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Wills Trusts & Estates

  1. Jurisdiction over Probate
    • Domicile of the dependent at the date of death
    • Real property is only probated in the state it is found in
    • - “Ancillary probate”
  2. Probate is either supervised or unsupervised - to what extent will the court supervise the probate process
    • Unsupervised typically only turns into supervised if someone protests
    • Supervised probate requires a court order for a number of actions (ex. Selling a piece of property)
  3. Shapira v. Union National Bank (Oh Crt of Comm Please 1974)
    • owner of the property has the right to devise the property how she fits
    • ‘If the boys aren’t married to Jewish girls within 7 years then the property goes to Israel
    • Boys sue saying that it unconstitutionally infringes their right to marry who they please
    • Estate argued that this is different than Loving v. VA because the limit on marriage is not imposed by the State, thus no civil right is infringed on.
    • Crt: “The right to receive property by will is a creature of the law, and is not a natural right or one guaranteed or protected by either the Ohio or the United States constitution”
    • The testator has the right to condition the gift as long as it does not pass some extreme barrier
  4. Incentive Trust
    conditioning an inheritance - you must do X before you inherit Y
  5. Hodel v. Irving (SCOTUS)
    • Litigants from the Souix tribe, questioning the procedures set out in the 1983 Land Indian Tribe Act (??).
    • Men received more land than women in 1889 and after years of succession and division through inheritance, the 1983 statute sought to combine the small portions of land into larger, commercially viable parcels and give them to the tribe.
    • The representatives of the estates claim that the collectivization amounts to a taking without fair compensation of the landowners, and therefore the law in unconstitutional.
    • SCOTUS: The landholders were receiving some monetary gain from leasing the land, even if one was only a penny per year. Therefore, there is a property interest in the land, no matter how small.
    • This is one of the most important ‘sticks in the bundle,’ and the property interest is close to constitutionally protected.
  6. Shaw Family Archives v. CMG Worldwide Inc. (SDNY 2007)
    • Consideration of property rights not owned at death
    • Marilyn Monroe (probate in NY) died testate in 1962.
    • The will contained a residuary clause (everything not devised goes to…) giving the remainder to May Reis, Dr. Kris, and Mr. Strasberg (with the remainder).
    • Strasberg marries Anna and devised her as the sole beneficiary of his will. When the administrator died, Anna became the administratrix. She closed the estate, with Court approval, and transferred the assets to a Delaware based company managing the IP and residuary benefits of the estate.
    • A photographer who took pictures of MM gave the rights to the photos to his children, who decades later used the pictures to make T-shirts to be sold in Target. The Delaware company sued saying that it was due royalties.
    • Crt: The property interest in the t-shirts did not exist at the time the property was devised. The will even says “at the time of my death.”
    • Both the laws in NY and CA had provisions of law allowing for devising assets owned at the time of death.
  7. Privity Defense
    beneficiaries cannot sue lawyer that drafted the will because they were not in privity you with the lawyer
  8. Simpson v. Calivas (NH 1994) (Privity and negligence)
    • A man devises his estate to his son from his first marriage but grants a life estate to his second wife.
    • The will only listed the “homestead” and not the land. It was clear from his notes that she was to get the house and the sone was to get the land and the house at her death.
    • The probate court gave the land to the step-mother. The son brought a malpractice suit against the Lawyer who drafted the will.
    • The lawyer put on a defense saying that he was not in privity with the beneficiaries of the decedent’s estate.
    • Crt: That beneficiary is in a way standing in the shoes of the client to get what the deceased client had asked for but the lawyer had screwed up.
    • The lawyer can be held liable to the intended beneficiary for his failure to act other than negligently.
  9. A v. B (Waiver of Conflict)
    • Client and wife go into large law firm and are told to about the inherent conflict but sign up.
    • The clerk does not enter their name properly.
    • Later, a young woman hires a young woman in a paternity suit against the husband. The suit is commenced and the woman demands for the husband’s financial information, and tells the associate that his firm has all the information because it has his information.
    • The firm withdraws from representing her; however, they still have a duty to the wife of the man, who is also a client (child outside of wedlock).
    • The couple had signed a waiver of conflict agreement, so the court found that it was alright.
  10. Estate tax v. Inheritance tax
    • Estate tax - tax levied on the creation of the estate upon decedent’s death
    • Inheritance tax - taxation upon receipt of inheritance
  11. general power of appointment
    • the power to appoint to one’s self, one’s estate, creditors, or creditors of the estate
    • May be a taxable event to your estate when you die
  12. special power of appointment
    the ability to appoint only to any other power but not thone listed under the general power
  13. Gift defined
    • a transfer of property for less than full and adequate consideration in money or money’s worth
    • Arm’s length transactions are not gifts
    • Donor must have relinquished dominion and control of the property for the donation to be completed.
    • A gift that remains incomplete during the donor’s lifetime is subject to estate taxation at the donor’s death
  14. Estate of Holtz v. Commissioner (US 1962)
    • possibility of control by donor may render gift incomplete and subject to estate tax
    • Decedent in life had set up a trust where the decendent was the settlor and the bank was the sole trustee.
    • The trustee was supposed to distribute the income and principal from the trust as follows:
    • To the settlor during his lifetime the income
    • To the settlor during his lifetime some of the principal as needed for comfort and support
    • Upon settlor’s death, to his wife, if alive, the trust’s income as well as principal as needed

    • At the death of the settlor and his wife, the trust was to terminate and the then remaining principal was payable to the estate of the survivor.
    • The IRS sought to assess a tax on the funding of the trust, saying that they weren't gifted.
  15. Marital deduction
    • Upon death of one spouse, the decedent spouse’s assets can pass to the surviving spouse without being taxed
    • It is a deferred tax arrangement
  16. Three ways Marital deduction can be done
    • Qualified terminable interest trust - Trust that could not benefit anyone other than the spouse as long as the spouse may live provided that:
    •  - the benefit was limited to income from the estate or
    •  - from the sale of assets
    • Trust set up with general powers appointed to surviving spouse
    • Spouse inherits and has full control
  17. What is left out of the taxable amount from a will
    • Casualty loss - something that wasn’t insured that should have been
    • Administrative fees
    • Charitable gifts (unlimited to the deductible amount for the estate tax return)
  18. Estate of Cristofani v. Commissioner (1991)
    • Present interest in the donee requirement
    • Crummey Estate case precedent - Each parent gave the maximum amount to each of the four children, but into four trusts. Under the trust, the child’s guardians (the parents) would have to decide whether to withdraw the amount gifted into the trust for the interest of the child or to let it be deposited.
    • Court ruled it was alright.
    • Ex. Trust for children buys insurance policy on parent. Trust is funded by gift to the trust under the limit and within the limit of the Crumi precedent.
    • In the Cristofani case, the children held contingent remainder interest and immediate right of withdraw.
    • The Crummey case does not require that a beneficiary of a trust have a vested present interest or vested remainder interest in the trust corpus or income in order to qualify for the section 2503(b) exclusion.
  19. qualified disclaimer (IRS)
    • must be exercised within 9 months of when the transfer was to occur
    •  - must provide notice of the disclaimer
    •  - if probate, it must be done in a probate court
    • the disclaimer of the property will not be treated as a taxable gift by the disclaimant
  20. Credit Shelter Trust requirements
    • Income of the trust, payable no less often than once per year;
    • The right to invasion of principal for ascertainable standards, including support, maintenance, medical care, and education;
    • The right to withdraw or demand the greater of $5,000 or 5% of principal per year; and,
    • The power to appoint the residue of the will to our issue. (testamentary power that is non general)
  21. Reason for a Credit Shelter Trust
    • will avoid the marital deduction deferral of the taxable event by preventing the surviving spouse from having general power to appoint the trust at death
    • conceptually, the 5% is a general power to appoint to yourself;
    • however, the code says that if it is limited to 5% then it will not be taxable.
  22. IRS Code 2044
    Jointly owned property is divided up between the spouses upon one of the spouse’s death
  23. Oneal v. Wilkes
    • O’neal bounces around during childhood. She had never been adopted but she lived with her aunt in NY, and then moved to her biological aunt, bounced around, and then the Cook family raises her as their own.
    • She never took their name, and the Cooks never said they wanted to adopt her. Her biological parents (father MIA, mother dead) did not give her up legally.
    • O’neal did not get out from under the authority of her family and under the protection of the state, which would have allowed her to get adopted.
