Wills Outline Fall 2024 PDF

Wills Outline Fall 2024 *[Freedom of Disposition]* -- property owners have nearly unrestricted rights to dispose of their property as they please. Property passes in accordance with the decedent's declared wishes if reliably preserved or if not then inn accordance with default system of succession...

Wills Outline Fall 2024 *[Freedom of Disposition]* -- property owners have nearly unrestricted rights to dispose of their property as they please. Property passes in accordance with the decedent's declared wishes if reliably preserved or if not then inn accordance with default system of succession - Facilitate, rather than regulate Limits: - Wealth transfer taxation - Surviving spouse forced to share - Rules protecting creditors - Public policy - Rules against perpetuity - Capricious trusts - Alienation *[Forced Succession]* -- decedent's property could be confiscated by state on the theory that the decedent's property rights terminate on death *[Confiscated by state]* -- decedent's property could be confiscated by state on the theory that the decedents property rights terminate on death [Incentive Trusts] *Shapira v. Union National Bank* - Will conditioned on marriage of jewish girl with jewish parents at time of death, otherwise goes to state of Israel (demonstrates conviction) - Argues that it violates EP and DP 14^th^ Amd right to marry - Court says it's about inheritance, not his right to marry, and there is no right to receive property. Not against public policy. - Gifts conditioned on marriage in faith are reasonable, not like gifts conditioned on personal faith Restatement 3^rd^ of Trusts -- to balance donor's freedom against social values and personal freedoms [Posthumously Created Property Rights] *Shaw Family Archives Ltd. v. CMG Worldwide, Inc.* - Marilyn Monroe, LLC sued Shaw for violating Publicity Act by selling products bearing likeness of Marilyn Monroe - A testator may not devise by will a property right that the testator did not own at time of death. At time of M's death, no postmortem publicity rights - Will is interpreted according to the law of domicile at time of death [Probate vs. Nonprobate Property] **Nonprobate Property** -- via will substitute - Inter vivos trust -- passes in accordance with terms of the trust - Pay on death/transfer on death contracts (ie. life insurance, transfers when death cert is filed) - Joint tenancy -- surviving joint tenant owns whole property **[INTESTACY]** -- estate plan by default \[Vs. testacy -- dying with a will\] Aims to carry out probable intent -- majoritarian rule **[Intestate statute]** -- usual structure favors spouse descendants parents collateral kin - Interest is an expectancy, not a legal interest, until person dies - **Choice of law** - Personal property -- law of the state where decedent was **domiciled at death** - Real property -- law of the state where the **real property is located** **[Uniform Probate Code §2-(101-105)]** S = Spouse; D = Descendants; P = Parents; G = Grandparents A screenshot of a computer Description automatically generated - In all states, after spouse's share, descendants take to the exclusion of ancestors and collateral kindred - When one of several children die before descendant, that child's kids represent child and divide shares. (See representation below) - Areas of divergence = share size of the surviving spouse and whether survivor must share with decedent's descendants or parents - Doesn't matter how long marriage was, only matters for forced shares - After spouse's share is set aside, descendants take remainer of property (parents are not heirs if decedent leaves a child) - In ½ of states, if no descendant, spouse shares with parents. In other ½, spouse takes all. - **Collateral Kindred:** all persons who are related by blood to the decedent but who are not descendants or ancestors - **First line collaterals --** descendants of the decedent's grandparents other than the decedent and the decedent's descendants - **Second line collaterals --** descendants of the decedent's grandparents other than the decedent's parents and their descendants - **UPC is limited to grandparents!** - **Laughing heirs** -- too distant to even know decedent, not allowed by UPC. - **UPC 2-103 --** limited to grandparents, first line collaterals, and step children (but differs by state) - **Step children** take if no surviving grandparents or descendants of grandparents under UPC - **"Half bloods" --** UPC and most states -- usually inherit regardless of number of common ancestors - **Escheat --** if no survivors, property escheats to the state **Unmarried Cohabitating Partners --** UCERA authorized equitable relief for a cohabitating partner upon termination of the cohabitation including by death, based on partner's contributions. How to establish cohabitating status? Facts + circumstances, formal registry **Uniform Simultaneous Death Act** -- if no "sufficient evidence" of order of deaths, both are assumed to predecease each other, so neither inherit from the other. Janus v. Tarasawicz -- life insurance goes to wife and then to wife's beneficiaries even though she died simultaneously with insurance holder - If insured and beneficiary die simultaneously, the proceeds distributed as if insured survived beneficiary - 2 joint tenants: ½ property distributed as if A survived, ½ as if B survived **[Representation - Descendants]** - ***[English Per Stirpes]*** -- **each line of descent is treated equally**. Property is divided into as many shares as there are living children of the designated person and deceased children who have descendants living. (vertical equality) - ***[Modern Per Stirpes]* --** each line of descent treated equally beginning at first generation with living taker. If any children survived decedent, distribution is by English per stirpes. If not, estate is **divided equally at first generation where there are living takers**. Any deceased descendant in that level is represented by her descendants using English per stirpes. - ***[Per Capita at Each Generation (UPC 1990)]* --** estate is divided into as many equal shares as there are surviving descendants in the generation nearest to decedent with surviving descendants and deceased descendants in same generation who left surviving descendants. Each descendant in the nearest generation is allocated one share. Remaining shares combined and divided in the same manner. **Unclaimed lines go "back into the pot" to be divided.** **Examples:**  **For Modern, ignore BCD, divide EFGHIJ into 1/6s For UPC, FIJ get 1/6 each, the the rest goes back into the pot and divides ½ equally** **[Disinheritance by Negative Will]** -- disinheriting causes partial intestacy if that share isn't allocated [UPC 2-101(b)] -- Authorizes negative will by way of express disinheritance provision. Treated as if disclaimed, which is treated as predeceased **[Transfers to Children ]** **Adopted Children** -- - Rule: the adopted child is treated in all respects like a child born to his adopting parents. UPC § 2-118(a). Generally, the adopted child does not also inherit from his genetic parents (unless in will). Exceptions: UPC § 2-119(b)(2): - Divorced or widowed parent remarries - Child inherits from and through both the biological parents and the adoptive parents. - Child is orphaned and then adopted - Child still inherits through her biological parents - Child is adopted by a relative on either side. - Child still inherits from and through both biological parents. - UPC approach -- turns on the parent/child relationship, doesn't automatically sever the right to inherit **Equitable Adoption** (raised by, never officially adopted) - Depends on the state -- recognized in majority, but details vary. Some reject - Cultural issue -- formal adoption not common in African American community in Georgia - Georgia law -- contract for adoption is invalid unless entered into by parent or guardian (harsh) - UPC § 2-118(b): a parent-child relationship exists for inheritance purposes between a child and the child's de facto parent. - UPC § 2-119(c): an adjudication of de facto parentage does not affect the child's parent-child relationship with a parent before the adjudication. - UPA -- rebuttable presumption that child born to woman during spouse's lifetime or within 300 days after death of spouse is child of spouse - [Rights of Children:] - Under UPC § 2-117: the rights of biological parents and children to inherit from one another is independent of marital status. - An individual is the child of its parents regardless of their marital state. - Maternity is proved from birth certificate. - Paternity may have to be proved under state law (e.g., acknowledgment, adjudication, etc.) by *clear and convincing evidence*. - States differ on whether to allow genetic testing on dead father. - The father need not have known that he had a child. - [Rights of Parents]: - Under UPC § 2-114: a parent will not inherit from a child if: - Parental rights were terminated; or - The child died before age 18, and there is clear and convincing evidence that immediately before his or her death, parental rights could have been terminated on the basis of nonsupport, abandonment, abuse, neglect etc. **[Advancements]** -- intestate or with a will (in calculating what estate is if not stated in will)  Administrator must calculate intestate shares by accounting for value of property that the decedent gave each child while living **[Guardianship]** -if parent dies, appointed guardian. Testamentary appointment is persuasive, not binding. A. [Guardianship of Property] -- ward gets rents from property and guardian gets management fee. Guardian required to account to court and must seek approval for actions. Subject to extensive judicial supervision. Turned into: B. [Conservatorship --] conservator given title as trustee to property and investment powers similar to trustee. Appointment and supervision by court is still required. Terminates when minor reaches majority or dies. Annual accounting to court, not transaction by transaction. More flexible C. [Custodianship --] custodian given property to hold for the benefit of a minor under UTMA and UGMA. Fiduciary duties like trustee. Small modest gifts. Ends