I.

INTRODUCTION

iThe Power to Transmit Property at Death

o

o The Right to Inherit and the Right to Convey

The West has put a very high premium on the right to dispose of property at death (including the right to disinherit
anyone except spouses)
Hodel v. Irving (pg. 3)

Facts Members of the Sioux Tribe alleged that the Indian Land Consolidation Act, by making fractional
interests in land escheat back to the tribe, was a taking.

HOLDING

This is a taking.

SCOTUS establishes that everyone has a right to dispose of their property at death (not
the right to inherit).

This right is one in the bundle of sticks, and cannot be taken, no matter how small the interest in
the land is.

This case comes very close to establishing a Constitutional right to devise property at death, but does not go all
the way.

After this case, Congress passed the American Indian Probate Reform Act, which replaced state probate law
with federal probate law and provided that if a decedent owned less than a 5% share in land, only the eldest
child or grandchild would inherit and it would not be divided further.
Shaw Family Archives v. CMG Worldwide (pg. 10)

Facts Ps argued they were entitled to publicity rights of Marilyn Monroe because of the residuary clause in
her will.

HOLDING

Marilyn Monroe could not convey publicity rights in her will because such rights did not exist
when she died.

CA tried to reverse this by making the statute creating publicity rights retroactive, but NY law applied because
the court determined Monroe was domiciled in NY when she died.

Like Hodel, this case revolves around the rights of people to dispose of their property, NOT the right of others
to inherit.
o The Problem of the Dead Hand
Restatement (Third) of Property: Wills and Other Donative Transfers (2003)

10.9 The controlling consideration in determining the meaning of a donative document is the donors
intention. The donors intention is given effect to the maximum extent allowed by law.

Rationale = property owners have nearly unrestricted right to dispose of property as they please.
dead hand control

Decedent exercises power of beneficiary by conditioning the gift to beneficiary upon beneficiary behaving in a
certain way

Generally dead hand control is OK

Cant be in violation of constitution or public policy

Illegal/ Impermissible uses of dead hand control

Absolute restriction on marriage

Requiring beneficiary to practice certain religion

Gifts that encourage/ require divorce

Gifts that direct property to be destroyed

Shapira v. Union National Bank (pg. 28)

Facts Fathers will provided that his sons could not inherit unless they married a Jewish girl with two Jewish
parents within 7 years of his death.

HOLDING

Court upholds the will.

Father has the absolute right to dispose of the property in the way he wants

It wasnt unconstitutional because it did not limit the right to marry, only the right to inherit.

However, the court also looked into the restriction itself under a reasonableness test and held
that it didnt violate public policy because it was only a partial restraint on marriage and not a
total restraint.

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If the restriction were unreasonable, then it might be unconstitutional.

Posner argues for cy pres approach to allow modification of conditions to testamentary gifts
Restatement (Second) of Property: Donative Transfers

6.2 a restraint unreasonably limits the transferees opportunity to marry if a marriage permitted by the
restraint is not likely to occur.

Today, most courts apply a reasonableness test to restrictions to marry in wills, but some courts will hold the
restrictions invalid without consideration of their reasonableness.
Incentive Trusts

Conditional gifts like in Shapira are today typically done as incentive trusts

People can leave their property in trust and the benefits can terminate if the beneficiary does or does not do
certain things.

This is useful motivation to encourage beneficiaries to be productive members of society

However, it can also backfire and does not account for changed circumstances

Transfer of the Decedent Estate

o Definitions
o Testate

If decedent dies with valid will then he died testate and property will be distributed pursuant to will
o Intestate

If decedent dies w/out valid will decedent died intestate and property will be distributed pursuant to
state law
o Testator

Male who executes will

o Testatrix

Female who executes will

o Devise

Gift of real property under a will

o Devisee

Beneficiary receiving real property under a will

o Bequest

Gift of personal property under a will

o Legacy

Gift of money under a will

o Legatee

Beneficiary receiving money under will

o Personal representative

Person appointed by probate court to oversee the administrative process of wrapping up and probating
decedents affairs
o Executor

What personal representative is called if decedent died testate or and will names personal representative
o Administrator

What personal representative is called if decedent died intestate or testate but fails to name personal
representative
o Heirs

Under statute decedents real property descends to heirs

o Heirs Apparent

When a decedent is still alive, the would-be heirs are called heirs apparent; you dont have heirs until
you die
o Next-of-kin

Under statute decedents personal property is distributed to next-of-kin

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Probate Courts
Special courts that manage the commencement, administration, and winding up of an estate
Purposes = (1) taking property titled in decedents name and getting it titled to the living; (2) protecting creditors;
(3) distributing property

Probate and Non-Probate Property

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Probate Property

Property titled in the name of the decedent

passes under will or through intestacy

Non-Probate Property

Property that passes outside of probate under an instrument other than a will

property that is not titled in the name of the decedent

Examples

Joint tenancy property (both real and personal)

o Joint tenancy with right of survivorship
o Tenancy by the entireties

Life insurance (so long as there is a named beneficiary)

Pension funds/retirement funds

o
(payable-on-death POD provisions)

Interests in trusts
Administration of Probate Estates (Process)
Decedent dies

EVERYONE HAS A WILL

either you execute one OR

the legislature drafted one for you in the intestacy statute

Personal representative named to be in charge of the process

If theres a will, this person will be named in the will (aka executor)

If theres no will, court will appoint someone according to statutory next-of-kin hierarchy
Jurisdiction

primary or domiciliary = where decedent domiciled at time of death

ancillary administration = for real estate, where property is located

Personal representative files petition with probate court
Probate court reviews the petition (without hearing)

Petition must identify name of decedent, date of death, interested parties, name of personal
representative, etc.
Letters of administration are issued by the court

These say that X was designated as the personal rep. of the estate of Y

Allows personal rep. to go to banks, brokerages, bring/defend lawsuits, etc.

Due Process requirements for letters of administration

Notification of all interested parties

o Heirs/beneficiaries

If there is a will, you have to notify BOTH the people named in the will AND
the people that would take if the will is invalid
o Creditors

Might be difficult for personal representative to identify creditors

Publication in a newspaper of general circulation in the area where the will is

being probated

Publication must include statute of limitations to make claims

against the estate (from 3-18 months, usually 6-9)
Duties of personal representative

Personal rep. is a fiduciary

Things the personal representative must do

File the petition

Give interested parties notice

Marshall the assets (this can be very difficult, best place to start is tax returns)

Manage the assets

File decedents final income tax return

File estate tax returns until the estate is closed

Deal with beneficiaries

Carry out the terms of the will/trust or follow intestacy statute

Personal rep. usually has to post a bond

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Regular bond = personal representative must go to bondsman for face value of the entire estate
(very expensive)

Many wills waive bonds and only minimal bonds are required

Possible liabilities

If the personal representative distributes property to beneficiaries and the decedent/estate has
tax liabilities, then the personal representative must pay the liabilities on the property already
distributed
Two types of probate

Formal/supervised

Personal representative must file accounting with the court periodically and every penny has to
be recorded and balanced

Informal/unsupervised

Personal representatives is still required to be able to account to beneficiaries, but formal

accountings to the court are no longer required

Typically only happens when personal rep. is trusted family member etc
Closing of the estate

Prof usually doesnt file a motion to close the estate but instead just lets it die

No expense to reopen the estate if an asset pops up down the road

Challenging a will

Usually the same statute of limitations as making a claim against the estate as a creditor
Probate is expensive

Some jurisdictions calculate fees as a percentage of the value of assets and some (and UPC) take the value
of the services rendered

An Estate Planning Problem

Which assets are probate
o We would hope that the residence, cabin, and cars are not jointly titled and are therefore probate property

If jointly titled would have to go to court if you stopped getting along

o Furniture no separate document reflecting title (would need bill of sale to prove ownership)

You need to force your client to give you a lot of information about their assets

Professional Responsibility
o
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Duties to Intended Beneficiaries

In most states lawyer has fiduciary duty to intended beneficiaries

So under tort theory 3rd party beneficiaries can sue for malpractice

Under contract theory there must be privity of contract so 3 rd party benificiaries can sue under it for
malpractice
Simpson v. Calivas (pg. 58)

Facts Son sues fathers lawyer for drafting will incorrectly.

Father wanted to give wife life estate in the house, remainder to the son and all other property to the son
right away.

This was accurately reflected in lawyers notes.

The lawyer instead referred to the house as a homestead, and the court gave the wife a life estate in ALL
the property and son got nothing until she died (she was his stepmother).

HOLDING

Lawyer committed malpractice because the term homestead has a legal significance that a
layperson might not understand.

Probably would NOT be malpractice to write the wrong name of beneficiary, because the client
should catch that when reading will

The son has standing even though there was no privity, because

(1) he was an intended beneficiary and

(2) the injury was foreseeable

Fiduciary duty runs from drafting attorney to an intended beneficiary

The sons rights are derivative of his fathers reasonable expectations

Malpractice suit goes to general jurisdiction court, NOT probate court
About 10 states retain the no privity rule and do not allow intended beneficiaries to bring malpractice suits

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Conflict of Interest
Any time a couple walks into your office to do estate planning, there IS a conflict of interest
A v. B (pg. 64)

Facts Law firm represents husband and wife in estate planning and also represents other woman in
paternity suit against husband.

Issue Can the law firm disclose confidential facts about one client to another client?

HOLDING

Yes. Although firm owes duty of confidentiality to husband, it also owes duty to disclose
information to the wife in the course of estate planning, and the existence of a child out of
marriage is relevant to the estate planning.

Firm has discretion to disclose, but does not have a duty to disclose.
II.

INTESTACY: AN ESTATE PLAN BY DEFAULT

A. The Basic Scheme

o Introduction
o Intestacy is common

well over half of the population dies without a will

People dont like to think about dying

People procrastinate

People dont like dealing with lawyers

o Intestacy statutes

Every state has its own intestacy statute

UPC is NOT very widely adopted

Older statutes are NOT as mindful of modern higher divorce rates

o Governing principle = blood relationships

Two exceptions spouses, adopted children

o Partial intestacy

People can die partially intestate if their will fails to dispose of all their property

Policy = legislature tries to carry out what would most likely be the intent of the decedent

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General rules
If there is a surviving spouse, no children, and parents

Most states = spouse gets everything

Some states = spouse would share with parents

If there is a surviving spouse and 3 children of the marriage

UPC = spouse gets everything (assumption that spouse will benefit children)

Some states divide between the spouse and the children, regardless of whether or not the children are of
the marriage
If there is no spouse and three sons

UPC and most states = 3 sons share equally

If there is no spouse, 3 sons, and 6 grandchildren (2 for son #1 and 4 for son #2)

UPC and most states = same as above, 3 sons share equally

Same as above, but the childless son predeceased decedent

UPC and most states = 2 remaining sons divide equally

Same as above, but only the son with 4 children was still alive

Half to the remaining son and half to the 2 kids of the dead son

By right of representation or per stripes

All three sons are dead and only 6 grandchildren are left

Per capita among grandchildren (modern rule)

Each grandchild gets 1/6

English per stripes (traditional rule)

By right of representation, 1/4 each for the two sons of son #1 and 1/8 each for the 4 sons of son
#2\

Types of Distribution

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Per Stirpes (by the stocks) right of representation (same thing) (pg 88) System treats each line of
descendents equally.

Per capita with representation Estate is divided equally to the first surviving generation:

Per capita at each generation UPC approach per capita at each generation. Combines 1&2 above

Same sex marriage

This area is fluid and will probably continue to change incrementally
Survival/simultaneous death
Statutes tend to have one of two rules

Traditional rule

Survival means bare survival (could be a matter of seconds) Janus

UPC rule---2-104 and 2-702

Survival must be by 120 hours (5 days)

If survival is shorter than this, the beneficiary is treated as having predeceased the decedent and
the property goes to the next in line
Drafting Wills Can Trump the Statutory Rules

Most well-drafted wills require beneficiaries to survive decedent by 30-90 days

Janus v. Tarasewicz (pg. 80)

Facts Cyanide in Tylenol tragedy

Husband and wife digested cyanide around the same time and both were rushed to hospital.

Husband pronounced dead after arrival and wife pronounced dead two days later, although she was
probably brain dead entire time.

Wife was primary beneficiary on life insurance policy, and husbands mom was contingent beneficiary
and the insurance company paid the wifes estate.

Mom argued that wife did not survive husband.

HOLDING

Wife survived husband.

There was sufficient evidence that the wife survived the husband because her heart beat on its
own, and there was minimal brain activity.
Hypotheticals involving sufficient evidence of bare survival

Husband and wife drown in boating accident. Wife was a better swimmer and died after a violent
struggle, whereas husband passively submitted to the drowning. Sufficient evidence of survival?

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Husband and wife die in plane crash. Wifes brain is intact and theres CO in her bloodstream.
Husbands brain is crushed and theres no CO in his bloodstream.
Negative Disinheritance
UPC

allows for negative disinheritance (UPC 2-101) and the barred heir is treated as if he disclaimed his
intestate share
Common law

you cant disinherit someone by providing in your will that you dont want them to get anything unless
your will entirely disposes of all your property

If not, remainder passes through intestacy and heir will take under the intestacy statute
Table of Consanguinity (p93)
If someone has no surviving spouse, children, or parents, you would consult this chart (very rare)
Try to find the person with the most common DNA with the deceased
In drafting a will, you should go through relatives that have an actual relationship with the decedent and then to
charity to avoid disputes involving far-removed relatives

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Transfers to Children
o Meaning of Children

Adoptive Children

Historically, adopted children were left out of intestacy statutes

Now, most states define adopted children to be the same as natural children

Four basic approaches

Adopted child inherits only from adoptive parents and their relatives

Adopted child inherits from both adoptive parents and genetic parents and their relatives

Adopted child inherits from adoptive parents and also from genetic parents and their relatives,
but only if the child is adopted by a stepparent (old UPC approach)

2008 UPC key determination = whether there was a parent-child relationship

(p101)
Hall v. Vallandingham (pg. 97)

Facts Husband died, wife remarried, and new husband adopted the children. First husbands
brother died and the children tried to inherit the distributive share their father would have
received.

HOLDING
o Children cannot inherit from natural fathers brother, because the children were
adopted by mothers second husband.
o This would give adopted children double inheritance.

Prof argues this is not a garden variety adoption

Under the old UPC, the children would take here, because they were adopted by their stepparent

Adult adoption

Most intestacy statutes draw no distinction between the adoption of a minor and the adoption of an adult
(in NY, you cannot adopt your lover)

This is utilized by people in atypical relationships (not married/ gay couples) to ensure inheritance

Can preempt will challenges by collateral kindred

Different from marriage, because you cannot get out of an adoption

Minary v. Citizens Fidelity Bank & Trust Co. (pg. 103)

Facts Woman left trust to her husband and three sons, and then to her then surviving heirs
according to the lawsthen in force in Kentucky.

Last alive son adopted his wife so that she could benefit from the trust as an heir of his mother.

HOLDING
o This is not allowed.
o
The purpose of the adoption statute was NOT to allow the wife to inherit through her
husband against the testators intent.
Doris Duke

Doris fathers trusts were to go to Doris children but she didnt have any

At age 75, she adopted a young woman, but then they had a falling out

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Doris could not get out of the adoption and the woman got $65 million
Adult adoptions can be used as a type of special power of appointment by bringing the adoptee into the
class of remainder beneficiaries

Virtual adoption/equitable adoption/adoption by estoppel

Some people do not have the resources/sophistication to go through formal adoption requirements
Through virtual adoption, adoption paperwork is not properly completed but if certain conditions are
met, child will be entitled to share of adoptive parents probate estate.
ONeal v. Wilkes (pg. 109)

Facts Cook took in a girl that no one else wanted and raised her as his own. Never formally
adopted her, but referred to her as his daughter. Administrator of Cooks estate refused to
recognize her as his daughter.

HOLDING
o Not an adoption.
o
Adoption is a statutory process and it was not satisfied here.
o No one had the legal authority to contract for the adoption.

Dissent We should look to the reality of the relationship through a moral and equitable
approach.
This doctrine has NOT been widely accepted, but some states allow it in unusual circumstances

Posthumous children
Children born after the death of the father are given rights to inheritance, with limitations

rebuttable presumption
o if the child is born within 280 days of the death of the husband, the child is treated as
being in existence as of the time of conception and therefore surviving the husband
o Anything more than 280 days burden falls upon the child to prove parentage

Uniform Parentage Act child born within 300 days of death of husband is presumptively the
child of the husband

Nonmarital children
At common law could not inherit from either parent
Now, all states permit inheritance from the mother
They should be able to inherit from both parents according to bloodlines
Very problematic because it can be very difficult to prove relation to decedent (DNA might be improving
this)

Reproductive technology and new forms of parentage

Hecht v. Superior Court (pg. 117)

Facts Boyfriend devised 15 vials of sperm to his girlfriend. His adult children wanted to
destroy the sperm.

HOLDING
o Court awarded the sperm to the girlfriend.
Woodward v. Commissioner of Social Security (pg. 118)

Facts Husband donated sperm when he got sick and then he died. Wife used sperm for
artificial insemination two years later and sought social security benefits for the children.
District Court certified questions of whether they were his children to the Massachusetts
Supreme Court.

HOLDING
o
In some limited circumstances, posthumously conceived children can enjoy
inheritance rights.
o This is a case-by-case determination.
o
Key question is whether or not the husband consented to
i. (1) the sperm being used to conceive children posthumously and
ii. (2) supporting such children.

Balance the interests of:

o The children (treated like all other children and not discriminated against due to
accident of their birth)
o The state (prompt and accurate administration of benefits)
o The reproductive rights of the decedent

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In re Martin B. (pg. 126)

Facts Martin granted a trust, and the trustee could distribute money to Martins issue during
his wifes life. James (Martins son) predeceased Martin, and James wife Nancy was artificially
inseminated by James sperm after James death.

Issue Do the children qualify as issue under the terms of the trust?

HOLDING

Yes. Look to grantors (Martins) intent.

Even though he probably didnt contemplate this, he intended to provide for his childrens
children.
Surrogate motherhood and married couples/assisted reproduction and same-sex couples

There is a lot of confusion over the property rights involved in these cases and a lot of work to be done to
provide clarity
Advancements
Gifts given during lifetime are calculated in to total estate
Parallel concept with wills (satisfaction)
Common law

Any lifetime gift was presumed to be an advancement a prepayment of the childs share of the estate
Many states

Lifetime gift is presumed NOT to be an advancement but is subject to rebuttal evidence that it was in fact
intended to be an advancement
UPC and some states

Requires that the intention to make an advancement be made in writing signed by the grantor or grantee

OTHERWISE THERE IS NO ADVANCEMENT

Guardianships, Conservatorships, Custodianship, and Trusts
These are relevant when dealing with minor children or incompetent/incapacitated people
Guardianships and conservatorships are expensive and time-consuming (must report to the court)
Guardianships

Generally refers to taking care of the physical person

Also used to have a guardianship of the property

Conservatorship

Replaced guardianship of the property

Now this refers to taking care of the property of the person

Custodianship

Something like conservatorship person given property to manage on behalf of a minor

Strategies to avoid guardianships/conservatorships

Create a trust

Power of attorney
Uniform Transfers to Minors Act

You can create a custodial account for your minor child under this act

However, a trust is probably better because you can condition the use of the funds

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Bars to Succession
o Homicide
o Majority Rule

Most states forbid slayers from inheriting from their victims

Most states treat the slayer as having predeceased the decedent

UPC provides that the slayer disclaimed the property (treated as having died immediately before
distribution)
o Minority Rules

Some states allow it, reasoning that there are other punishments

Other states have statutes, others rely on judicial decisions

Possible solutions in judicial decisions

o Legal title passes to slayer (court cant legislate)
o Legal title does not pass to slayer (b/c of equity)
o Legal title passes to slayer, but equity holds him to be a constructive trustee for the
heirs or next of kin of the decedent

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Court doesnt completely ignore intestacy statute if slayer is supposed to take

under it
Maintains constant chain of title

Constructive trust = remedy

Persons name is attached to title of property, but person doesnt have any equitable rights in the
property court can force the person to turn it over to next of kin
In re Estate of Mahoney (pg. 145)

Facts Wife convicted of manslaughter of decedent. There was NO slayer statute that governed.

HOLDING

Court remands the case to determine whether it was voluntary or involuntary manslaughter.

If voluntary, constructive trust should be created.