    • Crt: There can be effective guardianship without legal adoption. In the instant case, the biological father’s sister should have had the ability to be O’neal’s guardian.
  24. Woodward v. Commissioner of Social Security
    • children arising from husband’s donated sperm but conceived posthumously can be considered issue under intestacy
    • Warren Woodward gets leukemia and donates sperm prior to undergoing sterilizing treatment. He dies, but his wife Lauren conceives twins using the donated sperm and gave birth two years after his death.
    • She applies for SSA survivor’s benefits for “mother’s’ benefits and for “child” benefits.
    • SSA denies her application on the basis that the children are not entitled to inherit from Warren under Massachusetts’ intestacy and paternity laws.
    • The case was appealed to US District Court and then certified to the MA supreme court for a ruling on the issue.
    • Crt: Are the children issue? The mother claims genetics, the state says that the children are not “in being” at the time of death.
    • The overriding principle in relevant intestacy law is the ‘best interest of the child.’
    • Principle: posthumously conceived children, upon judicial recognition of paternity, should enjoy the inheritance rights if the deceased parent
    • 1) willingly donated sperm and
    • 2) submit to support any resulting child.
    • In this case, that the children are the decedent’s is not in question, but the other two must be shown at trial.
  25. In re. Martin B. (NY 2008)
    • Seven trusts were set up (NY and DC governing law, but the Crt decided they were substantially similar).
    • Grantor, with a life estate in a trust, died in 2001. The Grantor is survived by his wife, Abigail, his son LIndsay.
    • The Grantor also is predeceased by his son, James, who died several months prior to the Grantor.
    • James donated sperm before dying.
    • Crt: The law, when created, had not considered the conception of grandchildren conceived after the death of a beneficiary of a trust.
    • Where a governing instrument is silent, children born of cryo-means, with the consent of their parents, are entitled to the same rights as those of natural children.
  26. Hotchpot (common law)
    • any lifetime gift by the decedent to a child was presumed to be an advancement
    • - in effect, a prepayment, of the child’s intestate share. the child has the burden of proving that the gift was intended as an absolute gift that was not to be counted against the inheritance
  27. Hotchpot (UPC)
    any lifetime gift by the decedent to a child was presumed to be an absolute gift.
  28. In re Estate of Mahoney (VT 1966)
    • (Constructive Trust)
    • (slayer should not be permitted to improve their position because of the slaying)
    • Mahoney’s wife is convicted of manslaughter (killed him), he’s intestate, has $3.5k in the bank, and he has children.
    • His father is declared the executor, and under VT law an estate under $8,000 goes all to the wife before being partitioned out.
    • Crt: Three ways courts have dealt with this:
    • Criminal laws are already on the books punishing these crimes with imprisonment and anything imposed by intestacy laws is cruel and unusual because it is in addition to the criminal punishment.
    • The legal title will not pass to the killer because equitable interests prevent the killer from equitably profiting from the killing.
    • Legal title passes to the killer but equitable considerations holds him to be a constructive trustee for the heirs or next of kin of the slain.
  29. In re Groffman (1969)
    • Groffman went to a solicitor who wrote Groffman’s will and gave it back to him. Groffman never signs the will. Months later Groffman pulls the will out at a dinner party and signs it before witnesses.
    • The second witness was not in the room when Groffman signs the will, but came back in the room afterwards.
    • Post death, Groffman’s new wife does not like that the will gives a chunk of money to his son from the first marriage.
    • She attacks the will on the basis that the will was irregularly executed.
    • Crt: The will reflects his intent. However, it was demonstrated that the will was not executed with the necessary formalities so the will shall not be accepted.
  30. Stevens v. Casdorph
    • Casdorph brings Mr. Miller to the bank to have the employees notarize and witness his will.
    • The employees who witnessed the will but did not see Mr. Miller sign the will. The will left more than usual to Casdorph. Stevens sued.
    • Stevens argued that Miller will was not properly signed and should have been thrown out.
    • Crt: If the witness acknowledges his signature on a will in the physical presence of the other subscribing witness and the testator, then the will is properly witnessed within the terms of the law.
    • That did not happen here so the will is thrown out.
  31. The Meaning of “Presence”
    • Line of Sight: testator is capable of seeing witness in the act of signingConscious
    • Presence: the testator, through sight, hearing, or general consciousness of events, comprehends that the witness is in the act of signing
    • UPC: requires conscious presence
  32. Requirements for witnesses
    • Disinterested party
    • sound mind
    • of majority age
  33. Estate of Morea (1996)
    • (Disinterested witness requirement)
    • George was the friend of decendent and beneficiary under the will. He also witnessed Morea’s will.
    • Kevin, the decedent’s son, also was a beneficiary (less so under the will than if the will was thrown out) and a witness. The third attesting witness was not a beneficiary.
    • Crt: The NY statute requires that attesting witnesses (2 min. were required) much not be interested.
    • Kevin, the decedent’s son, was disinterested in the will because he was to receive less under the will than under intestacy, so his interest in lying to promote his interests is removed.
  34. Purging statute
    a will attested by an interested witness to be admitted to probate but it voided (purged) any bequest to the interested witness
  35. In re Pavlinko’s Estate (PA 1959)
    • Relief from strict compliance
    • The husband and wife have mirror image wills but accidentally sign each other’s will. They did not speak english and their lawyer spoke both languages. The will was in cyrillic.
    • The wills held that at the second death the estate was to go to her relatives, with a small bequest given to his brother Elias Martin.
    • There are a number of issues with the will - the genders and names are wrong, wrong signatuers, etc.
    • Helen & Vasil die and the will is submitted to probate.
    • Crt: The state Wills Act provided that each will shall be signed by the testator. It is clear and unambiguous
  36. In re Snide (NY 1981)
    • (Substantial Compliance)
    • Harvey and Rose Snide attempted to execute mirror image wills, but they signed each other’s wills.
    • Crt: The intent attaches irrevocably to the will. It is clear that the mistake is genuine, occuring through the presentment of the wrong will to each spouse.
    • We deny the formalistic view that the testator’s intent irrevocable attaches to the document and not the testamentary scheme it reflects.
  37. Substantial Compliance
    • Key thought is whether the manner in which an instrument was executed satisfied the purpose of the Wills Act formalities?
    • Factors:
    • does the noncomplying document express the decedent’s testamentary intent
    • Does its form sufficiently approximate Wills Act formality to enable the court to conclude that it serves the purposes of the Wills Act?
  38. In re Will of Ranney (NJ 1991)
    • Two lawyers from the firm that drew up Ranney’s will failed to witness the will, though they said under oath that they had done so.
    • Ranney’s wife tried to have the will invalidated based on the technicality
    • Crt: the will may be probated with the clear and convincing evidence that it substantially complies with the Wills Act.
  39. In re Will of Ferree (NJ 2003)
    • Ferree hand fills out and signs a stock will, has it notarized, but does not have the will witnessed by two signers.
    • Crt: You cannot completely disregard the formalities of a will.
  40. Harmless Error Rule
    • A non-compliant document or writing is treated as if it had been executed in compliance if the proponent of the document or writing establishes by clear and convincing evidence that the decedent intended the document or writing to constitute
    • the decedent’s will,
    • a partial or complete revocation of the will,an addition to or an alteration of the will, or
    • a partial or complete revival of a formerly revoked will or of a formerly revoked portion of the will
  41. In re Estate of Hall (Montana 2002)
    • Jim executes his own will. Later, he and his wife go to an attorney to have mirror wills written up.
    • The edited document needs cleaning up, but the couple asks the draft will be notarized while it is being cleaned up as a final draft so that it will be in effect.
    • Jim’s wife says he told her to tear up the old will. No witnesses signed the edited draft of their mirror image wills. They never properly execute a final copy of the will and Jim dies.
    • Sandra, Jim’s daughter who is completely omitted from the new will but not the one that Jim’s wife tore up, challenges the will saying that it was not properly witnesses or executed.
    • Crt: Did Jim demonstrate the desire to have this be his will?
    • Yes, by clear and convincing evidence - he had his wife tear up his own will, he had the attorney notarize the document, and they had asked if the document would be valid until the final draft could be executed.
  42. In re Probate of Will and Codicil of Macool (NJ 2010)
    • Louise Macool executed a will on September 13, 1995 through her attorney Kenneth Calloway. The will named her husband as the sole beneficiary and his children, grandchildren, and great-grandchildren as contingent beneficiaries. Macool executed a codicil on May 23, 2007.