at 18/20/25. Donor must make gift to X as custodian for A under the state UTMA D. [Trusteeship --] most flexible, trust can postpone possession until donor wants, or require some or all to remain in trust. As flexible as intent. E. [Guardian ad litem] -- represent interests of minor/unborn person at litigation, typical to fight for wellbeing of minor over wellbeing of family, fear of getting sued when minor reaches majority **[Bars to Succession --]** apply to wills and trusts 1. **The Slayer Rule** -- prohibits slayer from inheriting from victim unless killing was unintentional or involuntary. Slayer = feloniously and intentionally kills - Law of restitution and unjust enrichment gets property with no legal basis. Not a doctrine or morality - 3 Approaches: (1) Legal title passes anyway as statute instructs (not followed much); (2) legal title doesn't pass, passes as if slayer predeceases victim; (3) **legal title passes, but equity imposes constructive trust requiring killer to hold assets in trust for the next of kin** - Don't confuse constructive trust with other type of trust! Constructive is a remedy for unjust enrichment - Probate court lacks equitable power to impose constructive trust - Difference in ***voluntary and involuntary*** (most courts follow this differentiation, not murder vs. manslaughter) - Mercy killing (helping someone commit suicide) depends on statute - Who takes? Heirs of slayers? Depends on statute - **UPC 2-803** -- bars slayer from succeeding in probate and nonprobate - **(g)** [final criminal conviction of felonious and intentional killing is conclusive], acquittal is not conclusive. In absence of conviction -- preponderance of the evidence person would be found criminally accountable (civil standard -- unjust enrichment) - Slayer is treated as predeceasing victim, what happens after varies by statute - Evidence of spousal abuse -- depends on the statute 2. **Disclaimer** -- heir/devisee declines to take property - Disclaimer legislation -- (current approach) treats disclaimant as having died before decedent (UPC 2-1105, 1106) still follows intent of testator or intestacy systems with "caveat". UPC 2-1106(b)(3) adds caveat only disclaimed interest passes to representatives. strategic disclaimer is not possible because only the "disclaimed interest" passes to the descendants of a disclaimant who take by representation - Disclaimer may be made within 9 months of creation (UDPIA, federal, differs by state) - Note: the relation back doctrine---because the disclaimer relates back to the date of the testator's death, the property is treated as passing directly to others and bypassing the disclaimant. - So long as the disclaimer was made prior to the filing of a bankruptcy petition, the federal courts will respect the state law relationship-back doctrine for claims against a bankrupt debtor - Why do this? To avoid taxes/creditors - **Creditors** -- most statutes say disclaimer relates back to date of decedent's death, so property is treated as passing by disclaimant to others. Disclaimer doesn't defeat federal tax liens. Disclaimer must be made prior to bankruptcy to avoid creditors. IRS can file tax liens even if in bankruptcy. - Ordinary (majority) -- creditors cannot attack disclaimed property - Government -- not the same protection. Federal law always over state law - Most creditors cannot rreach it unless the disclaimer is in bankruptcy except for Medicaid and the IRS. **[WILLS ]** Choice of law issue: probate court follows law of state where person died (domicile, so vacation doesn't matter), so even if ceremony follows formality of one state, it may not follow state where they die. I. **[Will Authenticity / Execution]** a. **[Attested Wills] -** UPC §2-502 i. ***Writing*** -- all states - Electronic writings can be a writing under the Wills Act or with harmless error - Uniform Electronic Wills Act -- will may exist in electronic medium if retrievable in perceivable form and readable as text (reasonably permanent record) ii. ***Signature*** -- all states -- UPC -- signed by the testator or in their name by other unconscious presence & by direction - Evidence of finality and genuineness - \(1) [Full signature] - intent; - Almost every state: mark is sufficient if intended to be signature and intent that it is the will, even if it is a mark, cross, initials. But if stopped intentionally, no intent - UPC 2-504 -- One step self proving affidavit - combined attestation clause and self proving affidavit; Two step --self proving affidavit to be affixed to a will already signed and attested, signed by testator and witness in front of notary after testator and witnesses have signed will - Computer generated typed signature upheld -- intent - \(2) [Subscription] -- at the end - Order -- testator must sign before witnesses; if additions are made after signing, may be invalid unless signed again; - UPC 2-502(a)(3)A -- delayed attestation, signing after observing - must sign within a reasonable time - [Purging Statute] -- (minority) allowed will attested by interested witness but purged any bequest to interested witness or any in excess of what they'd receive intestacy. If enough disinterested witnesses supernumerary -- interested witnesses may take - UPC § 2-505(b) doesn't require disinterested witness - Allows a will attested by an interested witness to be admitted to probate, but it voids any bequest to the interested witness. Under the UPC, no witnesses are required to be disinterested. - Excess Benefits Rule: Interested witness may not be made better off by the execution of the will (versus intestacy) iii. ***Attestation*** -- signature by at least 2 people after reasonable time/self-attested will or notarization (UPC); attestation vis subscription by 3 witnesses (Statute of Frauds); subscription by 2 witnesses (Wills Act) - Attestation clause -- rebuttable presumption of due execution, usually with affidavit known as self-proving will - ***Presence*** (some states require) - [Line of sight test] -- testator must be ablet o see them if they looked - [Conscious presence] -- testator comprehends that witness is signing by sight/hearing/consciousness - [Continuous transaction] -- variance of conscious present - [UPC 2-502(a)] -- removes presence requirement unless testator directs another to sign on testator's behalf, then there must be conscious presence - [Attestation] -- *In re Estate of Hall* -- will notarized as will but not signed by witness, if not properly witnessed may still be treated as valid if proved by clear and convincing intent for document to be the will, no error that he intended draft of will to be a will because he revoked other wills, destroyed original, wife's testimony of intent - *In re Estate of Hand* - Love letter denied - [Signature] -- *In re Probate of Will and Codicil of Macod* - unable to review draft, draft cannot be admitted without clear and convincing evidence of review and final assent for intent that draft was a will - **Harmless error can excuse if clear and convincing evidence of intent that it is a will (not of finality):** - **Attestation error** - **Signature error** - **Cannot excuse:** (because intent was lacking) - **Love letter will** - **Review and final assent** b. **[Notarized Wills]** -- UPC § 2-502 -- alternative to attestation (serves the same function) North Dakota and Colorado - Almost always upheld under harmless error rule, but still contestable under fraud, duress, forgery, etc. - Notary public or other individual authorized by law to take acknowledgments (including lawyers in many states), acknowledged by testator before notary c. **[Holographic Wills]** -- UPC § 2-205(b) Alternative to compliance with Wills Act, more than ½ states allow UPC**:** **(1) written by testator's hand- signature and material provisions;** **(2) signed by testator (3) testamentary intent** - Doesn't need to be attested by witnesses (violates Wills Act) - Needs testamentary intent (*In re Kimmel's Estate* -- letter mailed to sons signed by him, intent to make posthumous gift "if anything happens" testamentary; signed "father" intent to execute is apparent - Preprinted Will Forms -- if enough was handwritten, may be fine even if not attested - [Material provision] must be handwritten (*In re Estate of Gonzalez* -- printed portions of a will form can be incorporated into a holographic will where there is testamentary intent) - Extrinsic evidence allowed to establish testamentary intent - Mr. Meeson's will valid -- tattoo - Harris's will valid -- carved into tractor II. **[Will Revocation]** - wills are ambulatory -- subject to amendment or revocation any time before death; if revocation and no subsequent will intestacy - Harmless error applies - [Dependent Relative Revocation] -- 3^rd^ Res Property - rebuttable presumption - revocation is ineffective if testator would not have revoked will but for mistaken belief (negates intent). Takes away revocation, pretends that revocation of original was conditional on new will and condition wasn't fulfilled, applies original will. (Rationale: intestacy is supposed to represent intent, but we have a better idea of intent in original will). Some courts require intent, others just rebuttable presumption. - *Lacroix v. Senecal* -- if T revokes will intending revocation only if subsequent will can be substituted, and that will isn't valid, then revocation fails to extent that condition is not met d. **[Revocation by Writing]** -- - Express revocation or - Inconsistency/implied revocation in a subsequent will - Turns on intent -- replacement or supplement - UPC 2-507(c) -- complete disposition of estate presumptively revokes prior will by inconsistency. If not, viewed as a codicil, and any property not disposed of is in accordance with prior will. Not always sufficient to overcome specific previous grants - *Thompson v. Royall* -- Writing must declare intent to revoke and be executed in the way a will is required to be executed. Revocation on back of will -- not signed by witnesses, not solely handwriting ineffective holographic will. e. **[Revocation by Physical Act]** - Traditional Rule: If it doesn't touch the writing of the will, it's not a cancellation - UPC: burning, tearing, etc is a revocatory act