Most states do not allow people to opt out of the slayer statutes (if H thinks W is crazy and might kill him, but
doesnt want to hold it against her)
Well-drafted instruments and the UPC also prevent slayers from getting non-probate property
Chinese system takes into account not only homicide but also other forms of good/bad behavior
Disclaimer
Aka renunciation
Definition = person that is entitled to inherit declines to accept the property

This is generally governed by state law

Generally the person disclaiming is treated as predeceasing

Person might disclaim for federal tax purposes

If so, must comply with IRS Code 2518 (p153)

Cannot accept benefits and then reject them later

Must make disclaimer in accordance with formalities within 9 months after the interest passes
Drye v. United States ( pg. 155)

Facts Son of intestate mother disclaimed because he owed the IRS backtaxes and wanted the money to
go to his daughter.

HOLDING

You cannot disclaim when the IRS comes calling.

Disclaiming to qualify for Medicaid

This area is in limbo whether you can disclaim or not

Troy v. Hart (pg. 156)

Facts Medicaid recipient appeared to be incapacitated, and his siblings got him to sign a
disclaimer without the knowledge of the power of attorney.

HOLDING
o Court held the disclaimer valid, but said the amount disclaimed had to be reported to
the Medicaid authorities and might be subject to an action by the state to recover the
funds.
o Basically have to disclose to Medicaid your wealth or potential wealth so if you disclaim
an inheritance that would disqualify you from Medicaid you still may not qualify b/c
Medicaid will take that into account
III.

WILLS: CAPACITY AND CONTESTS

A. Mental Capacity
o The Test of Mental Capacity

Requirements to make a will

Requirements are very low

Testator must be an adult (most places 18 y.o.)

Testator must be sound mind:

Must be capable to:

o Know the nature and extent of his property
o Know the natural object of his bounty

Theres a natural category of people that we would expect the testator to want
to benefit (spouses, children, blood relatives)
o Know the disposition that he is making of that property

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o Relate these elements to another

There is NO INTELLIGENCE requirement

These are simply general rules to allow people to express their intent to have a will
Burdens of proof

Majority = presumption of competency (Wilson)

Person challenging will has to rebut the presumption

So once there is prima facie evidence of due execution of will party contesting it has burden of
proof

Minority = burden on proponent of will to show testamentary capacity (Washburn)

In re Estate of Washburn ( pg. 159)

Facts Decedent executes three wills.

Each will gives greater portion of estate to nurse caretaker

Principal beneficiary under second will challenged the third will and argued decedent lacked capacity to
make that will due to Alzheimers.

HOLDING

Court found that there is a presumption that everyone is competent

o This must be rebutted by person challenging the will

Burden shifted to caretaker to show Decedents capacity which she could not

Court held third will invalid because there was no showing of testamentary capacity

there was medical evidence of her Alzheimers and her statements conflicted with the contents
of the wills.

beneficiary of the third will was NOT a relative, so the court might have been a bit more
skeptical because of that.
Wilson v. Lane (pg. 161)

Facts

Testator left will that went to 16 blood relatives and one non relative, who was a person who
cared for her later in life

Relatives argued that she lacked capacity to make will

o Offered some proof of dementia (was appointed a guardian for some affairs after she
made will)
o Peculiar
o Old
o Strange fear of house flooding
o Maybe had alzheimers

Jury found there was no capacity, but the trial court entered judgment n.o.v.

HOLDING

Will was upheld.

Although there was circumstantial evidence the will was shown duly executed so the burden is
on those contesting the will

Here evidence was not enough to deprive her of right to make will

Dissent This was a decision for the jury to make and there was enough evidence to uphold the jurys
decision.
Professional responsibility

If someone comes in with questionable mental capacity, the lawyer may rely upon their own judgment as
to whether the person is competent

If lawyers good faith belief is that person is incompetent, he cant draft the will

Ante-mortem probate

Some statutes permit a person to institute a proceeding of a will during the testators life to remove
uncertainty about testamentary capacity and freedom of undue influence

All beneficiaries to will and testators heirs must be parties to action

However, it also deprives the person of the opportunity to change the will
Capacity threshold

It takes more capacity to write a deed than to write a will

It takes more capacity to write a will than it does to get married

Why require mental capacity?

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Protection of peoples interests

Assures testators intent is expressed

Protect them from unscrupulous 3rd parties

Insane Delusions
Insane delusion

False sense of reality to which person adheres despite all evidence to the contrary
A person can have sufficient mental capacity generally to execute a will however, if he is suffering from an insane
delusion the will may fail for lack of testamentary capacity

the insane delusion MUST be related to or drive the will in some way

general insane delusions are not enough

HYPO

Woman goes around DC telling people that a man lives on moon and only eats blue cheese

She can do this for years and still write a perfectly valid will

Unless her will gives all or a substantial portion of her property to the man on the moon
o In that case the insane delusion drives the will
This test is separate from the mental capacity test

Being strange or eccentric is not enough it has to be pretty much crazy

Causation requirement

If the insane delusion does not affect the disposition, then the will is still valid

Most states require the delusion to have a material effect on the disposition

Some states require only a showing that the delusion might have affected the disposition
Most common example

False (crazy) belief about a member of the testators family causes them to exclude them from the will
Difference between insane delusion and a mistake

A simple mistake will NOT invalidate the will

In re Strittmater (pg. 169)

Facts Ladys will gave all her money to a womens organization that she worked with. Her cousins were
her only heirs at law and they challenged the will.

HOLDING

Her will was driven by insane delusions and is therefore invalid.

This decision was motivated by hostility toward womens movement. But prob just a social/
political decision in 47 by an old judge with views on feminists
o
just a relic from the past
Breeden v. Stone (pg. 171)

Breeden left a handwritten will basically leaving everything to Sydeny Stone

Killed himself after writing will and prob being on a coke binge and killing someone a few days before in a
hit and run accident

His relative contested the will arguing insane delusions

He was moody

Scared of govt agents threatening him and his dogs safety

Was on a coke binge

HOLDING

Will was upheld

Basically his delusions went towards his own safety and the will had nothing to do with that so
the will is upheld

Delusions unrelated to will

The will in this case was a holographic will

A will that is written in handwriting of testator and is NOT witnesses in ordinary course of law

Half of states allow these

o Typically rural or southern jurisdictions
In re Honigmans Will (pg. 178)

Facts Couple lived in new York and made their fortune owning deli shops in NYC

Mr honingman had health problems and surgeries etc and became depressed

In depression Husband had insane delusions that wife was cheating on him and excluded her from his
will.

HOLDING

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o
o
o
o

Court denied probate of the will. Court placed burden on will proponents to show the insane
delusion did not affect the disposition.
Dead Mans Statutes
These statutes refuse to allow an interested party testify about oral statements made by the decedent
Rationale = only person who knows what really happened is dead
These still exist in a minority of states

Undue Influence
o Definition
o When the will of the person who becomes the testator is coerced into doing that which he or she
does not desire to do
o Restatement if the wrongdoer exerted such influence over the donor that it overcame the donors free will and
caused the donor to make a donative transfer that the donor would not otherwise have made
o Undue influence does not require a lack of mental capacity

But it is very common that the testator was vulnerable

Young

Old

Frail

Compromised capacity (ie low IQ)

o Scope
o Only the portions of the will that are affected by the undue influence will be held invalid and the rest of the will
will be upheld, if possible
o Burden Shifting
o In most jurisdictions, the person challenging the will must establish a prima facie case of undue
influence
o
must show that:

There was a confidential relationship

If a person is in a confidential relationship with someone making a will, he should take

precautions in order to show that the will was fair and not the product of undue influence

Defendant received bulk of the estate

Testator was of weakened intellect

o Some jurisdictions allow showing one or more other suspicious circumstances

Restatement provides list of some suspicious circumstances (p185)

o If this is satisfied, the burden shifts to the proponent of the will to establish there was no undue influence
o Elements
o Evidence to prove undue influence will often be circumstantial and inferential

Restatement in the absence of direct evidence, circumstantial evidence is sufficient to raise a

presumption of undue influence if the contestant proves:

Susceptibility
o donor was susceptible to undue influence

Opportunity
o Alleged wrongdoer had opportunity to exert undue influence

Motive
o Wrongdoer had motive or disposition to exert undue influence

Causation
o There is a result appearing to be the effect of the undue influence
o Property was disposed of in a manner testator would not have otherwise done

Its likely that no neutral witnesses will be able to testify about the alleged influence
Estate of Lakatosh (pg. 182)
o Rose, Old lady lived alone, no visitors etc
o Roger Jacobs began visiting her once or twice a day

Begins helping her with stuff taking her around etc

o After a few months Roger suggests that Rose give Roger power of attorney
o Roger sent her to his counsin a lawyer to sign the power of attorney
o She also made a will giving Roger everything
o HOLDING

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Will was invalid.

Court looked to the three elements of the burden shifting test:

(1) there was a confidential relationship;

(2) person enjoying such relationship received bulk of the estate;

(3) decedents intellect was weakened.

Because all three of these were met, the burden shifted to the guy to show that there was no undue
influence and he could not do that.
In re Will of Moses (pg. 186)
o Woman married three times and all three husbands died.
o She then became involved with a younger man (Holland) who was an attorney
o 3 years before death she left all of her property to Holland

Holland had no knowledge of this will as Moses went to another lawyer

o Sister challenged the will as a product of undue influence.
o HOLDING

Court held the will invalid.

Although the woman had independent counsel, the attorney did not give adequate advice.
o Dissent The other attorney did exactly what he was supposed to. The woman knew how she wanted to dispose of
her property, and the other lawyer did that for her.
o Prof agrees with dissent and says there probably wasnt even a prima facie case of undue influence here.

He didnt even do anything to exert any influence and didnt even know about the will.
o This case points out that lawyers have to be very careful in entering into relationships with previous clients
(although Prof thinks this was misguided)
o Bequests to Lawyers Rule 1.8(c)

Lawyer shall not solicit any substantial gift from a client, including a testamentary gift, or prepare on
behalf of a client an instrument giving the lawyer or a person related to the lawyer any substantial gift
unless the lawyer or other recipient of the gift is related to the client
o Sexual Relationships and Undue Influence
o A sexual relationship used to be viewed as evidence that undue influence was more likely
o More recently, a sexual relationship has been viewed as evidence that the decedent would have wanted the person
to benefit (treated as natural object of bounty)
In re Kaufmanns Will (pg. 191)
o
Wealthy man had committed relationship with a same-sex partner.
o He executed multiple wills that gave larger and larger portions of his estate to his partner.
o Family challenged the will.
o HOLDING

Undue influence.

The man was vulnerable to his strange sexual preferences.

o This is probably not still good law in New York, but probably would be in lots of jurisdictions.
o Avoiding Undue Influence Charges for Non-Traditional Relationships

Adult adoption

Not available in all states and cannot be undone if the parties have a falling out

Owning property jointly with right of survivorship

However, if the parties have a falling out, the only way the property can be severed is by going to the
court and bringing an action for partition (expensive and problematic)

Revocable inter vivos trust

More flexible can be changed without litigation

You can control your property during your life and then it is disposed of according to the trust at your
death
Lipper v. Weslow (pg. 193)
o Will contest
o Sophie Block had 3 kids
o One died and left two children
o Blocks will, written by her lawyer son, left out the dead son and thereby the grandkids leaving her estate entirely
to her two living children
o Block resented the grandkids and their mother (daughter-in-law)

Didnt come visit

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o
o

o
o

Didnt like her

Werent nice etc

HOLDING

No undue influence.

Although there was a confidential relationship and the son benefitted disproportionately, the decedent
made her wishes clear and they were confirmed in statements to uninterested witnesses.
Prof thinks the court should have taken a closer look at the suspicious circumstances (drafter got more than his
intestate share, lived next door with key to house, bore malice toward his brother, will was executed 22 days before
she died, lady was in bad health, witness was a maid probably paid by the drafter).
The burden should have shifted here, but it didnt.
In will Block explains why she did not like the kids

Normally, you dont want to have a specific justification for the reasons for excluding someone

If these go into the will, they can be challenged

Prof says that explanation is not a good idea b/c it sets yourself up to be contradicted

If she wanted to do something she had to do something short

I know XXX exist but I am intentionally leaving them out

Or write a memo to the file that person is being intentionally left out
No contest clauses/in terrorem clauses
definition

Provision in will that states if a beneficiary under the will sues contesting it the beneficiary loses whatever
he was entitled to under the will
Baited no contest clause

Give the possible challenger a gift that they risk losing if they challenge the will

A no contest clause is useless if the person challenging will gets nothing or has very little to lose
Most cases will enforce these UNLESS there is probable cause for the challenge

Some states will not enforce these under any circumstances

Prof puts these clauses in almost every will she does

o
o
o

Avoiding Will Contests

Contests are often based upon lack of capacity and undue influence in the alternative
Things you can do to avoid will contests

Get permission to speak with doctors and get medical opinions on capacity

Try to get nurses to act as witnesses to the will, because they are in a special position to testify about
capacity

Have the client write a handwritten letter laying out the testamentary plan

Tape a video discussion

Family meeting

o
o
o

Definition
When the testator is deceived by a deliberate misrepresentation AND
The misrepresentation causes testator to dispose of property in a way he would not have if misrepresentation was
not made
Misrepresentation includes:
(1) the intent to deceive the testator and
(2) the purpose of influencing the testamentary disposition
Two types of fraud

Fraud in the inducement

When the testator is misled about material facts which causes him to sign a will he would not normally
sign

Doesnt address the will per se but just important facts

Example an heir promises to convey property to a person that the testator wants the property to go to
so that the testator doesnt put that provision in the will and the heir had no intention of conveying the
property

Fraud in the execution

Fraud

o
o
o
o

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When a person intentionally misrepresents the character or contents of the instrument signed by the
testator which does not in fact carry out the testators intent
Example putting a will in front of a person that is pretty much blind and telling them it is a deed and
having them sign it

Scope
Similarly to undue influence, only the portion of the will procured by fraud will be invalid and the
rest of the will will stand, if possible
o Fraudulently procured inheritance is invalid only if the testator would not have otherwise devised the property if
he knew the true facts
o Example

A man defrauds a woman into marrying him even though he was already married and they live happily
together for a year

Even though the marriage was a fraud, the woman leaving everything to the husband might not be a
result of the fraud, because she might have done that based upon their intimate relationship, and not
necessarily the legal characterization of their relationship
Puckett v. Krida (pg. 209)
o Live-in nurses convince a woman that her relatives were wasting her money and wanted to put her in a nursing
home, neither of which was true. The woman changed her will to benefit the nurses.

Holding Fraud in the inducement.

There is a distinction between fraud and undue influence
o
o

Duress
Definition
When undue influence becomes overtly coercive
Restatement a donative transfer is procured by duress if the wrongdoer threatened to perform or did perform a
wrongful act that coerced the donor into making a donative transfer that the donor would not have otherwise
made
Latham v. Father Divine (pg. 210)
o Decedent made a will leaving everything to Father Divine.
o Nieces (not her heirs at law) talked to decedent and convinced her to draft a new will, naming them as
beneficiaries.
o Before decedent could sign the new will, she fell ill and died
o the nieces alleged that Father Divine killed her to prevent her from signing the new will.
o Lower Court threw out the complaint for failure to state a claim.
o HOLDING

Reversed and remanded. (Ps stated a case for relief)

If Father Divine killed the lady to keep her from changing her will, a constructive trust would be imposed
for the benefit of the beneficiaries under the second will.
Duress, fraud, and undue influence also used to prevent person from signing new will
o If this is the case, a constructive trust can be imposed on behalf of the intended beneficiaries under the new will
o A constructive trust can be imposed on an heir who is innocent if other heirs unduly influence a person not to
make a will that would benefit someone else and die intestate instead

Reasoning = they wouldnt have benefitted at all under the will

o
o
o

Tortious Interference with an Expectancy

Brought in tort, and NOT in probate courts

o You are seeking tort damages from the wrongdoer, NOT challenging the will

A no contest clause would not apply here because this is not a challenge of the will
o A plaintiff is expected to exhaust probate remedies first, so long as they have notice and the probate remedies are
adequate

A will contest can act as res judicata to foreclose a claim of tortious interference

Rare
o Basically the only time you would use this is if the statute of limitations to challenge the will had run out, but the
general statute of limitations for torts had not

Statute of limitations for the tort starts running from the time the plaintiff discovered or should have
discovered the fraud, undue influence, or distress

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Elements
Reasonable expectancy of inheritance
Intentional interference w/ expectancy through tortuous conduct

fraud, duress, undue influence, but NOT lack of mental incapacity

o Causation

Tortuous conduct caused the interference

o Damages: Not recovered against the estate, recovered against interferer.
Schilling v. Herrera (pg. 215)
o Nurse moves in with decedent
o convinced her to execute a will (probably undue influence).
o Decedent dies and nurse does not notify her brother (heir at law) and puts the will through probate.
o Brother brings an action for tortious interference with an expectancy.
o Lower Court dismissed his complaint.
o HOLDING

Reversed and remanded.

If the nurse did this, then he would be entitled to relief.

b/c fraud was not discovered until after probate had finished (and brother was not notified of death and
probate) he wasnt prevented from bringing suit b/c he hadnt exhausted all remedies
Anna Nicole Smith
o Decedents son was trying to get assets out of the probate stream so that she couldnt get to them
o She brought a tortious interference case and ultimately prevailed
o
o
o

IV.

WILLS: FORMALITIES AND FORMS

A. Execution of Wills
o Attested Wills
o The functions of formalities

Ritual function = makes the testator aware of the severity of executing a will

Evidentiary function = increases the reliability of the proof presented to the court

Protective function = safeguards testator from undue influence, fraud, duress

Channeling function = easier for courts to determine testators wishes if all wishes are recorded in
standardized forms
o Basic formalities

In writing

Signature by testator

Attestation by witnesses

Pennsylvania doesnt require attestation

o Profs custom in execution

elements

In writing

Witnessed by at least two witnesses

Testator and witnesses are all in the same place at the same time observing each other sign the
will

Wise to follow the most conservative adherence to formalities so the will is upheld wherever it may be
challenged

Attestation clause

An attestation clause provides that the will was duly executed

These are not required in any state, but it gives rise to a presumption of due execution and its probably
malpractice if you dont include one

Wills execution can be upheld even if the witnesses predecease the decedent or cant remember the
execution

Affidavit of execution

This is a modern approach that allows the testator and witnesses to swear before a notary public that they
signed the will properly

Makes it very difficult to challenge the will on execution grounds

Two step self-proving will

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o
o

A separate affidavit is appended to the end of the will, and it contains an oath of the witnesses
(and often the testator) that the will was validly executed

One step self-proving will

Testator and witnesses sign only once and the affidavit language is folded into the attestation
clause
Strict Compliance: Writing, Signature, and Attestation:
Under the traditional rule, for a will to be admitted to probate, it must be in strict compliance with the formal
requirements of the applicable Wills Act

Elements

Will must be

(1) in writing;

(2) signed by testator;

(3) signed by at least two witnesses; and

(4) any additional requirements of the jurisdiction

Formalities in execution serve a purpose and we dont want to enter the slippery slope of whether or not the
execution was adequate to convey the testators intent.

Need to balance the need for a clear rule to avoid litigation with fairness toward people without resources
and their right to dispose of their property as they want
In re Groffman (pg. 228)

Facts Testator acknowledged his signature to the two witnesses separately and neither witness saw the
other witness sign.

HOLDING

Will Invalid.

Procedure wins over substance.

The testator did not satisfy the requirements of the Wills Act.

Lawyer here screwed up

Stevens v. Casdorph( pg. 229)

Facts Testator signed a will at the bank, and then the bank manager took it to two tellers to sign as
witnesses.

HOLDING

Will Invalid.

Two problems:
o (1) witnesses were not present when testator signed and he didnt acknowledge his
signature or publish the will as his and
o
(2) the testator was not present when the witnesses signed the will (line of sight rule).

Dissent This approach is too strict and we are supposed to focus on the intent of the testator.

Presence in will execution

Line of Sight Test

Most jurisdictions apply the line of sight test

Requirement that the witnesses sign in the presence of the testator is satisfied only if the
testator is capable of seeing the witnesses in the act of signing (does not actually have to see
them sign, only has to be able to see them sign)
Conscious Presence

Some jurisdictions apply the conscious presence test

Witness is in the presence of the testator if the testator, through sight, hearing, or general
consciousness of events comprehends that the witness is in the act of signing
UPC dispenses with presence requirement and provides two options

Signed by two people within a reasonable amount of time after witnessing signing of the will or
acknowledgement of the will

Acknowledged to a notary public

The meaning of signature

Signature by mark, with assistance, or by another

Preferable to have a full name signature, but a mark, cross, nickname, or abbreviation will
probably be sufficient

Typing up a will and typing the signature in a cursive font can be sufficient (Taylor v. Holt)

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Order of signature

Generally, testator should sign before witnesses

If everything happens in one transaction, the order is not critical

Subscription and addition after signature

Subscription = requirement that the testator sign at the end of the will
o This applies in a few states

Addition after signature

o If you handwrite something on a will

If written AFTER the testator signed will is probated and the handwritten
addition is ineffective because its an invalidly executed codicil

If written BEFORE the testator signed will might not be probated

Delayed attestation

NY requires witness to sign within 30 days

UPC requires reasonable time

Some cases say signature after the testators death is even ok

The meaning of writing

Will doesnt have to be on paper only need a reasonably permanent record

Interested witnesses and purging statutes

Interested witness

witness that stands to benefit from the will

o Traditionally, a will would be invalid if any required witness was an interested witness
Parsons Case

Facts Lawyer got an interested witness to disclaim any interest under the will in an effort not
to have the will invalidated.

