1) Mechanics of Successiona) Probate Administrationi) Functions(1) Provides evidence of transfer of title to new owners(2) Protects creditors by providing a procedure for payment of decedents debts(3) Distributes the decedents property to those intended after the decedents creditors are paidii) Choice of Law(1) Primary jurisdiction: law of the state where the decedent was domiciled at death(2) Ancillary jurisdiction: law of the state where the decedents real property is locatediii) Decedents Creditors(1) Nonclaim statutes: requires that the creditor file claims within a specified time period; problems arise when proper notice is not given(a) Two forms that these statutes operate in:(i) Bars claims not filed within 2-6 months after probate proceedings are commenced, or(ii) Bars claims not filed 1-5 years after the decedents death(2) Creditors can for a probate proceeding to be opened, even if there is no probate property in order to allow certain nonprobate property to be usedb) Nonprobate Administrationi) Most nonprobate property is contracts with third party beneficiaries, therefore no proceeding is neededc) Professional Responsibilityi) Duties to Intended Bs(1) Majority: the attorney drafting the will/nonprobate document is liable to the 3P Bs of the document for negligence in estate planning(a) Standard: exercise reasonable care(b) Rationale: harm to potential beneficiaries is reasonably foreseeable (Simpson v. Calivas)(2) Minority: Privity defense; the lawyer only has a duty to exercise reasonable care to the decedent, as the lawyers client in privity (only 9 states follow this rule)ii) Conflicts of Interest(1) Often an issue when the lawyer represents both H and W (2) Must ask for a waiver of confidentiality to represent both parties as interests may become adverse (see A v. B)(a) Example: any information regardless of source will be revealed if the lawyer believes it would affect the estate planning.2) Intestate Successiona) Purposei) Estate planning by default if no plan has been put in place by the decedentii) May be partial intestacy if some property had not been disbursed by other meansiii) Statutes of Descent and Distribution attempt to carry out the probable intent of the decedentb) Structure i) Surviving Spouses Share(1) General Rule: In most states, the surviving spouse receives at least of the decedents estate with the remainder to the descendants(2) Simultaneous Death Problem: when couples die in the same accident; a person receives the property of the decedent only if the person survives the decedent for a period of time(a) Uniform Simultaneous Death Act (USDA): if there is no sufficient evidence of the order of deaths, each spouse is deemed to have predeceased the other, so neither inherited from each other(b) 120-hour Survivorship Rule: The surviving spouse must survive by 120 hours (5 days), or otherwise deemed to predecease their spouseii) Descendants by Representation(1) English per stirpes: each live column is treated equally(a) live column is a column in the family tree where there is an issue alive; if a child of the decedent predeceased the decedent and did not have any issues, then the column is not considered live(2) Modern per stirpes: each column is treated equally, beginning at the first row with a survivor(a) The difference between English and Modern is where (horizontally) you start counting(3) UPC/Per Capita at Each Generation: Begin counting at the first row with a survivor, but each taker on any row is treated equally with other takers on that rowiii) Parents: if there are no descendants, then the parents take after the spouses shareiv) Other Collaterals: if there is no spouse, descendant, or parent, then other collateral family members take(1) First line collaterals: descendants of the parents (aka decedents siblings); (2) If there are no first line collaterals, states provide for two different schemes in how to divide:(a) (Majority) Parentelic System: the estate passes to the grandparents and their descendants, and if none, to the great-grandparents and their descendants; moves up the stairs on the table of consanguinity(b) (Minority) Degree of Relationship System: estate passes to the closest of kin, counting degrees of kinship on the table of consanguinityv) Escheat: if a person dies intestate and without any relatives who can take, the estate is said to escheat and goes to the state of the decedents domicilec) Problems arising from Transfers to Childreni) Step and Half Children: Most states and the UPC recognize step and half children as full children for the purpose of intestate successionii) Adopted Children(1) Formal Adoption: jurisdictional split on whether the child can inherit through/from both genetic and adopted parents, three versions:(a) The child can only inherit from their adopted parents/relatives, the genetic family is no longer in the family tree by way of adoption (see Hall v. Vallandingham)(b) The child can inherit from both the adoptive and genetic parents(c) The can inherit from both the adoptive and genetic parents, only if the child was adopted by a stepparent(2) Adult Adoption: most intestacy statutes draw no distinction between child adoptions and adult adoptions; the practical effect is to put the adult adopted person ahead of siblings if the validity of the will is to be challenged(a) Minority: it would be against public policy to allow the adult adopted child to take if the adoption was a covert attack against the testators intent (see Minary)(3) Adoption in Wills/Trusts: once the adoption is recognized by the statute, courts do not have a problem allowing the adopted child inherit from a will or other gift(a) Minority stranger to the adoption rule: The adopted child is presumptively barred if the donor is not the adoptive parent and a gift is given to the adoptive parent(4) Equitable Adoption/Adoption by Estoppel: if there is an oral agreement between a married couple and the genetic parent (if applicable), adoption is presumed if the couple takes a child into their home and raises it as their own for the purposes of successioniii) Posthumous Children: the child was conceived before, but born after the fathers death(1) The child is treated as alive from the time of conception rather than birth for the purpose of inheritanceiv) Non-Marital Children: children of unmarried parents(1) Common law: cannot inherit from either the mother or father(2) Modern law: (a) All states permit the child to inherit from the mother(b) States vary on whether the child can inherit from the father; require that:(i) There is a subsequent marriage between the mother and father;(ii) The father acknowledges the child as his;(iii) The issue has been adjudicated; or(iv) There is clear and convincing proof of paternity after deathv) Posthumously Conceived Children (as a result of reproductive technology)(1) Because marriage terminates at death, a posthumously conceived child is a nonmarital child by law(2) In order for the posthumously conceived child to enjoy inheritance rights the court must determine:(a) What is in the best interests of the child(b) The states interest in orderly administration of the estate(c) The reproductive rights of the genetic parent(i) The prospective donor must clearly and unequivocally consent to the posthumous reproduction and to the support of any resulting child (see Woodward v. Commn of Social Security)vi) Property Management of a Minor(1) Guardianship: guardian takes possession of the property with a duty to support the