    • Louise’s husband passed away on April 26, 2008. On May 21, 2008, Macool visited Calloway’s office to change her will. She brought a handwritten note that, among other things, reflected her wish to add as a beneficiary Mary Rescigno (plaintiff), her niece, and that her home be left in the Macool family. Rescigno’s daughter and grandchildren were named as contingent beneficiaries of her share. After Macool left Calloway’s office, Calloway prepared a draft will based on their conversation.
    • The draft was substantially similar to Macool’s handwritten notes but did not name her grandchildren as residual beneficiaries. Moreover, the draft will stated that the Macool children were to try to keep the home in the Macool family as long as possible. Calloway expected that Macool would return to review the draft. However, Macool passed away soon after leaving his office.
    • Macool’s 1995 will and 2007 codicil were admitted to probate. Rescigno brought this action to invalidate the 1995 will and 2007 codicil, and have the draft will admitted to probate.
    • The trial court found that there was insufficient evidence that Macool intended the draft will to be her final testament and ruled that it could not be admitted to probate.
    • Crt: The draft will cannot be probated. Louis had never read the final document, nor expressed her final consent to the document.
  43. Holographic Will
    • a will written by the testator’s hand and is signed by the testator need not be attested by a witness
    • The will can be entirely in the handwriting of the testator, but if it is also witnessed by two witnesses then the will is fully executed and is not dealt with under holographic wills law
  44. In re Kimmel’s Estate (PA 1924)
    • A hillbilly’s handwritten will reads more like a letter, but includes a line saying that if anything should happen that some money was in a bank and that his house should go to George Darl and Irvin Kepp (questionable whether he meant all three of his kids, or just two of them)(questionable whether he mispelled “keep” as kepp”). The man dies the afternoon after mailing the letter.
    • The Court had to seek whether the document was testamentary in character. The court found he did.
  45. Eaton v Brown (US 1904)
    • (conditional statement not a conditional, just a statement of why the will is written)
    • Easton writes a holographic will “I am going on a journey and may not return. If I do not, I leave everything to my adopted son.”
    • She returned, but dies some months later.
    • Crt: Her testimonial intent is found in her contemplation of death and the disposition thereafter of her estate.
    • The conditional in her language is not taken as a conditional, but rather a statement of the inducement for making a will.
  46. In re Estate of Gonzalez (Me. 2004)
    • (Handwriting - Material Provisions)
    • Fermin Gonzalez wanted to prepare his will before traveling.
    • He crudely fills out a form will, and it includes scratches and odd markings. He signed the form, but not in front of witnesses. He was given another blank form that he signed and was signed by witnesses, to be filled in. There were no words of disposition that were in his handwriting.
    • He disinherited two children in the new will who would have taken had the will been invalidated (and fought the will).
    • Crt: The pre-filled forms, though not in his handwriting, was evidence of his testamentary intent. The material provisions are written by the testator.
  47. In re Estate of Kuralt (Mont. 2000)
    • Kuralt has a mistress that he keeps beginning (1968) six years after his marriage (1962). He essentially lived two lives.
    • On May 3, 1989, Kuralt executed a holographic will giving all of his Montana property to the mistress, written on his engraved stationery, notarized but not witnesses (in VA).
    • Five years later (1994), he executes a formal will in NYC that does not mention Shannon. In 1997 he sells at below FMV part of his Montana property to his mistress, and gave her the money.
    • He writes a letter to her on his deathbed saying that he will call his lawyer to the hospital to make sure she inherits the remaining property in Montana (he underlined the word inherit).
    • Included with the letter was two checks, one for 8K and one for 9K. He dies and the mistress seeks to probate the letter as a valid holographic codicil to Kuralt’s formal will.
    • Crt: His intent is clear by the shell transactions, and by underlining ‘inherit.’
  48. Thompson v. Royall (VA 1934)
    • (Proper revocation) (revocation by mutilation)
    • Mrs. Kroll signs a will and it is witness by three people. The executor is given the will for safekeeping. Eleven days later she writes a codicil, signs it, and has it witnessed by two people.
    • The codicil is given to the Judge who helped her write the codicil and will. Four days later she called both documents to her home to be destroyed, but in the presence of both the judge and executor she says that she wants to keep it as a memorada.
    • He writes on the back of the codicil that the will is revoked and is only to be retained as a guide for another will- she signs it.
    • Crt: The revocation notation is not wholly in Kroll’s handwriting nor are her signatures attested to by signing witnesses.
    • If the writing intending to revoke the will does mutilate, erase, or deface an part of the writing of the will, it cannot be given greater weight than any other document that references the will (or in this case, doesn’t).
  49. In re Estate of Stoker (Cal. 2011)
    • Stoker gifts property in his will to his girlfriend. Years afterwards he later creates a codicil, in his hand and signed (but not witnessed), saying that his girlfriend gets nothing.
    • The codicil was dictated by Stoker (he has dyslexia) and signed by him. He orally says that it expresses his last will and intent to the people that helped him.
    • Crt: His intent must be determined. The document presents testamentary intent (to revoke his prior will with the codicil).
  50. LaCroiz v. Senecal (Conn. 1953)
    • Dupre (testatrix) first wrote a will saying that she was leaving half of her estate to her nephew and the other half to her friend.
    • She then writes a codicil clarifying the name of her nephew, but expressly stating that nothing in her will should change other than the clarification.
    • The husband of the friend is one of the witnesses of the codicil (voiding the codicil).
    • Crt: The overwhelming evidence of the intent of the party is clear - the revocation of the first will is dependent on the validity of the prior will.
    • She would not have wanted to throw the entire estate plan out if the codicil is thrown out.
  51. In re Estate of Alburn (Wis. 1963)
    • Alburn dies and his sister files to be named adminstrator of her intestate estate.
    • Her granddaughter shows a will executed in 1955 in WI, in which the granddaughter is named a legatee and executor.
    • Her sister-in-law then shows a will executed in 1959 (a year before she died, and executed immediately after she arrived at her brother’s house).
    • She had moved to WI, where her brother asks her “what did you do with that will.” She says ‘I destroyed it.’ He claims she came down the next morning with the ripped up portions of the will and said “take this to the garbage.”
    • WI will gave ¼ of residue to a friend (would not take by intestacy), ¼ to Alburn, and ¼ Heike.
    • Kenkikee will remainder to Alburn, her brother, and rest to doris Alburn.
    • In both wills, a good portion of her assets went to her sister in laws and friends.
    • That was an indication that she did not want to die intestate because the two groups that would take under the wills, sisters in law and friends, would not take.
    • Crt: In both wills, a good portion of her assets went to her sister in laws and friends. That was an indication that she did not want to die intestate because the two groups that would take under the wills, sisters in law and friends, would not take. Based on that the court applied the relative revocation doctrine - the kenkekee will was probated. The WI will was revoked correctly, which was not revived.
  52. effect of divorce on ex-spouse
    a divorce tends to revoke the provision of the will that benefits the ex-spouse, unless the provision explicitly overrides this. Most statutes exclude family of the ex-spouse as well
  53. effect of marriage on will
    A spouse is deemed to get an intestate share of a will if the will was executed before the marriage and no new will is executed
  54. Effect of birth of child on will
    • (pretermitted child)
    • a child will be read into a will that was written prior to the child’s birth that named other children.
    • This equalizes children’s standing under the will.
  55. Four doctrines of components of a will
    • Integration
    • Republication by codicil
    • incorporation by reference
    • acts of independent significance
  56. In re Estate of Rigsby (Ok 1992)
    • Holographic will (2 page document, pulled together but not fastened, both signed) was probated. Someone challenged the will.
    • The second page partially conflicted with the first.
    • The lower court probated the first page of the will, but not the second.
    • Crt: Upheld. The first page clearly reflected intentions, but there was not sufficient evidence that the second page should be integrated into the first page.
    • Further, the contradictory nature of the second page made it impossible to read the second page as a supplement of the first.
  57. Republication by Codicil
    • A validly executed will is treated as re-executed as of the date of the codicil.
    • Only to the extent that it does not contradict the will
    • You cannot republish a will that was never published***It must be signed in your handwriting (holographic) or signed and properly witnesses
    • Otherwise the unpublished will will have to be incorporated by reference
    • UPC - the unpublished will must be properly described in the reference and the be in writing
  58. Clark v. Greenhalge (Mass 1991)
    • Greenhalge helped Ms. Nesmith to draft a “memorandum” containing 49 specific bequests, which she modified in 1976 but did not mention a painting. Ms. Nesmith executes her will in 1977, naming her cousin Greenhalge as the executor and personal, and references the memorandum.