Holding Invalid. Witness must be disinterested at time of signing will.

o Purging statutes tried to remedy this by purging the benefits of the interested witness instead of throwing out the
entire will

Most states have purging statutes that purge only the benefit that the witness would receive under the
will that is in excess of what the witness would have received in intestacy
Estate of Morea (pg. 239)

Facts Son served as witness to a will that he benefitted from.

Holding Will is valid because son actually would have benefitted more under intestacy statute
and therefore had nothing to gain from the will.
o UPC and a minority of states do not require witnesses to be disinterested
Recommended method of executing a will pp. 242-245
o Safeguarding a will
o 3 possibilities as to where to keep a will

Testator keeps it and stores it somewhere

Law firm keeps the will at testators request

File the will with the probate court

o Problems w/ each

Testator could destroy, damage, misplace, scribble on the will or relatives could try to destroy it after
death

Law firm has burden of keeping will and periodically reminding testator it is in the firms possession

If the court has the will, it is difficult to change the will quickly
o Multiple originals = horrible idea
o Curing Defects in the Execution of Attested Wills
o Excusing execution defects by ad hoc exception

To avoid harsh results of strict compliance, some courts have occasionally excused or corrected an
obvious execution defect

Basically some courts will just correct will if obvious mistake (others wont)
In re Pavlinkos Estate (pg. 246)

Facts Husband and wife did not speak English and mistakenly signed each others wills
(mirror image wills). Wife dies and her will is not probated. Husband dies and they try to
probate his will.
o

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Holding Invalid. The court applied the 4 corners rule and held the will was a nullity and total
nonsense.

Dissent This is ridiculous. We should apply the 8 corners test and that would show us the
clear collective intent of the husband and wife.
In re Snide (pg. 250)

Facts Husband and wife mistakenly signed each others will.

Holding Will was upheld. Court allowed exception to strict compliance rule.

Dissent Majority misconstrues the case law, which weighs heavily in the direction of
invalidating the will.

This case was roundly criticized when it was decided

Which will would you apply for probate?

The will they signed contains incorrect provisions that dont make sense

The will that makes sense is not signed by the decedent

Curative Doctrines: Substantial Compliance and Harmless Error

Substantial Compliance

Rule
o court may deem a defectively executed will as being in accord with the statutory
formalities if the defective execution nonetheless, by clear and convincing evidence,
fulfills the purposes of those formalities
In re Will of Ranney (pg. 253)
o Facts Witnesses signed a two-step self-proving affidavit without having actually
signed the will beforehand as the affidavit said.
o Wife attacked the will for improper execution.
o HOLDING

Court applies the substantial compliance rule and remands to determine

whether purposes of the formalities were fulfilled.
o Prof is bothered by this case because a lawyer and two other people that work in a law
office get away with taking an oath that isnt true
o Prof also personally believes that most jurisdictions would not go this far with the
substantial compliance doctrine to uphold the will
Harmless Error (aka the dispensing power)

Rule
o court may excuse noncompliance with statutory formalities if there is clear and
convincing evidence that the decedent intended the document to be his will

UPC Harmless Error Rule

o Document is treated as if it had been executed in compliance with the wills statute if
the proponent of the document establishes by clear and convincing evidence that the
decedent intended the document or writing to constitute (i) the decedents will, (ii) a
partial or complete revocation of the will, (iii) an addition to or alteration of the will, or
(iv) a partial or complete revival of his formerly revoked will or of a formerly revoked
portion of the will
In re Estate of Hall (pg. 259)
o Facts Husband already had a will, and then went to make a joint will with his wife.
o They wanted the draft to serve as their joint will until the joint will was finalized

they signed it and it was notarized without witnesses.

o Wife applied the will for probate but the husbands daughter from a previous marriage
challenged it.
o HOLDING

Will is valid.

The husband intended the draft joint will to be his will.

It purported to revoke his original will and he ordered his wife to destroy his
original will.
o Montana had enacted the UPC Harmless Error Rule.
Comparing substantial compliance and harmless error

Lots of similarity, but a few differences

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o
o

o
o
o

Langbein was the architect of both and he came to prefer the harmless error rule because of its
focus upon the testators intent
Notarized Wills
UPC provides a will is valid if signed by two witnesses OR signed by a notary

Prof is skeptical because lots of times notaries sign things without having actually seen the person sign
the document

Prof doesnt know of any states that have adopted this yet
In re Will of Ferree (pg. 266)

Facts Guy wrote out his will on a will form and had it notarized, but not attested to by witnesses.

Holding

Will is invalid.

Having the will notarized did not satisfy the substantial compliance rule.
A notary can serve as an attesting witness if he intends to sign as a witness rather than as a notary

You would still need another witness to satisfy the attestation requirement
Holographic Wills
Definition

A will written in the testators hand but not signed by witnesses

Could take the form of a letter, scribble on pad etc

Slightly over half the states recognized holographic wills

Mostly popular in west and south (rural jurisdictions)

UPC recognizes holographic wills

Signature

In almost all states allowing holographic wills, the signature can be anywhere on the face of the document

However, if the signature is not at the end, there may be doubt as to whether the decedent intended his
name to be a signature
Often times holographic wills are written in extreme circumstances close to death
Kimmels Estate (pg. 269)

Facts Father writes a letter to his sons that says if anything happens he wants his two sons to take his
property (specifically listed pieces of property).

HOLDING

Valid holographic will.

Court focused upon fathers intent.

Signing it Father was a valid signature, because thats how he signed all his letters.

Factors pointing toward holographic will

Phrase if anything happens followed by specific pieces of property

Told the sons to hold onto the letter because it might help them

Sent the letter to the intended beneficiaries

Factors pointing against holographic will

Doesnt seem to be contemplating death

Leaves out natural object of his bounty

Lack of clarity court was forced to speculate

Conditional Wills

Some wills are written to become operative if death from a particular event occurs

Most cases presume that the language of the condition does not mean that the will is to be probated only
if stated event happens but is instead a statement (inducement) for making the will (ie they are thinking
about death)
Eaton v. Brown (pg. 272)

Facts Lady wrote a holographic will stating that if she died on a journey, she wanted
everything to go to her adopted son.

She died after returning from the journey.

HOLDING
o SCOTUS upholds will.
o The conditional language was evidence of why she was motivated to make the will, but
wasnt intended to limit its effectiveness.

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At the time, the adopted son would not have taken under the intestacy statute, so this might
have motivated the Courts decision.

Pre-Printed Will Forms

Holographic will statutes vary in how they treat pre-printed will forms w/ handwriting and whether or
not it is a valid holographic will

First-generation statutes entirely written, signed, and dated in the handwriting of the
testator
o Traditionally, a will had to be completely handwritten to be a valid holographic will
o Ten states still require a holographic will to be entirely in the handwriting of the
testator and two of these require the same for the date

Second-generation statutes material provisions

o Required only the signature and the material provisions to be in the testators
handwriting
o A court could ignore the pre-printed text and uphold the will if looking at only the
written portions made sense as a holographic will

Third-generation material portions and extrinsic evidence

o The court may look to the pre-printed text to give context to the handwritten portions
as a holographic will
In re Johnson (not in book)

Facts Man used pre-printed form and wrote my estate to followed by a list of people and
fractions, as well as a church.

HOLDING

Will Invalid.

Court looked only to the handwritten language and found no dispositive language or language
of testamentary intent.
Estate of Muder (pg. 276)

Facts Man used form with pre-printed text I give to and handwrote my wife followed by a
list of property.

HOLDING

Valid holographic will.

Court looked to the pre-printed language to find the testators testamentary intent.

This case was decided shortly after Johnson but didnt cite to it Prof thinks the court was
motivated by antipathy toward the church in Johnson and that these cases should have been
decided same way.

Estate of Gonzalez( pg. pg. 274)

Facts Guy filled out pre-printed form and showed it to 2 witnesses. Witnesses signed a blank
form that the guy was going to fill in later and make it neater.

Holding Court upheld it as a holographic will. The pre-printed text served as evidence of his
testamentary intent.
Formal wills can be amended by holographic codicils

Codicil

A testamentary instrument that amends a prior will

DOES NOT REPLACE IT

In re Estate of Kuralt (pg. 280)

Facts Man had a formal will

later wrote a letter to his mistress saying he was going to arrange for her to get his property in Montana.

HOLDING

Valid holographic codicil.

NY did not recognize holographic wills, but because the property was located in MT, there was ancillary
jurisdiction in MT.

Court looked to his intent and upheld the codicil.

Revocation of Wills
o Revocation by Writing or Physical Act

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o
o

o
o

A will is ambulatory it can be modified or revoked by the testator during his lifetime
How to Revoke

All states permit wills to be revoked in one of two ways

1) Subsequent writing executed with testamentary formalities

2) A physical act, such as destroying, obliterating, or burning the will

Oral declarations of revocation are insufficient in all states
UPC

Revocation by physical act must be accompanied by intent to revoke

Allows someone other than testator to revoke by a physical act IF performed in the testators conscious
presence and by the testators direction

At common law you would have to do it yourself (could not delegate)

Revocation by Inconsistency

If a subsequent will does not expressly revoke previous one but makes a complete disposition of the
property the previous will is revoke by inconsistency

However, if a subsequent will does not expressly revoke the prior will and does not make a complete
disposition of the former will, it is viewed as a codicil
Handwriting on a will can give rise to a presumption of revocation

Prof had to get affidavits swearing that the handwritten marks were made BEFORE the testator and the
witnesses signed it to probate a will
Revocation is only presumptive and subject to rebuttal

Revocation must be subject intent

So a tear on a will that was not made to revoke will should not revoke the will

But this is hard to prove

Revocation by Presumption

If the will is known to be in the possession of the decedent, but cannot be found after her death, there is a
presumption of revocation

This presumption can be overcome in certain circumstances (if a disinherited heir had access to the
house, if the house burned down, etc.)
Harrison v. Bird (pg. 287)

Facts Decedent asked her attorney to destroy her will and he tore it into pieces in front of his secretary
and brought the pieces to her house in an envelope.

HOLDING

Will was revoked.

The attorney tearing it up was NOT revocation, but the fact that she was known to have the will and it
could not be found gave rise to a presumption of revocation.

Note: this probably would NOT have satisfied the conscious presence rule of the UPC unless the lady was
on the phone with the lawyer as he was tearing it up.
Probate of Lost Wills

In states without a contrary statute, if the will is lost/destroyed without the consent of the testator or not
in compliance with the revocation statute, the will can be submitted to probate if the contents can be
proven

(for example, if there is a copy of the will somewhere)

Thompson v. Royall (pg. 290)

Facts Decedent wanted to revoke her will and codicil but the lawyer suggested she keep them for her
reference in case she wanted to make another will.

Lawyer wrote on the back of will that it was null and void and she signed it.

HOLDING

Will was probated.

She had the intent to revoke the will, but did not do an act of revocation.

The writing of the attorney on the back did not touch any of the language of the will as required
by the statute.

If holographic wills were permitted in this jurisdiction, she should have written the note herself and
signed it and it would have been revoked by holographic codicil.

If someone wants to revoke a will by writing cancelled there are two ways to accomplish it

Holographic codicil revocation

Act of revocation if the word cancelled is written across the text of the will

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o
o

o
o

Partial revocation by physical act

Many states allow partial revocation by physical act but many do not

Reasoning for NOT allowing partial revocation by physical act

Revoking a gift to someone = someone else taking a gift, and making a gift can only be done
through a testamentary writing

Opportunity for fraud

Dependent Relative Revocation and Revival (DRR)
definition

if the testator purports to revoke his will upon a mistaken assumption of law or fact, the revocation is
ineffective if the testator would not have revoked his will had he known the truth

Reasoning = testator lacks true revocatory intent

Example = a testator destroys his will under the belief that a new will is valid, but in fact the new will is
invalid
DRR can be applied to only a portion of a prior will

If a second will revokes an earlier will, but some of the second wills provisions fail, the revocation of the
earlier will is presumptively ineffective to the extent necessary to give effect to the dispositive provision in
the earlier will that the failed dispositive provision in the later will replaced

Limitations on DRR

Most courts say that DRR can only apply where:

There is an alternative plan of disposition that fails OR

Estate of Ausley (pg. 299)

Facts Lady revoked her will and had her lawyer draft a new will. The new
will was not executed because she wanted minor changes to be made from the
draft.

HOLDING

DRR was not applied.

Even though the attorney testified as to the new plan of disposition,

the testimony was not sufficient evidence of alternative plan
Campbell v. French (pg. 299)

Facts Person executed a codicil that read I revoke the legacy to Judy,
because Judy is dead and Judy was alive.

Holding DRR applied.

Where mistake is recited in the terms of the revoking instrument OR

Possibly Clear and convincing evidence

o Limited amount of extrinsic evidence allowed
LaCroix v. Senecal (pg.295)

Facts Lady executed a will and then executed a codicil where she revoked a provision of the will and
made minor changes.

The codicil was invalid because one of the witnesses was an interested witness.

HOLDING

Original will was not revoked.

If the testator would have known that the codicil would not have been upheld, she never would
have revoked her will.
Estate of Alburn (pg. 300)

Facts Lady executed one will, and then a second will (which revoked the first will) and then destroyed
the second will.

HODLING

Second will was not revoked.

There was evidence that the lady destroyed the second will believing that it would revive the first
will, but this wasnt allowed by statute.

The court held she would rather have the second will than the die intestate.
Revival
Fact pattern

Person executes will #1 and later executes will #2. Person later revokes will #2.

Does this revive will #1?

Three approaches

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A few states/English common law

Will # 1 never revoked

Will #2 wouldnt revoke will #1 until the testators death, so the destruction of will #2 doesnt
even technically revive will #1, as it could not have been revoked until death.

Majority of states

Will #2 revokes will #1 upon execution, but upon revocation of will #2, will #1 is revived if the
testator so intends.

Minority

Will #2 revokes will #1 and will #1 cannot be revived unless re-executed with testamentary
formalities or republished by being referred to in a later duly executed testamentary writing
UPC 2-509

(a) If a second will wholly revokes a first will and the second will is revoked by a revocatory act, the first
will is revived if it is evident from the circumstances of the revocation or from the testators
contemporary or subsequent declarations that the testator intended the first will to take effect as
executed

(b) If a second will partly revokes a first will and the second will is revoked by a revocatory act, the first
will is revived unless it is evident that the testator did NOT intend the revoked part to take effect as
executed

(c) If a second will revokes a first will wholly OR in part and the second will is revoked by a third will, the
first will is revived to the extent it appears from the terms of the third will that the testator intended the
previous will to take effect
Revocation by Operation of Law: Change in Family Circumstances

Divorce

Most states have statutes that provide that a divorce revokes any provision in the decedents will for the
divorced spouse

In the other states, revocation occurs only if divorce is accompanied by a property settlement

These normally apply only to wills and not to life insurance policies, pensions, or other nonprobate
transfers

UPC applies to both probate and nonprobate transfers

Marriage

Pretermitted spouse is entitled to intestate share in most states chapter 7

Birth of Children
Pretermitted child is entitled to a share in the estate in most states chapter 7

COMPONENTS OF A WILL
o Integration of Wills
o Rule

all papers present at the time of execution intended to be part of the will are integrated into the will
o Problems can arise if pages arent properly fastened, there is no internal coherence in the will, fonts are different
on one page, each page isnt initialed by the testator
Estate of Rigsby (pg. 308)

Facts Two page holographic will and only one page was signed. The pages werent fastened, didnt refer
to each other, and conflicted with each other.

HOLDING

Only the first page was admitted as a holographic will.

The other page could have been a worksheet that was not intended to be a part of the will.
o Republication by Codicil
o Rule

a will is treated as re-executed/republished as of the date of the codicil, even if the codicil does not
expressly republish the will, unless inconsistent with testators intent
o Examples

Suppose a testator revokes a first will by executing a second will, and then executes a codicil to the first
will the first will is republished and the second will is revoked by implication (squeezed out)

If a will is witnessed by interested witnesses but the codicil is witnessed by disinterested witnesses, then
the original interested witnesses will not be purged of their gifts

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o
o

o
o

In order to be republished, you must already have a validly executed will (different from incorporation by
reference, where a will can incorporate documents that have not been validly executed)

A properly executed codicil CANNOT cure improperly executed will

Incorporation by Reference
UPC 2-510

A writing in existence when a will is executed may be incorporated by reference if

the language of the will manifests this intent

describes the writing sufficiently to permit its identification

and writing in existence at time will executed

Example

A will says the testator wants to give a dime to every name in the Manhattan phone book

This manifests an intent to incorporate AND sufficiently describes the writing

Personal property UPC 2-513

Testator can incorporate a list to dispose of tangible personal property if the list is signed and describes
the items and devisees with reasonable certainty

Differences between 2-510 and 2-513

2-513 applies ONLY to tangible personal property

2-513 allows lists that are created after execution of the will and can be changed

2-513 has not been adopted very widely

Clark v. Greenhalge (pg. 310)

Facts Woman wrote a memorandum listing property and who should get it, then executed a will
incorporating that memorandum.

Then, woman wrote a notebook with more property and more devisees and executed a codicil to the will

So codicil republished the will

P was listed as getting the painting in the notebook.

HOLDING

P gets the painting through BOTH incorporation by reference and republication by codicil.

The will incorporated the notebook by reference to memorandum because they served the
same purpose.

The notebook was not in existence at the time the will was executed,
o But it was in existence at the time the codicil was executed and therefore republished
the will.
Simon v. Grayson ( pg. 315)

Facts Testator executed a will that left $4000 to his executors to be paid as directed in a letter.

Letter was dated AFTER the will but BEFORE a codicil that made minor changes.

HOLDING

Letter was incorporated by reference and it was in existence at the time the codicil republished
the will.
Johnson v. Johnson (pg. 317)

Facts Lawyer typed out a document that gave gifts to siblings, but did not execute it.

At the bottom, he wrote that he gave his brother $10 only.

HOLDING

Court holds this was a valid holographic codicil that republished the unexecuted will.

This is flat out wrong, because republication applies only to prior validly executed wills
Acts of Independent Significance
Rule

if the beneficiary or property designations are identified by acts or events that have a lifetime motive and
significance apart from their effect on the will, the gift will be upheld
Example

Testator executes a will leaving her nephew her automobile

A few years later, she trades in her old crappy car and buys a Porsche

The nephew gets the Porsche, even though the act of buying a new car increased the value of the gift to
the nephew
The phrasing of the will leaves it within the power of the testator to alter the value of the gifts to the beneficiaries
without changing the will

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Reasoning

its unlikely the testator is doing these things to alter the plan of disposition, but instead is doing them for
other reasons
Extrinsic evidence can be admitted to show the intent of the testator in phrases like the contents of my house
and whether that would include a safe with stock certificates inside of it

Contracts Relating to Wills

o Differences Between a Contract and a Will
o No consideration or exchange in a will
o Wills are unilateral
o Conflicts are resolved in the probate division instead of the civil division

Generally
o A party can enter into a contract to make a will or a contract not to revoke a will
o In case of breach, the plaintiff must sue the estate under the law of contracts in the civil division

The will is probated and the plaintiff must get damages for breach
o These are often seen in separation agreements where the wife gives things up in exchange for a promise that the
children will take under the husbands will

Prof thinks this is pretty worthless and borderline malpractice

o Prof doesnt recommend ever entering into a contract to make a will
Via v. Putnam (pg. 329)
o Facts Husband and wife had mutual wills that named children beneficiaries and promised each other to leave
the residue to children.
o Wife dies, husband remarries.
o Husband dies and surviving spouse takes elective share.
o Children argue they should be treated as third party beneficiaries of the promise to leave the residue to the
children and want to be treated as creditors.
o HOLDING

Court says no way.

Spouse Elective share is based upon fundamental policy and this cannot be overcome by a prior mutual
will/ contract
V.