on the will, whether or not the burn or tear touched any of the words of the will. - Presumption -- *Harrison v. Bird* -- if decedent's original will that was in possession before her death is (1) missing after her death and (2) if it was last in her possession rebuttable presumption that she revoked by destroying - Testator wasn't present while lawyer tore up will, not sufficient. Ironically, they would have probated pieces of will, unless harmless error jurisdiction f. **[Partial Revocation by Physical Act]** UPC § 2-507 - Many states authorize, others require partial revocation in writing - [Crossing out name and adding another (practice examples)] - UPC Jurisdiction (UPC 2-507) and majority -- rebuttable presumption that testator crossed out with testamentary intent (if in her possession) - Minority rule -- not permitted except in holographs - No partial rev by physical act -- original will be given effect. If name can't be read, same percentages but that portion will be given to intestate estate - Holograph -- new holographic will with new writing - [Typewritten will, sum crossed out and higher sum added written, initialed, and dated. States requiring:] - Holographic will -- no, only thing handwritten is amount, need all in handwriting - 2 witnesses observed signature and signed -- attested will becomes codicil, partial revocation - No partial rev by physical act -- not valid, keeps original - Permits partial rev by physical act, should court apply DRR? Partial rev with adjustment is invalid, so DRR? Yes -- only canceled under mistaken belief that change would apply - Permits partial rev by physical act, but new \$ is less -- intestacy or original? Depends on amount, intestacy may be preferable g. **[Revocation by Law]** -- circumstances change to render will obsolete presumptive revocation, rests on legislative judgment about probable intent of typical testator, can be overcome by evidence of contrary actual intent iv. **Divorce** -- All states -- presumptively revokes provision for divorced spouse. UPC 2-804 -- court order of contract of marriage revokes disposition, power of appointment, nomination in governing instrument, severs interest in property v. **Marriage** -- Premarital will remains valid in spite of subsequent marriage, but surviving pretermitted spouse may take share unless will indicates omission was intentional or spouse is provided for in will. UPC § 2-301 vi. **Birth of Children** -- pretermitted child statutes give that child a share in estate. UPC 2 § 2-302 h. **Effect of Revocation:** - A will that disposes of the testator's entire estate revokes all previous wills. - Revoking a codicil does NOT revoke the underlying will. - Revoking a will DOES revoke the codicils. - NOTE: it is never possible to add to a will without re-execution. - Holographs are an exception to this IF the state allows holographs. i. **[Revival of Revoked Wills]** - Executes will 1, executes will 2 which revokes will 1, revokes will 2 will 1 is revived without need for re-execution - Two methods of revival of a revoked will that are acceptable in all states: - Re-executing the previously revoked will - A codicil indicating an intent to revive the previously revoked will - Revoking the subsequent will by physical act to revive: - In states that have a rule like **UPC § 2-509** the earlier will is revived if "it is evident from the circumstances of the revocation of the subsequent will or from the testator's declaration that the testator intended the previous will to take effect." - If state allows revival, no need for DRR. Tearing up subsequent will does what testator wants - In some states, revoking subsequent will by physical act to revive a previous will is not permitted. If testator destroys subsequent will by physical act, then the earlier will remains revoked unless testator executes an attested writing indicating an intent to revive the earlier will - In states where testator cannot revive revoked will, apply DRR. - UPC § 2-509 - DRR is not available if the second will is revoked by a third (as opposed to revoking the second will by physical act). - If will \#1 is revoked by will \#2, and will \#2 is revoked by will \#3, then will \#1 remains revoked unless will \#3 indicates otherwise. - No extrinsic evidence is permitted. - *In re Album* -- intent is better in will than in intestacy j. **[Contracts and Wills --]** contract law applies. If will doesn't comply with will contract, it is probated, but contract beneficiary can sue for breach damages or constructive trust - Contract to make will -- statute of frauds, signed writing in most states - UPC § 2-514 -- contract established with signed writing and consideration. No attestation requirement. Provisions of will stating material provisions, express reference in will to contract and extrinsic evidence proving terms of contract, or writing evidencing the contract and signed by party alleged to have breached - Contract not to revoke III. **[Components of Will]** \[integration, republication by codicil, incorporation by reference, acts of independent significance\] k. **[Integration]** -- all papers that are present at the time of execution and are intended to be part of the will are treated as part of the will. Doesn't matter if written at different times or on different kinds of paper. *In re Estate of Rigsby --* where more than 1 paper, it must be made clearly apparent the testator intended that together they should constitute the will. If 2^nd^ page conflicts with 1^st^, evidence of intent that it wasn't meant to be included l. **[Republication by Codicil]** -- validly executed will is treated as re-executed as of the date of the codicil. Consequences: if revokes 1^st^ will by a 2^nd^ will and executes codicil to 1^st^, then 1^st^ is republished and 2^nd^ is revoked by implication. Only apply doctrine if carries out testator's intent m. **[Incorporation by Reference]** --Allows writing that was in existence but not present at the time of execution and that was not itself executed with testamentary formalities to be absorbed into testator's will - UPC § 2-510 -- incorporation if language of will manifests intent and describes writing sufficiently to permit its identification. **Writing must have existed at the time the will was executed. Language of will must manifest intent to incorporate. Will must describe writing enough to identify.** (but merely mentioning may be enough) - *Clark v. Greenhalge* -- a will may incorporate by reference any informal document not executed in the manner of a will that was in existence at the time of execution of the will, or a codicil to the will, and is shown by adequate proof to be the document referenced in the will - Incorporating printed text into holographic will -- *Johnson v. Johnson* -- valid holographic codicil incorporated the prior will by reference and republished and validated the prior will as of the date of the codicil, thus giving effect to the intention of the testator - Subsequent writings and tangible personal property -- UPC § 2-513 -- allows testator to dispose of tangible personal property by a separate writing, even if prepared after the execution of the testator's will, provided that the will makes reference to the separate writings - Whether or not the provisions relating to holographic wills apply, a will may refer to a written statement or list to dispose of items of tangible personal property not otherwise disposed of by the will, other than money. To be admissible under this section as evidence of the intended disposition, the writing must be signed by the testator 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 that has no significance apart from its effect on the dispositions made by the will n. **[Acts of Independent Significance]** -- actions by testator after execution, such that testator can identify a beneficiary or property passing under the will through those later actions without fresh execution formalities. that have a lifetime motive and significance apart from their effect on the will. UPC § 2-512 - a will may dispose of property by reference to acts or events that have a significance from their effect upon the disposition IV. **[Will Capacity ]** Capacities, weighing property with: Marriage Will Irrevocable Lifetime Gift, Contract, Deed ---------------------------------------------- ----------------------------------- ------------------------------------------------------- Individual autonomy (consenting); lowest bar Testamentary freedom (can change) Freedom of contract (irrevocable nature); highest bar o. **[Mental Capacity]** -- low threshold, less than to make a contract or to complete irrevocable lifetime gift. Capability, not actual knowledge. **Restatement: the testator must be capable of knowing and [understanding in a general way: (must be memorized!)]