    • She had a notebook (1979) in which she kept track of the items she wanted to give to various individuals, including a farmhouse painting she left to her friend, Clark.
    • She later executed two codicils, May and October 1980, and then died in 1986.
    • Before death, Ms. Nesmith expressed to Clark that she wanted Clark to have the painting. Greenhalge as executor distributed the assets of the estates according to the will, but refused to probate the notebook or execute those wishes (except for what he gave himself).
    • He claimed that the notebook was not incorporated by reference.
    • Crt: Neither codicil noted the notebooks or the notes written in the memorandum by 1976. However, Nesmith wrote the notebook and memorandum were created for identical purposes - to designate gifts. Take the substance over the form. The documents are the same.
  59. Acts of Independent Significance
    • a will may dispose of property by reference to acts and events that have significance apart from their effect upon the dispositions made by the will, whether they occur before or after the execution of the will or before or after the testator’s death.
    • the execution or revocation of another individual’s will is such an event
    • Ex. My will says - give X my car when I die.
    • I get a new car that is pricey and X does not need a new car years after I put that provisions in. I die. X still gets the car.
  60. Kieth v. Lulofs
    • Arvid and Lucy get married, they each have kids from prior marriages (Keith and Lulofs, respectively).
    • They make mirror wills saying that upon the death of the surviving spouse, the children will split their assets equally. They also had an insurance policy.
    • After Arvid’s death, Lucy cuts Keith out (partially for the insurance benefits, entirely from her will).
    • Kieth sues, saying that the mirror image wills should be read as a contract and he should get 50% of their share.
    • Crt: the mirror image wills by themselves does not constitute a contract.
  61. Mental competence to make a will
    • minimal standard (below gift or contract) is necessary
    • Must be capable of understanding
    •  - the nature or extent of the property
    •  - the natural objects of his or her bounty (children or family, or perhaps an individual/organization that is near and dear to the deceased)
    •  - the disposition that he or she is making of that property
    •  - relating these elements to one another and forming an orderly desire regarding the disposition of the property
  62. In re Wright’s Estate (Cal 1936)
    • estamentary capacity - is one of capability, not actual knowledge
    • Wright dies in 1933 at the age of 69. In executed a will one year and four months prior to his death.
    • In it he bequeaths property to his friend, a home to his daughter, interest in a property in Salt Lake City to one granddaughter, and everyone else just $1 each.
    • Wright’s daughter (only surviving, but has children) contests the will on the grounds that Wright did not have the capacity to make the will.
    • The witnesses to the executed will all testify that they believed he was incapable at the time of making the will. His daughter and others testified to the same, but nobody could give specifics or demonstrate that he had been institutionalized.
    • Crt: The will stands. The witnesses cannot attest that he had the faculty necessary at the time and then later change their minds. More is needed.
  63. Wilson v. Lane
    • Will is offered for probate that would give to her sixteen surviving family members and her friend. One of her relatives filed a petition against the will, claiming that she was not medically competent.
    • The expert witness at trial based his opinion on a review of her medical file, but had never met her. Her physician, shortly before she signed her will, stated in his notes that she was blind and had senile dementia, thought the doctor later testified that he was unsure if that was true. Witnesses testified that she was odd.
    • Crt: No evidence at the time of trial was offered to establish that Lane was suffered from a level of dementia that rendered her unable to form a decided and rational desire regarding the disposition of her estate.
  64. Seeking revocation by mental incompetence
    • A rebuttable presumption is created once the will is decided valid.
    • There evidentiary burden to prove incapacity is placed on the moving party.
    • Insane Delusion - when you delusions drive the provision of the will.
  65. Strittmater’s Estate
    • Parents are dead, she is spouseless, siblingless, and childless. The distant cousins, with whom she has no relationship, challenges her wills, saying that her bequeath to the Womens Organization was invalid because she suffered from insane delusions.
    • Her parents dies when she was in her thirties, and she spoke highly of them. Decades later, she disparaged her parents, including her father. She participated in a womans group for about a decade.
    • Crt: She was delusional about her attachment to the womans group, and that delusion led her to bequeath her property to the group.
    • The will is thrown out.
  66. Breeden v. Stone
    • Breeden executes a holographic will just prior to committing suicide.
    • He was involved in a hit-and-run accident that killed the driver of the other vehicle. He left everything to his friend, Stone, in the holographic will.
    • The will was signed, clearly described the assets, and had decent handwriting.
    • His family challenges the will, saying that his prior executed will and holographic codicil should be used instead of the holographic suicide will.
    • He was using heavily cocaine and alcohol, including the two days preceding the suicide. He was also paranoid and thought the government was snooping on him, someone had planned a bomb in his house, and that FBI was surveilling him.
    • Crt: The probate court did not error when it found that the petitioners did not prove by a preponderance of the evidence that, because of the decedent’s chronic use of alcohol and drugs, he was not of sound mind.
    • The court applies two tests:
    • Cunningham Test - The testamentor must have the mental capacity to understand the nature of the act, know the extent of their property, understand the testimentary disposition, know the natural objects of her bounty, and the will represents her wishes.
    • Insane Delusion Test- There must be a causal link between the delusion and the tainted will - materially affects the contested disposition of the will
  67. Finding insane delusion under Breeden v. Stone
    • First the Cunningham test is applied to see if the testator was competent
    •  - The testamentor must have the mental capacity to understand the nature of the act, know the extent of their property, understand the testimentary disposition, know the natural objects of her bounty, and the will represents her wishes.
    • Second the Insane Delusion test is applied to see whether the wishes or testamentary wishes were tainted by an insane delusion.
    •  - There must be a causal link between the delusion and the tainted will - materially affects the contested disposition of the will
  68. Undue Influence
    • when the influence exerted over the donor oversame the donor’s free will and caused the donor to make a donative transfer that the donor would not otherwise have made
    • can be made from a confidential relationship (ex. POA) and the presence of a suspicious circumstances
    • Prima facie case of undue influence switches the burden of proof to the alleged influencer to prove by a reasonable doubt that there was no undue influence.
  69. Suspicious circumstances to infer undue influence
    • the donor is susceptible to undue influence
    • wrongdoer had the opportunity to exert undue influence
    • alleged wrongdoer had the disposition to exert undue influence; and
    • there was a result appearing to be the effect of undue influence.
  70. Estate of Lakatosh (PA 1995)
    • Lakatosh lived alone and did not have much of a relationship with her family (isolated). She developed a relationship with Roger, who’s cousin helped Lakatosh to make Roger her POA and to write her will.
    • Roger helped her retain the services of his cousin in fighter a lawsuit against her nephew. Roger used his POA to gift her assets to his friend and converted $120k for his own benefit.
    • She was living in squaller. She tried to revoke the POA.
    • Once she died the guardian of her estate petitioned the court to create a constructive trust to divest him of the benefit of her assets.
    • Crt: Was there a confidential relationship? Yes - POA, and because of her infirm state.
    • His constant proffering of assistance made her dependent on him. The guardian of the estate showed that the bulk of the estate went to a person because of the undue influence (just so happened to be Roger). Upheld.
  71. Durability of common law POA
    • durable as long as the principal had the capacity to will the agency
    • Difficult because the principal needs the agent most at the point they are incapacitated
    • Durable power of attorney - survives incapacity, but not death
  72. In re Estate of Reid (Miss. 2002)
    • Cupit, a law student in Mississippi, “befriended” an old woman (hints that there were more intimate relations).
    • Cupit took Reid to an attorney to have himself written into the will,, and asked an attorney to draft the deed conveying her home to him upon death.
    • He went to the first lawyer who told him he did not need to be adopted but that the will was fine. He went to another firm to be adopted.
    • She did not have separate counsel.
    • Crt: Undue influence and fraud allows the deed, adoption, and will to be thrown out.
  73. Anitlapse Statues
    • substitutes other beneficiary for a deceased beneficiary if certain requirements are met
    • Theory is of presumed intent - for certain predeceasing devisees, the testator would prefer a substitute gift to the divisee’s descendants rather than for the gift to pass in accordance with the common law of lapse
  74. Class gifts
    • if a class member predeceases the testator, the surviving members of the class divide the total gift, including the deceased member’s share, unless an antilapse statute applies.