child; cannot change investment without a court order(2) Conservatorship: conservator is given title as trustee of the property with investment powers; appointment and supervision of a court still required(3) Custodianship: given the property to hold for the benefit of the minor; required to transfer property when s/he reaches the age of majority; under no court supervision(4) Trusteeship: only available if created during life of the decedentd) Other Problemsi) Disinheritance: If a person is disinherited by will or other document, s/he may still get something by partial intestacy if the estate plan was not complete(1) Common Law: cannot have a negative disinheritance, ie cannot keep people from getting something in the will unless the will devises all property(2) Modern Trend: a disinherited heir in the will is treated as a disclaiming heir, to have predeceased the testatorii) The Slayer Rule: prevents people from inheriting from their victims if that person wrongfully/purposely bring upon their death(1) Applies to wills, intestacy, and nonprobate estate planning(2) No conviction required, but there must still be a court proceeding to determine faultiii) Disclaimers(1) Common law: if an heir refused to accept an inheritance, the common law treated the heirs renunciation as if title had passed to the heir and then from the heir to the next intestate successor(2) Statutory law: treats the person disclaiming as to have predeceased the decedent before the time of distribution so it would go to the next in line(a) General rule regarding creditors: if disclaimed, the debtor is deemed to not ever have had an interest in the property for creditors/tax purposes because there is no control over what happens next to the property(i) Exception for Federal Tax Liens: by disclaiming the property, the party exerted a right and control over the property. (see Drye note case)3) Willsa) Wills Acti) Formalities(1) The will must be in writing;(2) With the testators signature; (3) And signed by two witnesses(a) Attestation: the testator communicated an intent that this is his/her will and the witnesses acknowledge it; creates a rebuttable presumption that the formalities have been met(b) Self-Proving Affidavit: recites that the requirements have been complied with and signed in front of a notary; creates clear and convincing evidence that the formalities have been met(c) Presence requirement: the will must be signed or acknowledged in the presence of the two witnesses(i) Line of sight rule: the testator is capable of seeing the witnesses in the act of signing (see Stevens v. Casdorph and in re Groffman)(ii) (majority) Conscious presence rule: the witness is in the present of the testator through a general consciousness of events and the testator comprehends that the witness is in the act of signingii) Purpose of the Formalities(1) Ritual function(2) Evidentiary function(3) Protective function(4) Channeling functioniii) (Traditional) Strict Compliance Rule: the will is only valid if it is in strict compliance with the Wills Act formalities (see Stevens v. Casdorph and in re Groffman)iv) Substantial Compliance Rule: the will is valid if the functions of the formalities were followed as closely as possible; (1) demonstrable by clear and convincing evidence that the testator intended that it be his will despite lack of strict complianceb) Purging Statutesi) Majority: if an interested person to a will signs as a witness, then they must purge/forfeit the benefit they would have received by the will(1) Some states provide that only the excess needs to be purged, the amount they would have received through intestacy may still stay (estate of Morea)ii) Minority: no requirement that the witness be disinterestedc) (Strong Trend) Harmless Error Rulei) The document is treated as if it had been executed in compliance with the Wills Act if the proponent of the will can show by clear and convincing evidence that the testator intended that the document is his will(1) Estate of Hall: clear and convincing evidence that the testator intended the edited, but not executed will to stand(2) In re Macool: must show an intent that the new document be the will, not intent to change the current oned) (Slim Majority) Holographic Wills: valid if it is in the testators handwriting and the proponent can show testamentary intent by clear and convincing evidencei) Handwriting requirement:(1) Traditional definition: A holographic will is written entirely in the testators handwriting and signed/dated by the testator; it does not need to be signed by a witness(2) Relaxed Rule: parts of the will may be on a preprinted form, but the will must work with only the handwritten parts being read(3) Most Relaxed Rule: a preprinted form can be used, but any words identifying property/beneficiaries must be handwritten (Estate of Gonzalez)ii) Testamentary Intent: intent that the document have legal effect (Kimmels Estate, fathers letter to his sons saying if anything happens to me)e) Revocation of Wills: a will can be revoked and modified at any timei) Subsequent Writing Revocation(1) The subsequent writing must be executed in compliance with the Wills Act formalities(2) Express: I, [name], make this my will and revoke all prior wills and codicils(a) Estate of Stoker, holographic will expressly revoked the earlier trust(3) Revoked by Inconsistency (Implied):(a) UPC: a subsequent will does not expressly revoke a prior will but makes a complete disposition of the testators estate, then the subsequent will presumptively revokes the earlier will by inconsistencyii) Physical Act Revocation(1) A physical act, such as destroying, obliterating, or burning the will must be done to the words/content of the will(a) Thompson v. Royall, writing on the back of a will is not enough of a physical act revocation, must cross the words(2) Harmless error is not available for physical act revocations(3) Physical act revocation on a copy of a will that is believed to be the original can revoke the original (Estate of Stoker)iii) (Majority) Presumption of Physical Act Revocation(1) There is a presumption of revocation when a will last known to be in the possession of the T cannot be found or found in a mutilated condition (Harrison v. Bird)(2) The presumption may be rebutted by clear and convincing evidence that T did not intend to revoke the will; (modern trend only requires a preponderance of the evidence)(3) If the will is lost and was last known to be in the possession of another person there is no presumption of revocationiv) Revocation of a Codicil(1) If the codicil depends on the will for its meaning and the underlying will is revoked, then the codicil is revoked as wellv) Dependent Relative Revocation (DRR): Revocation of a will/codicil is presumptively ineffective if the T made the revocation because of a false assumption of fact/law that is demonstrated by clear and convincing evidence. (1) Estate of Alburn: cannot have the first will, no revival, she revoked the second will thinking the first will was revived. Since there was evidence preferred a will over intestacy, the court applied the second will under DRR(2) Analytic Framework to Follow:(a) Did T revoke the Will?(b) Did T make a mistake of law or fact?(c) Was there an alternative plan of disposition that failed?(d) If the mistake could have been corrected would T prefer to retract the revocation?