Trust and Estates Outline- from notes and book
I. Overview
a. What’s it all about
i. Two kinds of Property when you die- Probate and non-Probate
1. Probate property has to be divested in a will or it falls to intestate law of the state
2. Non-Probate law is not subject to the probate process
a. Joint property
b. Life insurance
c. Living revocable trust
d. Life estate with remainder
b. Public Policy
i. Wealth transition laws Goals
1. Cintinue Regime of private property
2. Affect individual wishes
3. Provision for well-being of family
4. Provision for well-being of society
ii. Freedom of testation-
1. Allows individuals to dispose of wealth as they like
a. BUT= wills can be contested, Rights aren’t so automatic, have public policy concerns, and Constitutional probs
i. Ie can’t put in your will that you want the house destroyed-
2. Note- Dead Hand restraints
a. Provisions in will that control Ben’s actions- the law generally validates these provisions as long as not against PP or contrary to law
i. Ie total barrs to marriage are invalid but not partial ones- provisions to get divorced are barred
1. BUT religious or occupation, personal habits or education are not
c. Probate- Gennerally-
i. Probate terms
1. Probateè formal proceeding to validate and execute a will and disperse probate property
a. Probate propertyèProp that requires some legal process to transfer clear title to a successor at owners death
b. Some “small estates” may fall under stats to avoid Probate
ii. Probate procedures
1. Did dies testate or intestate
2. If testate- Interested party files petition to the probate court to admit will to probate- then Personal representative named to administer state
a. Ct usually goes with one nominated- can name a line (in case they are not around) But if not, then the Prob J will appoint a rep-
b. Can also end the line of possibilities with a Corp Fiduciary
3. If will is valid- Ct enters into probate and then issues Letters Testamentary to PR (if named in Will) If not named- Ct will issue letters of administration
4. PR gives notice to creditors
5. PR marshals assets, files inventory with Ct, and accounts to Ben during admin of estate
6. PR pays taxes and debts
7. PR files final accounting then Ct issues distribution decree
8. PR can distribute remaining assets
d. NonProbate property-
i. Passes directly to successor without being subject to Probate
e. Personal tangible property
i. Small items- In most cases- not owned in joint tenancy so can be a problem with probate
f. Dealing with Probate Property
i. Can leave it in a will- would have to go through probate to get administered
ii. Can put in a testamentary trust-
1. Administered at death- PR gets letters testamentary
a. Under control of Probate court which makes more control over fiduciary acting
b. Can get acting at time of distribution
2. Disadvantage it that is more expensive and time consuming
iii. Usually- set up a revocable inter vivos trust with residuary clause and pour over wills
II. Lifetime transfers
a. Reasons to chose to make these gifts,
i. Avoid taxes (estate and death taxes)
ii. If they can afford it- may want to choose to enjoy giving it away while alive
b. Requirements of making a valid gift
i. Intent
1. Donative intent is inherently ambiguous- was it given for safe keeping? Was it intended as a gift? Was it an advancement on the interest in will??
ii. Delivery
1. Real Property- Required to have a DEED or writing (SOF)
iii. Acceptance
1. Assumed
c. Gruen case- Paiting was given to son from father in a letter. Second letter tells son to destroy first because not supposed to say that the fater was keeping it until he dies. The issue was was there a valid delivery because the painting remained in the father’s house?= it was enough
d. Is a diamond ring a conditional gift or not-
i. Courts can say it is but does society
e. Gift Causa Mortis
i. If death is impending, can make a gift. It is valid if you are in imminent feaer of death. If you survive, may not be valid-
1. Questions of do you have to revoke gift, how soon?
a. What is a reasonable amount of time before it becomes an irrevocable gift????
2. Also donative intent- did you intend to gove it all away by clear and convincing evidence?
a. Fraud? Undue Influence?
ii. It’s not a planning tool, more used as a “what if something happens” tool. OR classify a gift after the fact
iii. Need to remember elements of gift (Intent, Delivery, Acceptance) and D may have the burden to prove NO fraud or UI
f. Tax Con
n as grantor and TE
b. Trust agreement
i. Transfer funds to Bank X for Ben of B
vii. Joint Bank accounts
b. Constructive trust (not a will substitute)
i. Equitable remedy created by courts to prevent unjust enrichment
1. The court will order A (TE) (holding legal titile to prop) to convey prop to B (BEN) who is rightfully entitled to it
ii. Has to be some wrongdoing for court to create
1. Ie get title by murder, abusing fiduciary rel, fraud, duress or UI
2. Usually allow extrinsic ev to prove
c. Pay on death arrangements (Such as on pensions, EE benefits, partnership or other agreements)
i. Challenged for validity but upheld in Cts
d. Laws regulating Will Substitutes
i. VERY Jd in nature-
ii. Unprovided-for cases like if unmarried marries or married divorces without changing BEN
1. Failure to change Ben info after divorce is a big one-
a. Courts try to find ways to deny ex-spouse’s claim
i. Use substantial compliance
ii. Can hold that the divorce decree covers Ben designation
iii. OR can say that divorce revokes the will
e. Multiple party Bank Accts
i. Why important
1. Most common type of W/S
2. Law is complex and Jd based
3. Laws vary a ton based on which law governs the acct
ii. Types (NOT all recognized everywhere)
1. Joint acct
a. Usu set up for convenience of depositor
b. If no specific stat- then Cts will allow extrinsic ev
2. Totten Trust
a. Only TE can reach funds during lifetime
b. NO Ben if die before TE
c. TE can revoke trust by taking out money and closing acct
d. Can use as will substitute but NOT to cover for incapacitation
3. POD acct
a. Same as Totten because depositor retains interest during lifetime but directs that at death pay to a BEN
b. More closely related to life insurance or K agreements
c. Valid in some and invalid in others