    • A class gift is where the testator was group minded and uses a label to describe the beneficiares.“A’s children”
  75. Dawson v. Yucus (Ill 1968)
    • Gift is devised to her nephews, naming them individually and providing for their share of a gifted farm property.
    • One of the nephews died.
    • Crt: Not a class gift because they were named, were to the exclusion of other linear relatives.
  76. Ademption by Extinction
    • a specific devise of real or personal property that the testator sells or is disposed of prior to death
    • The devise fails as the specified property is no longer the individual’s to give
    • Does not apply to general, demonstrative, or residuary gifts (ex. $10,000)
    • Intent theory - if it seems like the testator wanted the beneficiary to have the gift, but the devisee sold the item and the proceeds are still in the estate, then the value of the pre-disposed gift can be conveyed.
  77. In re Estate of Anton
    • She receives a piece of property from her step-daughter. After her husbands death she obtains full property rights.
    • She bequeathed the property to two individuals, son and step-daughter, and the remainder of her estate to her son and other daughter. Her daughter decides to sell the property (had received POA).
    • After exhausting other assets, the duaghter sells the property to pay for health care needs of injured mother.
    • The step-daughter would not take her half of the property because it was sold unless the court applies the ademption of exemption. (i.e. the court needs to apply the intent of the dead person by extrapolating from the circumstances surrounding the sale of the house).
    • Crt: As the testator did not have the capacity to change the will, then the sale of the property could not have been alternately dealt with under a new will. The ademption by extinction is applied.
  78. Exoneration of leins
    • if 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 that the testator wanted the debt, like other debts, to be paid out of the residuary estate.
    • Modern rule (majority) - devisee gets the property subject to the mortgage
  79. Abatement  hierarchy:
    • (who gets what after debts are paid)
    • the residuary legatee gives up first to pay debts
    • the general bequests legatees give up next to pay debts
    • the specific bequests legatees give up last to pay debts
  80. Trust
    legal arrangement created by a settlor in which a trustee holds property has a fiduciary for one or more beneficiaries
  81. Declaration of trust
    settlor declares himself to be trustee of certain property
  82. Deed of trust
    settlor transfers to the trustee the property to be held in trust
  83. Who is the Settlor/grantor/trustor
    Settlor/grantor/trustor
  84. Revocability of a trust
    • Inter vivos trusts can be revocable or irrevocable
    • Testamentary trusts can only be irrevocable
  85. Unwritten trust
    • created when there is the intent to create a trust, assets to fund the trust, and a beneficiary
    • No trustee needs to be named - the court will appoint one
    • Intent to create a trust - a trust can be created in a will even though no particular words in a will actually say the word “trust”
  86. Jiminez v. Lee (Or 1976)
    • Daughter sues her father to compel him to account for assets which she alleges were held for her by her father (trustee).
    • She claims that a trust occurred when two gifts were made for her benefit - 1) paternal grandmother gave her $1k bonds and 2) business associate gve her $500 - both for her educational benefits.
    • Father invested the money in stocks. He did not keep a record of the proceeds of the trust, and he used money from it for tickets to the theatre and to pay for her own birthday present. He also spent some money on her education.
    • Crt: The case must be remanded for the father to show that he spent the trust’s money for the trust’s purpose.
  87. Hebrew Uni Assoc v. Nye (1st trial) & Hebrew Uni Assoc v. Nye (2nd trial)
    • Professor Yahuda and his wife Etherl declared their desire to gift of old books a library.
    • They said the same before dignataries in Israel, and she issued a press release saying she would give the gift.
    • She returned to catalogue the library, she refused to give something from the collection to another person (saying I don’t own it) and she dies without shipping the books. Is the Assoc. entitled to the books?
    • Crt: There must be an exrpess trust, even if oral. There was no true inter vivos gift there was merely an unexecuted promise. She did not ever name herself the trustee.

    On remand the Assoc. claimed the the gift had existed and had been executed - delivery was made through constructive delivery.
  88. Unthank v. Rippstein (Tex. 1964)
    • (lack of specific corpus)
    • C.P. Craft wrote a long letter to Mrs. Iva Rippstein, not in anticipation of death, though he died soon after.
    • A portion of that letter said that he would send Mrs. Rippstein $200 cash on the first of each month provided that he lived that long, provided cash for a few months, and in the margin scrawled a note saying he strickened the phrase (provided I live that long) and that he wanted to bind his estate to pay her. Rippstein tried to submit the letter.
    • Crt: There is no property in the trust to support the validity. There was a promise to make a gift, but no corpus was set aside.
    • A trust was not constructed for lack of specific corpus.
  89. Clark v. Campbell (NH 1926)
    • (ascertainable beneficiaries - failure)
    • The deceased, Clark, in the 9th clause of his will, willed that all of his nick-nacks be distributed to his "friends" by his trustees, noting he can't in life but his trustees know what to do. Those items not given away should be sold and would become part of the estate’s residue.
    • Crt: The intent to create a trust is present: “I give my property in trust.”
    • The trust bestows upon the trustee the power to execute the articulated desires of the settlor.
    • However, friends is not an ascertainable category of individuals. Insufficient guidance is provided, so the trust fails.
  90. In re Searight’s Estate (Ohio App 1950)
    • Sea right's will bequeathed his dog to his friend and created a bank account to pay his friend for the upkeep of the dog.
    • If the dog dies before the money is used up, then the remainder would be given to others.
    • Attacks: Is there an ascertainable beneficiary?
    • Crt: Yes, because there is an “honorary trust.”
    • Though the dog was being taken care of it could not bring action.
    • The friend accepted the bequest and the money, so the whole thing wasn’t ‘unlawful.’
    • no R.A.Perp. issue b/c dog wasn't going to live that long
  91. In re Estate of Fournier (Me. 2006)
    • (creating an oral trust) (standard - clear and convincing that a trust was intended)
    • Fournier gave $400k cash to a couple and told them to hold it in secret until his death, upon which time they should give it to his sister Faustina Fogarty. Fogarty, he said, would need it more.
    • Fournier told his other sister and her daughter that his friends were holding the money for Fogarty.
    • Fogarty was appointed his executor of Fournier’s estate.
    • Upon receiving the money after his death Fogarty sought a declaratory judgment that Fournier had created an oral trust for her benefit. 
    • Crt: The trust’s prerequisites were met - the standard required for creation of oral trusts of clear and convincing evidence was reached.
  92. Oliffe v. Wells
    • (extrinsic evidence)
    • Donovan created a will leaving the residuary estate to Rev. Wells to distribute for a charitable purpose that she expressed to Rev. before and after the execution of her will. 
    • Rev. was named as executor.
    • Rev. stated Donovan had orally expressed to him before and after the execution of the will that her estate be used for charitable purposes.
    • He also stated that he desired and intended to distribute the residue of the estate for those purposes.
    • Crt: Extrinsic evidence may not be admitted to show that the testator intended to create a trust because it would defeat the rights of the heirs at law.
    • Because heirs at law inherit property of the deceased in the absence of a trust, a trust must sufficiently be declared in the instrument to defeat the rights of heirs at law.
  93. Doctrine of Merger
    • (no longer valid)
    • if all of the interests of the trust merge into one person then it is not a valid trust 
    • Most revocable trusts have the grantor, trustee, and initial beneficiary as the same person.
  94. Farkas v. Williams (Ill. 1955)
    • (inter vivos trust?)
    • Farkas had siblings, nephew and a niece, and an employee of long standing named Williams.
    • Farkas wanted to benefit Williams, so he purchased stock and created trusts named “Albert Farkas trustee for Richard J. Williams”.
    • Trust instrument was revocable; Farkas retained the power to vote, sell, redeem, and exchange the stock. He also retained the right to change the beneficiary or revoke the trust at any time. Upon his death, the title to the stock was to be vested in the beneficiary;
    • the death of Farkas shall make the trust irrovocable if he dies without changing it.
    • When Farkas died, Williams sought to have the stock directed to him. However the circuit court held that the trust declarations were testamentary in character and were invalid.
    • Crt: A document is a valid intervivos trust where the settlor relinquishes some of the powers that are incident to stock ownership and the beneficiary has a claim against the settlor as a trustee if he does not fulfill his duties to the beneficiary in regards to the trust property, and the trust is formal.
    • Where a person creates an inter vivos trust that makes a disposition at death, it will not be held invalid because it is testamentary in character where the settlor passes on an interest through the trust before his death and the beneficiary has a claim against the estate for the mishandling of any funds in the trust.