(i) If yes to these, then DRR applies; No at any stage, DRR does not applyvi) Revival of a Revoked Will(1) Common law rule: Will 1 is revived upon revocation of Will 2 because the will does not speak until the Ts death; Now revocation is effective immediately therefore need evidence that will was intended to be revived.(2) Majority rule: Revoking Will 2 revives Will 1, but only if the circumstances surrounding the revocation shows an intent that the first will is revived.(3) Minority rule: a revoked will cannot be revived without testamentary formalities or being republishedvii) Revocation by Law(1) Divorce: (Majority) deems the ex-spouse to predecease the T and revokes their provisions(2) Marriage:(a) Common law: premarital will is revoked by marriage(b) Majority rule: premarital will remains valid despite subsequent marriage, but a surviving pretermitted spouse is entitled to an intestate share of the estate unless the omission was intentional. (see protection of the spouse below)f) Components of a Willi) Doctrine of Integration: all papers present at the time of executing are intended to be part of the Will are treated as part of the Will (Estate of Rigsby)ii) Republication by Codicil: a validly executed will is treated as re-executed on the date the codicil is executed(1) Clark v. Greenhalge: can has an effect on how cases are decided because the date of the will moves upiii) Incorporation by Reference:(1) Existing writings (common law): Incorporation occurs when the will references the independent document in existence at the time of execution, but not executed with Wills Act formalities. (see Clark v. Greenhalge)(2) Subsequent writings of tangible personal property (UPC rule; slim majority): Allows for T to dispose of tangible personal property by a separate writing even if prepared after the execution of the will, provided that the will makes reference to the subsequent writing.iv) Acts of Independent Significance:(1) A T cannot condition testamentary gifts on acts that have no independent significance other than testamentary intent.(a) Example (not valid term in a will): Anything labeled with a blue flag goes to my son and a red flag goes to my daughter(2) Rationale: these sort of acts are conducive to fraudg) Contracts Relating to Willsi) Contract to Make a Will: Controlled by contract law, not the law of wills(1) Arises in situations where someone offers to take care of another for the duration of their life in exchange for something in the will.(2) General Rule: If a party to a valid will contract dies leaving a will that does not comply with the contract terms, the will is probated in accordance with the Wills Act, and the contract beneficiary is entitled to a remedy for the breach(3) Remedies for a breach(a) Monetary damages(b) Constructive trust in favor of the contract beneficiary to prevent adjustment enrichment of the will beneficiaryii) Contract Not to Revoke a Will(1) Arises in situations where H and W write joint/mutual wills that mirror each others(2) Majority rule: execution of a joint/mutual will does not give rise to a presumption of a contract not to revoke a will(a) For this claim to be successful, the plaintiff must show that the testators intended to make the wills irrevocable. (Keith v. Lulofs)(3) Minority rule: language in the mutual/joint will such as we or our indicates a contract not to revokeh) Will Contestsi) Standing: (1) The challenger must be an interested party that would take under intestacy if the will is set aside(2) If the plaintiff cannot get standing in a probate proceeding, they can seek standing through other equitable means (Latham v. Father Divine: Court gave the plaintiffs standing under a constructive trust theory because they demonstrated that the T promised to make them beneficiaries and revoke the current will)(1) In terrorem Clauses: If a person with an interest in this will contests it, they lose their benefit under the will(a) Majority rule: courts will enforce these clause if unsuccessful challenger lacked probable cause; Success in the suit is not necessary(b) Minority rule: clause is not enforceable at all(c) Other minority rule: clause is enforceable according to its termsii) Testamentary Capacity(1) Ethical issues: if the lawyer suspects someone lacks capacity, cannot prepare a will(a) Person may have a lucid interval and the lawyer may execute a will then(2) General Rule: if the will is valid on its face, the challenger bears the burden to prove lack of capacity (Wilson v. Lane)(3) Test: the testator has testamentary capacity if they are capable of knowing/understanding in a general way:(a) The nature/extent of his/her property (What is my property?)(b) The natural objects of his/her bounty (Who is going to get it?)(c) The disposition that s/he is making of that property (How is it going to go?)(i) Must be reasonable and orderly (Breeden v. Stone)iii) Insane Delusion Doctrine: the testator adheres to a false conception of reality despite all the evidence to the contrary(2) General Rule: A person may satisfy the test for testamentary capacity but an insane delusion may cause the entire will to be invalidated if the delusion affects the disposition of the will (Strittmaters Estate; see also Breeden v. Stone)iv) Undue Influence(1) Definition: Influence over the donor that overcame the donors free will and results in a donative transfer(2) Purpose: Protects against overreaching by a wrongdoer seeking to take an unfair advantage of a donor who is susceptible to influence(3) Test: A challenger is entitled to a presumption of undue influence, when they demonstrate (circumstantial evidence admissible)(a) There is a confidential relationship between the alleged influencer and the donor, and(i) Examples: fiduciary, reliant, dominant and subservient(b) one or more suspicious circumstances exist(i) Examples: donor was in a weakened condition; the wrongdoer participated in the preparation of the will/document; donor did not receive independent advice; will/document procured in secrecy or haste; disposition is regarded by a reasonable person as unnatural, unjust, or unfair1. See Estate of Lakatosh; Estate of Reid(4) Burden of proof (a) Challenger bears the burden of proof to show the confidential relationship + suspicious circumstances (see Lipper v. Weslow)(i) There is a presumption of undue influence when there is a confidential relationship and an inter vivos gift (see Estate of Reid)(b) If the test is met, the burden shifts to the proponent of the will to show the will is validv) Duress: coercion by force/threat of force which causes the T to revoke or execute a will (see Latham v. Father Divine)vi) Fraud: False representation of a material fact intended to induce, and did induce, action based on reliance of that false representation(1) In the execution: person intentionally misrepresents the character/contents of the instrument signed by the testator(2) In the inducement: a misrepresentation that causes the T to execute/revoke a will in the wrongdoers favor(3) Proving causation: the will is only invalid for fraud if the donor would not have made the transfer had he/she known the true factsvii) Tortious Interference with an Expectancy(1) Courts in almost half the states recognize this new tort, however will not entertain the claim without the plaintiff exhausting probate remedies. (Schilling v. Herrera)(2) Elements:(a) Expectancy (b) Intentional interference through tortious conduct(i) Including duress, undue influence and fraud(c) Causation(d) Damages(3) Benefits to bringing a tort claim (if available)(a) Longer statute of limitations(b) Punitive damages available(c) Evidence