** 1. **The nature and extent of his or her property** 2. **The natural objects of his or her bounty** 3. **The disposition of property he or she is making** 4. **Capable of relating these elements to one another and forming an orderly desire regarding the disposition og the property** - Restatement provided for lucid intervals -- will will be probated if made during lucid interval - ***Delusion:*** false conception of reality, testator adheres against all evidence and reason. If any evidence to support delusion, it is not insane - ***Causal Connection:*** majority -- materially affects - *Breeden v. Stone* -- holographic will written before suicide - \(1) [Cunningham test:] mental capacity requires: testator understands nature of act, knows extent of property, understands proposed disposition, knows natural objects of bounty, will represents her wishes. Here, satisfied mental capacity. - \(2) [Insane delusion test:] (a) Persistent belief in that which has no existence in fact -- minority strict approach. (b) Causal connection - materially affects. He did suffer insane delusions, but satisfied insane delusions since delusions weren't related to disposition of property so no material affect sound mind. - Tests are not mutually exclusive, sound mind = both tests satisfied - Testamentary capacity under general test + no delusions or no causation under insane delusion test = sound mind. - *In re Strittmater's Estate* -- did insane delusions about men cause her to leave estate to NWP? Yes -- gender bias, probably couldn't come out this way today. - Religion -- would not be overturned, faith is accepted in society, not insane delusion despite lack of facts p. **[Undue Influence]** -- wrongdoer exerted such influence if exerted over donor such that it is **overcame** donor's free will and **caused** donor to make donative transfer that the donor would not have made otherwise - Burden on contestant; or - Inferred by circumstantial evidence that shows that: - Donor was **susceptible** to undue influence - Alleged wrongdoer had an **opportunity** to exert undue influence - Alleged wrongdoer had **disposition** to exert undue influence - **Result** appearing to be the effect of undue influence - *In re Estate of Sharis* -- person named in will may have unlawfully influenced even without proof of specific acts of beneficiary at the time the will was executed. Suspicious: took place in execution, unnatural disposition, secrecy, susceptible or weakness and confidential relationship = presumption, burden shifts. Claims she sought independent legal counsel (not a bar to UI) - **Presumption of Undue Influence** -- - [(1) Confidential relationship] -- sensitive relationship based in trust, question of fact \[fiduciary -- *legal relationship*; reliant -- *factual*; or dominant -- *factual*\] - [(2) Suspicious circumstances] -- influencer procured will, question of fact. Examples -- sickness, participated in preparing, etc. Warnings: secrecy, haste, unnatural disposition, differs from other wills, caregiving - Shifts burden to proponent for rebuttal evidence - Caregiver statutes -- presumed when giving above modest gift, statute deems per se confidential relationship and suspicion - **Bequest to Lawyers** - Fiduciary Appointments -- need informed consent of conflict and available alternatives - Undue Influence -- if you're related, you can draft the will, but if you get more than others, probably don't - Unethical Conduct -- if not related, no gift allowed - *Lipper v. Weslow* -- case where they took protective steps, disinheritance statement written by beneficiary (lawyer with confidential relationship), wasn't read by her. Court doesn't follow presumption -- court says raises suspicion, but not proof that he substituted her wishes for his - **No Contest Clause** -- deprives unsuccessful contestant of their bequest under challenged will - UPC 2-517 and 3-905 -- enforce no contest clause only if unsuccessful contestant lacked probable cause for bringing contest (most states, some states don't enforce, some states enforce even if PC or good faith) - Doesn't work if people not contesting it don't have anything to lose - Testamentary libel -- can sue an estate for untrue statements in will - Punitive damages -- deterrence/retributive, in cases with actual malice, not for cases based on presumption - Protection against UI -- inter vivos trust with someone else as trustee q. **[Duress]** -- wrongdoer threatened to perform or did perform a wrongful act that coerced donor into making donative transfer that the donor would not otherwise have made - If person wrongfully prevents decedent from making a will or wrongfully interferes with a non-probate transfer pursue equitable remedy of constructive trust, restitution to prevent unjust enrichment r. **[Fraud]** -- donative transfer where wrongdoer knowingly or recklessly made a false representation to the donor about a material fact that was intended to and did lead donor to make donative transfer that they wouldn't have made otherwise - [In execution] -- intentionally misrepresents character or contents of instrument signed by testator, which doesn't carry out intent (restitution action, constructive trust) - [In inducement] -- misrepresentation causes T to execute or revoke will, to refrain from such activity, or to include provisions in their favor - **No Contest Clauses & Unjust Enrichment:** - **No Contest Clause:** a clause penalizing beneficiaries who contest the will. - Effect: such clauses are unenforceable if probable cause exists for instituting proceedings. - Note: a no-contest clause cannot prohibit contests. It makes contest risky, but strong challenges will go ahead. - **UPC § 2-517:** - Probable cause means "evidence that would lead a reasonable person, properly informed, to conclude that the challenge was likely to succeed." - If the beneficiary consulted a lawyer in **good faith** and with **full disclosure of the facts**, and acted in reliance on her counsel, then she had probable cause. - **Restatement (3d) of Restitution and Unjust Enrichment:** a claim in restitution with a remedy via constructive trust is the traditional response to wrongful interference. Wrongful interference may prevent either the making or revocation of a will, codicil, or bequest V. **[Will Construction ]** s. **[Mistaken or Ambiguous Language in Wills ]** Ambiguity versus Mistake: - *Sanderson v. Norcross -* Courts have no power to reform wills\...mistakes of testators cannot be corrected. Omissions cannot be supplied. Language\ cannot be modified to meet unforeseen changes in conditions. The\ only means for ascertaining the intent of the testator are the words\ written and the acts done by him. - **Patent Ambiguity** -- Evident from the face of a will. - Minority (old) Rule: extrinsic evidence is not admitted to resolve a patent ambiguity. The gift fails. - **Majority (new) Rule:** extrinsic evidence is admissible to resolve either a patent or latent ambiguity---but only to determine what the testator meant by the words used, not to determine an intent irreconcilable with the words. - Most courts now admit evidence to resolve patent ambiguities. - **Latent Ambiguity** - When the terms are applied to the facts. All courts reform latent ambiguity. Becomes apparent only when we try to carry out the bequest (i.e., when the terms are applied to the facts). - Equivocation -- When two or more person or things fit the\ description exactly. - Personal Usage -- If a testator habitually used a term in an\ idiosyncratic manner. - No Exact Fit -- A description in a will does not exactly fit any person or thing. - Reformation alternatives: (1) Falsa demonstratio non nocet; (2) ignoring certain details - [Mistake -] requires a correction (alteration) of the written text. Traditionally courts have refused to alter (correct) mistaken terms except for minor mistakes of misdescription (e.g., metes and bounds). - If a description is part true and part false---and the true part describes the subject sufficiently, we may ignore the false part. - Reformation to correct mistakes: UPC § 2-805 - The court may reform the terms of a governing instrument, even if unambiguous, to conform the terms to the transferor's intention if it is proved by **clear and convincing evidence**: what the transferor's intention was and that the terms of the governing instrument were affected by a mistake of fact or law, whether in expression or inducement. - Higher standard of proof for resolving ambiguities - Evidence must show: that there was a mistake and the donor's true intent - Would correct: A term that misstates the donor's intention, A mistake of fact recited in the will, A term that was not meant to be included or that the testator failed to include, A mistake in the inducement. The intention to include or not include the term was the product of a mistake of fact or law. - Will not: Correct a failure to execute the will. Modify a will to the donor's change of mind. Compensate for other changes in circumstances. - Clear and Convincing Evidence: R.3d Property § 12.1 - The higher standard of proof \... imposes a greater risk of an erroneous factual determination on the party opposing reformation. Tilting the risk of an erroneous factual determination in this fashion is appropriate because the party seeking reformation is seeking to establish that a donative document does not reflect the donor's intention. This tilt also deters a potential plaintiff from bringing a reformation suit on the basis of insubstantial evidence. t. **[Lapse \[common law\]]** -- if a devisee doesn't survive the testator, devise is said to have lapsed - [Specific or general devise --] devise falls into residue - [Residuary devise --] if residuary devise lapses, heirs of testator take by intestacy. If only a share lapses, no residue of a residue rule (goes to heirs, not residuary) - [Class gift --] surviving members divide gift - [Void devise --] if devisee is already dead or otherwise an ineligible taker, the devise is void and the common law rule of lapse applies *In re Estate of Russell* -- void devise (left to dog, who cannot take) treated as lapsed devise. Probate court can choose to pass estate to residue or let it pass via intestacy. If not ambiguous, no extrinsic evidence. Court reverses latent/patent distinction, can use extrinsic evidence to determine intent.  **Anti-Lapse-** under certain circumstances, substitute another beneficiary for the predeceased devisee UPC § 2-605 -- key is who it covers -- most don't cover spouses, UPC is broader than most If a devisee who is a grandparent or a lineal descendant of\ a grandparent of the testator is dead at the time of\ execution of the will, fails to survive the testator, or is\ treated as if he predeceased the testator, the issue of the\ deceased devisee who survive the testator by 120 hours\ take in place of the deceased devisee and if they are all of\ the same degree of kinship to the devisee they take\ equally, but if of unequal degree then those of more\ remote degree take by representation. **UPC § 2-603:** Beyond Residuary Beneficiaries: - If a predeceased beneficiary is a donor's grandparent, descendant of a grandparent (including grandparent's siblings), or stepchild, **and** - That beneficiary left descendants who survived the testator, **then** - A bequest to that beneficiary does not lapse, it goes to that beneficiary's issue by representation. - Beneficiary's spouse does not get anything. UPC § 707 -- different rule for trusts than wills    [Reversing Words of Survivorship Rule \[UPC § 2-603\]] - The argument \[for the majority rule\] is that attaching words of survivorship indicates that the testator thought about the matter and intentionally did not provide a substitute gift to the devisee's descendants. At best, this is an inference only, which may or may not accurately reflect the testator's actual intention. An equally plausible influence is that the words of survivorship are in the testator's will merely because the testator's lawyer used a will form with words of survivorship. [Class Gifts] -- given to group -- identities and shares may fluctuate (if fixed, not a class) **Rule:** if a gift is to a class ("my cousins," "my servants," etc.) and a member of the class dies before the testator, that member's share is divided among the other members of the class. *Consider:* (1) expressly fixed, (2) presumption is rebutted if languages/circumstances establishes that the transferor intended beneficiaries to take as a class - Rules of Construction: - A group label creates a **rebuttable presumption of a class**. - E.g., "My team members" - A rebuttable presumption of **no class** arises if beneficiaries are identified by: - The individuals' names alone. - E.g., "my team members Mary and Michael" - A group label plus a number - E.g., "my two team members" - Such a presumption can be rebutted by language or circumstances, indicating that a class was intended. - There is no explicit rule on how to rebut the presumption of no class. - **Natural Class:** a specific gift to a group of family members that bear the same relationship to the testator (e.g., all children) using their individual names creates a natural class. **Changes in Property After Execution of Will** - [Ademption] -- (cancelled) - Generally if a will includes a gift of a specific item or property (not general or residuary), which is not in his estate at death, the gift is **adeemed** (fails). - NOTE: does not apply to general devises (i.e., gifts of money) or residuary devises. - Identity Doctrine: allows changes in **form** due to: - Stock splits or company takeovers - E.g., stock in Ohio Gas, now Exxon Mobil - Acts of independent significance - E.g., "my car," "my house," now a different car or house. - *Exception to Ademption: In re estate of Anton -- **modified intention rule*** -- property change by guardian with knowledge of testator, devise is not adeemed (cancelled) to extent there are identifiable proceeds remaining in estate. Identity rule is modified in the case of an incomplete sale (beneficiary gets the balance of the purchase price still owed) or an involuntary transfer (beneficiary gets balance of condemnation award owed, balance of casualty insured owed, or balance due to foreclosure). Vs. ***strict identity theory*** -- adeemed/cancelled - No knowledge, no opportunity to change will, so devise is not adeemed - Split on remedy -- full value or only remaining proceeds - [Replacement] -- uses proceeds of devised property to buy something else (replacement property). Follows identity (don't take, ademption) or modified intention rule take) - [Abatement] -- estate doesn't have enough property to satisfy all devises, devises abate in following order: - Residuary devises are reduced, then general devises are reduced, then specific devises abate and are reduced pro rata - If testamentary intent would be frustrated by usual order, UPC 902 allows for change **[TRUSTS ]** - Legal arrangement where a settlor conveys property to a trustee to hold as a fiduciary for one or more beneficiaries. (ongoing fiduciary administration) - 1\. [Testamentary] -- created by will, arising in probate, irrevocable - 2\. [Inter Vivos] -- created during settlor's lifetime by (a) declaration of trust or by deed of trust as a will substitute, (b) avoids probate, (c) revocable or irrevocable depending on intent - **Uniform Trust Code (UTC**) -- - Default rules that can be overridden by terms of trust (exception, mandatory rules UTC §105(b) -- duty of good faith, etc. - Common law abides to extent not superseded by UTC §106 - Restatement (Third) of Trusts -- codified common law but not always (rights of creditosr) - **Choice of Law** - [Real property] - trust that holds real property is governed by law of the state where the real property is located - [Personal property] -- settlor can designate law that governs validity, but there is a public policy limit, the law of the trust's principal place of admin will govern I. **[Creation]** requires: **(1) intent** by settlor to create trust, **(2) ascertainable beneficiaries** to enforce trust, **(3) specific property**, and **(4) writing** (Wills Act/Statute of Frauds) a. **[Intent]** i. **Testamentary Trust --** created by a will; intent = clearly stated or inferred from language/structure of will in light of circumstances; court appointed trustee if fails to name trustee (usually executor) - *Lux v. Lux* -- no magic words, trust immaterial, focus on "shall be maintained for the benefit of" - Don't need to name a trustee to create a trust ii. **Deed of Trust (Inter Vivos Trust) -- with property transfer** 1. Intent to create a trust; **and** 2. Transfer of property to the intended trustee. a. Trust is not created until the property is **delivered** (can be symbolic delivery, e.g., keys to car or boat). NOTE: no specific words or documentation are required **unless** the trust contains real property. - Once accepted, cannot be released except by court or beneficiaries - *Jiminez v. Lee* -- default rule -- gift of property with fiduciary duty of another iii. **Declaration of Trust (Inter vivos trust, but not a transfer)** - Intent of settlor -- settlor declares themselves to be trustee of property, may also be beneficiary - Merger Rule -- titles merge -- absolute legal trust (UTC §402a), sole trustee is sole beneficiary. Interests merge and they hold property free of trust. Doesn't apply when there are remainder beneficiaries! - Requires no formalities or transfer, need only intent to hold settlor's property in trust - Outright gift -- (not a trust) requires donor to deliver property to donee (can be symbolic ie. by memoranda) - Minimum Formality: only need declaration that the property is held in trust. - If the trust contains **no real property**, it is enough that only the donor declare orally that she holds her property in trust for another. - NOTE: there is no requirement that anyone else hear her do so, but without a witness, this would be difficult to enforce. - If the trust holds **real property**, then declaration must be in writing. - Burden of Proof: - To enforce the trust, the beneficiary needs evidence of intent (e.g., witnesses to the declaration, accounting, property held in the name of the trust, etc.). - Usual Practice: - Write a "trust instrument" stating the terms of the trust---but there is no need to transfer or retitle the property. b. **[Beneficiaries Principle]** - A trust is created only if the trust has a defined beneficiary or is (a) a charitable trust; (b) a trust for the care of an animal as provided in section 408, or (c) a trust for a noncharitable purpose as provided in section 409 - UTC 402(c) power in trustee to select beneficiary from indefinite class within a reasonable time, if trustee doesn't exercise power within reasonable time, fails - "Friends " not definable; "kin" or "family" have statutory meaning, so definable c. **[Trust Property]** - Any interest in any type of property that is transferable - Specifically identified - Future profits cannot be held in a trust - Trust vs. debt (debtor agrees to pay money to creditor by title stays with debtor, whereas title transfers in trust) II. **[Bifurcation of Ownership]** (trustee -- legal title; beneficiaries -- equitable ownership) - Four Functions of Trusteeship -- **custodial** (safeguard property), **administration** (accounting, record keeping filing), **investment** (reviewing assets and investing), **distribution** (making distributions to beneficiaries) III. **[Trusts for Noncharitable Purposes ]** - Pets are not valid beneficiaries, they cannot be plaintiffs - [Honorary trust] -- if transferee declines, she holds property on resulting trust and property reverts to settlor or settlor's successors; may be enforceable but may be invalid under rule of perpetuities. Honoree not required to carry out purpose. Charitable purpose or ascertainable beneficiaries = enforceable - [Charitable purpose] -- religion, dogs in general, etc. - [Statutory purpose trust **--** ]for pet animal or other non-charitable purpose, allows court to reduce excessive trust property and provide for enforcement by settlor or court appointee IV. **[Charitable Trusts ]** +-----------------------+-----------------------+-----------------------+ | | **Charitable** | Private | +=======================+=======================+=======================+ | Purpose | to benefit charitable | to benefit | | | purpose | ascertainable | | | | beneficiaries | +-----------------------+-----------------------+-----------------------+ | Modification | Cy pres doctrine | Caflin | | | | | | | Deviation | Deviation | +-----------------------+-----------------------+-----------------------+ | Enforce | State AG | Beneficiaries | +-----------------------+-----------------------+-----------------------+ - **[Key Factors:]** (1) intent requirement to create trust, and trust must be charitable; (2)Cy pres; (3) Traditional law vs. UPC approach - [UTC § 405(a)] -- charitable trust may be created for relief of poverty, advancement of education or religion, promotion of health, governmental or municipal purposes, other purposes, the achievement of which is beneficial to the community - Charitable purpose does not benefit public at large, that would be mere benevolence (ie. trust to be distributed to everyone in the city every year) - [Cy Pres] -- "As nearly as possible." Should comply with trust as nearly as possible. rule against perpetuities doesn't apply, so more of a chance of changed circumstances. Replaces *Caflin* doctrine. - [Traditional Law**:** ]**(1)** did testator have general (to benefit village) or specific intent? **(2)** If general, what alternative charitable purposes would be consistent with that intent? (applying cy pres) - [UPC 413 -] **presumes** general charitable intent V. **[Will Substitutes]** -- non probate