  95. Moon v. Lesikar
    • (Standing of Contingent Beneficiary of Revocable Trust)
    • Father created a trust, named himself and Son as the initial trustees, indicated that he could revoke or amend by giving written notice to the trustee, and named himself as the sole beneficiary during his life.  
    • Many transactions subsequently occurred including a sale of trust property to Son at a price considerably below market value.  
    • Daughter (a remainder beneficiary of the trust) claimed that this sale was in breach of duty.
    • Crt: The court concluded that since Father was both the settlor and the trustee and had full power to revoke the trust, the vesting of Daughter’s contingent interest was subject to Father’s discretion until his death.
  96. Patterson v. Patterson (Utah 2011)
  97. Settlor created her revocable trust in 1999.  The trust said, “The interests of the beneficiaries are presently vested interests subject to divestment which shall continue until this Trust is revoked or terminated other than by death.”  
    • 2006, the settlor purported to remove one of her sons as a trust beneficiary by amending (but not revoking) the trust.  
    • After the settlor’s death, the son argued that the amendment was invalid because, under the terms of the trust, his interest could be revoked only if the trust were revoked.
    • Crt: a trust revocation or amendment need not precisely comply with the method of revocation or amendment prescribed in the trust instrumentif the method prescribed is not made exclusive, the trust may be amended by any method that manifests the settlor’s intent by clear and convincing evidence.
  98. State Street Bank and Trust Co. v. Reiser (Mass 1979)
    • Dunnebrier created an intervivos trust and reserved the power to amend and revoke, and to direct the disposition of principal and income during his lifetime.
    • He conveyed the capital stock of five closely held corporations. After the execution of the trust, he executed a will in which he left his residuary estate to the trust.
    • A little over a year later Dunnebrier applied for and received a business loan from State Street Bank for $75,000. At his death, he owed State Street Bank & Trust $75,000.
    • The bank sought to reach the assets of the trust. He has a pour over will (everything in my will under probate shall be placed in my trust).
    • Crt: The bank gave Dunnebrier the money without knowing that most of his assets were in the trust (and not in his estate).
    • The settlor retained all the substantial incidents of ownership, and cannot be used to shield the assets from lenders - rather it is intended to be used in estate planning.
    • His level of control over the assets during his life means that he should have the same control, and the bank the same access, under death.
  99. Clymer v. Mayo (Mass 1985)
    • Clara Mayo executed a will naming her husband as the primary beneficiary with her nieces and nephews by marriage.
    • She named her husband as the beneficiary of her life insurance policy, retirement plan.
    • She created a trust for the marital deduction portion of her estate (portion) and another to deal with the rest.
    • She executed a pour over will placing the residual of her estate into the trust.
    • After the divorce she took her husband off of the life insurance but failed to take him off the residual trust.
    • Crt: Regarding the residual trust, which had secondary beneficiaries (her nieces and nephews by marriage), the court took findings and found that the children were still close to her.
    • Her intent overrode.
  100. Uses/advantages of revocable trusts:
    • Can provide for planning for incapacity
    • can ensure continuity in property management
    • Allows you to avoid the public record
    • Can help to identify and segregate non-marital property for prenuptial agreements
    • You can chose the jurisdiction (provided there is a nexus with that jurisdiction)
  101. Pour-Over Will
    if the grantor of a revocable trust fails to transfer everything into the trust, then the will “pours” everything into the trust during probate.
  102. Cook v. equitable Life Assurance Society (Ind. App. 1981)
    • (Designating life insurance policy beneficiary by will, or not)
    • Douglas Cook designates his wife as the beneficiary of his insurance policy. He later divorces, and stops paying the premiums on his whole life term policy.
    • He never changes the beneficiary, even after he gets married years later.
    • He writes a holographic will in which he bequeathed his insurance policy to his new wife and son.
    • He dies, the new wife (administrator) seeks payment of the life insurance. The life insurance sought court order telling them who to pay (old wife or new wife/son).
    • Crt: The holographic will was not enough. It would be an administrative nightmare for insurance companies, who would also never know who to pay.
  103. Nunenman v. Estate of Grubbs (Ark. App 2010)
    • Grubbs had an IRA with a beneficiary designated as Jeannie.
    • He had a last will and testament drawn up while he was in the hospital saying his property should go to his mother, Shervena, but DID NOT mention the IRA.
    • The mother later claimed that she found a handwritten codicil saying that the IRA should go to her.
    • Crt: the situation is sketchy. The will did not identify the IRA will specificity or the intent to change the beneficiary.
    • The codicil is not enough to be a new will (it would have been superseded by the new will anyways).
  104. Egelhoff v. Egelhoff (US 2001)
    • Two months after divorce, Mr. Engelhoff died.
    • A Washington state statute said that after a divorce the provision in the will providing for the spouse if void, as well as transfers at death of nonprobate assets.
    • Mr. Engelhoff had not removed Mrs. Engelhoff as the beneficiary under his pension and life insurance plan.
    • Crt: The Washington statute is pre-emted by federal statute- ERISA. ERISA says that half of the married couple’s federal pension assets must pass to the surviving spouse at death.
    • ERISA deliniates how federal pension plans must be paid out, and being that it speaks to the topic to which the state law also speaks, the ERISA statute must prevail.
    • Further, it would be burdensome for the pension planners to figure out the proper laws in all 50 states.
  105. Varela v. Bernachea (Fl. App. 2005)
    • (rebuttable presumption that adding a joint signer is a donative account)
    • Lovers move to his condo in Florida (they are Argentinian). She said she didn’t know he was married, but he said that it was openly acknowledged.
    • She becomes a signer onto the account and gets a check card.
    • He is hospitalized. When his kids visit him, they kicked her out. She withdraws $280k out and establishes a separate account.
    • Crt: He had donative intent when he signed her onto the account. The broker told him about her access to her account.
    • There is a rebuttable presumption of donative intent that can only be overcome by clear and convincing evidence otherwise.
  106. Tenancy in the entirity
    cannot be broken up. when one spouse dies the other authomatically receives the property
  107. Tenancy in common
    each party can dispose of their half of the property
  108. In re. Estate of Kurrelmeyer
    • While competent, Louis Kurrelmeyer executed a durable POA providing his wife Martina with broad powers, including the power to convey his real estate into a trust, execute “trust instruments,” and “convey any real estate.” 
    • POA was limited gift giving to $10,000 per year per donee.
    • When Louis was no longer competent about a year before his death, Martina executed an inter vivos trust and transferred some of Louis’ real estate (the Clearwater property) into the trust. Under the terms of the trust, Martina gave herself broad control over the Clearwater property, including the right to sell the property and use the proceeds to buy another property, as well as the right to receive the trust income and any principle required for her support and maintenance. Louis’ will left the Clearwater property to Martina as a life estate and the remainder to his children.
    • After Louis’ death, Martina was appointed executor and Louis, Jr. challenged Martina’s authority to execute the trust and convey the Clearwater property into the trust according to terms of the will rather than the trust.
    • The probate court held that the trust was valid and the children appealed to the superior court.   
    • Crt: The revocable trust can be modified, though a will cannot be, by a POA. This POA granted is broad and allows the creation and change of trusts, even if not exactly in line with the express words in the will.
  109. what type of assets are subject to the elective share?
    probate assets
  110. Sullivan v. Burkin (Mass 1984)
    • (surviving spouse’s portion of the deceased spouse’s trust)
    • Ernest is married to Mary. The were separated for years but not divorced. She had received a court order for support.
    • He executed a will that explicitly demonstrated his intention to exclude her from his will. He also created a revocable deed of trust, with himself as the sole trustee and beneficiary, with two friends to be paid equally upon Ernest’s death. The trust was funded with his home.
    • Ernest dies and his wife filed suit to have the inter vivos trust declared as a part of his estate, from which she could take an elective share.
    • Crt: In the past, a surviving spouse was not entitled to a share of assets transferred to an inter vivos trust by the deceased spouse.
    • Thus, for this instance Mary cannot claim her share; However, the times are a changing and there is no reason why a divorcee should be able to take from an inter vivos trust when a surviving spouse could not.
    • An inter vivos trust over which the deceased spouse maintains sole and complete control will not be considered to be a part of the deceased’s estate.
  111. In re Estate of Jackson (Ok 2008)
    • Jackson dies intestate.
    • He set up a revocable inter vivos trust with the Bulters as his co-trustees.
    • Benajmin is declared the sole heir and tries to claim a statutory share of the trust assets, claiming he was an ommitted child from the trust document.