rule barring testimony by interested parties in probate court do not apply to tort casesi) Construction of Willsi) Governing Principle: look for the intent of the testator, traditional rules do a poor job at this which has led to modern construction changesii) Mistakes and Ambiguities(1) Plain Meaning Rule (Traditional): no extrinsic evidence is allowed if the plain meaning of the will is clear on the face of the document (Mahoney v. Granger)(2) Patent Ambiguity: ambiguity is evident on the face of the will(3) Latent Ambiguity: ambiguity is only evident when the terms of the will are applied to the facts(a) Traditional rule: no extrinsic evidence allowed, the term fails and the gift falls into the residuary clause(b) Minority rule: collapses the distinctions between patent and latent ambiguity and allows extrinsic evidence for both. (see Estate of Cole)(4) Ad Hoc Relief for a Mistake: court created exceptions just short of openly reforming the will but keeping more closely with the testators intent than the plain meaning rule(a) Allows extrinsic evidence of the Ts actual intent when there is a mistake in the details, particularly when details are susceptible to mistakes(i) Arnheiter, mistake in the street address of a property owned(ii) Gibbs Estate, mistake in the middle initial of one of the beneficiaries(5) Will Reformation for a Mistake (minority rule): some courts are willing to reform a mistaken term in a will to reflect Ts actual intent(a) A court can admit extrinsic evidence, if the proponent shows(i) A mistake of law/fact exists by clear and convincing evidence(ii) What the ts actual intent was by clear and convincing evidence(b) See Estate of Herceg, computing error dropped off the beneficiary of the residuary clause, clear that the presence of a residuary clause means that the T wanted oneiii) Beneficiaries predeceasing the Testator(1) Lapsed Devises (traditional): If a devisee does not survive the testator, the devise fails and is said to have lapsed(a) if a specific/general devise lapses, the devise falls into the residue, absent an antilapse statute?(b) if a residuary devise lapses, one of two things could happen (absent an antilapse statute)(i) no residue of a residue rule (common law): when a residuary devise lapses, the devise goes through intestacy (Estate of Russell)(ii) Modern Rule: when the residuary devise lapses, the devise gets absorbed into the rest of the residuary, unless there is an antilapse statute(2) Void Devises: if the devisee is already dead or an ineligible take, such as a dog, the devise is void and the same rule for lapsed devises applies, see above. (Estate of Russell)(3) Antilapse Statutes: statute that substitutes other beneficiaries in the event of a lapse where the beneficiary predeceases the testator(a) If an antilapse statute applies, the issue/descendant of the predeceased devisee takes if there is a qualified relationship between the substitute devisee and the testator.(b) Purpose: to get to the presumed intent of the testator(c) Words of Survivorship: to A, if he survives me(i) Majority: words of survivorship express an intent to condition the gift on surviving the testator; an antilapse statute does not apply and the gift goes into the residue if there is one (if not, to intestate heirs of T)(ii) UPC/Minority: words of survivorship, absent other evidence, is not enough to condition the gift on surviving the testator; and the antilapse statute applies (Ruotolo)(4) Class Gifts:(a) Common law: if a devise is to a class of persons, and one member of the class predeceases the T, then the surviving members of the class take the gift(b) Modern Rule: if a devise is to a class of persons, and one member of the class predeceases the T, then the surviving members of the class take the gift, unless an antilapse statute applies(c) Evidence of a Class:(i) Group label, ie my first cousins(ii) Dynamic share, ie a share that can expand and contract with the classiv) Changes in Property after Execution of a Will(1) Ademption: occurs when physical property in a specific devise in a will no longer exists because the T either gave it away before death or it was destroyed(a) Identity theory (traditional/majority): if a specific devise gift is no longer in the estate, the gift is extinguished and the term fails(b) Modified Identity Theory: if the transfer of property out of the estate was involuntary, it is presumed that the T intended the person to get what was left(i) Applies in 2 specific cases1. Destruction of property occurred with the death of the T2. T has a legal guardian/DPOA and the T has no capacity to execute/modify the willa. As a matter of policy, the identity theorys purpose does not work in this case. (Estate of Anton)(c) Intent Theory (rising trend): if a specific devise gift is no longer in the estate, the beneficiary may be entitled to the replacement/cash value of the original item if the beneficiary can show that a replacement was what the T intended(2) Satisfaction(a) Only arises when the parent gives money to their children, common law considers that it is an advancement on the legacy; (b) Modern jurisdictions require a writing for it to be satisfaction.(3) Exoneration (a) Common law: if a will makes a specific disposition of real/personal property, it is presumed that the T intended the estate to take care of any liens on the property/item(b) Modern Trend: devisees take the property subject to the lien(4) Abatement: If an estate lacks sufficient assets to pay the decedents debts as well as devises, it is treated like a bankruptcy dividing pay among claimants of different priorities(a) Residuary loses first, then general, then specific(b) Note: avoid abatement by drafting a will in percentages of the estate rather than dollar amounts.4) Nonprobate Transfersa) Basic Informationi) Nonprobate transfers are donative transfers taking place after death; revocable until the moment of deathii) Most take the form of 3P beneficiary contractsb) Trustsi) Trust Characteristics(1) A trust is a gift projected over time and subject to a management scheme(2) The trust is governed by the trust instrument first, and then by the Uniform Trust Code (UTC) as a default rule if the trust instrument does not speak on the issue(3) Bifurcation of ownership is the hallmark characteristic of a trust; the trustee holds legal title to the property and the beneficiaries have equitable title(4) Functions of a trusteeship(a) Custodial; taking care of property and safeguarding it(b) Administrative; accounting and recordkeeping(c) Investment; making and implementing an investment program for assets as part of an overall strategy suited for the needs of the beneficiaries(d) Distribution; making disbursements of income or principal to the beneficiaries in accordance with the terms of the trust(i) Income interest: Fiduciary accounting income under the traditional meaning, includes interest, dividends, royalties, rents1. Example: the trustee shall distribute all of the net income of the trust at least annually to A, during her lifetime 2. Trust instrument can define it differently if the settlor wants(ii) Principal interest: Includes the assets themselves, stocks, land and can increase in value (capital appreciation)1. Example: the trustee shall distribute so much of the principal of the trust to A for her health and education as the trustee in its sole discretion deems advisable (iii) Revised Uniform Principal and Income Act1. Permits the trustee to adjust between principal and income