing, 8

Reciprocal wills, 45Remainder interest, 25Research and writing

Google, 252importance for paralegals, 6, 252Internet resources, 252–254legal reasoning, 254search terms, 252

Residual (residuary) devise, 119will clause, 136

Residual (residuary) legacy, 119will clause, 136

Residuary clauses, 136Res (trust property), 155Resulting trusts, 32Revocable living trusts

definition, 32, 86estate planning, 86–89tax issues, 86

Revocationademption, 119clause on wills, 135wills, 122–123, 135

Rieger v. Jacque, 105–107Rule, in legal reasoning, 254Rule against perpetuities, 165–166

S

Safe deposit box, sample petition and order to open, 9

Self-proof clause (will), 141, 142Self-proved will, 142Separate property, 29Separate writing clause, 139–140Settlor, 155, 157Severally

definition of, 25ownership of property, 26–27


Index 281

Siblings, in intestate succession, 68“Significant others,” in intestate

succession, 72Silverman, Associate Judge Scott J., 256Simultaneous death, 77–78

will clause, 136–137, 263Sisson v. Jankowski, 14–16Sisters, in intestate succession, 68“Slayer” statutes, 51, 53

sample statute, 54–55Small estates, 213–214Sole proprietor, 7Solorzano v. First Union Mortgage

Corporation, 255–257Sound mind, 132Special powers of appointment, 98Specific bequest, 118, 119Specific devise, 118, 119

will clause, 136Specific legacy, 118, 119

will clause, 136Spendthrift trust, 95–96Sprinkling trusts, 96State laws

advance directives, 177anti-lapse requirement, 122community property, 51–52declaration concerning life-sustaining

treatment, 177–178elective share, 52estate tax, 98holographic wills, 40–42living wills, 172, 177National Conference of Commissioners

on Uniform State Laws (NCCUSL), 3–4

non-profit status, 94probate, 198–200, 214taxes, 243wills, 113

State tax forms, 243–247Statutory will

advantages/disadvantages, 45, 49sample form, 46–48

Stepchildren, in intestate succession, 69Stone, Judge, 147Subscribing, by witnesses at will

execution, 144Surety, will provision, 138Surviving spouse

definition, 67intestate succession, 67

T

Taliaferro v. Taliaferro, 168Tangible personal property, 24Taxes; see also Internal Revenue

Servicecharitable trusts, 94estate tax; see Estate taxexemptions, 94generation-skipping tax, 98gift tax; see Gift taxincome tax; see Income taxnon-profit status, 94

Taxes—Cont.probate procedure for payment,

209–210state intangible personal property

tax, 221Tenancy in partnership, 25Tenants by the entirety, 25, 28–29Tenants in common

definition of, 24ownership rights, 27–28

Terminologygender distinctions, 4key terms, 3–5states adopting UPC, 5traditional versus UPC, 4wills, 118–119

Term life insurance, 85–86Testamentary capacity

definition of, 9requirement for valid will, 132–133

Testamentary gifts, 16Testamentary trusts, 25, 153–154, 156

checklist, 153–154definition, 32estate planning, 86–89tax issues, 86wills, 141

Testate, 4, 38Testate succession, 38–39Testator

definition of, 4, 5will as expression of intent, 117

Testatrix, 4, 5Testimonium clause (will), 141Tickler system, 8

probate, 197Title to property

definition of, 25, 31–32equitable title, 3, 31, 32legal title, 3, 31, 32types of ownership, 26–31

Torts and tort law, 7Totten trusts, 89Trade fixtures, 23Transfer on death (TOD), 26Trust agreement, 159Trustee

compensation, 157definition of, 3, 137, 155doctrine of merger, 157duties of, 157–158powers of, 158requirements for being, 157

Trust instrument, 157, 158–159Trustor, 155Trust property, 155–156Trust purpose, 155Trusts

AB trust, 89, 94beneficiary, 89, 158benefits of, 155bypass trust, 89, 94charitable remainder trust, 95charitable trust, 94–95, 156checklists, 153–154common clauses, 163, 165constructive trusts, 32, 89credit shelter trust, 89, 94

Trusts—Cont.declaration of trust, 159definition of, 3doctrine of merger, 157drafting a trust, 163, 165essential elements, 155estate planning tool, 86–96exception to merger doctrine, 157express trusts, 32, 89, 156family trust, 89, 94Federal Citizen Information Center

publication, 99–101implied trusts, 32, 89, 156Income Tax Return for Estates and

Trusts (IRS Form 1041), 221, 229, 232–235

inter vivos trusts, 25, 32, 156irrevocable living trusts; see Irrevocable

living trustslife insurance trust, 95living trusts, 25, 32, 86–89marital deduction trust, 89, 94paralegal’s role, 152–153participants in, 157–158pet trusts, 96pour-over trusts, 96precatory trusts, 89–94private trusts, 156property of, 155–156purpose of, 31–32, 155qualified terminal interest property

(QTIP) trust, 94reason for, 155requirements, 158residuary clause, 89resulting trusts, 32, 89revocable living trusts, 32, 86–89rule against perpetuities, 165–166sample checklist, 153–154sample statutes

exception to merger doctrine, 157rule against perpetuities, 166trust creation, 159

sample trusts/clausesAB trust clause, 89irrevocable trust, 164–165pet trust, 97rule against perpetuities savings

clause, 166spendthrift clause, 96trust agreement, 159

settlor, 155, 157spendthrift trust, 96–97sprinkling trusts, 96tax consideration, 86, 89termination of, 167testamentary trusts; see Testamentary

trustsTotten trusts, 89trust agreement, 159trustee; see Trusteetrust instrument, 157, 158–159trustor, 155types of, 32, 86–96, 156will containing trust, 158–159