    • Crt: The laws for pretermitted heirs applied to wills only, and not trusts.
  112. Two core principles/norms of fiduciary administration
    • The care norm - the duty of prudent administration
    • The loyalty norm - the duty to administer the trust for the benefit of the beneficiary
  113. hierarchy of duties for trustees
    Hierarchy of duties goes loyalty first, then prudence
  114. Hartman v. Hartle (NJ Ch. 1923)
    • (introduction to self-dealing fiduciaries)
    • Dorothea Geick died, leaving 5 children. Two son-in-laws are executors.
    • The will instructed the son-in-laws to sell the property and divide the proceeds. The executors sold a part of the properties to one of her sons for his sister, who is the wife of the executor. Days later the house was sold at a 50% markup.
    • Crt: The son, in buying the property for his sister, created a situation of self-dealing.
    • The Trustee cannot purchase from himself at his own sale, that that his wife cannot do it unless leave from the court is granted.
  115. In re Gleeson’s Will (Ill App 1955)
    • Mary Gleeson died testate on February 1. On March 29 Con Colbrook has named executor by the court.
    • The the intervening time (Mar. 1) the executor had renewed his lease (with a partner) on land leased from the deceased to run until the following Mar. 1.
    • The executor argued that there was no self-dealing and that the estate would have been harmed had he NOT renewed the lease because it was too close to planting season to find a new tenant - the estate would suffer economic loss.
    • Crt: It does not matter that it does not make sense economically - would damage beneficiaries. The man did not try to find another tenant.
    • The good faith and honesty of the executor are not being questioned, merely the position that the man is in. He elected to be the trustee and thus could not deal with himself.
  116. In re Rothko (NY 1977)
    • (Co-executor acceding to another co-executor’s misdealings can be liable under loyalty duty)
    • Rothko did not mention his children (katie and christopher) with respect to his paintings.
    • NY at the time had a law that allowed a child of a testator to challenge a testamentary disposition to a charity to the extent it exceeds one-half of the estate. Rothko devised his residual estate (the paintings) to a foundation that Reis, Stamos, and Levine were the directors of.
    • The three dealt with the 798 paintings through two contracts within three weeks - 100 paintings to a company from Lichtenstein, Malborough, (for only $1,600,000) and the rest of the paintings to be sold by MNY corporation, over the course of 12 years, at a commission of 50% (generally), or 40% if another dealer sells a painting. Reis was the head of Malborough and Stamos wanted to have his paintings sold at Malborough.
    • Katie brings suit to enjoin the executors and to disgorge the assets, and the AG of NY also sued.
    • Crt: Stamos’s conflict of interest came from his new relationship with Reis and his new ability to show his artwork.
    • Reis had an obvious conflict of interest.
    • Levine knew of the other conflicts of interest and failed to act. The contracts were voidable and restitution was owed - Levine owed the actual value of the painting.
    • Reis and Stamos were liable for that and for appreciation damages. Co-fiduciaries are jointly and severally liable.
  117. Two types of discretion (trustees)
    • Mandatory trust - the trustee must make specified distributions to an identified beneficiary
    • Discretionary trust - the trustee has discretion over when, to whom, or in what amounts to make a distribution
  118. types of discretionary trusts
    • Spray trust - income must be distributed currently and to specified beneficiaries, but amounts may vary
    • Sprinkle trust - authorize the trustee to accumulate income and add it to principal
    • Support trusts - the trustee has discretion subject to an ascertainable standard, such as “to provide for the beneficiary’s support and maintenance.”
  119. Marsman v. Nasca (Mass App 1991)
    • (duty of trustee under a discretionary trust) (trustee can still be held liable for not distributing trust assets even if given discretion) (exculpatory clause)
    • Sara Marsman dies. Her lawyer drew a will and created a trust thereunder requiring the husband, Cappy, to receive reasonable maintenance and comfort. They owned the property prior to death as tenants in the entirety. Upon death, Cappy was to get the house, the trust money which he could access for his reasonable maintenance and comfort, and the daughter Sally.
    • Cappy remarried but fell on hard times. Cappy asked for some money from the trustee, the lawyer, saying that he was on hard times.
    • The lawyer gave him a couple hundred dollars and said to put in writing an explanation as to the need for the money.
    • Cappy was to sell the house to the daughter, Sally, but reserving a life estate for himself.
    • The lawyer wrote a letter explicitly noting that Cappy’s new wife, Margaret, would not live in the house after Cappy’s death. Nobody told Cappy.
    • Crt: The trustee’s duty was to make a reasonable inquiry into Cappy’s standard of living and to distribute the trust’s assets. He needed to proactively ascertain Cappy’s situation.
    • His discretion did not allow him to not make inquiries to figure out whether Cappy needed help, especially after he had notice of Cappy’s hard times.
  120. Exculpatory clause in a trust
    • typically, the provision can be upheld as long as they do not overreach or do not abuse a trusted relationship.
    • Ex. a lawyer protecting himself may not be protected by it
    • Ex. wilful misconduct or gross negligence may not be protected, even if provided for in the instrument
  121. “Sole, absolute, and exclusive discretion” allocated to a trustee means...
    • that the trustee may do what they like as long as the trustee does not abuse that discretion
    • An abuse of the basic tenants of the trust relationship in itself violates the trust
  122. In re Estate of Janes (NY 1997)
    • (when disinvestment is required) (standard of care - investments)
    • Janes has a lot of Kodak stock (~ 71% of his 2.5M portfolio). At his time of death, the value of the stock is valued at 1.7M, or $135 per share. He devised to three trusts (one for his wife’s benefit during her lifetime).
    • The Lincoln Rochester Trust Company was to take care of the trust accounts, and told Mrs. Janos to sell roughly 1,200 shares of Kodak to pay for all necessary fees.
    • For years, they did not divest the stock in kodak into other less risky stock. They simply left it in as the stock value plummeted to 47% of its original value.
    • Crt: The company fiduciary duty was to maintain an investment portfolio that was not overly invested in any single company or investment.
    • The company failed to exercise due care and skill it held itself out to possess (failed to do an initial analysis, failed to follow its own internal review protocol, and failed to conduct more than routine reviews of the Kodak holdings in this estate).
    • The test is “the diligence and prudence of prudent and intelligent person in the management of their own affairs.”
  123. Wood v. US Bank N.A. (Ohio App 2005)
    • The trust held stock of the corporate trustee.
    • The trust authorized the trustee to retain its own stock, but it was silent as to the trustee's obligation to diversify.
    • Although the trust beneficiaries did not object to a plan to sell off some stock in order to pay the estate expenses, they later requested that the trustee diversify the holdings, which it did not do.
    • Thereafter, the trustee's corporate stock price plunged, and the distributions to the beneficiaries were made from the decreased assets.
    • The beneficiary filed suit, alleging the trustee had a mandatory duty to diversify. The trial court adopted the trustee's abuse of discretion and estoppel instructions, and judgment was entered for the trustee.
    • Crt: The power to retain the trustee's own stock was for the purpose of circumventing the rule of undivided loyalty only, and diversification was required absence special circumstances.
    • There was at least enough evidence of special circumstances to avoid a directed verdict.
  124. Duty to earmark
    must mark the money or signify in some way that the property is for the trust
  125. Duty of impartiality
    • How to administer the trust while accounting for the various interests of the beneficiaries
    • Often between income beneficiaries and remainder beneficiaries
    • -Income beneficiary: interested in the income from the investments high dividend stocks
    • - Remainder beneficiary: interested in the principal and growth in value of real property and non-dividend stocks
    • UPC: must give ‘due regard’ to the respective interests
  126. Howard v. Howard (Or App 2007)
    • The income beneficiary was married to the settlor (Marcene). They had trust agreements prepared to replace their earlier wills.
    • After the settlor's death, a dispute arose between the Marcene and Coy Howard, the decedent’s (Leo) children. The trust had been set up so that 60% of the funds would be in Leo’s trust (he had three kids, 20% each remainder) and 40% would be in Marcene’s trust (2 children, 20% remainder interest each).
    • Upon Leo’s death, his assets were to be split between two trusts, with one being funded with assets equal to the maximum amount that could pass free of the federal estate tax.
    • Marcene is to be able to access the net income of the trusts during her lifetime, the remainder goes to his kids, and nothing to his step-children (Marcene’s kids).
    • Leo’s will held that Marcene’s wellbeing should take precedence over the remaindermens’.