in investment choices2. Frees up investments in total return as opposed to balancing between income and principal3. Settlor may choose an amount to disburse as incomeii) Trust Creation(1) Requires:(a) A manifestation of intent of the settlor to create a fiduciary relationship(i) a trust does not fail for want of a trustee the court will appoint one(ii) Precatory language: does not create a fiduciary relationship, thus does not create a trust1. Example: I wish I hope, or I recommend(b) Ascertainable beneficiaries who can enforce the trust(i) A trust fails when at the time the trust becomes effective, the beneficiaries are too vague or indefinite to be ascertainable. See Clark v. Campbell(ii) The beneficiaries must have legal standing to enforce the trust, therefore trusts for pets cannot work in common law. See Searights Estate1. Exception by statute: almost every state now allows for a trust for the care of a pet, as long as it is only for the duration of the pets life(c) Specific property held in trust(i) Unthank v. Rippstein, no specific property mentioned to be held in trust in the declaration, therefore it is not a trust but a failed gift(d) A writing as required by the Statute of Frauds/Wills Act(2) Private Trusts(a) Testamentary Trust(i) Created by a will, still must go through probate1. When determining whether the testator intended to create a trust, the court must determine whether the testator intended to create a fiduciary relationship and it is not just precatory language(b) Inter Vivos Trust/Revocable Trust(i) Most popular form of trust because it is not asset specific and provides the best substitute for all property(ii) Created either by a declaration of trust or a deed of trust:1. Declaration of trust: The settlor holds the property in trust for himself, but for it to be valid, he must owe a fiduciary duty to someone other than himself2. Deed of trust: the settlor and the trustee are different people(iii) Provides for a form of uniform/across platform estate planning1. Settlor creates a trust for all his property2. Settlor then makes the trust a beneficiary of a pour over willa. All property acquired later in life after making the trust will end up in the trust regardless3. Uniform Testamentary Additions to the Trust Act: a trust can be executed before, concurrently, or after a will(c) Honorary Trust(i) The trustee does not have a fiduciary obligation to carry out the intent of the settlor1. If they decide not to carry out the gift, the property in question reverts back to the settlor/settlors successors in resulting trust2. Typically used for trusts for pets if there is no statute in placeiii) Fiduciary Administration(1) The trustee has all the powers over the trust property that a legally competent, unmarried individual has with respect to individually owned property(2) The trustee must subordinate his/her interests to those of the beneficiaries(3) Liability of the trustee:(a) Traditional law: when a trustee holds legal title of the trust property, the trustee was personally liable for the debts and obligations arising from ownership. As a remedy, the trustee could indemnify himself against the trust(b) Prevailing modern law: a creditor of the trustee in the trustees fiduciary capacity recovers directly out of the trust fund without recourse against the trustee personallyiv) Alienation(1) Two questions, the answer depends on what kind of trust provisions are present(a) Can the beneficiary alienate his/her interest?(b) Can the beneficiarys creditors attach to the interest?(2) Mandatory(a) Gives the trustee no discretion and it must be followed(i) Example: the trustee shall distribute all net income to B in annual or more frequent installments(3) Discretionary (no support standard)(a) The trustee is given sole discretion over when, to whom, and in what amount to make a distribution(i) Example: the trustee shall distribute so much of the income and principal to the beneficiary as the trustee in its sole discretion deems advisable from time to time.(b) Creditor cannot attach/compel distribution; theory is that the B does not have a property interest until the trustee makes a distribution(i) Hamilton Order Exception: the creditor may get a court order prohibiting the trustee from making distributions to the beneficiary until the creditor has been paid.(4) Support(a) The trustee has discretion over the disbursements, but must disburse for the support of the beneficiary(i) Example: the trustee shall distribute so much of the net income and principal of the trust to A as necessary for As support(b) Traditional: An ordinary creditor cannot reach the interest even with a court order; (i) Exception: a child or spouse can reach the interest for child support/alimony. Also, other creditors such as physicians who supplied support(c) UTC and Restatement have different rules for creditors in support trusts(i) Restatement: creditor can reach distributions the trustee makes or is required to make from a discretionary trust(ii) UTC: a creditor cannot compel a distribution in a discretionary trust, even if the trust is subject to a standard and even if the trustee has abused its discretion1. Only exception: child, spouse, or former spouse for support or maintenance but only to the extent that the trustee has abused its discretion(5) Discretionary with a Support Standard (most common)(a) The trust has an ascertainable standard for support, since there is a standard, the beneficiary has a standard to demand enforcement(i) Example: the trustee shall distribute to the beneficiary so much of the income and principal as the trustee in its sole discretion deems advisable for the support of the beneficiary.(b) Treated as a discretionary trust (see above) by the UTC and Restatement for the purposes of creditors(6) Protective(a) Starts off with a mandatory provision, but in the event that the B attempts to alienate/assign an interest or any creditor attempts to attach the interest, it changes to a discretionary trust with no ascertainable standard(b) Used in England in the absence of spendthrift trusts(7) Spendthrift(a) a provision prohibits the B from voluntarily alienating her interest in the trust and prohibits creditors from reaching the Bs interest(i) Example: to the full extent allowed by applicable law, the interest of any B in the income and principal of this trust shall be free from the control or interference of any creditor of the B or any spouse of a married B. Such interest shall not be subject to attachment or susceptible to anticipation or alienation.