CONSTRUCTION OF WILLS

A. Mistaken or Ambiguous Language in Wills

o Traditional Approach: No Extrinsic Evidence, No Reformation
o Two Traditional Rules

Plain meaning or no extrinsic evidence rule

Extrinsic evidence may be admitted to resolve some ambiguities, but the plain meaning of the
words of the will may not be disturbed by evidence that another meaning was intended

No reformation rule

Reformation is an equitable remedy, that if applied to a will, would correct a mistaken term in
the will to reflect what the testator intended the will to say

Instead, courts interpret the words the testator actually used and not the words he intended to
use

Latent vs. patent ambiguity

Patent ambiguity appears on the face of the will

Example = in one clause, testator leaves residue of estate to A, while the next clause leaves her
entire state to A and B

Extrinsic evidence is NOT admissible

Latent ambiguity manifests itself only when the terms of the will are applied to the testators property or
designated beneficiaries

Two types
o If a will clearly describes a person or things and two or more persons or things fit that
description

Example = devise to my niece Alicia, and the testator has two nieces named
Alicia

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Where the description in the will does not exactly fit any person or thing

Example = devise to Mr. and Mrs. X, presently residing at Y and they dont
live there

Extrinsic evidence IS admissible

Courts are blurring the lines between patent and latent ambiguities
Allowing extrinsic evidence raises risk that well allow judges to re-write wills of dead people
Mahoney v. Grainger (pg. 336)

Facts Decedent wanted to devise her property to her cousins, but lawyer instead devises the property to
her heirs at law and her only heir at law was decedents aunt. Cousins challenged the will.

HOLDING

No extrinsic evidence admitted.

The language of the will was plain and it only has one possible meaning.
Moving Toward Reformation: Correcting Mistakes Without the Power to Reform Wills
Recent trend

admitting extrinsic evidence not merely to resolve latent, and more recently patent ambiguities, but also
to correct mistaken terms to conform to actual intent of the testator
Arnheiter v. Arnheiter (pg. 343)

Facts Decedent left her interest in the property at 304 Harrison Avenue to be sold and the proceeds
to be given to her nieces via trusts, but the lady actually had an interest in 317 Harrison Avenue instead.

HOLDING

Court does not insert the proper number, but instead simply deletes the improper number and
the property is adequately described by only the street name.
Estate of Gibbs ( pg. 344)

Facts Decedent messed up the middle initial and street address of his friend, and it accurately
described a man the decedent didnt even know.

HOLDING

Court completely ignores the middle initial and street address and gives the property to the
friend.

Lesson dont be too specific in your will because it can come back to bite you
o

o
o

Openly Reforming Wills for Mistake

Connecticut Junior Republic v. Sharon Hospital (pg. 348)

Facts Law firm mixed up which charities would take under the will.

HOLDING

Court did not allow extrinsic evidence or reform the will because of scriveners error.

The will was plain on its face.

Dissent Gives three reasons why the court should have allowed extrinsic evidence.

No reason to distinguish between fraud (where extrinsic evidence would be admitted) and
innocent mistake (as is the case here)

Risk of blindly enforcing testamentary language is more threatening to the intent of the testator
than the admission of extrinsic evidence to determine the testators intent

Addresses objections (1) presumption that testator ratified the mistake is rebuttable and (2)
this will not lead to groundless will contests
Erickson v. Erickson (pg. 345)

OVERRULES above case Sharon Hospital

Facts Guy executes a will two days before his wedding and the will does not expressly acknowledge the
wedding will take place. Under the state statute, that revoked the will.

HOLDING

Extrinsic evidence can be admitted to show testators intent that he did not want the will to be
revoked and it was merely scriveners error not to include an acknowledgment of the wedding.
(Basically adopted dissent from Sharon Hospital)

Prof would distinguish Sharon Hospital, because there, the testator should have known the wrong
charities were included, whereas here, the testator could not have known of the statutory requirements to
avoid revocation by subsequent marriage.
UPC explicitly allows reformation of a will even if its unambiguous on its face if proven by clear and convincing
evidence

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Prof and Langbein are concerned about the effect of allowing extrinsic evidence and reformation on the incentives
for lawyers to perform good work
Fleming v. Morrison (pg. 356)

Facts Guy wanted to entice a woman into sleeping with him by leaving her his estate.

After his lawyer witnessed the will leaving his estate to her, guy said that it was fraud.

HOLDING

Court held will invalid b/c the testator lacked testamentary intent

Court admitted extrinsic evidence to show lack of intent even though the will was plain on its
face.

DEATH OF BENEFICIARY BEFORE DEATH OF TESTATOR

o Lapse
o Definition

If a devisee does not survive the testator, the devise lapses (it fails) unless the will specifies a contingent
beneficiary

well-drafted wills should never allow a lapse!!!!

o Common law rules

If a specific or general devise lapses, the devise falls into the residue

If the residuary devise lapses, the heirs of the testator take by intestacy

No-residue-of-a-residue rule
o If a share of the residue lapses, that share goes to the heirs of the testator rather than to
the surviving residuary beneficiaries
o Vast majority of the states have rejected this rule
o Well-drafted wills provide the share of the residuary is to be divided among the other
residuary takers

Class Gift - If a class member predeceases the testator, the surviving class members divide the gift

Void Devise - If a beneficiary is dead at the time the will is executed , or the devise is made to a pet or
some ineligible taker, the devise is void (treated as if it lapses)
Estate of Russell (pg. 359)

Facts Lady executed holographic will that left residue of estate to a guy and her dog.

HOLDING

Devise of half of the residue was void because the dog was an ineligible taker.

This half lapsed to decedents heirs at law Quinn and Hembree.

People try to leave things to pets all the time

Honorary trusts cannot be enforced by the dog, so the trustee acts on behalf of the dog on his
honor
o
o

o
o
o

o
o

Anti-Lapse Statutes
Definition

Antilapse statutes DO NOT prevent a lapse,

they merely substitute other beneficiaries, usually descendants, for the beneficiary if other requirements
are met
Typical antilapse statute provides that if a devisee is of a specific relationship to the testator and is survived by
descendants who survive the testator, the descendants are substituted for the predeceased devisee
Antilapse statutes also apply if the devisee was dead when the will was executed or if he does not survive the
testator long enough to satisfy the will and is therefore treated as predeceased
Theory

For certain predeceased devisees, the testator would prefer a substitute gift to go to the descendants of
the devisee rather than the gift lapsing
Almost all states have some form of antilapse statute
Limitation

Only applies if devisee bears a particular relationship to testator specified in the statute

Some would be limited to ONLY the descendants of the testator

Some are broader, and apply to the descendants of the testators parents or grandparents

UPC allows substitute gifts if the predeceased devisee is a grandparent or a lineal descendant of
a grandparent of the testator

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Result = issue of the devisee share the gift (if they are all the same degree of kinship,
they take equally)
Statutes change the common law and provide default rules that the devise will go to someone else unless the
testator intended otherwise

Contrary intent is sometimes hard to determine

Using words of survivorship such as if he survives me or my surviving children is sufficient

to express a contrary intent in most states, but this is NOT sufficient to preempt the antilapse
statute under the UPC or the case below

In Georgia, mere words of survivorship are sufficient to prevent the anti-lapse statute from
tolling

To be sure that contrary intent is express, a well-drafted will should say if she fails to survive me, then to
X
Ruotolo v. Tietjen (pg. 367)

Facts Testator left half of the residue of her estate to the stepdaughter if she survives me and the
stepdaughter predeceased the testator. The CT antilapse statute applied to stepchildren.

HOLDING

Antilapse statute was applied.

These words of survivorship were not sufficient evidence that the will provided for the
contingency of the devisee predeceasing the testator.

This was just boilerplate language and did not really reflect any intent of the testator that the
antilapse statute should not apply. Court reasons that the antilapse statute is remedial and
deserves a liberal construction.

This is the minority approach, and most states would have let the devise lapse
o

o
o

Class Gifts
Class gifts were treated differently from individual gifts at common law

If a class member predeceased the testator, the surviving members of the class divided the total gift,
including the deceased class members share
Two basic factors to determine if theres a class gift

Group labels

Dynamic shares that will be different depending on the number of class members surviving the testator
What is a class?

Determined by whether the testator was group-minded whether the testator uses a class label when
designating beneficiaries

Examples to Xs children or to my nieces and nephews

If you have a natural class and you describe the class by a group label AND each member individually by
name, it could still be a class gift if extrinsic evidence showed the intent of the testator to treat the class as
a group

UPC 13.1 and 13.2

If you describe a class only by a class label, a class gift is created

If you describe a class by using individual names without a class label, the disposition does NOT
create a class gift

If you describe a class with BOTH a class label AND individual names or the number of class
members, there is a presumption that it is not a class gift, but this can be rebutted with extrinsic
evidence of testators intent
Dawson v. Yucus (pg. 376)

Facts Testator devised her interest in property one-half to her nephew X and one-half to her nephew Y.
Y predeceased the testator. X argued it was a class gift and he should get the entire interest.

HOLDING

No class gift.

The will never used the generic class label as such (relatives, nephews etc), but instead only
described each named individual as a nephew.

Also, the devise did not depend on how many class members survived (it specifically said onehalf to each).

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The lawyer could have avoided this by specifically providing that if a nephew didnt survive her, then to
that nephews issue
Most states apply their antilapse statutes to class gifts to a single-generation class

Some states provide this by statute, but in other states, courts reason that the average testator would
intend the deceased class members share to go to his descendants rather than to the surviving members
of the class

Basically, class gifts dont really exist anymore

CHANGES IN PROPERTY AFTER EXECUTION OF WILL

o Ademption by Extinction
o Ademption only applies to specific devises!!
o Types of devises

Specific devise

The disposition of a specific item of the testators property

Examples grandmothers engagement ring, Blackacre

General devise

Where the testator intends to confer a general benefit and not a particular asset

Examples legacy of $100k to A

o If the money isnt there, other property must be sold to satisfy As general legacy

Demonstrative devise

A hybrid between a specific and general devise

o General devise payable from a specific source

Example the sum of $100k to be paid from the proceeds of sale of my Apple stock
o If theres enough Apple stock, it must be sold to pay out the $100k
o If the testator doesnt own sufficient stock, other property must be sold to raise $100k

Residuary devise

Conveys the portion of the testators estate not otherwise effectively devised in the will

Example devise to A all the rest, residue, and remainder of my property and estate

You have to be careful when giving a lot of specific and general devises because this leaves less
for the residuary beneficiary, who is often the most important
o Only specific devises of real and personal property are subject to doctrine of ademption by
extinction

Beneficiary doesnt get anything if the property is disposed of before testators death

Basically its treated as if testator revoked the gift

In re Estate of Anton (pg. 381)

Facts Decedent executed a will and made specific devise of half her duplex to her stepdaughter.

Decedent then gave birth-daughter power of attorney and she sold the duplex to pay for nursing home
expenses.

HOLDING

No ademption, and stepdaughter gets half of the remaining proceeds from the sale of the
duplex.

Decedent didnt the request intent to sell the property so it is not deemed to adeempt

Identity theory vs. intent theory

Identity theory traditional rule

If the property wasnt there, the beneficiary didnt get anything

Courts and legislatures have crafted several exceptions to this if the property isnt in the estate
by accident or by action of someone other than the testator
o Condemnation award or insurance proceeds can be paid to the devisee

Example if T died in a plane crash and left the plane to his son, son will be
entitled to the insurance proceeds from the destruction of the plane
o Characterizing the devise as general or demonstrative

Example if T devises 100 shares of X stock, court might say that is a general
devise and look to the value of 100 shares at Ts death

Intent theory more modern UPC approach

Codifies the exceptions to the identity theory and some additional exceptions

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If the property isnt there, you are entitled to cash if you can show the testator didnt intend
ademption
Some criticize this as spawning litigation, but the burden now rests on the party opposing
ademption

o
o

Stock Splits
If testator makes a will devising 100 shares of stock to A, and then the corporation splits its stock and 100 shares
becomes 300 shares

Old rule = look at the specific devise of 100 shares

This was mechanical

New rule = look at the economic total

A stock split is a change in form and not substance

Most states now use this approach

Devisee will get all 300 shares unless the testator intended otherwise

o
o
o

Satisfaction
When the testator makes a transfer to a devisee after executing the will
This generally applies to general devises and not specific or residuary devises

Cross reference to advancements in intestate succession

So if a painting is given away after will is executed painting is treated as adeemed by extinction
Common law

Gift is part of the will (gift is given in satisfaction of devise in the will)
UPC

Parallel to the rule for advancements

Presumption that there is no satisfaction and intent of satisfaction would have to be shown in a writing
Example

Testators will gives his son $50k and the residue of her estate to her daughter

After execution of the will, testator gives her son $30k

At common law, son only gets $20k at death

Under the UPC, the son would still get all $50k

o
o

o
o

o
o

o
o

Exoneration of Liens
Common law doctrine/some states exonerate liens

When a will makes a specific disposition of real or personal property that is subject to a mortgage to
secure a note on which the testator is personally liable, it is presumed, absent contrary language in the
will, that the testator wanted the debt, like other debts, to be paid out of the residuary estate

Basically, the beneficiary gets the property free of the mortgage

Modern rule/UPC/majority of states

Mortgage follows the property

Example

Ts will devises Blackacre to her daughter, A

At Ts death, Blackacre is subject to a mortgage that secures a note on which T was personally liable

Common law/minority of states A takes Blackacre free of the mortgage

Majority/UPC A takes Blackacre subject to the mortgage

Abatement
When the estate has insufficient assets to pay debts as well as devises

Some devises must be abated or reduced

Analogous to bankruptcy
Common law

There was a typical order of abatement

Residuary devises reduced first

General devises reduced second

Specific and demonstrative devises are last to abate and reduced pro rata
VI.

WILL SUBSTITUTES:

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NONPROBATE TRANSFERS AND PLANNING FOR INCAPACITY

A. An Introduction to Will Substitutes
o Types

Life insurance

Non-probate if it names a beneficiary (beneficiary can be an individual or a trust)

If the policy names the estate or doesnt name anybody, then it is a probate transfer

This is inflexible

Pension Accounts
Required to pay a certain benefit to the surviving spouse
Also inflexible if a child predeceases, there is no way to make the childs portion go the grandchildren
Undesirable to make the estate the beneficiary due to tax consequences

Bank, Brokerage, and Mutual Fund Accounts, Joint Property

If you arrange joint property, you are creating a present interest in the donee
These dont accommodate fine tuning property automatically vests in whoever is named on the
property/account
Payable on death accounts depositor maintains explicit lifetime dominion but designates beneficiaries
to take upon death
TOD Transfer on Deathtypically with stocks

Revocable Inter Vivos Trusts

Imperfect Will Substitutes

Common law joint tenancy

o Georgia doesnt have tenancy by the entirety.
These are asset-specificdont have to be probated, dont have ability to confer specific personal property (like rings, jewels, etc).

Wills Substitutes and the Wills Act

o Revocable Inter Vivos Trusts
o Requirements

Property

Beneficiaries

Intent

Dont have to have a named trustee

o Three roles

Grantor/settlor/donor

Creates trust and puts it into the control of a trustee

Trustee

Manages the trust with fiduciary duty to one or more beneficiaries

There are duties during grantors life AND upon grantors death
o UTC 603

While a trust is revocable (during the settlors life), the rights of the
beneficiaries are subject to the control of, and the duties of the trustee are
owed exclusively to the settlor

Beneficiaries

Hold equitable title and entitlement to the benefits of the trust

o Contrast with testamentary trust

Testamentary trust is created by will and is always irrevocable

o Comparison between trusts and wills

Trust is generally not governed by the law of wills

Trust is not unilateral (trustee must agree to serve as trustee)

Trust can be changed without formalities

o Why would you use a trust?

Avoid an attack on the will

Flexibility can be changed without formalities

Farkas v. Williams (pg. 398) Farkas Case Brief

Facts Guy held stock certificates in his own name as trustee for someone else, pursuant to a trust
instrument.

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trust gave Farkas a lot of control and could be revoked before his death.
Trial court considered these stocks to be testamentary and held them invalid because they were not
executed with the formalities of a will.

HOLDING

Valid trust.

Farkas conferred a present interest on Williams when he created the trust, so the interest was
not testamentary.
o Farkas showed intention to part w/ some incidents of ownership
o He couldnt use the stock same as if he fully owned it
o If Williams didnt get an interest then what was intended as a trust would have been
testamentary and valid b/c did meet will standards

Farkas did not retain such control over the trust to render the dispositions testamentary, even
though he had a ton of control.
Linthicum v. Rudi (pg. 403)

Facts Guy created revocable inter vivos trust and then amended the trust while his capacity was
questionable.

Beneficiaries wanted to challenge amendments to the trust.

HOLDING

No standing.

Beneficiaries have only contingent interests that have not yet vested, and they are subject to the
control of the settlor.
o Possibly could have challenged capacity

Payable on Death Contracts and Other Nonprobate Transfers

In re Estate of Atkinson ( pg. 407)

Facts Decedent deposited three CDs with POD provisions to be paid to his daughters and left his
current wife out of the will.

Wife elects the forced share and wants to include the CDs in calculating the amount of her share.

HOLDING

Court includes the CDs in the amount of the estate, because they were a testamentary
disposition.

This case was against the trend (outlier), and Ohio later changed its statute

He should have put the CDs in a trust OR created a joint account with the right of survivorship
Estate of Hillowitz (pg. 409)

Facts Decedent was partner in a partnership and the partnership agreement said that the spouse gets
paid $2800 when a partner dies.

Estate argued this was testamentary and an invalid attempt to pass assets outside the will.

HOLDING

Valid contract.

Widow wins as third party beneficiary of the contract.

The modern law no longer denies the will-like nature of will substitutes

UPC authorizes POD designations in all contracts, and most states have followed suit

Will Substitutes and the Subsidiary Law of Wills

o Introduction
o Restatement 7.2

Although a will substitute need not be executed in compliance with the statutory formalities required for
a will, such an arrangement is, to the extent appropriate, subject to substantive restrictions on testation
and to rules of construction and other rules applicable to testamentary dispositions
o
o
o

Revocable Trusts
The most will-like of all will substitutes
Courts have applied to revocable trusts subsidiary rules from the law of wills, such as abatement and ademption

Discerning appropriateness of applying other subsidiary rules has been more challenging

The applicability of lapse rules and antilapse statutes has been the most controversial

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Default rules and presumptions that run afoul of express provisions of the trust instrument generally do not get
adopted

In re Estate and Trust of Pilafas (pg. 414)

Facts Decedent executed a revocable trust and pour-over will, leaving out some of his kids.

Decedent then made amends with his kids but did not amend the trust instrument.

At his death, the kids could not find the trust instrument and therefore argued it had been revoked, based
upon the presumption that arises when a will cannot be found.

HOLDING

Court upholds the trust.

The trust instrument provided that it could only be revoked in writing by decedent, so court
refused to apply the presumption of revocation.

Trust was not subject to physical revocation by its terms

Prof thinks the court was extra-suspicious of the kids because they stood to gain if the trust was revoked.

Prof also says that if trust instrument was found ripped up that would not be revocation because it would
still go against the terms of the trust instrument.

If the trust provides that it can be revoked in the decedents will, and the will revoked the trust, that
would be allowed.
State Street Bank and Trust Co. v. Reiser (pg. 416)

Facts Decedent set up a revocable trust and placed his stock in multiple corporations into the trust.

Decedent got a loan from the bank and instead of collateral, he told the bank he had controlling interests
in the corporations, forgetting that they were actually subject to the trust.

Decedent died without paying back the loan and the bank wanted to get at the stock to satisfy the debt.

HOLDING

Bank can get at stock.

Trusts cannot be used as mechanism to cheat creditors.

This is the prevailing view.

However, creditors generally dont have access to joint property, life insurance proceeds, and
retirement benefits.

o
o
o
o

o
o
o

Life Insurance
Term Insurance Whole Life Insurance Life insurance is a time-honored method of avoiding probate and getting assets into the hands of family members
quickly
Cook v. Equitable Life Assurance Society pg. (420)

Decedent designated his first wife as beneficiary on his life insurance policy.

Then divorced and remarried, but never changed designation.

However, he wrote a holographic will that purported to change the designation.

HOLDING

First wife is the beneficiary.

Decedent had plenty of time to properly change the beneficiary according to the terms of the
contract.

The insurance company needs certainty as to who to pay so that benefits can be distributed
quickly.

This is by far the majority rule.

UPC takes the opposite approach it says that nonprobate transfers should be modifiable by the terms of the will.
Pension and Retirement Accounts
Pension plans are a very important asset for most people today
Egelhoff v. Egelhoff (pg. 426)

Facts Decedent designated his wife as beneficiary under two ERISA accounts and then divorced her.

Decedent died without changing the beneficiary.

Children argued that WAs state law automatically revoked the designation upon divorce.

HOLDING

SCOTUS strikes down WA state law because ERISA preempts it

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o
o

States cannot make laws that would require administrators to know 50 different state laws
before paying out benefits.