    • The trial court determined that the personal income, assets, and financial posture of the income beneficiary were not relevant to the administration of the trust.
    • The remainder beneficiary then sought review.
    • Crt: affirmed. the settlor did not intend for the trustee to consider the income beneficiary's other financial resources when administering the assets of the estate. 
    • The provision relating to the payment of net trust income did not reference such a requirement, even though such was explicitly included in other provisions.
  127. In re Heller (NY 2006)
    • (remaindermen beneficiary & trustee electing to also care for remaindermen at expense of income beneficiary)
    • Jacob Heller created a trust to benefit his wife, Bertha (should she survive him) and his children.
    • His entire residuary was to go into a trust during Bertha’s life. His brother Frank was the trustee with his sons as trustees on Franks death.
    • Bertha was receive the greater of $40K or the total income of the trust. Jacob named his children as remainder beneficiaries.
    • Bertha was receiving approx. $190K from 1986 until 2001.
    • The children became trustees in 2003 and elected the unitrust provision, reducing Bertha’s income to $70K and to have the unitrust provision apply retroactively. Bertha’s daughter sought to annul the unitrust election and to remove the children as trustees. She lost in the lower court on summary judgement.
    • Crt: Under the Prudent Investor Act, the trustee must pursue an overall strategy that would allow the trust to make appropriate distributions to current and future beneficiaries, with risk and return objectives reasonably suited for the entire portfolio.
    • 2001 legislation required that the trustee must balance the interests between current and future beneficiaries.
    • Remainder beneficiaries under the Prudent Investor Act who are also trustees may elect the unitrust provision, thereby saving the principle for the remainder beneficiaries, without it being considered self-dealing; however, doing so will be scrutinized by the courts.
  128. Allard v. Pacific National Bank (wash. 1983)
    • (duty to inform beneficiaries) (trustee must inform beneficiaries of all material facts affecting the trust)
    • The Stones set up a trust with a building in it - to their children and then to their childrens’ issue upon their death.
    • The property interest was in a building, with a 99-year lease with a no-rent increase clause, with the credit union occupying the lease having right of first refusal for purchase.
    • The credit union went to the bank and quickly negotiated a purchase price ($200k) The trustee, a bank, was instructed by the trust document to have “full power to manage, improve, sell, lease, mortgage, pledge, encumber, and exchange in whole or in part the property.”
    • The bank only told the beneficiaries of the sale ($200K) after the fact.
    • Crt: They did not tell the beneficiaries. The bank was within its power to sell the property, but should have had an appraisal and worked harder to sell at the best and highest price.
  129. spendthrift trust
    the beneficiary cannot voluntarily alienate her interest in the trust, nor can her creditors' attach to her interests
  130. What type of creditors may recover from a spendthrift trust?
    • Third party creditors who have provided necessary services may recover from the trust
    • (ex. Lawyers advocating for the beneficiary, providers of food/other necessities)
  131. Two traditional grounds for judicial modification/termination of a trust
    • By consent of all beneficiaries if the modification is not contrary to a material purpose of the settlor (Claflin Doctrine)*
    • Changed circumstances not anticipated by the settlor that would defeat or substantially impair the accomplishment of the purpose of the trust
  132. Claflin Doctrine application to successive beneficiaries trust in practice
    • If the settlor’s only purpose in creating the trust was to preserve the trust principal during the life of an income beneficiary, for the eventual enjoyment by a remainder beneficiary, early termination ordinarily does not defeat a material trust purpose.
    • If the settlor intended to protect the life beneficiary against his or her own mismanagement, early termination would defeat a material purpos of the trust.
  133. In general, a trust cannot be terminated if...
    • It is a spendthrift trust
    • The beneficiary is not to receive the principal until attaining a specific age
    • It is a discretionary trust
    • It is a trust for support of the beneficiary
  134. In re Trust of Stuchell (Or. App. 1990)
    • By will, testator established a testamentary trust for family - upon death of life beneficiary the principal is to be distributed to children/decendents per stirpes.
    • One child would not receive public assistance (mental health) if paid from the trust.
    • Crt: the equitable doctrine does not apply as the only reason to modify the trust is to make the trust more advantageous to the beneficiaries, and only three of them would most clearly benefit.
  135. Schefel v. Krueger (N.H. 2001)
    • (ability of creditor to go after a trust)
    • Krueger molested Schefel’s son. There was a criminal prosecution and a civil judgment against Krueger.
    • Schefel sought to take the assets of the trust in payment of the court ordered judgment.
    • Krueger’s grandmother created a testimentary trust for Krueger’s benefit, with the trustee being directed to pay income quarterly to Krueger and the principal if, in the sole discretion of the trustee, towards the maintenance, support, or education, and not until he attained the age of 50.
    • There was a spendthrift clause disallowing alienation of the beneficiaries to satisfy creditors.
    • Crt: The creditor cannot collect against the trust because of the spendthrift clause. The beneficiary is not the settlor (NH state law exemption).
  136. FTC v. Affordable Media LLC
    • (Offshore self-settled trust to hide assets for judgement will not stand)
    • Andersons runs ponzu scheme. The FTC wins a civil judgment and seeks to have it enforced.
    • The Andersons had a self-settled offshore trust in the Cook Islands, were co-trustees, and had a “duress provision” that removed them as co-trustees (w/ bank) to give the appearance of not being able to control their money.
    • They brought a defense against a contempt motion saying that inability to comply was an absolute defense.
    • Crt: they have the ability to comply, and they put themselves in the position.
    • A self-settled trust with clauses against alienability can still be accessed to enforce judgement/creditors if it was set up with the intent to defraud or hide illicit gains.
  137. Is a power of appointment a property interest?
    • No, but it is close
    • Ex. IRS taxes a power of appointment under the estate/gift/transfer tax
  138. Taxability of types of power of appointment
    • General power is taxable
    • Special/Non-general power is not taxable
  139. Who is the donor of a power of appointment?
    He who gives the power of appointment
  140. Who is the donee of a power of appointment
    He who takes the power of appointment
  141. Who are the objects of a power of appointment
    Potential recipients of the appointive property
  142. Who are the objects under a general power of appointment?
    Anyone
  143. Who are the objects under non-general power of appointment?
    specified individuals
  144. Who is the taker in default?
    • The individual who gets the appointed property if the donee fails to appoint the property
    • "In the event that someone does not exercise the power, the property shall go to..."
  145. Beals v. State Street Bank and Trust
    • Trust instrument was created by will before 1904 by Hunnewell. He left everything to his wife in the trust, income payable to her in her lifetime, then upon her death to be divided to his children and for his children who died but have surviving children themselves.
    • The trust was to continue, with each of the daughters having an unrestrained testimonial general power of appointment “appoint the residue as they see fit in their wills.”
    • A daughter (Isabella) marries into a wealthy family from NY (she domiciles in NY for the rest of her life). When she died, there was a dispute over whether there Isabella exercised her power of appointment through her trust.
    • However, in 1944, as a resident of NY, she executed a document in Mass. (where the will was created) which partially released her power of appointment (limiting it) to say that she gave up her right to appoint it with the exception of appointing to her father’s offspring. By relinquishing the general power, Isabella’s trust funds would not be taxed as a part of her estate.
    • Crt: where a donee of a general testamentary power of appointment, by a partial release prior to execution of her will, had reduced the power to a special power of appointment, and her will was silent as to the exercise of the power, it was held that the residuary clause of her will should be presumed to have exercised the power
    • a general residuary clause in a will is equally competent to exercise a special power as it is to exercise a general power
  146. Loving v. Marshall (Mass. 1985)
    • (implied gift in failed appointment)
    • Marian Hovey created a testamentary trust granting powers of appointment over the trust income to his nephews to exercise in favor of their wives under limited circumstances. If her nephews failed to make such an appointment, the trust property was to be transferred to the Boston Museum of Fine Arts and other charities. Hovey’s nephew, Cabot Jackson Morse, left the remainder of his estate to Anna Braden Morse.
    • Morse never exercised his right in regards to the trust principal of the trust created by Hovey.
    • When she passed, the trustees were uncertain how to distribute the principal of the trust.
    • Crt: Each nephew was limited in exercising his power of appointment to those other nephews in the family. The charities should not take b/c Marian Hovey expressed her intent to keep the money in the family. The trust principal should be distributed to Cabot Jackson Morse’s estate.
Author
cfontanesi
ID
318865
Card Set
Wills Trusts & Estates
Description
Wills Trusts & Estates
Updated

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