system of private succession Should they be subject to Wills Act formalities? **No**. Or subsidiary law of wills? **Yes** -- but depends on the state Give the right to sue beneficiaries? **No**. - Nonprobate system execute easy transfers and send the hard ones to probate (probate in default, on standby) - Wills Act formalities don't apply, but nonprobate system usually requires writing and signature (but not attestation) - UPC extends divorce revocation statute to will substitutes (functionally comparable transaction to a will) - Extends slayer rule and 120 hour rule for survivorship and antilapse Major types of will substitutes: - **[Revocable Trusts]** - (ie. pour over will, lifetime transfer, nonprobate transfer) Resembles a will in nature and function, not inherently asset specific, just not in probate system. Ambulatory -- subject to amendment or revocation, like a will. Gives beneficiaries no rights until death (like a will). Duties go to settlor. As to trustee, no duties owed while trust was revocable. Can still transfer without Wills Act formalities - Always inter vivos, but either created as: - **Deed of Trust** -- settlor transfers property to be held in trust to the trustee, settlor's death, distributor or held in further trust - **Declaration of Trust** -- settlor declares himself to be trustee of certain property for his own benefit during his life, with remainder to pass at his death in accordance with terms of declaration - **UTC § 603** -- settlor's powers, powers of withdrawal a. To extent revocable by settlor or settlor and another person other than trustee and adverse interest person, trustee may follow a direction of settlor contrary to terms of trust b. To extent revocable and settlor has capacity to revoke, rights of beneficiaries are subject to control of and duties of trust are owed to settlor (like in a will, testator has control of property while alive) - **Revoking/Amending Revocable Trust** - Minority approach: lifetime trusts are presumptively irrevocable unless it expressly provides that it is. BUT: a revocable lifetime trust can be revoked or amended by an express direction in the creator's will, which specifically refers to such lifetime trust or a particular provision thereof. - **Subsidiary Law of Wills** A. **[Life insurance]** Creates an instant estate at death of policy holder. a. **Types:** i. **Whole Life:** aka "ordinary" or "straight" life insurance. Combines life insurance with a savings plan. Policy eventually becomes paid up/endowed and no more premiums are owed. Permanent and lasts until insured's death. Results in **certain payment**. ii. **Term Life:** the simplest and most common type of life insurance. Term policy is a contract that obligates the insurance company to pay the named beneficiary if the insured dies within the policy's term. b. **Life insurance proceeds pass free of:** iii. Income tax iv. Creditors' claims v. State death taxes vi. Claims of a disinherited surviving spouse (in some jurisdictions). c. **Changes to a Life Insurance Policy:** vii. **Divorce:** does not revoke a beneficiary designation. 1. In many states, the statute that revokes a will provision for an ex-spouse does not apply to life insurance contracts. viii. **Will**: no states allow change of beneficiary by will BUT **UPC § 2-804** does. ix. If an insurance company is notified of a dispute about who is entitled to the payout, it can deposit the payout with the probate court pending resolution. B. **[Pension and retirement plans]** d. **Defined Benefit Plan:** retired employee typically receives a regular pension check for life (life annuity) or the joint and several lives of the employee and the employee's spouse (a joint and survivor annuity). Size of benefit depends on the number of years the employee participated in the plan and the employee's level of compensation around the time of retirement. e. **Defined Contribution Plan:** 401(k), employer, employee, or both contribute to a specifc account from which benefits will be withdrawn at retirement at employee's death whatever is left in the account passes outside of probate in accordance with the employee's death beneficiary designation or in plan documents. f. **Individual Retirement Accounts:** not established by an employer, but largely the same as a 401(k). g. **Spouse's Right in a Pension:** x. Governed by Employee Retirement Income Security Act (ERISA). xi. The right to the pension vests in the spouse married to the participant when he retires. xii. A former spouse may have a claim on the pension if she gets a QDRO (Qualified Domestic Relations Order) prior to retirement. xiii. A spouse can waive his or her survivor rights only if: 2. After marriage; 3. After the age 35; **and** 4. In notarized writing. C. **[Pay on death/transfer on death contracts]** - **Planning for Incapacity:** - **Conservatorship:** is the default plan in most states for managing the property of an incapacitated person who does not provide otherwise. - Conservator has broad powers to manage property and is typically subject to fiduciary duties of loyalty and prudence. - **Durable Power of Attorney:** gives someone the power to act for you financially. The person becomes an agent bound by fiduciary laws of care and prudence. - **Durable:** means that it remains effective during the incapacity of the principal and until the principal dies. - Must explicitly state that the power is "durable." - Could take effect immediately. - Contrast with "springing" power of attorney---becomes effective upon incapacity (but someone has to be declared incapacitated for someone to take over, which is not always easy to do). - **Requirements:** most states require notarization or an attorney signature. - **Effect:** gives authority over all property (i.e., no need to put property in a trust). - **Advanced Directive:** states wishes about refusing or terminating medical treatment or appoints an agent to make such decisions for her. - **3 Types:** - **Instructional Objectives** (living will): specifies either generally or by way of hypothetical examples of how one wants to be treated in end-of-life situations or in the event of incompetence. - **Proxy Directives** (healthcare proxy or durable power of attorney for healthcare): designates an agency to make healthcare decisions for the patient; and - **Hybrid or Combined Directives:** directing treatment preferences and designating an agent to make substituted decisions. - **Surrogate or Proxy Designation:** allows family members, close friends, etc. to make healthcare decisions. VI. **[Limits on Freedom of Disposition: Spousal + Children Protections]** **Marital Property Systems** [Community Property] - Property earned or acquired during marriage is\ community property. No elective share, because each spouse owns all earnings during marriage in equal, undivided shares. Forced share does not equal intestacy share - **Rule:** all income earned during marriage belong to both spouses. - Each spouse has an equal share in assets acquired during the marriage. - Either spouse can devise his or her half of the assets by will, etc. - Survivor does **not** need an elective - Survivor automatically own half of the property acquired during the marriage. - What is **not** community property (treated as separate property, and the spouse has no right to it): - Property acquired before marriage. - Property acquired by gift or inheritance (or as personal injury recovery). - **Management and Disposition of Community Property:** - Either spouse in a community property state can dispose of his or her ½ of the couple's community property at death. - **Item Theory:** spouses own equal shares in each item of community property. - **Aggregate Theory:** sometimes allows disposition of one asset to someone other than the spouse receives ½ of total community property. - **Elective Share:** under these statutes, a surviving spouse can elect to take under the decedent's will, or to renounce the will and take a share of the decedent's estate (typically 1/3 and non-probate transfers of a certain kind) - Spouses my waive elective share rights by premarital or marital agreement. - **Special Issues with Elective Share:** - **Satisfaction:** the forced share will be satisfied first by the spouse's inheritance under the will. - The spouse who elects against the will must take what was given in the decedent's estate plan. - Example: Bill's probate estate is \$900k. His will left his wife, Dot, his \$200k car. What would she have if she took the elective share? - Dot is entitled to \$300k (elective share), would take the car (\$200k) plus an additional \$100k from the estate. - **Life Estate:** law of most states. States that if the surviving spouse renounces the life estate and elects to take her share in fee simple, she is **not** charged with the value of the life estate. - Example: decedent's estate is worth \$3M. Decedent leaves spouse a **life interest** in \$2M trust, remainder to his children. This is valued at \$1M. - Here, Spouse **need not accept it**: she may elect to take \$1M in fee simple. - Spouse dies before election: spouse's estate may **not** elect the forced share. - Elective share is personal to the spouse. - Incompetent surviving spouse: spouse's guardian, however, **may** elect a forced share. - But the amount over what the decedent left the spouse is placed in a custodial trust, the remainder of which goes to decedent's heirs. - **Abandonment:** a spouse who abandoned the decedent may **not** take an elective share (minority approach). [Partnership Theory] - Elective share justified because surviving spouse contributed to decedent's wealth. Surviving spouse should be entitled to one-half of decedent's property acquired during marriage [Support Obligation -] Older view that marriage entails a support obligation Support theory implies: smaller percentage applied to all of the decedent's property, a minimum amount, accounting for other resources available for support of survivor **Elective Share** *[In re Estate of Myers -]\ *The **elective share** of the surviving spouse shall be limited to all of the following:\ a. One-third in value of all the legal or equitable estates in real property possessed by\ the decedent at any time during the marriage which have not been sold on\ execution or other judicial sale, and to which the surviving spouse has made no\ express written relinquishment of right.