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Trusts and Estates
University of Toledo School of Law
Moore, Kelly

Trusts & Estates, Moore, Spring 2013
 
Overview Analysis
During Life:
·         Non-gratuitous
·         Debts
·         Contract away testamentary freedom
·         Ademption by extinction
·         Gratuitous
·         Gifts
Present donative intent to relinquish diminutive control
Delivery
Acceptance
(Conditional Gifts)
·         Gift Causa Mortis
·         Advancement
·         Ademption by Satisfaction
·         Promises – not enforceable w/o consideration
·         Changes during life
·         Marriage
·         Divorce
·         Pretermitted Child
·         Adoption
·         Killed by Taker
·         Write a (new) will
After Death:
·         Non-Probate (Will Substitutes)
·         Beneficiary designation (ex. life insurance, bank account, etc.)
·         Titles of property owned by more than one person (ex. JTROS)
·         Inter vivos revocable trust
·         Probate
·         Testacy
Oral Will
Holographic Will
·         Elements (3):
·         Material portions in testator’s handwriting
·         Signed by testator
·         Evince a strong testamentary intent (vs. precatory language)
Formal Will
·         Elements (3): Must STRICTLY MEET (unless state has harmless error rule = substantial compliance sufficient)
·         In writing
·         Signed by testator
Capacity
·         General extent of bounty (who his family is)
·         General extent of assets (what he owns)
·         Knows he is signing a will
3.      Two witnesses (observatory/signatory function à line of sight vs. conscious presence)
Interested witnesses
·         (Self-Proving wills)
·         (Substantial compliance vs. strict compliance)
·         Integration
·         Incorporation by Reference
·         Tangible Personal Property Lists
·         Codicils
·         Acts of Independent Significance (having another child, ademption by extinction, contents of drawers)
Contesting the Will
·         Standing
·         Will Formalities met?
·         (Tortious Interference w. a Will)
·         Capacity
·         General
·         Specific (NOT including mistake)
Insane Delusion
Fraud
Undue Influence
·         In Terrorem Clauses
·         Revocation
·         Revival
·         [Contractual Limitations on Testamentary Freedom] ·         Other limitations on testamentary freedom
·         Surviving spouse’s elective share
·         Omitted spouse’s share
Construction of the Will
·         Ambiguities (patent vs. latent)
·         Pre-  Gift vs. Residuary Gift
·         Class Gift vs. Individual Gift
Implementation of the Will
·         Lapse (and Divorce)
·         Marriage – limits testamentary freedom to some extent
·         Surviving Spouse
·         Omitted Spouse
·         Killed by Taker
·         Pretermitted Child
·         Adoption
·         Write a (new) will
·         Creditors/Debts/Liens
·         Ademption by Extinction
·         Contracting away Testamentary Freedom
·         Intestacy
Define the family
·         Limited Parentelic System:  bloodline + adopted children
Distribute the assets (per capita vs. per stirpes)
Advancements
Recipient’s Perspective:  what are you getting?
·         Outright/fee simple absolute
·         In trust
·         Power of appointment
Trusts
·         Elements (5 + 3):
·         Grantor
Lawful purpose
Capacity
Intent to create a trust (bifurcated ownership; prop. held by one for benefit of another)
·         Trustee (owns legal title)
·         Current Beneficiary (owns beneficial title)
·         Remainder Beneficiary
·         Property put in trust (“res”)
·         NOTE some jurisdictions require trusts be created in writing; some allow oral trusts to be valid though
·         Terms of Trust (4):
1.      Current Beneficiary Terms
2.      Grantor Retained Powers
3.      Administrative Powers
4.      Termination Terms
 