(b) A B of a spendthrift trust cannot transfer interest and a creditor cannot compel a distribution, even if the trust is a mandatory trust(i) All US jurisdictions recognize some form of the spendthrift(ii) Exceptions: child support and alimony in most, but not all, jurisdictions (c) Traditional law: not a spendthrift trust unless expressly stated in the trust instrument(8) Self-Settled(a) General Rule: a self-settled trust cannot be used to shield assets from the settlors creditors(i) Exceptions now exist by statute in 14 jurisdictions(b) Jurisdictions that allow asset protection self-settled trusts typically allow the settlor to remain the co-trustee but provide for termination of the relationship in an event of duress(i) These provisions have not been tested stateside yet, unknown if it is enforceable(9) Problems arising with Tort Creditors(a) Typically tort creditors are not allowed to attach to an interest in a trust, but few jurisdictions now allow it in two exceptions(i) Self-settled trusts(ii) Fraudulent transfers(10) Problems arising with individuals on state support(a) The principal and all income are considered resources of the individual for the purposes of state funded support, regardless if it is self-settled or created by a 3P(i) Two exceptions for Medicaid1. Discretionary trust created by the will of the deceased spouse2. Established for the benefit of a disabled person from the persons own property by a guardian, provided that the state will receive reimbursement upon death for medical assistancev) Modification and Termination without consent of the Settlor (most likely because of death)(1) Termination: Claflin Doctrine:(a) A trust can be terminated with consent of all the beneficiaries except if doing so would be contrary to the material purpose of the settlor(i) Prima facie examples of material purpose: the trust has a spendthrift provision, the trust postpones distribution until a certain age, the trust is a support/discretionary trust(2) Modification: Equitable Deviation(a) The court may modify the terms of the trust if:(i) Changed circumstances not anticipated by the settlor exist; and(ii) The changed circumstances substantially impair the accomplishment of the purpose of the trust(b) Traditional: only for administrative terms(c) Modern: allows equitable deviation for administrative and dispositive terms(i) UTC Equitable Deviation (more liberal reading)1. The court can modify both the administrative and dispositive provisions if:a. Circumstances not anticipated by the settlor occurred;b. Modification of trust will further the purposec. The modification is made in accordance with the settlors probable intent(1) Decanting: pouring over the assets of one trust into another trust(a) Used to refresh the trust that has become stale over time(3) Modification for Tax Objectives: biggest reason beneficiaries request a modification; the court will usually approve a modification for tax purposes(4) Trustee Removal:(a) Traditional rule: only to be used as a remedy for breach of trust/wrongdoing(b) Modern rule: beneficiaries can remove the trustee for cause(i) Typically by a provision in the terms of the trust that overrides traditional law(ii) UTC: beneficiaries can remove a trustee on account of,1. Ineffective administration by the trustee2. Change in circumstances or3. By the consent of all the beneficiaries if it is in the best interest of the beneficiaries and not contrary to a material purpose of the settlorvi) Purpose and Charitable Trusts(1) Charitable Trust(a) Distinguishable from private trusts in three ways(i) Must be for a recognized charitable purpose rather than for one or more ascertainable beneficiaries(ii) May endure forever(iii) Enforced by the State AG(b) Determining if it is a Charitable trust(i) First look for an identifiable beneficiary, not allowed for charitable trusts1. Example (not a charitable trust): trust to pay for the health care costs of X, injured in the marathon bombing2. Example (charitable trust): trust created for victims of the marathon bombings(ii) If it is not charitable, then determine if the trust is either:1. Private (there is a particular individual as the beneficiary)2. Purpose (not a particular beneficiary, but established for particular noncharitable purposes; example: maintenance of a gravestone)a. UTC allows for a purpose trust, but it must have someone who can enforce itb. A purpose trust can have a term of 21 years in some jurisdictions to deal with the rule against perpetuities problems, not exempt like a charitable trust(c) Charitable purpose:(i) Restatement says it includes1. relief of poverty, (ie soup kitchens and homeless shelters)2. the advancement of education/religion3. the promotion of health, (ie cancer research)4. government or municipal purposes, 5. and other purposes the accomplishment of which is beneficial to the community(ii) the donor may give the trustee discretion to choose the charitable purpose(iii) mixed charitable purposes: a trust cannot have mixed charitable and non-charitable purposes unless the trust can be divided into separate shares for each purpose1. example: income to X for life, remainder to charity Y(2) Cy Pres: if a charitable trusts purpose becomes illegal, impossible, or impracticable, the court will modify the trust rather than let it fail(a) The longer the trust goes on, the more likely the court will allow modification(b) Traditional law: the court must find that the donor had a general rather than specific charitable intent before it can apply cy pres(i) Nehers Will, The court applied the traditional rule loosely and found that there was a general intent because the town could not afford to build a hospital and the needs were already met by a nearby township.(c) UTC: there is a presumption that the donor had a general charitable intent for the purpose of cy pres(i) UTC applies equitable deviation to charitable and other purpose trusts, but the traditional rule is still cy pres.(d) Wasteful trusts(i) traditionally, the court will not apply cy pres if the charitable trust is wasteful(ii) Strong trend: UTC and many states now apply cy pres when the particular charitable purpose becomes wasteful1. The court will not consider wasteful in terms of efficiency of the funds, but rather considers the trust fund having surplus funds in the account wasteful.(e) Discriminatory trusts: not permissible, the court will apply cy pres to remove the discriminatory provisions. If that cannot be done, the property will be held in resulting trust for the settlors heirsvii) Construction of Future Interests in Trusts(1) Majority: a future interest in a trust is considered vested when the trust is created(a) Rationale: There is a general preference for vested interests because they are more marketable and economic(b) Because the future interest is vested, it may be freely alienable, except if there is a spendthrift clause in it. See Estate of Gilbert(2) Requiring Survival until Distribution means that the interest is not vested until something else occurs(a) Traditional no implied condition of survival rule states that if a remainder beneficiary dies before a life tenant, the remainder interest passes as part of the predeceased beneficiarys estate (see Tait v. Community First)(b) UPC changes the traditional rule and extends antilapse statutes to trust instruments(i) All future interests are contingent on B surviving until the date of distribution(ii) if remainder B does not survive, then the descendants of B take in an antilapse type way1. differs from the traditional rule because the traditional rule allows it to go to the Bs estate, may have a different effect if there is a Will or other nonprobate device in place for B(iii) if the remainder B who predeceases distribution has no descendants, then the interest reverts to the settlors heirs/devisees(c) Multigenerational Class Gifts(i) Single generational gift: no condition of survivorship implied (the traditional rule) because all interests are vested1. Example: Children means immediate offspring and is therefore a single generational gift(ii) Multigenerational gift: creates an implied condition of survivorship; interest is not vested1. Example: issues or descendants creates a multigenerational gift2. Descendants means that later generations take by representationc) Other Will Substitutesi) Life Insurance: Shifts the economic risk of premature death to an insurance company(1) Life insurance contracts have long been valid to transfer property on death without Wills Act formalities(2) Term life insurance:(a) Simplest and most common form(b) Contract that obligates the insurance company to pay the named beneficiary if the insured dies within the policys term(3) Whole life insurance:(a) Combines life insurance with a savings plan(b) Policy eventually becomes paid up to a point where there are no over premiums owedii) Pension/Retirement Accounts(1) Defined Benefit Pension Plan: employee receives a regular check for life. (a) At the employees death there is nothing left in the plan for the employee or the spouse to pass on(2) Defined Contribution Plan: the employer and the employee both make contributions to a specific account for the employee.