Multi-Party Bank and Brokerage Accounts

Types of accounts

Joint and survivor accounts

Either A or B has the power to draw on the account and survivor solely owns balance of account,
which does not pass through probate

POD accounts

B does not have any rights in the account until A dies, then B gets the balance

Agency/convenience accounts

B has the power to draw on account during As life, but only for the convenience of A and not for
other purposes and B does not get the balance and As death

Savings (Totten trust) accounts

Banks and brokerage houses often give customers one uniform joint tenancy form without regard to what type of
account they actually want

This means courts have to try to figure out what type of account was actually intended
Varela v. Bernachea pg. 432

Facts Guy opens up a bank account with his mistresss named on the account and gives her check card
privileges.

Her spending was never restricted.

Guy went into the hospital and his kids kicked her out of his house and she withdrew $280k from the
account.

Guy brought suit to establish the status of the account, arguing it was not a joint account.

HOLDING

It is a Joint account.

When a joint account is opened with the funds of one person, a gift of funds is presumed.

This presumption was not rebutted in this case.

This is the general rule presumption of present gift can only be rebutted by clear and
convincing evidence.

UPC says joint accounts, during the lifetimes of the parties, belong to the parties in proportion
to the net contribution of each party

POUR-OVER WILLS AND REVOCABLE TRUSTS IN MODERN ESTATE PLANNING

o
o

o
o

Introduction
Revocable inter vivos trusts have replaced wills as the central instrument governing property
transfer at death today

Inter vivos trust is always revocable

Testamentary is not b/c testamentary trust only goes into effect at death
Reasons for this

Avoids probate

Allows settlor to consolidate all her property (probate and nonprobate) into one dispositive instrument
Basic Components of the trust

Provisions that apply during settlors life

Provisions that apply after settlors death

This part is the will substitute

Signature by at least two parties involved (settlor and trustee)

Dont need attestation by witnesses more like a contract

Pros and Cons of Revocable Inter Vivos Trusts
Pros

Property management by fiduciary

Relieves burden of financial management from settlor

Also poses inconveniences though (banks might want to see trust instrument)

Keeping title clear

Avoid probate no delays

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o
o

Plan for incompetency someone is in place to take over if you become incompetent

Avoid ancillary jurisdiction for real property

Choice of law must be a nexus between the state and the property/settlor/trust

Convenience

Privacy trusts are not public documents

Avoiding will contests

Cons

Uncertainty not large body of law on whether subsidiary law of wills will be applied

Creditors cannot benefit from short statute of limitations in probate

Tax consequences are neither a pro nor a con, because a well drafted will and a well drafted trust can both achieve
the same tax objectives
Pour-Over Wills
definition

a will that contains an express clause giving some or all of the decedents probate property to the trustee
of the decedents inter vivos trust to hold and distribute pursuant to the terms of the trust
There used to be a problem under incorporation by reference

The settlor would reference the trust in the will, but would then make changes to the trust afterward
the will would not incorporate the changes that werent yet in existence at the wills execution

Now, every state has provided an exception for revocable trusts so they can be amended after the will is
executed and the will incorporates the changes
Clymer v. Mayo pg. 445

Facts Lady created a revocable inter vivos trust and a pour-over will naming her husband as beneficiary
under the trust and naming the trustee of the trust as beneficiary under her will.

Lady then divorced her husband and died without changing her will.

HOLDING

Husbands interest was revoked by statute.

The statute only applies to wills, but the trust was incorporated by reference into the will.

JOINT TENANCIES IN REALTY

o Joint tenancy and tenancy by the entirety
o Upon the death of one joint tenant or tenant by the entirety, the survivor owns the property absolutely, freed of the
decedents interest in the property

Prof doesnt like joint tenancies

o If you dont want the other tenant to get your share, you have to go to court to sever the joint tenancy during your
life and this is costly

PLANNING FOR INCAPACITY

o Definition of power of attorney
o Agency relationship whereby the agent, called the attorney in fact is given a written
authorization to act on behalf of the principal

Attorney in fact has the power to do everything that the principal could do, unless the attorney in fact is
on a frolic of his own

Power of attorney is an agency relationship

o NOT governed by contract or wills law, but agency law
o Attorney in fact must abide by fiduciary standards (loyalty, care, and obedience)
o Automatically revoked upon Principals incapacity UNLESS its a durable power of attorney
o Two types of powers of attorney
o Non-Durable = prepare for management of financial assets

A general power of attorney becomes invalid if the principal loses the capacity to continue to give the
attorney in fact the authority

Incapacity cancels non-durable power of attorney

o Durable

Authority of the principal continues throughout incapacity

If principal is competent can cancel this at any time

Power ceases when person dies

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If agent dies power ends until successor is named

Powers of attorney = two edged sword
o Offers Flexibility but there is Risk of abuse
o Springing Power of Attorney

-Springs into effect upon some event; if it does not say that, it is in effect as soon as it is
signed.
Executing a power of attorney
Financial

Usually requires a notary public, but no witnesses

o Health care

Usually requires witnesses unrelated to the principal AND people that dont provide health care for the
principal
Some powers of attorney are effective immediately and others spring up only when the principal becomes incapacitated
In re Estate of Kurrelmeyer pg. 449
o Facts Husband gave durable power of attorney to wife and daughter and became incapacitated.
o
Wife put property in trust that conflicted with his will and also gave herself additional benefits.
o HOLDING

Wife had the power to create the trust.

The power of attorney document was very broadly worded.

o Prof thinks this is a bad rule unless it was explicitly authorized by the power of attorney document. Power of
attorney cannot be used to make a will for the principal, but here, the court allowed the attorney in fact to make a
will substitute that became irrevocable at the principals death and acted as a will.
Prof likes to give the attorney in fact the right to give gifts in order to save on estate taxes, but she likes to limit the possible
recipients to curb the risk of abuse
Banks are hesitant to accept power of attorneys, but they often times have their own shabby versions that they will make
you sign
o Health care powers
o You can have a power of attorney over your health care decisions

You can limit the powers of the attorney in fact to exclude life support
o Advance directives

Instructional directive

Specifies either generally or by way of hypothetical examples how one wants to be treated at end
of life situations or in the event of incompetence

Proxy directive

Designates an agent to make health care decisions for the patient

Usually called a health care proxy or durable power of attorney for health care

This does not lapse with incompetency

Hybrid/combined directives

Incorporates both of the first two approaches directs treatment preferences and designates an
agent to make substituted decisions
Cruzan v. Director, Mo. Dept. of Health pg. 457

Facts Woman was in vegetative state and parents wanted to remove artificial nutrition/hydration. Care
provider said they couldnt because they did not have the womans authorization.

HOLDING

SCOTUS says that if you can prove the intent of the patient, you can remove the artificial
nutrition/hydration and you cannot be sued.

After this case, healthcare providers began giving forms to patients asking whether they want artificial
nutrition/hydration, and estate planners started doing this too

Prof thinks this is a bad idea, because we might need some flexibility for the attorney in fact to
make decisions as they see fit
o Prof likes to include the power to switch hospitals/doctors and the power to move from hospital to hospice
Organ Donation
o Problem = more demand than supply
o What kind of laws do we need to control how we allocate organs?
o
o

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Elder Law
o Financial problems interaction of Medicaid and estate planning issues

Transferring assets to maintain Medicaid eligibility is a touchy subject, and there are different Medicaid
laws in each state
Euthanasia
o Oregon is the only state with a law that allows assisted suicide
VII.

RESTRICTIONS ON THE POWER OF DISPOSITION:

PROTECTION OF THE SPOUSE AND CHILDREN

A. Right of the Surviving Spouse

o Introduction to Marital Property Systems
o Separate Property

Property acquired by each spouse (including income) is owned individually

Spouse has no rights to this property (before divorce or death)

At death spouse can elect to take share of the others property despite terms of the will

GA is seperate
o Community Property

Property acquired during marriage is community property so each spouse have equal rights to it

Death of one spouse dissolves community

Dead spouse owns one half and has testamentary power over it

living spouse owns other half

Income tax advantage

o Rights of Surviving Spouse to Support
o Although the different theories differ on spouses right to share in deceaseds property (community v separate)
each jurisdiction agrees that spouses and even sometimes children have a RIGHT OF SUPPORT from the
deceased spouse
o Social Security

Spouse can elect the other spouses benefits after the other spouse dies

A divorced former spouse of the worker has a right to the benefits if the marriage lasted for 10 years or
longer
o Employee Pension Plans

ERISA requires that the spouse of an employee have survivorship rights if the employee predeceases the
spouse
o Homestead

Surviving spouse often has a right to occupy the family home or be granted sum money from state (UPC
recommends $22,500)
o Personal Property Set-Aside

Related to homestead

Right of surviving spouse to receive tangible personal property up to a certain value (regardless of
deceased spouse attempts to devise them)

Usually applied to furniture and clothing

o Family Allowance

Probate court can award whatever the jurisdictions set amount is to maintain and support the spouse
and children even before the creditors get paid
o Dower and Curtesy

Dower entitles surviving wife to a life estate in 1/3 of her husbands land

Curtesy entitled surviving husband to a life estate in all of the land, but only if children were born of the
marriage

Almost ALL jurisdictions have abolished this in favor of elective share

o Elective Share
o Elective Share (aka Forced Share) and Its Rationale

Prevents spouse from being disinherited

In separate property states, statutes allow for the spouse to elect a share of the deceased estate (usually
happens if not happy with will)

Usually the share is 1/3 of the estate

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o
it is more nuanced in lots of states
Once the amount of the elective share has been determined, the surviving spouse is charged with the
value of all other interests given her by the will

If those do not meet the elective share requirement, the difference must be made up either by
pro rata contributions from all other beneficiaries (majority/UPC) or from the residuary

Elective share has traditionally been easy to avoid because it only applied to the probate estate

Most states say that if spouse dies but before she can elect spouse share wife dies her estates does NOT
have right to elect share and husbands estate passes to devises

Not considered:

Length of marriage

Surviving spouses wealth

Inconsistencies with divorce law

Whether prop was acquired during marriage

Whether prop was acquired through inheritance

Marital deduction and the dependency of women (pg 428)

Taxes lower in community property states b/c only Hs half of community property taxed at death, where
all taxed in separate property/common law states.

H gets an estate tax marital deduction for 50% of estate for property left in effect outright to W. No limit
to amount.

Inter-spousal transfers not taxed as long as at least life estate in property.

QTIP trust (Qualified terminable interest trust): required by marital deduction giving spouse support for
life. The QTIP trust is fundamentally at odds with the partnership theory of marriage.
Must the surviving spouse accept a life estate?

When spouse does not take under the will, the elective share is charged what she is actually left under the
will + pro rata contributions by other beneficiaries or residuary estate.

UPC: a life estate renounced by spouse is not charged against her elective share.
In states that allow same-sex marriage, it would be considered the same as a heterosexual marriage
Avoiding Elective Share

Prenuptial agreement

Give property away

Community Property hinges on what was earned during the marriage

What if there is co-mingling of community property and non-community property? Two theories:

Pro Rata percentage is community prop

Inception test when was the inception of title on the prop

o
o

Incompetent Surviving Spouse

In re Estate of Cross pg. 484

Wife was incompetent with Alzheimers and living in a nursing home.

Husband left his entire estate to his son.

Commissioner appointed by court has the wife elect against the will.

Appellate court reversed, holding that she was fully supported by Medicaid and might lose her Medicaid
eligibility by taking.

HOLDING

Court reverses and has wife take against the will.

Refusal to take could disqualify her for Medicaid because eligibility took consideration of
available resources.

A court appointed guardian or other agent can take on behalf of the surviving spouse if it is in the best
interests of the spouse to do so

In determining best interests, most states look to all the circumstances, but a minority simply do
the math of the elective share vs. the amount in will
Unknown Case from Nebraska Not in the Book

Facts Husband left incompetent wife of his assets in trust. was the elective share in Nebraska.
Guardian asked court whether to take under the will or take against the will.

Holding Court ordered the wife to take against the will. It is always better to have property outright
than to have property in a trust.
Property Subject to the Elective Share

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o
o

Elective share statutes originally applied only to the decedents probate estate
Not many states have resolved the question whether the elective share can be avoided through a revocable trust

Majority of states that have addressed this question have said that trusts CANNOT defeat the elective
share
Massachusetts judicial decisions
Sullivan v. Burkin pg. 488

Facts Husband created a revocable inter vivos trust excluding his wife and grandson, and then
transfers all of his assets into it. Widow wants to include the trust assets in calculating her
elective share.

HOLDING
o
Court allows the trust to defeat the elective share in this case, but announces the
opposite rule for the future.
o Court announced a uniform rule that if person creates inter vivos trust during marriage
over which he has sole general power of appointment that is treated as part of estate for
spouse election
Bongaards v. Millen pg. 492

Facts Wife was beneficiary of a trust created by her mother and had a general power of
appointment during her life. She appointed the trust remainder to her sister. Husband argued
that it should be included in her estate for purposes of calculating his elective share.

Holding No way. Trust was created by third party and not wife herself.

Illusory transfer test

The trust is valid, but the assets are nevertheless included in the probate estate for purposes of
calculating the elective share and some of the assets might have to go to the surviving spouse to satisfy
the elective share

Intent to defraud test

If the transfers of property into the trust were done for purposes of avoiding the elective share, the assets
will be included in the probate estate for purposes of calculating the elective share

Present donative intent test

Whether the settlor intended to make a present gift into the trust

Multifactor balancing test

This means that future results will be highly fact-dependent

Augmented Estate/ Statutory schemes

Statutes can attempt to list which assets will and will not be considered in calculating the elective share
augmented estate
1969 UPC

Includes 5 categories of property in the augmented estate

o Retained life estate
o Revocable trust
o Joint tenancy with someone other than surviving spouse
o Death bed transfers in excess of gift tax exclusion
o Property given to surviving spouse

UPC has been pretty much ignored and is impossible to implement

1990 UPC

Redesigned the elective share and augmented estate to be closer to a community property
system

The longer the marriage lasted, the higher percentage the surviving spouse got of all the marital
property

o
o

Must the surviving spouse accept a life estate?

In most states, if the surviving spouse renounces the life estate and forces the elective share, she is not charged
with the value of the life estate

o
o
o

Waiver
The right to elect against the will can be waived
Main requirements

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o
o

o
o

Full disclosure

Full comprehension of what is being waived

UPC requirements (not adopted by all states)

Voluntary

Not unconscionable when it was drafted

Before execution, challenging party was provided fair and equitable disclosure; waived their right to
disclosure; or had adequate knowledge of the property of the decedent

Prenups

Prenups have to main purposes

What happens in case of divorce

What happens in case of death

Reece v. Elliott pg. 503

Facts Husband and wife signed prenup, and later wife challenged it because the values of the husbands
property were not listed on the appendix.

HOLDING

Prenup upheld.

Wife had independent counsel and an adequate opportunity to investigate the value of the property
listed.
Some states require independent counsel or an informed waiver of the right to independent counsel
Prof recommends executing prenup way before marriage

Removes element of coercion

Spouse Omitted from Pre-Marital Will
Spouses omitted from a will executed before the marriage are generally treated more generously, because we
cannot presume that the decedent intended to omit the spouse

Generally they get an intestate share instead of being limited to elective share
In re Estate of Prestie pg. 516

Facts Husband and wife divorced amicably.

Husband made will and trust and gave wife life estate in his condo.

They actually remarried shortly before his death.

HOLDING

Wife gets intestate share.

Will was revoked as to her by subsequent marriage.

Lambeff v. Farmers Co-operative Executors & Trustees Ltd.

Australian system = family based system

American = better

1. If there is some sort of dispute/contention/etc between parent and child, parent's intent is
carried out

2. Adult children can provide for themselves, looks out for elderly spouses who may not be able
to provide for themselves

Family Maintenence = better

1. Providing for one's blood is the right thing to do

2. More equitable

Rights of Decedents Omitted from the Will

o Protection from Intentional Omission
o In every state except Louisiana, a child or other descendant has no statutory protection against intentional
disinheritance by a parent
Many other countries protect intentionally omitted children
o Exceptions:
Legally obligated support: child support, court ordered support, etc
In GA, a minor child is entitled to a years support
Elective share may apply to minor children
o Adult Children no obligation to leave anything to your adult children
o

Protection from Unintentional Omission

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Pretermitted child statutes protect a child unintentionally left out of the will by either giving him his intestate share or
shares equal to other children that were provided for
some only protect children born or adopted after execution of will
other protect children alive at time of wills execution
Gray v. Gray pg. 528
Facts Guy had two kids from a previous marriage and left everything to his second wife in his will. Second
wife later gave birth to a son.
HOLDING

Pretermitted child statute did not apply because of a convoluted exception under these
circumstances.
Azcunce v. Estate of Azcunce pg. 532
Facts Guy drafted will naming his children as beneficiaries and then had another child.
After the birth of this child he executed a codicil to the will so the will was republished
HOLDING

Child was not pretermitted, because codicil republished will after her birth.

In this state pretermitted statutes only apply to children born after publication of the will and she
was alive when will was republished
Kidwell v. Rhew pg. 536
Facts Decedent created a trust and named her daughter as successor trustee, but never executed a will so
died intestate
Court-appointed sister to administrator estate; attempted to include trust assets in the probate estate, arguing
the pretermitted statute should apply to dispositions made by will substitute.
HOLDING

Pretermitted heir statute does not apply to trusts, only to wills.

There is less protection for children that are excluded than there is for spouses that are excluded
(trend is to not allow the trust to defeat the elective share for spouses)
Rights to Decedents Property:
D Dies Intestate

D Does Not Include in Will

Ds Spouse

Intestate Share of probate

estate

Ds Child Adult

Intestate Share of probate

estate
Intestate Share of probate
estate

-Separate Prop forced share

of probate estate; augmented
estate
-GA/Community Prop spouse
keeps own half of community
prop
Child gets nothing, except in
Louisiana
Child gets nothing unless they
get an elective share if included
in statute or 1 year of support
(GA)

Ds Child Minor

VIII.
A. Introduction
o
o
o

Born/Married After
Execution of Ds Will
-Pretermitted Spouse gets
intestate share or 1 year of
support or forced share
(whichever is bigger)

Pretermitted child get

intestate share
Pretermitted child get
intestate share

TRUSTS: INTRODUCTION AND CREATION

Background
In England, trusts go back to the Middle Ages

Concept spread from institutional purposes into the private arena gradually
Trusts can carry a lot of different labels

However, a trust can very seldom be adequately described by a single label

Most trusts have several components incorporated into a single instrument

Two exceptions where labels are definitive

o Revocable vs. irrevocable
o Inter vivos vs. testamentary

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o
o

o
o

o
o
o
o

o
o

o
o

Other labels can be misleading and refer to characteristics that overlap

Definitions
Trust

Arrangement whereby trustee manages property as a fiduciary for beneficiaries

To create a trust, must have three things:

Trust property

Beneficiaries

Intent to create a trust

Most trusts are testamentary

Oral Trusts:

Acceptable

Unless its an oral trust to land:

o Barred by Statute of Frauds:
Settlor

Party who creates the trust

Trustee

Party to whom settlor transfers the trust property

Holds legal title to trust property and manages property for duration of trust

Three duties:

Investment

Administration

Distribution
Beneficiaries

Parties who hold equitable interest in the trust

Trustee owes beneficiaries fiduciary duties

Corpus

Trust property
Inter vivos trust

Trust created while settlor is alive

Testamentary trust

Trust created when settler dies (created or funded by will)

Bifurcation

Trustee holds legal title to trust property

Beneficiaries hold equitable title

Parties to a Trust
Three main players in a trust

Settlor/grantor/donor/decedent

Person who creates the trust

Beneficiaries

Person or persons who benefit from the trust

Can be income beneficiaries OR remainder beneficiaries

Trustee(s)

Person or persons that manage the trust property/hold legal title to the property

H devises property to W in trust to pay income to W for life and then on Ws death, the property
passes to Hs children

A trust will NOT be invalid for failure to designate a trustee, so long as the intent to create a
trust is expressed (trustee can be appointed by court)
One person can play all three roles and wear all three hats (cannot be sole beneficiary)

Examples

Farkas Case

O executes a trust declaring herself trustee of Whiteacre with the income from Whiteacre to
herself for life, and then upon her death, to pass to A
Trusts vs. Wills
Trust is closer to a contract than it is to a will

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o
o
o
o
o

A trustee MUST agree to serve as trustee

Law of trusts is NOT the same as the law of wills

There is some overlap because some trusts are testamentary and the law of inter vivos trusts is less
developed so some subsidiary law of wills might be integrated
Commercial Uses of the Trust
Trusts used to be a common way to organize a business

Now, the corporation is much more popular

However, trusts are still used for mutual funds, asset securitization, bankruptcy, and pensions
Trustees have Fiduciary Obligations and can be held Personally Liable
Trustee holds bare legal title to trust property

equitable title lies with beneficiaries

Fiduciary duties

duty of loyalty, duty of prudence, must account to beneficiaries

Duties of executors/personal representatives are the same as the duties of trustees
Rhode Island Hospital Trust Co.