\ b. All personal property that, at the time of death, was in the hands of the decedent\ as the head of a family, exempt from execution.\ c. One-third of all personal property of the decedent that is not necessary for the\ payment of debts and charges.\ d. One-third in value of the property held in trust not necessary for the payment of\ debts and charges over which the decedent was a grantor and retained at the time\ of death the power to alter, amend, or revoke the trust, or over which the decedent\ waived or rescinded any such power within one year of the date of death, and to\ which the surviving spouse has not made any express written relinquishment. [Elective Share under UPC (2008) -] To bring elective-share law in line with the partnership theory of marriage." Includes in the augmented estate a schedule of nonprobate transfers (§ 2-203(a)); elective share is 50 percent of the marital-property portion of the augmented estate (§ 2-202); marital-property portion is based on the length of the marriage (§ 2-203(b)). **Augmented Estate (UPC):** - The UPC's response for when a decedent attempts to inherit the spouse by using will substitutes (which are not part of the probate estate). - The decedent's "augmented estate" consists of: - The probate estate - **Retained Life Estate:** transfers in which the decedent retained the right to possession or income from the property. - **Revocable Inter Vivos Trust:** transfers in which the decedent retains a right to revoke or to use the principal. - Transfers in joint tenancy with someone else. - Transfers made within two years of death **over \$17k** per donee. - Property given to the surviving spouse during life (including a life estate in a trust) and transferred to the spouse at death (i.e., non-probate assets, such as life insurance and pensions). - NOTE: the elective share applies only to transfers made **during the marriage**. - If the deceased spouse made his children beneficiaries of a POD account before his second marriage that POD account would not be subject to the elective share. - **1990 UPC:** the longer the marriage, the greater the percentage of the couple's property that is assumed to be marital. - Adds to the augmented estate many transfers made **before** marriage as well as during, if the decedent retained substantial control over the property. - **2008 Revision:** elected share of a surviving spouse of a decedent is 50% of the value of the marital property portion of the augmented estate. - **Marital Property Portion:** computed by multiplying the augmented estate by a percentage that is determined by the length of the marriage. - **Subsequently Deceased Surviving Spouse:** in most states and under the UPC, the right of election may be exercised by the surviving spouse only during the survivor's life. - **Incompetent Surviving Spouse:** UPC provides that if a representative claims the elective share for an incompetent surviving spouse, the portion that exceeds what the decedent spouse provided for the survivor must be placed in a custodial trust for benefit of survivor. - Upon his/her subsequent death, trust property goes to residuary devisees or heirs of the predeceased spouse. - **Migrating Couples and Multi-State Property Holdings:** - **Choice-of-Law Rules:** - The law of the marital domicile **at the time property was acquired** controls the **characterization** of property as separate or community. - The law of the marital domicile **at the death of one spouse** controls the **survivor's rights.** - The law of the situs controls problems related to land (assume the situs applies the law of the marital domicile). - **Moving FROM Community Property TO Separate Property State:** - Property acquired in the community property state (generally) remains community property. - The couple can convert it to separate property, but they will lose some tax advantages. - **Moving FROM Separate Property TO Community Property State:** - Property acquired by one spouse while the couple lived in a separate property state still belongs to that spouse (up until that spouse dies). - Some states treat property acquired during the marriage as "quasi-community property" only for the purpose of providing for a surviving spouse. - If the acquiring spouse dies, half belongs to the surviving spouse. - **Quasi-Community Property:** property owned by a spouse acquired while domiciled elsewhere, which would have been characterized as community property if the couple had been domiciled in the community property state when acquired. - During the marriage, treated for most purposes as the separate property of the acquiring spouse. - ½ belongs to the surviving spouse at death, other ½ subject to testamentary disposition by decedent. - Analogous to an elective share in the deceased spouse's property acquired from earnings while domiciled in another state. - **Uniform Disposition of Community Property Rights at Death Act:** - Community property brought into the state remains community property for purposes of testamentary disposition, unless the spouses had agreed to convert it to separate property. - Community property brought into the state is not subject to the elective share. **Premarital/Prenuptial Agreement** [Uniform Premarital Agreement Act -] Party opposing premarital enforcement must prove agreement was: Not voluntary; or, Unconscionable when executed \[Adopted in about half the states\] [Uniform Premarital and Marital Agreement Act -] Supersedes UPAA; Expressly validates postnuptial marital agreements; Applies same substantive standards to the enforceability of both premarital and postnuptial agreements \[Absorbed into UPC § 2-213\] **Protection Against Unintentional Admission** - Occurs when the will was not updated after marriage or children: - **Spouse Omitted from Premarital Will:** - Called "pretermitted spouse" - Contrast: a spouse omitted from a will made **after** the marriage is a **disinherited** spouse. - **Child Born After Will was Executed:** - Called "pretermitted child" - Contrast: a disinherited child. - **Pretermitted Spouse:** - If a spouse was omitted from a premarital will: - **Almost** all states give the spouse an intestate share if the omission was **unintentional.** - Scope: - Pretermitted spouse share applies to the **probate estate**. - It could be less than the alternative---the elective share. - **UPC § 2-301: Unintentional Omission:** - If testator married **after executing his will**, the surviving spouse is entitled to receive an intestate share of that part of the estate that was not devised to his issue born before the marriage, unless the omission was intentional. - Examples of Intent: - Will was made "in contemplation of marriage." - Will states that it is valid even in case of marriage. - Testator provided for spouse by transfer outside the will in lieu of a testamentary provision. - "in lieu of a testamentary provision" can be shown by testator's statement, the amount of transfer, the spouse's own assets, etc. - Examples: life insurance, revocable trusts. - NOTE: will must have been made **before** the marriage - **Pretermitted Children:** - **Majority Rule:** applies to only children born **after** the will was executed. - Minority: applies to all children not named in the will. - NOTE: no state has extended this rule to give after-born children a share of will substitutes. - **UPC § 2-302: Omitted Children:** - When a child is born after the execution of the will: - If the testator was **childless** at the time of execution, then the after-born gets an intestate share. - UNLESS the will left everything to the other parent. - If the testator **had other children**, then the after-born shares in total are devised to them. - And their shares abate ratably. - Application: pool the amount left to the other children, then divide by the number of children (including the after-born child). - Neither apply if: - The omission was **intentional** (as appears from the will); **or** - The testator **provided for the child outside the will**. - If the testator fails to provide for a living child solely because he believes the child to be dead then the child is entitled to the share of an after-born. - NOTE: all children can be disinherited (whether minor or adult). VII. **[Types of Trusts ]** - **Mandatory Trusts:** means the trustee **has no discretion** about how much he will pay our or to whom. - e.g., "\$50k per year to Mary for 20 years" or "income to Paul until he is 30." - The beneficiary has a **right to his mandatory distributions**, which means: - The beneficiary can **sell** that right; **and** - Creditors **can** reach it. - What is "trust income?" - Assets generally generate income. - E.g., stocks pay dividends or appreciate. Bank deposits generate interest. Real property produces rental income. Copyrights yield royalties. - The total amount generated by the trust annually is called the "trust income." - **Assigning and Alienating an Interest in a Trust:** - The beneficiary's interest in a trust is a property right. - Unless prohibited by the terms of the trust, the beneficiary could give away his interest or sell it (i.e., assigning an interest). - Creditors could also attach one's interest to satisfy a debt. - BUT most trusts **prohibit** alienation (including spendthrift trusts). - **Creditors' Rights in a Mandatory Trust:** - Creditors can reach the beneficiary's interest in a mandatory trust. - The rights of creditors loosly mirror the beneficiary's rights. - i.e., creditors step into the shoes of the beneficiary: - e.g., if a beneficiary's interest is \$3,000 a month, then the creditors can only collect \$3,000 a month until the debt is satisfied. A. **[Discretionary Trusts]** -- flexible, asset protection -- creditor has limited recourse on beneficiary, trustee must use his judgment in making distributions a. **Pure Discretionary Trust** - Trustee has absolute discretion over distributions to beneficiary - Creditor has no recourse against beneficiary's interest in trust - Hamilton order -- cuts off distributions until paying