(a) Plan includes investment decisions during employment(b) After retirement, the employee controls the size and timing of distributions from the account subject to certain distribution rules such as mandatory annual withdrawals(c) At the employees death, whatever is left in the account passes outside of probate in accordance with the employees death beneficiary designation in the plan documents(3) Individual Retirement Account (IRA): main form of retirement planning for self-employed persons(a) Similar to a defined contribution plan; key difference is that the IRA is governed by the terms of the contract between the account holder and the custodial institution not the employer(b) The IRA holder controls the timing and amounts of withdrawals subject to distribution rules similar to the defined contribution account(c) At the IRA holders death, whatever is left passes outside of probate in accordance with the holders beneficiary designation in the plan documentsiii) Bank Accounts(1) Bank Accounts with POD/TOD designations(a) Modern law has recognized a POD contract as valid despite noncompliance with the Wills Act(b) POD: payable on death, typically bank accounts(c) TOD: transfer on death, typically for brokerage accounts and securities(d) Totten Trust: create a savings account that says in trust for X. The court reads that to mean the owner of the account has control, but on his death transfers it to the beneficiary; structurally similar to a POD(2) Joint Bank Accounts(a) True joint/survivor account: shared equally with rights of survivorship(i) When a joint account is established with funds from one person, a gift is presumed(ii) The presumption can be rebutted by clear and convincing evidence that the donor lacked donative intent to make a gift (see Varela v. Bernachea)(b) Convenience Account: arises in cases where the depositor loses capacity and puts an adult child on the account to write checks on the depositors behalf(i) Must determine if the decedent intended it to be a pure convenience account (no right of survivorship) or a POD account (with rights of survivorship)iv) Real Property Transfers(1) Joint Tenancy: not really a will substitute because the joint tenant has present interest in something, not at the transferors death(2) Transfer on Death Deeds (strong trend)(a) Revocable before death(b) Example: I still own Blackacre, but when I die, X owns it.v) Problems arising with the Other Wills Substitutes(1) Changing Beneficiary Designations(a) Majority Rule: a will is ineffective to change a life insurance or Pension/IRAs beneficiary designation(i) In order to change the beneficiary of the policy, the policy holder must conform with the requirements in the trust document (see Cook v. Equitable Life Assurance Society)(b) Minority Rule: a change of beneficiary can in fact be accomplished in a will so long as the language of the will is sufficient to identify the insurance policy/pension plan involved and an intent to change the beneficiary (see Nunnenman v. Estate of Grubbs)(2) Revocation on Divorce(a) Traditionally, a will is revoked by law upon divorce, but for nonprobate assets it depends on the jurisdiction(b) Strong Trend: to include nonprobate assets in the state statute that revokes upon divorce(c) However, typically preempted by federal law:(i) ERISA preempts a state regulation insofar as the state regulation relates to any employee benefit plan, in that it has a connection with or reference to such a plan. see Egelhoff(ii) ERISA applies to qualified retirement plans, ie tax advantage plans, almost all employer-sponsored retirement plans and 401Ks; but not to IRAs1. The spouse must be named as the beneficiary if married unless the spouse waives his/her rights in writing; revocation must be done in accordance with the plan (provides for no room for revocation by law)(3) Antilapse Statutes(a) Many states apply their antilapse statutes to nonprobate transfers as well(4) Revocation of Trust or Other Will Substitute(a) Majority rule: look at the trust instrument for the correct revocation procedure(i) No presumption based on a missing document revocation(b) UTC Revocation (minority):(i) Unless the terms of a trust expressly provide that the trust is irrevocable, the settlor may revoke or amend the trust by:1. Substantial compliance with a method provided in the terms of the trust2. If the terms of the trust do not provide a method, then bya. A later will or codicil that expressly refers to the trust, orb. Any other method manifesting clear and convincing evidence of the settlors intentd) Other Estate Planning Toolsi) Powers of Appointment(1) Purpose: to build flexibility into an estate plan, also provides for tax planning and asset protection(2) Not governed by fiduciary standards; confers discretion to the done on how to disuse the donors property(3) Creation: donor must manifest an intent to create a power of appointment by either express terms or by implication(4) General Power of Appointment: (a) The class of Bs can include the donee, their estate, and their creditors(b) Considered an ownership equivalent for federal tax and creditor purposes(i) Traditional rule: the donees creditors cannot reach the assets covered by an unexercised general power of appointment if the power has been created by a person other than the donee(ii) Modern rule: general power of appointment is treated as an ownership interest if it is presently exercisable(c) Exception to general power: if the power is limited to an ascertainable standard relating to health, education, support and maintenance, it will not be treated as a general power(5) Nongeneral Power of Appointment:(a) The class of Bs cannot include the donee(b) The assets are therefore not reachable by the donees creditors(6) Time/Manner of exercise of power(a) Testamentary power: the donee can only exercise the power by will(b) Inter vivos/lifetime power: the donee can only exercise the power by deed during the donees lifetime(c) Presently exercisable power: may be exercised immediately(d) Postponed power: only exercisable upon the occurrence of a specific event, satisfaction of an ascertainable standard, or passage of a specified timeii) Planning for Incapacity(1) Property Management(a) Conservatorship: court appointed person to manage the property of an incapacitated person(i) Two standards for appointment by the court:1. Clear and convincing evidence that he person is unable to manage property and business affairs because of an impairment in the ability to receive and evaluate information and make decisions2. Preponderance of the evidence that:a. the person has property that will be wasted unless management is provided;b. Or money is needed to support the person(b) Revocable Trust:(i) The trust instrument may provide a mechanism for a successor trustee/co-trustee who takes over when the settlor becomes incapacitated1. Example: the trust instrument states that the trustee/settlor can be removed by a unanimous vote of the spouse, children, and doctor determining incapacity.