Facts Trustee held buildings in trust and didnt maintain the buildings and paid out all the income to
the income beneficiaries.

Remainder beneficiaries brought suit.

HOLDING

Trustee made bad decisions, was obligated to diversify and favored the income beneficiaries
over the remainder beneficiaries.

o
o

Trusts are Flexible

Professor Scott (classic treatise) said that trusts were only limited by imagination of the lawyers that draft them

o
o

Institutional vs. Corporate Trustees

Institutional trustees

More sophisticated, better at investing, but charge fees and dont know the settlor/beneficiaries as well,
so arent as attentive to individuals wishes

o
o

Legal Life Estates vs. Trusts

Legal life estates can cause problems

Life tenant cannot cut the timber and sell it

Life tenant cannot plant sequential crops of wheat (the soil will be less fertile)

If the roof caves in life tenant has to pay for it

Hard to incentivize waste. LT doesnt care if the prop goes to shit, bc after he dies there is no more
interest in the land
Trusts can spell out rules on these issues in great detail so things operate more efficiently

UNIFORM TRUST CODE GA just adopted it

o
o
o
o

Requirements for a Valid Trust (in addition to capacity)

Intent (does not have to be written)

Settlor must have intent to make a gift in trust

Beneficiaries

Beneficiaries must be ascertainable so court knows who has standing to enforce

Property

A trust is created when it is funded so the trust must have some property to exist

Creation of a Trust
o Intent to Create a Trust
o Introduction

Settlor doesnt have to use the word trust or name or refer to a trustee

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o
o
o

o
o

o
o

Example = transfer of property to an individual to hold for the use and benefit of another
person manifests an intention to create a trust

Trusts can be formed by oral representation

When there is a clear intent to form a trust, courts will look to function over form
Lux v. Lux pg. 557

Decedent devised property to her grandchildren in her will.

Will provided that the property shall be maintained for the benefit of the grandchildren and shall not
be sold until the youngest of the grandchildren reached 21 years old.

Will did not mention the word trust nor designate a trustee.

HOLDING

Court held that decedent had the intent to create a trust.

Even imprecise language can lead to the formation of a trust.

Here, the executor would be named as trustee (Prof doesnt think this would be the absolute rule
everywhere, but it was in this case).
Jimenez v. Lee pg. 558

Two gifts made to daughter (one from grandmother, one from fathers client) for purpose of her
education - $1,500 total.

Father (lawyer) cashed in the gifts and bought closely held stock as custodian for daughter, without
keeping an accounting.

HOLDING

Court held oral trust was formed.

o Word trust was not used but it is enough if the transfer of property is made with the
intent to vest the beneficial ownership in a third party

Father violated duties by taking stock as custodian (fewer duties than a trustee), being
imprudent by not diversifying, and not keeping a proper accounting.

Many trust instruments will waive the requirement for a formal accounting, but this was not the
case here.
Precatory Language
Definition

unclear language that expresses aspirations or recommendations

Often times, this language is used intentionally to express a desire to give trustees more latitude and flexibility in
administering the trust

However, it MIGHT make an unenforceable moral obligation instead of a trust

This is particularly a problem in testamentary trusts

Example of precatory language that does NOT give rise to a trust

I wish, but do not legally require, that C permit D to live on the land
Intent of settlor must be found by construing the language of the instrument in light of all the
circumstances

This leads to uncertainty and a lot of litigation

Distinguish trusts from equitable charges

If a settlor gives property subject to the payment of a sum of money to a third person, the testator has
created an equitable charge and NOT a trust (creates a security interest, NOT a fiduciary relationship)
Gift in trust vs. outright gift
Outright gift requires delivery

can be actual, constructive, or symbolic delivery

and acceptance
If donor fails to make delivery, can a gift be characterized as a declaration of trust?

Yes, declaration of trust does not require delivery (settlor is also trustee)
Hebrew University Association v. Nye pg. 563

Facts Lady announced she was giving library to University, issued press release, and told third parties it
belonged to the school. Lady died before she completed cataloging the library and her will left the
residue to a charity.

First Holding No trust created, because the lady lacked any intention to create a trust (donative intent
is different from intention to create a trust). Remanded.

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Second Holding Inter vivos gift with constructive delivery. Delivery was completed constructively and
so the gift was completed during life.
Oral declaration Must intend to create trust and take on trust duties
Necessity of Trust Property
Introduction

Property can be anything (contingent remainders, leasehold interests, choses in action, royalties,
insurance policies, even a single penny)
Unthank v. Rippstein pg. 569

Facts Guy wrote a letter to a lady promising to give her $200/month for 5 years.

Guy died, and lady first tried to probate this as a holographic codicil (rejected)

She then argued it was a trust.

HOLDING

No trust because there was no property in the trust.

Lady argued his estate was the property, but because he was still alive when he wrote the letter,
he didnt have an estate.

This was merely a promise to make a gift.

Brainard v. Commissioner pg. 572

Facts Guy tried to trade stocks and put the profits in trust for his wife, mother, and young children (for
tax purposes)

He declared a trust of the expected profits for the wife and kids

HOLDING

No trust because there was no property in the trust.

Trust could not have arisen until the profits were earned, so declaring the trust one year earlier
did NOT create a trust.

Guy didnt commit the stocks to the trust for a defined amount of time (Clifford trusts required
property to be committed to trust for 10 years + one day before reverting back to settlor).

There is an important distinction between saying I give the profits to A in trust vs. I give the profits
from my 1000 shares of Apple Corp. to A in trust

Identifying that the settlor already has the shares

Assignment of UNEARNED FUTURE INCOME not sufficient = corpus

Speelman v. Pascal pg. 572

Facts Pascal assigned to Speelman a share of his profits to be derived from the musical and movie
based on Pygmalion (at the time, he had two years left on license agreement).

HOLDING

Valid assignment.

Even though there were no profits at the time the letter was written, there was still property in
the expectance of profits to be derived from the license agreement (PROP NOT TO BE
ACQUIRED IN FUTURE)

Note: This was NOT a trust, but whoever held the profits for Speelman presumably had fiduciary duties
to her.
Distinguishing Brainard and Speelman

An expectation or hope of receiving property in the future is NOT sufficient property to create a trust

However, a person may assign future earnings from a present contract

Reasoning = future yield from an existing property right can be transferred even though property to be
acquired in the future cannot be

o
o

o
o
o
o

Necessity of Trust Beneficiaries

Trusts must have one or more ascertainable beneficiaries

There must be someone the trustee owes duties to and can call on the trustee to account
This is tied up with the intent requirement

The intent to create a trust should involve the intent to benefit specific people
Beneficiaries have to be ascertainable

They may be unborn or unascertained when the trust is created

Example = trust created by O (who is childless) for benefit of future children = valid
Clark v. Campbell pg. 579

Facts Guy writes will directing trustees to give away personal property to his friends as trustees select

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HOLDING

No valid trust.

Although there was intent and property, there were no ascertainable beneficiaries because
friends is not an ascertainable standard.
In re Seawrights Estate pg. 582

Facts Guy gave his dog to lady and directed executor to place $1000 in a bank and distribute 75
cents/day to the lady to care for the dog.

Two issues Was this a valid trust? Did it violate the Rule Against Perpetuities?

HOLDING

Valid trust because even though nobody could enforce it, the trustee agreed to honor her
obligations (can be called honorary trust or not). No violation of the RAP, because the trust
property would be exhausted according to the distributions well within the allowed timed
period.

If this was honorary trust that couldnt be enforced, how did this case even come about?

Somebody failed to file an accounting over the estate and a tax collector raised a question about
the value of the dog

Trusts for Pets

If youre unsure that your jurisdiction will uphold honorary trusts, the safest thing to do is give your pet
to someone you trust and leave them X amount of dollars

Trusts for specific pet generally dont qualify as charitable trusts because charitable trusts may not have
private inurement (benefit) (assets cannot be distributed to particular individuals)

One option = create your own charitable organization to take care of animals and then give your
animals to that organization

Necessity of a Written Instrument

Oral trusts for disposition at death

In re Estate of Fournier pg. 589

Facts Guy gave $400k cash to his neighbors to hold until he died and then give to sister #1,
who was also executor of his estate.

Guy died, and sister #1 sought declaratory judgment that guy had created oral trust on her
behalf.

HOLDING
o
Guy created an oral trust.
o All the elements were present (intent, beneficiary, property, capacity).

Prof thinks that this is a pretty cowardly way to favor a sibling

o Other options

Make gifts during life

Make a written trust during life

Favor the sibling in the will

Secret and semi-secret trusts

Testamentary trusts are supposed to be created by will

Sometimes the wills are not clear on the trust or even if one exists
Distinction between the two

Semi-secret invalid, no extrinsic evidence permitted to demonstrate purpose/beneficiary

(trust is invalid because it shows intent NOT to benefit trustee personally)
o So property passes to heirs

Secret valid, extrinsic evidence permitted to show purpose/beneficiary so that trustee is not
unjustly enriched by pocketing the legacy
o Trust is upheld, but constructive trust is imposed for benefit of intended beneficiaries
Olliffe v. Wells pg. 593

Facts Lady devises her estate to Reverend Wells and says that he should distribute property as
he sees fit

So Wells has no beneficiary interest in property

He gives property to his church

Heirs challenge the will.

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HOLDING
o Trust is invalid.
o Semi-secret trusts are not valid and extrinsic evidence is not permitted to show the
purpose of the trust.
o If the trust would have been totally secret (no allusion to a trust at all), extrinsic
evidence would have been allowed and the trust may have been upheld (this distinction
makes no sense).

Prof thinks maybe the real reason this case came out this way was that Wells died shortly after
lady did and the mission had burnt down.
Distinction between secret and semi-secret trust is still recognized in most states, but rejected in others
Restatement = constructive trust should be imposed for BOTH secret and semi-secret trusts

Oral inter vivos trusts of land

Oral agreements relating to land are generally forbidden by statute of frauds
Hieble v. Hieble pg. 596

Facts Woman had cancer and titled her property to children with retained life estate, with oral
side agreement that the kids would give it back if she survived. She survived, but her son
refused to convey the property back to the mother.

HOLDING
o Constructive trust was imposed because the son was unjustly enriched and there was a
confidential relationship.
o
The son had to convey the property back to the mother.
Pappas v. Pappas pg. 596

Facts Man planned to divorce his wife and gave land to the son to hold until after the divorce
was over.

After the divorce, guy tries to get the property back and the son refuses.

HOLDING
o
Court refused to give relief to the father because of his unclean hands (only conveyed
the property to defraud the divorce court).
Key seems to be equitable principles and whether or not you have clean hands in seeking an equitable
remedy
People transfer property at their own risk

Foreign Countries have trusts, but USA is the origination of trusts, so this is where most exist
Taxation of Trust Revokable trusts are different. A trust is treated as an individual (gains, losses, etc) and taxed accordingly. However,
a trustee can elect to pass through in the income to the beneficiaries.
Leaving a trust to My Family = Leaving a trust to Heirs at Law.
IX.

RIGHTS TO DISTRIBUTIONS FROM THE TRUST FUND

A. Rights of the Beneficiary to Distribution

o Introduction

Mandatory trusts vs. discretionary trusts

This label can be somewhat misleading because most trust instruments contain some mandatory
provisions and some discretionary provisions

Very common for trustee to have mandatory duty to distribute income while also having
discretion to distribute principal

Mandatory

trustee is required to pay all the income to the beneficiaries at some interval

Discretionary

trustee has discretion over distributions of income and principal

Marsman v. Nasca pg. 598

o Sara died
o Her will leaves testamentary trust with Farr (lawyer/drafter) as trustee and Cappy as beneficiary.

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o
o
o
o

o
o

Trustee had mandatory duty to pay Cappy income at least quarterly and also had discretion to distribute principal
for Cappys comfortable support and maintenance (trustee had duty to check up on Cappy and make sure he was
comfortable).
There was an exculpatory clause provided that trustee could not be held personally liable except for willful neglect
or default.
Farr (1) helped Cappy take out a mortgage on his house; (2) required Cappy to make written requests for extra
money from trust; (3) executed deal where Cappy deeded house to Sally (step-daughter) and retained a life estate.
Cappys second wife brought suit alleging Farr breached his duties.
HOLDING

Breach of fiduciary duty by Farr.

Cant order Sallys husband to give the house back, so remedy = constructive trust over amount that
Cappy should have been paid from the trust to maintain comfortable support and maintenance.

Court upheld exculpatory clause and held Farr couldnt be held personally liable (put burden on Cappys
wife to show bad faith or undue influence by Farr in drafting the clause).

Exculpatory clauses

Prof and UTC/Restatement take the position that the burden should have been on Farr (drafter/trustee)
to show the exculpatory clause was fair and the settlor gave informed consent to the clause
Also, there was a conflict of interest here, because Farr represented BOTH Cappy and Sally and always made
decisions in Sallys favor
Mandatory Arbitration Clauses
There is a preference for arbitration as a form of ADR, but should mandatory arbitration clauses be permitted in
trust instruments?

One could argue that it deprives beneficiaries of their full rights to enforce the trust
Law on this issue is thin, but mandatory arbitration clauses have been frowned on in some
jurisdictions

Rights of the Beneficiarys Creditors

o Introduction
o In the US, we are particularly protective of the settlors right to control his property, including the right to protect
it from the creditors of the beneficiary

This might seem offensive, but keep in mind you cannot protect your own assets from your own creditors

Three ways to protect trust property from creditors

Increase the level of discretion of the trustee

Spendthrift clauses (preclude beneficiary from alienating his interest in the trust)

Powers of appointment (limit permissible appointees)

Pure discretionary trusts vs. support trusts (traditional distinction)

Pure discretionary trust

Trustee has broad discretion about making distributions of income and/or principal

Downside = beneficiary cant bring action against trustee (trustee has broad discretion)

Trustee must be ABUSING his discretion and this is a very high standard to meet

Creditors get their rights from debtors, so if the debtor cant get the money, neither can the creditor

However, the creditor might be able to obtain a court order entitling him to distributions before
the beneficiary may receive any

Creditor might be able to seize property thats still in the hands of the trustee if the trustee has
exercised discretion by marking in his books that he will distribute to beneficiary

Support trust

Trustee has OBLIGATION to make distribution for support of beneficiary and DISCRETION to make any
additional distributions

Beneficiary can make a demand of the trustee

Traditionally, beneficiary could not alienate her interest at all

i.e. Cant assign interest to the Porsche dealer in exchange for a car

However, some creditors (providers of necessaries, child support, alimony) might be able to enforce
claims against a support trust

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o
o
o
o
o
o

o
o
o
o
o

Hybrid trust

Its discretionary support trust (not really a distinct category)

Courts have tended to treat these as pure discretionary trusts

UTC and Restatement get rid of any distinction between pure discretionary and support trusts

All trusts where trustee has any amount of discretion are treated the same

UTC 504

If the trustee has violated a standard for distribution or abused discretion over distribution,
child support and alimony creditors can force a distribution by the trustee, but only to the
amount that the trustee would distribute under the standards of the trust

This is also the law in a lot of states

Protective Trusts
If settlor wants the beneficiary to have a mandatory right to distribution, but also wants the asset-protection
features of a discretionary trust, might try a protective trust
The trustee normally has mandatory duty to distribute to beneficiary, but if judgment creditors of the beneficiary
attach to the interest, then the distribution becomes discretionary
Prof thinks this is too good to be true, and might not survive when it is more fully litigated
Spendthrift Trusts
Beneficiary of a spendthrift trust cannot voluntarily alienate/transfer her interest, nor can her
creditors reach her interest in the trust

Beneficiary cannot assign interest in future payments, can only spend the money as it is distributed
incrementally

These protect the money only as long as its IN the trust

Once any money hits the pocket of the beneficiary, then the beneficiary can spend it and
creditors can attach it [if they can find it]
Purpose = protect beneficiaries from their own vices and bad decisions
Spendthrift clauses are enforceable in most jurisdictions
Trustee has no obligation to give $$ to creditors, etc.
Must specify the trust is spendthrift in GA
Exceptions where creditors CAN get to trust property in spendthrift trusts

Tort Creditors
Scheffel v. Krueger pg. 616
o Mother of abused child brought lawsuit against the guy that abused the child and got
civil damages.
o D had an interest in an irrevocable spendthrift trust that gave right to distributions of
income quarterly, but he could not invade the principal until he turned 50.
o Mother wanted to claim against the trust principal.
o HOLDING

Court upholds spendthrift provision and holds P cannot claim against the
trust.

Court denies making tort creditor exception to spendthrift provision.

P must collect on the judgment incrementally as the income is paid out.

This is probably the majority view NO exception for tort creditors

Child Support and Alimony Creditors

Shelley v. Shelley pg. 618
o 2 ex-wives (each with 2 children) try to satisfy child support claims against trust set up
for father that gave him the right to income, but limited his right to distribution of the
principal to himself or his children in case of emergency.
o Wife 2 also tried to satisfy claim for alimony.
o HOLDING

Child support can be paid out of the principal of the trust, because the trust
itself names guys children as beneficiaries in times of emergency (father
abandoning = emergency).

Wife 2 cannot satisfy claim for alimony out of the principal.

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Although support of children is probably the most important public policy argument to
establish an exception to a spendthrift clause, it was not necessary in this case.

Restatement and UTC make clear that public policy carves out exceptions to spendthrift
provisions for:
o Spouse/children with a court order for support or maintenance
o Judgment creditor who has provided services for protection for the beneficiarys
interest in the trust
o Claim of the United States (tax collectors)

People that provide necessaries to beneficiaries

This is uncertain
Language of the spendthrift clause might try to limit exceptions

The spendthrift provisions in some trusts specifically says that the trust property is protected from exspouses

This might affect the courts analysis

However, under UTC 503, this provision would be invalid no matter what
o

o
o
o

o
o
o

Self-Settled Asset Protection Trusts

Under traditional law, the settlor cannot shield assets from creditors by placing his own assets in
a trust for the settlors own benefit
Some devices have been developed that attempt to overcome this basic rule

Lots of people have gone to foreign jurisdictions that have amended trust laws to allow people to selfsettle assets in trusts designed to protect assets from creditors

However, this might not be effective in the US

Lawyers are hesitant to advise clients on these, because the lawyer could be convicted of fraud and lose
her law license
FTC v. Affordable Media pg. 628

Facts Couple was involved in Ponzi scheme, and put their assets in a trust in the Cook Islands (couple
were co-trustees and trust protectors). FTC brought claim to get money for defrauded investors, and
couple claimed it was impossible to get the assets because a duress provision had kicked in and the
trustee would not give them the assets. Court held them in contempt.

Duress Provision When settlor informs trustee he is being sued and needs money, the
settlor is removed as a beneficiary and bank refuses to repatriate the funds.

HOLDING

Impossibility IS a defense to contempt, but here, it was brought about intentionally by the
couple.

Also, it wasnt impossible because the couple could have prevented duress provision from taking
effect as trust protectors under the trust
Trusts for the State-Supported
A settlor cannot execute a self-settled trust to shield his own assets from Medicaid eligibility or
other govt support programs
However, a third party without support obligations can create a discretionary trust that will not be considered in
determining the beneficiarys eligibility for Medicaid

Rules on this are very tricky

This is a specialty within estate planning very dangerous if youre not familiar with the rules in your
jurisdiction
Federal law on Medicaid has tightened gradually over the last 40 years

In some of these changes, lawyers can be charged with fraud

Modification and Termination of Trusts

o

Reformation

Fixing a trust so that it reflects settlors intent; correction of a drafting error.

o

Modification

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A change in circumstance causes court to change trust so that it reflects what court
believes would have been settlors intent
o
o

Introduction
If the settlor and ALL the beneficiaries consent, an irrevocable trust may be modified or
terminated (even if the trust contains a spendthrift clause)

However, lots of trusts are testamentary, which means the settlor cannot consent to modification or
termination

If a trusts purpose is illegal or impossible it will likely be terminated by law

Modifying a testamentary trust is basically just as difficult as modifying a will

Very difficult, with just a few limited ways to change the trust

Claflin Doctrine
A testator has a right to dispose of his own property with such restrictions and limitations as he sees fit,
and his intentions ought to be carried out, unless they contravene the law or public policy
Modification and termination can ONLY be allowed if it its NOT contrary to material purpose of the
settlor

Deviation and Changed Circumstances

In re Trust of Stuchell pg. 643

Facts Guy created a trust for his family, and upon the death of the last life beneficiary, the trust was to
be divided equally between ladys children.