creditor, court order that if trustee decided to make a distribution, she must pay creditor before beneficiary - **UTC § 501:** absent a spendthrift provision, the "court may authorize a creditor of the beneficiary to reach the beneficiary's interest by attachment of present or future distributions to or for the benefit of the beneficiary. - Available in all states. b. **Support Trust** - Trustee required to make distribution for beneficiaries' needs - Insulates trust property from some but not all beneficiaries' creditors (child, spouse, suppliers of necessities) c. **Discretionary Support Trust** - Combines absolute discretion with a distribution standard - Trustee must distribute funds in line with a standard (e.g., education, support). - Trustee may determine the **time and amount** of distributions, so long as he adheres to the standard. - Compared to a mandatory trust: the trustee of a discretionary trust with standards must decide when and how much to distribute. - Compared to a pure discretionary trust: the trustee of a discretionary trust with standards must act reasonably and based on an acceptable interpretation of the trust terms. - **Support** is an **objective standard** meaning "in accordance with the standard of living to which they have been accustomed." - it varies with life's vicissitudes (e.g., inflation, newly acquired dependents (spouse, children), education of children) - If the trust directs that the trustee must use the income and/or principal as needed for the **"comfortable support and happiness"** of the beneficiaries: - This is a more generous standard that would allow more payouts for the benefit of the beneficiary. - **Enforceable** by child or spouse. - **Creditors' Rights:** a support trust insulates the trust property from some but not all of the beneficiary's creditors. - Suppliers of **necessities** (food, medicine, and shelter) and **claimants for spousal or child support** can recover their costs from the trust (i.e., can attach interest). - The creditors' rights correspond to the beneficiary's right to necessities (and only necessities). - E.g., Medicaid can reach a support trust because Medicaid furnishes support (healthcare, housing, etc.). - Creditors cannot compel a distribution even if the trustee has abused his discretion, except for: - Spouse and/or child with a court order for support. - Supplies of food, shelter, medicine. - Lawyers acting to defend the trust. - Creditor may not compel distro subject to trustee's discretion, even if (1) discretion is standard of distro or (2) trustee has abused discretion - To extent trustee has not complied/abused discretion, distro may be ordered by court to satisfy judgment/court order for support of beneficiary's child, spouse, former spouse. Amount as is equitable under the circumstances - **[Spendthrift Trusts]** -- meant to protect beneficiary from spending all their money. Valid in every state, question is exceptions for creditors - Prohibition on attachment of creditor -- can be avoided completely by paying on behalf of beneficiary rather than paying beneficiary - Like a conditional gift - Beneficiary takes interest on conditions of settlors - Should court recognize exception to spendthrift trusts for claims by tort victims? No -- if exceptions not made, intent is to disclude other exceptions - UTC also rejects tort exception! Restatement may allow for exception with pattern of tortious conduct - E.g., "no interest of my son, James, in income or principal shall be anticipated or assigned. No such interest shall be subject to the claims of creditors." - Means that James cannot give away or sell his *interest* in the trust. But once he gets the interest, he can do whatever he wants. - Exception for Child Support or Alimony? - **Majority:** spendthrift provision does *not* bar a claim for child support or alimony. - Minority: spendthrift provision does bar claims by spouse and children. - **Creditors' Rights:** - A restraint on alienation is valid against tort creditors---even those who are victims of the beneficiary's act (only allowed in a minority of states). - Most creditors cannot reach an interest in a spendthrift trust until the beneficiary is paid. - Exceptions to restraint on alienation: - Medicaid and the IRS - Creditors who furnish necessities can reach spendthrift trusts in most states. - Spouse and children can reach spendthrift trusts in most states. - Lawyers to protect the trusts. - UTC § 503 -- child, spouse, former spouse -- judgment/court order for support/maintenance - Creditor who has provided services for the protection of beneficiary's interest in trust (ie. lawyer) - Claim of state or U.S. to extent state/federal law provides - **[Self Settled Asset Protection Trust]** -- putting all assets in trust to protect from creditors while still maintaining interest. Grantor is beneficiary. Not allowed in all states. The settlor/trustee/beneficiary's creditors can reach this trust. Most states do not recognize self-settled asset protection trusts. - Substantial relationship to trust at time of creation = (1) trustee/settlor is domiciled in state; (2) assets are located in state, and (3) the beneficiaries are domiciled in the state - Difference in law can only allow courts to refuse foreign right if violate some fundamental principle of justice, good morals, against deep rooted tradition +-----------------------------------+-----------------------------------+ | **Type of Trust** | **Creditors' Rights** | +===================================+===================================+ | Mandatory | Creditors can reach the | | | beneficiary's interest. | | | | | | Counts as asset for Medicaid and | | | government. | +-----------------------------------+-----------------------------------+ | Pure Discretionary | No creditor (even Medicaid) can | | | attach the interest -- but may | | | get court order to be paid before | | | beneficiary. | +-----------------------------------+-----------------------------------+ | Discretionary with Standards | Creditor cannot attach his | | | interest. | | | | | | Exceptions for Support Trusts | | | (see below) | +-----------------------------------+-----------------------------------+ | Support | Creditors cannot compel a | | | distribution even if the trustee | | | has abused his discretion. Except | | | for certain creditors: | | | | | | 1. Spouse and children with | | | court order | | | | | | 2. Suppliers of food, shelter, | | | medicine | | | | | | 3. Lawyers acting to defend the | | | trust | | | | | | Note: counts as an asset because | | | Medicaid furnishes support | | | (health care, nursing home) | +-----------------------------------+-----------------------------------+ | Spendthrift | **Exceptions to the restraint on | | | alienation**: | | | | | | A restraint on alienation is | | | valid against tort | | | creditors---even those who are | | | the victims of the beneficiary's | | | act. | | | | | | Most creditors *cannot* reach an | | | interest in a spendthrift trust | | | until the beneficiary is paid. | | | | | | Exceptions: | | | | | | 1. Medicaid and IRS. | | | | | | 2. Creditors who furnish | | | necessities can reach | | | spendthrift trusts in most | | | states. | | | | | | 3. Spouse and children can reach | | | spendthrift trusts in most | | | states. | +-----------------------------------+-----------------------------------+ | Self-Settled | **Old (Majority) Rule**: If the | | | trust is revocable, creditors can | | | reach everything (*after* | | | payment). | | | | | | If trust is irrevocable: | | | | | | 1. "**Income paid to settlor for | | | life, then to child**" | | | Creditors can reach all | | | income. | | | | | | 2. **Support Trust** Creditors | | | can reach the maximum amount | | | (trust assets) that *could in | | | theory* be used for the | | | settlor's support. | | | | | | 3. **Discretionary Trust** | | | Creditors can reach the | | | maximum amount (trust assets) | | | that the trustee could pay | | | the settlor *under any | | | circumstances*, using his | | | discretion. | | | | | | **New (Minority) Rule**: | | | Self-settled trusts are treated | | | like 3^rd^ party trusts | | | [unless] the donor | | | put property in trust in order to | | | defeat existing or particularly | | | contemplated creditors, | | | **[or]** if the | | | transfer leaves the donor | | | insolvent. | +-----------------------------------+-----------------------------------+ +-----------------------+-----------------------+-----------------------+ | **Type of trust** | **Beneficiary's | **When can the | | | rights** | beneficiary enforce | | | | his rights?** | +=======================+=======================+=======================+ | Mandatory | Trustee has no | If the trustee does | | | discretion. | not make a required | | | | payment. | | | "Pay all income," | | | | **or** "\$40,000 per | | | | year," **or** | | | | "principal." | | +-----------------------+-----------------------+-----------------------+ | Discretionary with | E.g., a support | If the trustee's | | standards | trust. Trustee must | application of the | | | distribute enough for | standard is not | | | the beneficiary's | reasonable. | | | standard of living. | | +-----------------------+-----------------------+-----------------------+ | Pure discretionary | Trustee has complete | If the trustee does | | | discretion about | not act reasonably | | | distribution but must | and in the spirit of | | | act reasonably and in | the trust. | | | the spirit of the | | | | trust. | | +-----------------------+-----------------------+-----------------------+ | Spendthrift | Beneficiary may not | Not relevant A | | (disabling) | anticipate or | disabling restraint | | | alienate. Creditors | can be added to any | | | cannot reach it. | trust. | +-----------------------+-----------------------+-----------------------+ - **[Trusts for the State Supported ]** 3. **[Self Settled Trusts]** -- available in eligibility considerations, Medicaid eligibility -- trust is considered in qualification decision assets of individual were used to form all or part of corpus of trust, and trust was established by: "self" includes person, spouse, or another who acts on behalf as guardian, or if trust is revocabl