(c) Durable Power of Attorney:(i) Ordinary POA terminates once the person becomes incapacitated at common law(ii) Durable POA (DPOA) terminates once the person dies, and is still effective during incapacity(iii) Springing POA springs into effect when/if the principle becomes incapacitated, as defined by the document which creates the power1. Example: a letter from a medical official declaring incapacity can spring the power into effect(iv) Creates an agency relationship; the agent is allowed to do all the things that the principle could have done(v) Scope: determined based on the document that authorizes the power of attorney, can be extensive1. Some actions the DPOA cannot take without express language in the documenta. Example: the power to make a gift or to create a trust (see Kurrlemeyer)(2) Healthcare(a) Default Law: State statute gives priority to spouse, unless legally separated, then adult children, then parent, then adult sibling.(b) Advance Directives: (i) Instructional (living will) Directives: specify either generally or by way of hypothetical how one wants to be treated in end-of-life situations(ii) Proxy directives: designate an agent to make health care decisions for the person(iii) Hybrid/combined directives: directs treatment and designates an agent to make substituted decisions5) Protection of the Spouse and Childrena) Intentional omissioni) Spouse: the Elective Share(1) Two marital property systems exist:(a) Separate Property at Common Law: spouses own everything separately during the marriage (Separate Property States give the surviving spouse an elective/forced share)(b) Community Property: spouses retain separate ownership of property brought to the marriage, but they own all earnings and acquisitions from earnings during the marriage in equal shares (No need for an elective share in community property states)(2) Spouse can elect to take under the decedents will or to renounce the will and take a fractional share of the decedents estate(a) Typically 1/3 of the decedents probate property plus certain non-probate transfers(3) Variations across state lines: Major differences are caused by the two purposes of the elective share because it alters how the elective share is treated (a) Two purposes:(i) Economic Partnership: primary justification is that the surviving spouse contributed to the decedents acquisition of wealth; justifies of the decedents property(ii) Support Obligation: justifies a smaller percentage than (4) Forcing an Elective Share(a) Subsequently deceased surviving spouse:(i) Majority: the executor cannot force an elective share(ii) Minority: the executor can force an elective share if under a partnership theory(b) Incompetent Surviving Spouse:(i) Majority: allows the representative to take into account all the facts and circumstances before taking the elective share including the preservation of the original estate plan.(ii) Minority: a guardian can and should elect to take against the will if it is to the surviving spouses economic benefit(c) Abandonment:(i) Minority: Elective share is denied to the spouse who abandoned or refused to support the deceased spouse before death.(d) Creditors of the surviving spouse:(i) Most jurisdictions say that debtors cannot be forced to take the elective share by their creditors(ii) On the other hand, the value of the elective share will be counted toward social security availability and Medicaid as resources when determining eligibility(5) Elective Share and nonprobate property:(a) Traditional rule: can only take from the probate estate(b) Majority rule: most states allow revocable trust assets to be included; some might include all other nonprobate assets(i) Case law responsible for the change1. Massachusetts (evolution)a. Legislature meant probate estate, cannot take from nonprobate assets, see Kerwin v. Donaghy (1945)b. If the deceased spouse had complete control over the assets in the inter vivos trust it can be reached, see Sullivan v. Burkin (1984)c. If the trust was created by a 3P, it cannot be reached despite the fact that the decedent had complete control over the assets, see Bongaards v. Millen (2003)(ii) Other judicial approaches:1. Illusory transfer test: if the inter vivos trust was established during the marriage and was illusory it is invalid and counts as part of the decedents assets subject to the elective share2. Intent to defraud test: determine whether the decedent intended to defraud his surviving spouse of her elective share (rests on subjective intent)(iii) Statutory Reform: States attempted to create objective criteria for determining which nonprobate transfers are subject to the elective share(6) Waiver of elective share by Marital Agreement(a) Premarital agreements are uniformly enforceable(i) Unenforceable if the agreement was either:1. Not voluntary; or2. Was both unconscionable when executed and the party did not have reasonable disclosure of the other parties finances(ii) Uniform Post Marital Agreement Act (2012 Enactment) Expressly validates postnuptial agreements1. A marital agreement is unenforceable if:a. The partys consent was involuntary due to duressb. The party did not have access to independent legal representationc. The agreement did not include a notice of waiver of rights in plain languaged. The party did not receive adequate financial disclosurei. A marital agreement is enforceable if the party has opportunity to investigate the assets but did not do so, see Reece v. Elliotii) Intentional Omission of a Child(1) American Law: no statutory protection for the disinherited child but doing so invites a will contest by that child so prepare for it.(2) Civil Law: has a forced share for children (in Louisiana)b) Unintentional omissioni) Spouse unintentionally omitted(1) Common law/majority rule: marriage revokes a premarital will(2) Statutory rule: state statutes give the surviving spouse not considered in the premarital will an interest in the estate as if it had gone through intestacy(a) Different policy concern from the elective share; here, trying to effectuate Ts intent because if T remembered, T would have written a new will for the spouse.(3) The omitted spouse carries a rebuttable presumption that it was unintentionalii) Child: Pretermitted Heir Statutes: designed to prevent unintentional disinheritance of a child(1) Majority: statute only applies to children born after the execution of the will(2) UPC version (minority) provides for children born after the execution of a will too(a) If T fails to provide for any of his/her children born or adopted after the execution of the will, the omitted after-born child receives a share of the estate as follows(i) If T had no child when drafting the will the afterborn child receives a share that they would have if T had died intestate1. Exception: unless the will devises all/substantially all of the estate to the other parent of the omitted child (Gray v. Gray)(3) Does not apply if it appears that the omission was intentional or if the T provided for the after-born child by transfer outside of the will(4) Pretermitted heir statutes cannot nonprobate assets, see Estate of Jackson(5) The problem can be avoided by providing for descendants through representation in drafting the will/nonprobate device