One of her children was mentally retarded and received govt assistance.

Lady wanted to permit the trustee to deviate from the trust by not giving anything to the retarded child
b/c it may but him in financial position where he wouldnt receive govt assistance any more

HOLDING

This is NOT allowed.

The only purpose of this modification is to cheat the state and to enrich the other children.

Deviation is NOT permitted where the only reason is that it would be more advantageous to the
beneficiaries.

Deviation from Administrative Directions (aka Equitable Deviation)

Courts have been much more liberal in allowing deviation from administrative directions in the trust
rather than distributive provisions

Dont change wills because will is only to govern estate for a short amount of time. A trust is only limited
by the rule against perpetuities
In re Pulitzer pg. 644

Facts Pulitzers will prohibited the sale of stock of a publishing corporation.

After heavy losses, the trustees petitioned for right to sell the stock.

HOLDING
o Court approved the sale because the trust estate was in jeopardy due to an
unanticipated change in circumstances.

More modern approach treats distributive provisions the same as administrative provisions (both can
be modified if a change in circumstances means that continuation of the trust under its
terms would defeat or substantially impair the purposes of the trust)

Restatement/UTC

Both adopt more modern approach and treat distributive and administrative provisions as
modifiable due to a change in circumstances
In re Riddell pg. 645

Grandparents created a trust for grandchildren.

Father wanted to alter the trust to create a special needs trust for his schizophrenic and bipolar daughter.

HOLDING

Court adopted UTC/Restatement equitable deviation doctrine;

held it would be equitable to create special needs trust that allowed daughter to receive govt
assistance while benefitting her supplementally.

Grandparents could not anticipate this problem, and if they would have, they would have
created a special needs trust.

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o
o

Reformation and Modification to Achieve Tax Objective

Important and recent development
Courts are fairly indulgent to change trusts to accommodate changes in the tax law to permit the trustees
to achieve objectives of trust more fully
This is positive tax law is unpredictable, and can be retroactive

Trust Protectors
Settlor can name someone as trustee and someone else or multiple other people as trust protectors
Trust protectors have the right to fire the trustee and appoint a new one without bringing suit against the
trustee

This is especially useful if an institutional trustee is being used (more likely to be uncooperative
and bureaucratic)

This gives the protector great leverage over the trustee

Requirements of replacing the trustee depend upon the trust instrument
Trust protector can retain general oversight role while not having to micromanage details
Prof thinks this device is quite useful
Lots of law in this area remains to be developed

To what extent is protector a fiduciary subject to oversight? we dont know

Claflin Doctrine and Material Purpose

Claflin doctrine

There cannot modification or termination where there is a material purpose of the trust that remains to
be carried out

Modification or termination can be rejected even if there is no spendthrift or support provision in the
trust
In re Estate of Brown pg. 653

Trust had multiple consecutive purposes:

(1) education of children of settlors nephew,

(2) nephew and his wife get support and maintenance for their lifetimes in the style and
manner to which they are accustomed,

(3) upon nephew and wifes death remainder to be paid to nephews children.

Education was paid for, and nephew, wife, and children all wanted to terminate the trust.

HOLDING

No termination permitted.

Although the education purpose was satisfied, the purpose of providing support for nephew and
wifes lifetimes was NOT satisfied.
Restatement

If all the beneficiaries of a trust consent, the trust can be modified or terminated even if it would be
inconsistent with a material purpose of the trust if the court determines that the reasons for modification
or termination outweigh the material purpose
UTC

Maintains the material purpose standard trust can only be modified or terminated if all beneficiaries
agree AND it would not be inconsistent with a material purpose of the trust

However, also allows court to make modification without consent of all beneficiaries, if the nonconsenting beneficiaries will be adequately protected
Most inter vivos trusts are revocable and can be modified unilaterally by the settlor during life
Trustee Removal

Traditional rule

cannot remove trustee except for cause

Even if all beneficiaries agreed, trustee could not be removed

Well-drafted trust

give someone power to remove (beneficiaries OR trust protector)

Statutes

might provide for removal under certain circumstances (such as UTC, etc.)
UTC 706 allows removal slightly more easily than traditional for cause requirement:

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Possible reasons for removal under the UTC

Breach of trust (same as traditional for-cause rule)

Lack of cooperation among co-trustees (not quite for-cause, but pretty high bar)

Unfitness, unwillingness, failure to administer effectively (sounds like for-cause)

Substantial change of circumstances

Requested by all beneficiaries, betters the interests of beneficiaries, suitable replacement trustee
is available

This is slightly easier than for cause removal, but still pretty difficult
Hypothetical

Man fled Germany having lost everything in the Holocaust

Became very successful in NY and had millions when he died

Did a lot of business with a bank that was taken over by Deusche Bank after his death

He named this institution his trustee BEFORE the acquisition

Family members wanted to remove the trustee because of relationship to Nazi regime

Trustee had been performing satisfactorily

Prospects for removal?

Under the traditional for cause rule, theyd have no chance

Probably NOT a substantial change of circumstances that militates against their interests under
the trust under the UTC

Options

Approach the trustee and ask for resignation as trustee

Take it to the media even if its a losing proposition, the media would pick up on a case like
this
Davis v. U.S. Bank National Assn pg. 660

Settlor appointed bank as trustee of the trust.

Trust made grandchild an income beneficiary for life, and at his death, principal distributed to
grandchilds children.

Grandchild wanted to switch trustees because the fees were too high and the requested successor trustee
was situated closer and knew the familys situation better.

HOLDING

Court allows removal of trustee under states version of UTC:

o
(1) removal was requested by all beneficiaries (grandchild virtually represented his
daughter),
o (2) removal served best interests of all beneficiaries (lower fees meant higher
distributions),
o (3) removal wasnt inconsistent with a material purpose of trust,
o
(4) suitable successor trustee was available and willing to serve.

NOTE

Probably more difficult to meet best interests standard and possibly material purpose if the
trustee is an individual that was hand-picked by the settlor rather than an institution.

NOTE: In most jurisdictions, fiduciary fee schedules are set out in statutes, but most institutions require
waivers to these and impose their own schedules.

Successor Trustees

They are held to their own fiduciary standards

NOT responsible for wrongful behavior of prior trustee unless they violate their own obligation to
mitigate it or correct it

Virtual Representation

What if you have all of the beneficiaries agreeing that the trustee should be changed or another
modification ought to happen, but you have a generation-skipping trust thats supposed to vest in the
next generation

Its impossible to have all the beneficiaries request removal/modification unborn people are
beneficiaries

UTC 304

Unless otherwise represented, a minor, incapacitated, or unborn individual, or a person whose

identity or location is unknown and not reasonably ascertainable, may be represented by and

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X.

bound by another having a substantially identical interest with respect to the particular question
or dispute, but only to the extent there is no conflict of interest between the representative and
the person represented
This expands virtual representation in two ways
o Allows for representation not only in judicial proceedings, but also in obtaining
consent of the beneficiaries without judicial involvement
o Allows a parent to represent a minor or unborn child, even if the parent does not have
a similar personal interest, so long as there is no conflict of interest with respect to the
particular question or dispute
TRUST ADMINISTRATION: THE FIDUCIARY OBLIGATION

THIS CHAPTER WILL BE ON THE FINAL EXAM

A. Introduction
o
o
o
o
o
o

Comparing Fiduciary Obligations of Trustees and Personal Representatives/Executors

Obligations of trustees are the same as personal representatives
Private trusts are often designed to go on for long period of time

Obligation of trustees can have a long duration (trusts can last for decades)

Unlike personal reps (administration of estate will take around 2-3 years)

Important to make sure interests of beneficiaries are taken care of over the long term of service of the
trustee

o
o

Most jurisdictions have statutory outlines that address fiduciary duties

These trump trust provisions at some level

cant contract out of the fundamental fiduciary rules

Can give trustees latitude and cut them some slack,
CANNOT say they dont have to act like a fiduciary

o
o
o
o
o
o
o

Reason for Fiduciary Obligation

Trustee lacks direct personal/financial interest in the trust property

Beneficiary is probably unable to directly monitor and oversee everything the trustee does
Threat of fiduciary litigation is the primary check on the agency costs of trust

Powers of the Trustee

Powers used to be limited because the trustee was simply a passive holder of property

Now powers must be much broader because the trustee has to invest the property
Most states have statutes that codify this broadening of trustee powers
Regardless of the breadth of the jurisdictions powers statute, a well-drafted trust will include a detailed schedule
of powers
Two Main Duties:

Duty of Loyalty

Duty of Prudence
Subsidiary Duties:

Duty of Impartiality

THE DUTY OF LOYALTY

o Definition

Trustee must administer the trust SOLELY in the interests of the beneficiaries

IT IS THE MOST FUNDAMENTAL PRINCIPLE

o Self-Dealing

Occurs when the trust and trustee engage in a transaction

No further inquiry rule

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If a fiduciary is self-dealing, there is no further inquiry into good faith or fairness

Only two defenses

o (1) Settlor authorized the transaction in the trust instrument OR
o (2) Beneficiaries consented after full disclosure

The fiduciary is automatically in violation of his duty of loyalty if neither of these defenses are
met, regardless of whether the transaction was fair and in good faith
o A trustee must have UNDIVIDED LOYALTY. Purchasing prop from the estate violates
the duty of loyalty (SEE BELOW)

Fiduciary can try to get advance judicial approval of a transaction

Hartman v. Hartle pg. 675

Lady appoints two sons-in-law to serve as executors of her estate and directs them to sell the
property and divide the proceeds equally among her children.

Executors sold the property to one of the ladys sons, who bought it on behalf of his sister
(daughter of lady and wife of executor).

This amount was divided equally among the children.

Sister sold it for profit and kept the difference.

Different daughter brought suit for violation of fiduciary duty.

HOLDING
o Executor violated the duty of loyalty because he was self-dealing (enriching his own
family at the expense of the other beneficiaries).
o
Daughter was ordered to split the profits from the resale of the house among all
beneficiaries.
Its possible that there has been a little bit of retreat from the no further inquiry rule

Statutes in most states allow a corporate trustee to deposit the trust assets with its own banking
department and to invest the trust assets in a common trust fund or in a mutual fund that it
operates

Trustee can give herself reasonable compensation out of the trust funds

Trust pursuit rule

When a trustee self-deals or otherwise breaches the trust, the beneficiaries are entitled to a constructive trust of
whatever property comes out of the transaction, unless a third party is bona fide purchaser without notice of the
breach of trust
In re Rothko pg. 679
o Artist appointed 3 executors:

Reis (accountant that set up estate plan and director of consignee gallery);

Stamos (unsuccessful artist); and

Levine (amiable idiot).

o After his death, executors agreed to dispose of about 800 paintings within three weeks:

100 to a company for a flat fee, which included a large interest-free loan; and

700 on consignment to Reis gallery with 50% commission, even though going rate for commission was
10%.
o Artists daughter brought suit under state statute that allowed child to challenge wills that left more than half of
the estate to a charity

(Daughter would NOT have standing today, this statue has been repealed).
o Surrogate court found:

Reis had a serious conflict of interest being a director of the gallery;

Stamos was also conflicted because the gallery allowed him to display artwork;

Levine failed to make any effort to make sure things were being done fairly.
o HOLDING

All 3 executors violated the duty of loyalty, but none were found to have directly self-dealt (Reis was a
director and NOT a shareholder that would enjoy direct benefit and Stamos being able to display his work
was not a direct benefit from the contract).

Levine was subject to $6 million in fines (only liable for actual value of the paintings, because he wasnt
acting in his own interest).

Reis and Stamos were subject to $9 million in fines which included appreciation damages because they
were acting in their own self-interest.
o
o

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o
o

Appreciation Damages
Artwork is likely to increase in value acutely at the artists death and then gradually over a long period of
time
Where do you cut off appreciation damages?

Court cut off the appreciation damages at the end of the trial
In another situation, appreciation damages might be less appropriate

If the violation isnt to such a big magnitude

If the market is uncertain and could go up or down

Co-Trustees
Under traditional law, if there is more than one trustee, the trustees must act as a group with
unanimity, unless the trust instrument provides otherwise

Because co-trustees act jointly, a co-trustee is liable for the wrongful acts of another co-trustee to which
she has consented or enabled through negligent inaction
Traditional rule of unanimity is on the way out

UTC = majority can act

Duty of Prudence
o Introduction
o Duty of prudence mostly relates to investment decisions made by the trustee
o Classic approach = prudent man rule
o Fiduciary has limited options for investments (must be absolutely protective of principal even if that means lower
income)

Many older legal list statutes provided a short list of acceptable investments
o Problems with this approach

Hindsight bias (didnt know at the time it would be a bad investment)

Each investment was evaluated in isolation

o
o

o
o
o
o

UTC/Restatement/UPIA = prudent investor standard (all states)

Basic principles of prudent investor rule

Trustee shall invest and manage trust assets as a prudent investor would, exercising reasonable care, skill
and caution

Investment decisions are to be evaluated not in isolation, but in the context of the trust portfolio was a
whole

Trustee shall diversify the investments of the trust, unless the trustee reasonably determines that,
because of special circumstances, the purposes of the trust are better served without diversifying
Trust instrument can provide for broader latitude than the prudent investor rule
Diversification
Diversification is a very important element of the duty of prudence
Duty to diversify is a LEGAL standard

Lawyers cannot advise as to what to buy when you sell off the majority stock, can only say that it is NOT
legally prudent to have all your eggs in one basket
In re Estate of Janes pg. 702

Testator left his property (which consisted of 71% Kodak stock) in three trusts.

Trustee sold off some of the stock to pay expenses, but not very much.

Price of the stock continued to fall and the trustee continued to hold the stock. Beneficiaries brought suit.

HOLDING

Trustee violated the duty of prudence by not diversifying.

It should have sold the stock within 3 months after the settlor died.

The trust contained too much Kodak stock to meet the standard of diversification.

Liability of the trustee = value of capital lost plus interest.

Diversification is more difficult to accomplish if trust property contains illiquid assets

If there is one piece of real estate, there is probably more latitude in how quickly the trustee has to
diversify, but still probably want to get it on the market quickly

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Special circumstances where diversification might not be required

If there is language in the trust instrument that authorizes the trustee to hold on to particular assets,
then the trustee still probably has a duty to diversify

However, it may justify a slower reallocation of the trust portfolio

If there is language in the trust instrument that ORDERS the trustee to hold on to particular assets, then
that changes the analysis

However, if this is clearly a stupid thing to do, the trustee probably has a duty to seek
modification of the trust
Wood v. U.S. Bank, N.A. pg. 712

Estate consisted entirely of financial stock and more than 80% was Firstar stock.

Trust authorized the retention of the Firstar stock.

Stock prices plummeted and beneficiary brought suit.

HOLDING

Trustee violated prudent investor rule by not diversifying.

Retention language only negated the prohibition on self-dealing, and didnt negate the duty to
diversify.

Calculating Damages for Imprudent Investment

Two main options

Capital lost plus interest

Value of the trusts property on the date by which it should have been sold off PLUS compound
interest through the date of judgment MINUS the actual value of the property

Interest is determined by statute (usually between 6%-9%)

Total return damages

Fact finder compares the actual performance of the imprudent portfolio against the
performance of a hypothetical prudent portfolio and awards damages in the amount of the
difference (perhaps adjusting for taxes, expenses, and distributions)

Usually requires expert testimony

o
o
o

Prudent Investor Rule Imposes Immediate Duties

Trustee must immediately make an inventory and assessment of all the assets in the trust
Then, trustee must devise a plan of which assets will be disposed of, how theyll be disposed of, and what will be
achieved by doing this

o
o

Trustee Insurance
Bonds are available to cover a trustees possible liability

If the instrument waives it, you might not have to pay anything, but you might still have to buy a minimal
bond that will cover taxes and administrative costs
Trustees of complicated and large trusts should probably get a bond

o
o
o

Social Investing
Trustee cannot sacrifice higher returns or other interests of the beneficiary to pursue social
objectives

o
o

Delegation
Under traditional law, trustees could NOT delegate matters that the trustee could reasonably be required to
perform
General rule now

trustee can delegate anything if the trust instrument doesnt prohibit it, but trustee is still subject to a
duty of care, skill, and caution in selecting, instructing, or monitoring the agent trustee can still be
held liable if he delegates to someone dishonest, or doesnt pay attention after delegation
UPIA trustee has to use reasonable care in delegating a function
Delegated vs. Directive Trusts

Delegated trusts = responsibilities of trusteeship are divided by the trustee

o
o

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Directed trusts = trust instrument provides that the trustee must follow the direction of a third party
(considerable overlap with idea of trust protectors)
Trust Protector =

Impartiality and the Principal and Income Problem

o Duty of impartiality
o in investing, managing, and distributing the trust property, the trustee must strike a balance between the
beneficiaries, giving due regard to their respective interests
o This duty is implicated when a trust has two or more beneficiaries (most commonly when there are successive
beneficiaries)
o Trustee MUST consider any preferences the settlor expressed in the trust instrument or otherwise, and also must
consider the sometimes conflicting interests of the beneficiaries
o Sometimes, the trustee MUST favor one beneficiary over another

Its generally true that if you invest in income-producing investments, the principal is not likely to grow;
if you invest in capital-appreciating investments, the income will be low
o Sometimes the duty to invest wisely, etc is in conflict with the duty of loyalty and impartiality to beneficiaries; two
solutions:

Adjustment Power gives trustee the power to reallocate between the income and the principal if the
trustee concludes that total return investing leads to an unfair result under the traditional rules.
Howard v. Howard pg. 726
o Guys trust gave preference to his wife (if she survived him) over the remainder beneficiaries (his children).
o Guy died and his son argued that the trustee should consider the wifes other resources in distributing the trust
funds or else some of the benefits would go to her children (guys stepchildren) instead of the remainder
beneficiaries.
o HOLDING

Trustee was not to consider wifes other resources.

Settlor specifically gave preference to his wife over the remainder beneficiaries.
o This case is a good example where the provisions of a trust instrument can provide protection for the trustee (trust
expressly preferred wife over children).
o Establishing Priorities
o It is Important to have explicit priorities established in the trust if its a complex/blended family
situation
o The probability of conflict is greater, so trustee needs some sort of guidance
o Protection for the trustee AND the trust property

People will start bringing lawsuits that will drain assets of the trust
o These provisions not only instruct the trustee what the testator wanted to achieve, but also prevent beneficiaries
from bringing suit unnecessarily
o
o

Principal and Income Problem

Under traditional fiduciary rules, the particular form of the trusts investment return determines its classification
as principal or income

Examples

Income = cash dividends on common stock, interest on bonds

Principal = appreciation in the price of the stock or bond

If the trustee opts to invest in a stock that does not pay a dividend (price will appreciate faster) then the
principal beneficiary is advantaged at the expense of the income beneficiary, and vice versa

The classification between income and principal is pretty much arbitrary

Modern portfolio theory challenged these arbitrary classifications

Uniform Principal and Income Act

Contains an adjustment power the trustee can reallocate between income and principal if he
concludes that total return investing is leading to unfair results

Unitrust statutes

Idea = statute sets the percentage of the value of the trust principal that must be paid to the
income beneficiary each year
o Unitrust provisions can also be included in the trust

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instrument and the settlor can determine the percentage of the trust property to be
paid out

This allows trustee to maximize returns regardless of what form the returns take

Can include rolling average values so payments dont jump up and down sharply
In re Matter of Heller pg. 731

Guy set up a trust with his wife as income beneficiary and others as remainder beneficiaries.

Trust provided that wife receive the greater of $40k/year or the total income of the trust each year.

State statute provided an optional unitrust provision.

Trustees converted the trust into a unitrust under the statute, which sharply reduced wifes distributions.

She argued that one of the trustees was also a remainder beneficiary and there was a conflict of interest.

HOLDING

Court upholds use of unitrust provision.

Trustee in question was NOT the only remainder beneficiary, so this was not per se invalid.