 
·         Is property probate or non-probate?
·         If NON-PROBATE, was will substitute validly formed?  What is the relevant state law about will substitutes?
·         If PROBATE, was testator testate or intestate?
If TESTATE, what type of will did the testator have?
·         Oral
·         If HOLOGRAPHIC, does jurisdiction allow holographic wills?
·         If YES, will meet three elements (material portions in testator’s handwriting, signed by testator, strong evidence of testamentary intent)?
If YES, go to capacity/fraud/undue influence/insane delusion
If NO, holograph is invalid, go to intestacy
·         If NO, holograph is invalid; go to intestacy
·         If FORMAL, does will meet three elements (in writing, signed by testator, 2 witnesses)?
·         If YES, go to capacity/fraud/undue influence/insane delusion
·         If NO, will is invalid, go to intestacy
If INTESTATE, then:
·         Define the family (bloodline + adoption)
·         Apply intestacy statutes
Looking at capacity, are there problems with:
·         Standing?
·         Capacity (General or specific)?
·         Fraud?
·         Undue Influence?
·         Insane Delusions?
Has the will been revoked?
·         If YES, are you in a jurisdiction that allows revival? 
·         If YES, has the will been revived? 
If YES, old “revoked” will is revived/valid, go on to construction
If NO, go to intestacy
·         If NO, does DRR apply b/c secondary/different intent when revoking?
If YES, newest “revoked” will is “unrevoked”/valid again, go on to construction
If NO, all wills still invalid, go to intestacy
·         If NO, will is valid, go on to construction
Looking at construction, are there ambiguities in the document?
·         If YES, are they patent or latent?
·         If PATENT, look at the face of the document only (although modern trend is to also consider extrinsic evidence); then move to implementation
·         If LATENT, look at extrinsic evidence to resolve the ambiguity; then move to implementation
·         If NO, move on to implementation
Looking at implementation, is there a problem with lapse?
·         If YES, was the lapse in the pre-residuary clause or residuary clause? Is gift a class gift or an individual gift?
·         Pre-residuary class gift – give property to other members of class
·         Residuary class gift – give property to other members of class
·         Pre-residuary individual gift – give property to residuary
·         Residuary individual gift – property goes to intestacy
·         ALSO CONSIDER ANTI-LAPSE STATUTES
·         If NO, were there any other changes of circumstances during testator’s life?
·         If YES, figure out if that means gift lapsed, etc.
·         If NO, implement will as written and construed!
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Detailed Analysis
During Life:
·         Non-gratuitous
·         Debts/Liens
·         Contract away testamentary freedom
·         Ademption by extinction
·         Gratuitous (i.e. Gifts)
·         Elements (3):  à if 1 element is really strong, may be willing to accept < perfect compliance w. other elements (subs. compliance) Present donative intent to relinquish dominion and control ·         Once again, intent requires inquiry into capacity ·         Gifts are generally irrevocable b/c you intend to relinquish control of the item NOW, not in the future ·         EXCEPT gifts causa mortis OR conditional gifts (see below) ·         Present donative intent vs. testamentary intent (compare/discuss the two in a problem): ·         Testamentary intent is NOT present donative intent to give the item away NOW = invalid gift Ex. “I want you to have all of this property when I die” = testamentary probably b/c gift not effective until testator’s death (although recipient will argue present donative intent ·         Courts generally torture language to reach the result they want on if it was testamentary vs. present intent to give a gift… (just argue both ways on the test) ·         NOTE testamentary intent must generally be manifested and implemented via will (with all the normal will formalities); if no formalities, no valid testamentary gift ·         NOTE giving a remainder (and retaining a life estate in an item) is sufficient to have an inter vivos gift as long as that was the INTENT (usu. delivery of a remainder interest can be done via letter, etc.; Gruen) ·         If person retaining life estate then gives property to someone else, he can only give what interest he still has in the property, so the new “owner” only has a life estate also ·         Precatory language and present donative intent ·         If I give you money and say “I want you to do X with the money,” that is a completed gift to you, and what I wanted you to do with the money (my expressed hopes/desires) is precatory language that does not bind you to follow my wishes at all ·         Precatory language CANNOT create a trust; if that is what I want, I need to use

no independent counsel, no properly formed donative intent, and gift is invalid
·         If gift does NOT leave impoverish the gift-giver, just see if clear & convincing evidence if the person giving gift intended it to be fair, open, and voluntary gift (burden is on recipient of gift still, but easier to prove)
·         Promises – not enforceable w/o consideration
·         Changes during life (combine w. non-gratuitous changes (above))
·         Marriage
·         Divorce
·         Adoption/Pretermitted Child
·         Killed by Taker
UPC 2-803:  if you kill someone, you are barred from taking under their will
NOTE this rule is true for wills, will substitutes, OR taking under intestacy…
·         Write a (new) will
After Death:
·         **Wills and will substitutes are ambulatory (i.e. don’t take binding legal effect until you are dead; can be changed frequently until death)
·         Non-Probate (Will Substitutes)
·         UPC 6-101:  No will is needed to pass ownership to a successor at death (and doesn’t have to go through probate!)
Present donative intent vs. testamentary intent is especially murky here (one more issue to discuss)
·         UPC says these are NOT testamentary (i.e. don’t have to follow formalities), even though look like wills
Most people’s assets pass through will substitutes today
·         The two questions to ask for will substitutes are:
What is the (state) law that controls this type of will substitute, and what does that law require?
·         NOTE if state statute regarding a particular type of will substitute does not recognize a certain type of capacity challenge (ex. undue influence), it doesn’t matter if it exists!  You can always still argue it, but court would have to use its equitable powers to impose a remedy if statute doesn’t provide one
Was the will substitute properly executed/created?
·         If NO, argue this was a testamentary transfer substantially complying with formalities
·         If YES, discuss capacity for forming/executing a will substitute
·         Probate’s purpose is to efficiently transfer and/or re-title property after death, allow for consistent handling of prop., allow us to honor testamentary intent, and allow creditors to be paid off
B/c will substitutes also accomplish each of these four functions themselves, they are honored w/o probate
·         Usually, creditors have the right to go after will substitute property to the same extent as probate property (statute allows it)
EXCEPT tenancy by the entirety with your spouse à unless spouse was a co-debtor, creditors can’t get property
If local law permits severability of the prop., creditors may go after it during life but not after death
·         Some scholars argue will substitutes are just non-probate wills and should be subject to many of the same rules, esp. w. respect to construction of the language in them and resolving ambiguities, etc.
·         Beneficiary designation (ex. life insurance, bank account, retirement/pension agreements, etc.)(Impure Will Substitute-K law trumps probate law)
These are not statutory controlled per se; they are controlled/implemented via contract law
·         Since they are not effected by probate law, changing a beneficiary for one of these CANNOT be done by will
Are revocable/ambulatory just like wills
UPC 2-804(b)(1):  an ex-spouse is treated as having predeceased the testator so that the ex-spouse does not get part of the estate (their share lapses); the UPC applies this rule to will substitutes also (i.e. UPC kicks out spouse from the probate estate AND the will substitute); majority rule though does NOT kick out ex-spouse from will substitute