Tulsa Professional Collection Services v. Pope, 206–209


282 Index

U

Uncles, in intestate succession, 76Undivided interest

definition of, 27tenant’s ownership right, 27–28

Undue influencedefinition of, 7paralegal’s responsibilities, 12signs of, 13

Unified tax credit, 101, 247Uniform Act on Intestacy, Wills and

Donative Transfers, 78Uniform Anatomical Gift Act, 185Uniform Donor Card, 185, 186Uniform Probate Code (UPC) terminology,

3–5Uniform Simultaneous Death Act, 78Uniform Transfers on Death Security

Registration Act (UTODSRA), 26Uniform Trust Code, 156Unities

comparison of forms of ownership, 29joint tenants with right of survivorship, 28tenants by the entirety, 28–29

Universal life insurance, 85Unlicensed practice of law, 12Unlimited exclusion (gift tax), 103Unmarried couples, in intestate succession, 72

V

Valid will, 38–39, 49Valuation (gifts), 103Valuation (gifts and estates), 103Venue, 194

W

Warranty deeddefinition of, 26sample form of, 27

Westlaw, 253Whole life insurance, 85Will contest

definition of, 7grounds for challenge, 214–217no contest (in terrorem) clause, 135, 139

Wills: drafting and executionappointment of fiduciary clause, 137attestation clause, 141attesting, by witnesses, 144basic clauses, 133–143checklists, 129–132decorum appropriate for execution,

143–144disinheritance clause, 141, 143dispositive provisions, 136dos and don’ts, 144exordium clause, 135format, 133funeral direction clause, 135

Wills: drafting and execution—Cont.incorporation by reference, 141, 143language, 133legalese, 133legal forms, 129lucid moment (interval), 132no bond required clause, 138no contest (in terrorem) clause, 135, 139organ donation clause, 135–136paralegal’s role, 8–9, 119, 128, 129payment of debts clause, 136powers of personal representative clause,

138–139, 140requirements for valid will, 113,

132–133residuary clause, 136review of final draft, 143revocation clause, 135sample clauses

appointment of fiduciary, 137attestation, 141disinheritance, 143exordium, 135funeral direction, 135incorporation by reference, 143no bond required, 138no contest (in terrorem), 140organ donation, 135–136payment of debts, 136powers of personal representative,

140residuary, 136, 261–263self-proof, 142separate writing, 140simultaneous death, 136–137specific devise, 136testimonium, 141

sample documentsestate planning checklist, 130–131last will and testament, 258–268will, 133–134

sample statutesexecution of will, 132powers of personal representative,

138–139self-proved will, 142separate writing, 140

self-proof clause, 141, 142self-proved will, 142separate writing clause, 139–140signing of will, 143–144simultaneous death clause, 136–137sound mind requirement, 132specific devises, 136specific legacies, 136standard clauses, 129subscribing, by witnesses, 144surety, 138testamentary capacity, 132–133testamentary trusts, 141testimonium clause, 141witnesses to signing, 143–144

Wills: generallyabatement, 122ademption, 119advancement, 119ambulatory nature of, 122–123

Wills: generally—Cont.anti-lapse statute, 122basic requirements, 113, 132–133benefits of, 116–118bequest, 118, 119changing provisions of, 122–123codicils, 122–123consideration, 115contested, 7, 214–217conveyable gifts, types of, 118–119definition of, 2, 3demonstrative legacy, 119devise, 119disadvantages, 86drafting; see Wills: drafting and

executionelective share, 6estate planning tool, 86execution; see Wills: drafting and

executionfamily stress and, 117general legacy, 118, 119hearing to determine validity, 203holographic will, 39, 40–42importance, 38–39joint will, 39lapse, 119legacy, 118, 119modifying, 122–123mutual will, 45nonconveyable gifts, types of, 119,

122–123noncupative, 42, 45prenuptial agreements, 122–123reasons for having, 116–118reasons for not having, 113–116reciprocal will, 45requirements, 113, 132–133residual (residuary) devise, 119residual (residuary) legacy, 119revoking, 122–123sample order admitting will to

probate, 205sample state statutes

anti-lapse provision, 122formal requirements of will, 113revocation of will, 123

sample will, 133–134specific bequest, 118, 119specific devise, 118, 119specific legacy, 118, 119statutory will, 45–49storage of will, 146terminology, 118–119trusts within will, 158–159types, 39–49updating, 123validity, 38–39, 49

Witnessing legal documentsattesting, 144disinterested witness, 144paralegal’s responsibilities as notary, 16subscribing, 144will signing, 143–144

Writing and research; see Research and writing


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ISBN 978-0-07-340306-9MHID 0-07-340306-7


Kent

Written for paralegal students, not lawyers. Wills, Trusts, and Estates for Paralegals presents the students with hands-on assignments to help develop their legal reasoning skills and demonstrate their knowledge of the material without overwhelming the student in the process. The text provides students with the opportunity to learn about the law of wills, trusts, and estates and develop the skill sets they need to succeed in the legal field.

Topics are presented in a straightforward and comprehensive manner, while the learning features focus on three goals:

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