Guy probably didnt expect that the income would reach this high of a level and probably would
have wanted unitrust provision to apply in this case.
o

Subrules Relating to the Trust Property

o Duty to Collect and Protect Trust Property
o Trustee has duty to collect trust property without unnecessary delay
o For a testamentary trust, the trustee should collect the assets from the executor as soon as possible under the
circumstances

Trustee also has duty to examine the property tendered by the executor to make sure its what the trustee
ought to receive

Trustee has duty to require executor to redress any breach of duty that diminished assets
o
o
o
o

o
o
o
o
o

Duty to Earmark Trust Property

Earmarking the property

designating the property as trust property rather than trustees own

Reasoning if trustee doesnt designate between the two, the trustee might later claim that the most successful
investments were his personally and less successful ones were trust property
Trustee is only liable for loss that results from failure to earmark, not loss resulting from general economic
conditions
Duty Not to Mingle Trust Funds with Trustees Own Funds
This is often a result of the failure to earmark
Breach even if the trustee doesnt use the funds for his own purpose
Reasoning mingled assets might be reached by trustees personal creditors
This duty has been partially abrogated in most jurisdictions because corporate fiduciary can hold and invest trust
assets in a common trust fund

UTC allows trustees to make joint investment from separate trusts

This allows trustees to take advantage of economies of scale

Duty to Inform and Account

o Duty to Inform
o Trustee has duty to inform the beneficiaries of the existence of the trust AND significant
developments pertaining to the administration of the trust

Trustee also has duty to respond to requests by beneficiaries for information reasonably related to
their interest in the trust
o UTC 813

Trustee upon request by beneficiary, shall promptly furnish to the beneficiary a copy of the trust
instrument

Trustee, within 60 days of accepting trusteeship, shall notify qualified beneficiaries of his acceptance and
of his name, address, and phone number

Trustee, within 60 days of creation of irrevocable trust, shall notify qualified beneficiaries of trusts
existence, the ID of the settlor(s), the right to request a copy of the trust instrument, and the right to a
trustees report

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o
o

Trustee shall notify qualified beneficiaries of any change in trustees compensation (in advance)
Fletcher v. Fletcher pg. 739

Lady created a trust that was to be separated into three separate trusts upon her death for her son and his
two children.

After the lady died, the son sought access to a schedule of assets that were transferred to one of the other
trusts, but the trustees only gave him the part of the instrument relating to his trust and claimed the lady
wanted to keep things private.

HOLDING

Court held that the beneficiary was entitled to see the entire instrument, including the
additional schedule of assets.

He was the equitable owner of trust property and trustee had duty to inform him with the entire
trust instrument.

Secret wills?

Can a settlor create a secret will by using a revocable trust?

Fletcher implicitly holds NO and that trustee has duty to provide a copy of the trust to beneficiaries AND
heirs of the settlor that request it

Secret trusts?

Settlor might want to conceal the existence of a trust from a beneficiary to prevent beneficiary from being
lazy

Traditional law = settlor may not completely eliminate the trustees duty to inform

UTC provides that beneficiary can be kept in the dark until age 25, but lots of states allow an older age or
even indefinitely if there is a trust protector to whom information must be given and who has standing to
bring a suit
Duty to Account
Trustee has a duty to account on a regular basis for his actions as trustee so his performance can
be assessed

Liability Safe Harbor

The law protects trustee from liability to the beneficiary for breach of trust if

the facts underlying the claim are fairly disclosed in an accounting filed with the court,

notice of the accounting is served on the beneficiary, and

the beneficiary does not object to the accounting

Always have a duty to account

Lots of times people want to waive the obligation to account to a court (so expensive and labor-intensive)
this does NOT mean theres no obligation to account to beneficiaries (trustees ALWAYS have this
obligation, even to remainder beneficiaries Jacob v. Davis pg. 749)
National Academy of Sciences v. Cambridge Trust Co. pg. 745

Guy created trust with his wife as income beneficiary and NAS as remainder beneficiary on her death.

However, guy conditioned wife receiving income on her staying unmarried.

Wife re-married, but concealed this from the trustee.

Trustee filed annual accountings that accounted for every penny in the trust.

After her death, NAS found wife had been improperly paid and brought suit against the trustee.

HOLDING

Trustee breached duty because it should have investigated whether she was re-married or not.

Even though trustee did formal accountings, its duty was not satisfied, because it did not
discover underlying facts material to the trust.

What could the trustee have done?

Look through marriage records (probably nearly impossible)

Requested wifes tax returns to see if she was filing jointly

XI.

A. Introduction
o
o

CHARITABLE TRUSTS

Charitable trusts are governed by the same rules as private trusts with a few exceptions:
Charitable trust must be for the benefit of a charitable purpose

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o
o

not an ascertainable beneficiary

Charitable trusts are exempt from Rule Against Perpetuities

more easily modified under cy pres

State Attorney General, NOT ascertainable beneficiary, is the principal party with standing to
enforce a charitable trust

NATURE OF CHARITABLE PURPOSES

Shenandoah Valley National Bank v. Taylor pg. 752
o In guys will, he purported to create a trust with income payable to the children in grades 1-3 of the local
elementary school (contained language that the money was to be used for their education).
o However, the trust had no provisions for termination.
o If a residual bequest lapses, the $ goes to intestacy
o Guys relatives challenged the will as in violation of the Rule Against Perpetuities.
o HOLDING

Court held the trust invalid because it violated RAP.

A trust must be a charitable trust to avoid application of RAP, and this was NOT a charitable trust
because it was not sufficiently restricted to the advancement of education or limited to children in need.

Could not apply cy pres because cy pres can only be applied if it is a charitable trust to begin with.
o Today, you might have been able to argue for administrative deviation of this trust

It had all the aspects of a charitable trust, but it wasnt administrable

Instead, just give the money to the school itself

o Requirement of a Charitable Purpose

Requires having some sort of provision that guarantees that these charitable purposes will
be met and the money wont be used for private instrument (benefit of private individuals)
o In the case above, there was no mechanism to ensure that the children would spend the money on education
Defining Charitable Purpose
o examples

Relief of poverty

Advancement of education

Advancement of religion

Promotion of health

Governmental purposes

Any other purpose the accomplishment of which is beneficial to community at large

o Can benefit law professors (furthering education purpose) but cannot benefit lawyers
o Can benefit needy employees (battling poverty) but cannot benefit all employees generally

Modification of Charitable Trusts: Cy Pres

o Reasoning for Modifications
o Modification of charitable trusts has always been considered necessary b/c if there is a trust that
can last forever the settlor could not possibly be able to foresee everything
o Something had to exist to allow modification of charitable trusts
o
o

Cy pres defined
If a settlors charitable purpose becomes illegal, impossible, or impracticable, the court may direct
the application of the trust property to another charitable purpose that approximates the settlors
intention

If its not impossible or impracticable to carry out settlors wishes, cy pres doesnt apply and no
modification is allowed

If cy pres applies, you are supposed to modify the trust to come as close as possible to the intent of the
settler

In re Neher pg. 761

o Lady left her home in trust to the village where she lived and expressed her desire that it be used as a hospital.
o Village accepted it, but then asked the court to allow it to be used as an administration building because a hospital
had just been built nearby.
o HOLDING

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Court allowed modification of the trust.

Court reasoned that ladys intent was a general intent to benefit the village, even though she explicitly
focused upon the hospital aspect.
Prof doesnt buy this case because administration building is NOT as close as possible to settlors intent (also
thinks village knew the hospital was being built and planned this all along).

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The Buck Trust pg. 765

o Woman lived in very wealthy county and left charitable trust for a foundation that served her county and 4 others.
o She restricted use of the trust to her own county.
o Foundation requested modification after the trust property increased dramatically so it could spend the money in
the poorer surrounding counties.
o HOLDING

Court denied this argument and rejected modification.

Inefficiency or ineffectiveness is NOT the same as impossibility or impracticability.

Lady had such a broad range of charitable purposes that it would never be impossible to spend it all, even
in the limited geographic area.
o Remedy Court took the funds from the foundation and created another foundation exclusively for the ladys
county. Court created a panel of trustees to oversee the new foundation.

The Barnes Foundation

o Chemist got rich and bought a lot of very valuable paintings.
o Guy established a trust and laid down very specific rules for how paintings should be displayed, building should be
maintained, etc.
o There has been a lot of cy pres litigation trying to modify the trust to preserve the artwork

Trustees got permission to charge admission to gallery, take pieces on tours to raise money, etc.
o
o

Discriminatory Trusts
Often times settlors might want to discriminate in how the charitable trust is used

Must balance between the benefits of a private charitable trust and public policy
Podberesky v. Kirwin pg. 775

4th Circuit holds that state university scholarships for blacks were invalid under Equal Protection Clause
unless justifiable to remedy present effects of past discrimination
Grutter v. Bollinger pg. 775

SCOTUS upholds race-conscious admissions of Michigan law school because of the compelling state
interest in achieving diversity
This area of the law is emerging and not well-settled (decided on a case-by-case basis)

Supervision of Charitable Trusts

o Fiduciary duties that apply to a trustee of a private trust also apply to a trustee of a charitable trust
o However, because there are no ascertainable beneficiaries, who will enforce the trust?
o In most states, the state Attorney General is the only person with standing
Smithers v. St. Lukes-Roosevelt Hospital Center pg. 776
o Guy (recovering alcoholic) promised $10 million to hospital to create stand alone rehab center.
o
Halfway through the gift, guy got mad and forced hospital to agree to maintain the stand alone building and
forbid use of the trust money for anything other than maintaining the building.
o After guy died, hospital planned to sell the building and move the center into the hospital.
o Wife challenged, AG intervened and found out hospital was misappropriating trust funds, and wife brought suit.
o HOLDING

Wife has standing to enforce terms of the trust.

Wife was uniquely interested in the administration of the trust and the state AG was unable to
sufficiently police charitable trusts in all cases.

The Bishop Estate in Hawaii

o Princess of Hawaii left huge trust to establish schools (one for boys and one for girls) in Hawaii.
o Trustees were to be appointed by Hawaii Supreme Court.
o Abuses ran rampant along with corruption between trustees and political figures
o State senate refused to confirm Attorney General for second term after she tried to enforce trust
o IRS threatened retroactive tax liability in the amount of over $1 billion, and then the abuses were somewhat
curbed however, conflicts still exist today
o
o

Problems with AG being the only person with standing to enforce charitable trusts
Charitable trust enforcement is not politically rewarding, so no real incentive to police them

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o
o

Lack of resources
This is a huge problem because there are huge taxpayer interests and tax dollars at stake

We dont have an effective way to police this people committing the funds have lost control in most
cases

Carl J. Herzog Foundation, Inc. v. University of Bridgeport pg. 776

o Facts School closed its nursing school and added trust funds specifically designated
for nursing to general fund. Herzog Foundation brought suit.
o HOLDING
i. Court held the donor of the gift had no standing to challenge to enforce the terms
of the gift.

Only effective way to enforce charitable trusts = IRS threatens to cut off tax exemption (IRS cant spend
too much time on this)

Other possible solutions

Trust protectors
o Probably have to be a panel, but its possible

Drafting the instrument to keep someone from the family involved

More than 20 states, along with the UPC and the Restatement, allow the settlor of a charitable trust to maintain a
proceeding to enforce the trust
XII.

A. Introduction
o
o

o
o
o
o

o
o

o
o

POWERS OF APPOINTMENT: BUILDING FLEXIBILITY INTO TRUSTS

Terminology
Power of Appointment Gives the person who holds the power the ability to distribute the trust property.
Through a power of appointment, the settlor is able to postpone and delegate decisions about who should receive
trust property.

This is a way to delegate disposition to someone who has more information and is better able to dispose
of the property/money/etc

Typically, its difficult to modify a trust. Having a Donee with special powers of appointment eliminates
the need to modify b/c disposition is flexible.
Donor

person that creates the power of appointment in someone else

Donee

person that holds the power

Objects Of The Power/Permissible Appointees

persons in whose favor power can be exercised (these exist as a result of the mere creation of the power)
Appointee

person to whom property is appointed (ONLY if the power is exercised)

Object becomes an appointee once the donee has exercised the power
Appointive Property

property subject to the power permitted to be appointed

Takers in Default

designation of who gets the appointive property if the donee fails to exercise the power (any well-drafted
POA will include this, but its not mandatory)
Two types of powers MUST MEMORIZE FOR EXAM
General Power of Appointment

If donee can appoint to self, estate, creditors, or creditors of estate, its a general power of appointment.
If they cannot donate to one of those, it is a limited/special power of appointment.

EXCEPTION: (HEMS)
o H-Health
o E- Education
o M- Maintenance
o S- Support

The power of appointment includes the power to appoint to any one or all of the following people:
oneself, ones creditors, ones estate, the creditors of ones estate

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Complete freedom to appoint prop to yourself. If you can appoint to yourself, you have auto
general power.

Examples

T devises property to X in trust to distribute the income and principal to such of the creditors of
A as A shall appoint by deed.

T devises property to X in trust to pay the income to A for life, or until such time as A appoints,
and to distribute the principal to such person or persons as A shall appoint. (A can appoint to
anyone, including himself and his creditors).
Special/Limited Power of Appointment

Any power of appointment thats not a general power of appointment

If you have any restriction, you have a special power

Difference between these two is also understood in terms of tax consequences

Property subject to general power = taxable

Property subject to special power = not taxable

2041- Tax
Powers of appointment are intertwined with and driven by tax concepts
2041 provides that general powers of appointment are taxable to the donees estate, even if they are unexercised
Background Zachary Smith Reynolds

He was the heir to two large fortunes, and he inherited them when he was rather young

Both were in the form of trusts that included general powers of appointment that he could exercise by
will

He died before he was old enough to have a will, so the property was not taxable at his death under the
tax law of the time

Congress changed the tax law so that property subject to a general powers of appointment by the
decedent was taxable as property of the decedent even if unexercised
Five and five rule

You can give someone a general POA over as much as 5% or $5k (whichever is greater) each year without
causing the entire principal to be taxable in that persons estate

o
o
o
o

o
o
o

o
o

Flexibility
Its impossible to predict changing circumstances, so giving a power of appointment allows the donee to make the
decision in the future
Because POAs are aimed at flexibility, its unlikely they can be neatly categorized or reduced to a formulaic
definition (must read the language carefully)
Relation-Back Doctrine
Does the property belong to the donor or the donee?

Historical perception

Donee acts in place of donor, as though donee is agent of donor, so the property relates back as
though belonging to the donor
o Appointee was deemed to receive the property directly from the donor

This doctrine still logically applies to special POAs

Donees power is limited to classes of people donor has identified

However, its no longer applied consistently to general POAs

Can a creditor of the donee with a general POA claim against the appointive property?

Yes. If its presently exercisable, the only thing preventing the donee from becoming the owner is
manifesting intention to exercise (with formalities possibly required)
Irwin Union Bank & Trust Co. v. Long pg. 806

Ex-wife wants to pursue trust property of Laura Long to satisfy a civil judgment in their divorce
decree. The trust established by Laura Long gave the ex-husband a right to withdraw 4% of the
trust principal each year.

HOLDING
o Because the husband has not exercised the right, the property is not his yet and the
court cannot force him to exercise his right.

General POA is very close to having outright ownership, but its not the same

This is the majority rule

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o
o

Restatement and minority of states DO allow creditors of donees with general POAs to claim against the
appointive property.

Tax Considerations/Advantages/Disadvantages
Holder of general POA is treated as owner of the property for estate tax purposes

Income from the appointive property is taxable to the donee

If the donee exercised the power during life, the resulting transfer of the appointive property is subject to
gift taxation as if the donee had personally made a gift of that property

If the donee dies without exercising the power, his estate is subject to taxation on the property
Holder of special POA is NOT treated as owner for tax purposes

Donor can give property to A to hold in trust for A as life beneficiary and then give A special power of
appointment and As estate will not be taxed on the property

Credit shelter trust

Avoid giving spouse general POA so property wont be taxed in spouses estate

Spouse creates credit shelter trust and gives spouse: (1) income rights, (2) the right to invade
principal for ascertainable standards, and (3) special POA

By giving the spouse a special POA, this allows her to make this appointment based upon
circumstances that have arisen in the interim (between the deaths of the spouses)

Creation of a Power of Appointment

o Donor must manifest an intent to create POA, either expressly or by implication
o Not necessary to use words power of appointment or appoint
o Only requires discretion for the donee (donee can exercise the power or not)
o Donor doesnt even have to be conscious of the fact that a POA was created

EXERCISE OF A POWER OF APPOINTMENT

o A well-drafted instrument will make it very clear whether the donee is exercising the POA or not
o Exercise by Residuary Clause in Donees Will
Beals v. State Street Bank & Trust Co. pg. 813

Father created trust for daughter that contained general POA; takers in default were both of daughters
sisters.

Daughter partially released POA for tax purposes (making it a special POA) and failed to mention
anything about exercising the power in her will.

HOLDING

Court finds that MA law applies because that was the jurisdiction governing the fathers trust.

Court applied the rule that a general POA can be exercised by the residuary clause in the donees
will even without being mentioned.

This POA was a general POA from the start and daughter only partially released for tax
purposes.
o
Partial release was in itself a type of exercise of ownership

Also, it was clear that daughter intended everything to go to her one sister and not her other.

This is a minority rule and isnt even the rule in MA anymore - Notes
o Majority rule

Residuary clause does NOT exercise a POA held by testator

o How to address POAs when drafting the donees will
o Try to specifically address the POA in the will, but its not always obvious that the donee even has a POA
o Best option = blending clause with blanket exercise clause

My residuary estate and all property over which I have a power of appointment shall go to X

This might be ineffective if the donors trust requires a specific reference

o Choice of Law
o When the appointive property is land, that jurisdictions law governs
o When the appointive property is NOT land

Traditional view (Beals) = donors domicile

Minority view = donees domicile

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Release of a Power of Appointment

A donee may NOT contract to exercise a POA at a later time if it is not presently exercisable (many
POAs can only be exercised by will testamentary POAs)
Siedel v. Werner pg. 827
o
Ex-husband had a general POA over trust created by his grandparents.
o
In divorce separation agreement, ex-husband agreed to write a will that exercised POA in favor of his two children
with ex-wife (takers in default would have been those two kids PLUS his two kids from a prior marriage).
o
Ex-husband then made a will exercising the POA for his third wife.
o HOLDING

Contract was NOT enforceable.

Ex-husband could not contract his POA here b/c it was a testamentary POA (exercised by his will)

Cant contract a POA that is not presently exercisable

This could not be characterized as a release either.

o
o

Donee can release a POA at any time, even if he can only exercise it under his will
This release is treated as an exercise at the time its made, so it creates gift tax liability

Failure to Exercise Power of Appointment

o Takers in Default
o Every well-drafted trust with a POA will name a taker in default that takes if the POA goes
unexercised
o If there is NO taker in default named and the POA goes unexercised

General POA

The property reverts back to the donor and goes to the takers under the donors will or the
intestacy takers

Special POA

If the special POA is narrow (as she may appoint to my grandparents issue) the property will
likely go to the permissible appointees (grandparents issue)

If the special POA is broad (excludes the 4 categories of general POA) the property will likely
revert to the donor as under an unexercised general POA
Loring v. Marshall pg. 832
o Aunts trust gave special POA to nephew, nephew gave his second wife income for life, but nephews son
predeceased his wife.
o HOLDING

Court awarded the property to the estate of the nephews son (went to the family of his mother that
divorced the nephew).

Nephews son was the ONLY permissible appointee, so it went to his estate even though the appointment
was never made.

Court held there was an implied gift in default of appointment.

Rule Against Perpetuities:

Wait-and-See Doctrine Lets just wait and see if there is a problem with RAP. To avoid calculations, trust can last 90 years max;
everything must have vested by then.
Many states want to abolish RAP because there are a lot of wealthy people that create dynasty trusts and banks want that trust business.
Taxes:
I. Estate Tax:
a.

The difference between an estate tax and an inheritance tax is who pays.

b.

Paid by estate

c.

Some states (very few not GA) have this;

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d.

Gross Estate: (includes)

i. Non-probate property
ii.

All property you ever controlled

iii.

Retirement funds

iv. Etc
II. Interitence Tax:
a.

Paid by recipient of the property

b.

Some states (very few not GA) have this; no federal inheritance taxes

III. Gift Tax: (Wealth Transfer Tax)

a.

Cant avoid estate taxes by giving away your property during your lifetime.

b.

There are limits to what any individual can give away during his/her lifetime without incurring taxes
i. Annual Exclusion any person can give any other person a certain amount every year without incurring any
taxes. (Currently, that amount is $13,000.)
ii.

No limit to the number of $13,000 gifts that a person can receive.

iii.

No limit to the number of $13,000 gifts that a person can give.

iv. EXCEPTIONS:
1.

Tuition (if you pay school directly)

2.

Medical Expenses (if you pay provider directly)

v. You can use your death credit during your lifetime

1.

Must file gift tax return to alert IRS that youre using your death credit during your lifetime.

IV. FINAL EXAM:

a.

80 Points + Extra Credit Question (probably 5 points)

i. Short Answer 10 points

b.

ii.

2 Essays 4 specific questions per essay 30 points each

iii.

1 Short Essay 10 points

Format
i. Most Successful Format = approach every question with a 3 prong outline:
1.

Rule

2.

Application of Rule to Facts

3.

Conclusion

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ii.

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