Text: Dukeminer, Johnson, 6th Ed, “Wills, Trusts and Estates.”
Lewis—a new lawyer, solo practitioner, was disciplined for professional responsibility, by borrowing money and did not associate with an expert in drawing up an inmates will. The estate consisted of security and some stock. It was Vacha’s late wife’s property and he get the lawyer to probate the estate. He sells the securities, doesn’t use an interest bearing account, commingling his clients funds, the estates assets should be kept separate. Made disbursements without any court approval. He takes out an unsecured personal loan, based on word of mouth, without independent council.
Lesson: know something about what you’re doing and get help from someone who knows.
Dead Hand Control
Shapira, p. 24
Shapira left everything to his children (Ruth, Daniel, and Mark) provided they marry a Jewish girl with Jewish parents within 7 years of his death. Held, no constitutional violation because the court is only being asked to enforce the testator’s restrictions on his son’s inheritance, not who he marries; he still has the right to marry, only whether he gets the inheritance. No violation of public policy because there is only a partial restraint on marriage. Unlike Maddox, there are plenty of Jewish women available to Daniel, and it is therefore not an unreasonable restraint on marriage.
1. Unreasonable restraint. “if a marriage permitted by the restraint is not likely to occur. Testator’s motive is irrelevant.
- marriage has been encouraged by the courts as a matter of public policy.
- what if the will provided “my brother gets a bequest if he quits smoking?” What if the reverse, you take if you start smoking? –There is a public policy argument that smoking harms your health.
2. family harmony. If a will or trust is intended to or tends to encourage disruption of family relationship, the provision is ordinarily invalid.
· daughter will not inherit until she turns 65, unless husband dies sooner or they get divorced.
· testator’s brothers and sisters must not communicate with each other.
handout, p. 1
1. p. 29 “The public policy of Ohio does not countenance a bequest of device conditioned on the beneficiary’s obtaining a separation or divorce from his wife.”
- maybe the mother thinks that as long as the daughter is married, she doesn’t need the money. maybe mother didn’t like Bubba and didn’t want him to have it if she died.
- the fact that there is a “gift over” is significant. - as a drafter, you want to spell this out clearly, say, for example, “because I’m not interested in my son-in-law having control of this money.”
2. Nancy is unmarried, and the trust will pay as long as she’s single. Is this a restriction against marriage?
-argue mother is concerned about support.
3. Trustee will pay as long as she remains single. Horace doesn’t want his wife to remarry. Or maybe he wants his daughter to be provided for. It might be a support notion, not just to protect the child. That’s why its important to spell out the rational.
Grounds for suing the drafting attorney:
(1) Privity not required (majority). Majority jx: suit against the drafting attorney may be based on tort or contract, therefore, the intended beneficiaries have a cause of action. The first case to abolish with the requirement of privity, was Heyer v. Flaig.
EX: Simpson v. Calivas, p. 59— Atty drafted a will leaving T’s homestead to his second wife; it’s unclear whether “homestead” includes the entire 100 acre parcel of land or just the house. Son from a first marriage, buys out second wife’s share and sues the lawyer for negligence and breach of contract. The lawyer claims there was no privity of contract; only the dead father had privity with the lawyer. Held, Privity is not required when it harms the intended beneficiary, especially when there is a foreseeable harm to the intended beneficiary. So a negligence claim is appropriate.
(2) Minority. TX: privity required. Lack of privity of contract between the drafter and the beneficiary prevent a malpractice action by the beneficiary. Must have privity, between the lawyer and the client. Barcello v. Elliot (Tex.) The estate, however, may have a claim for malpractice. But, in Simpson, the estate is not harmed because its all going to be split up anyway.
(3) Breach of fiduciary duty--Hotz. v. Minyard, p. 66
Dobson was a long time family lawyer and he was a CDA. He did the father’s will and the daughter’s will and taxes. Lawyer drafted father’s will in the presence of son and daughter, leaving land to them. Later, father returned to draft a new will in secret, instructing atty not to tell anyone which cut his daughter out of estate, revoking the morning will. A year later, the daughter wanted to look at the will, and Dobson showed her the first will, in reliance on this will the daughter acted to her detriment and not sues Dobson for breach of fiduciary duty. Here, Dobson had an ongoing atty-client relationship with Judy. he misrepresented the first will. She sues for tortious misrepresentation and breach of fiduciary duty. Held, Dobson has a duty to daughter.
NOTE: Hotz is not a contract claim so privity wouldn’t matter and a beneficiary could sue, as judy did, for tortious misrepresentation in Texas.
In the McCamish, TEX, case allows a case of action for misrepresentation.
Estate Planning Problem, p, 49
Howard and Wendy Brown. The letter doesn’t set out who owns what and in what capacity. Don’t know much about the family, it only says “our children”.
Howard has a will on p. 50-51, and Wendy’s is reciprocal.
FIRST: pay “just debts” this doesn’t do anything that isn’t already required by law. If debts are owed by Howard or Wendy during their lifetime, those debts are still owed by the estate. unintended problems: the mortgage on the house would have to be paid by the estate. Usually whoever inherits the house inherits the mortgage. This could deplete the estate. What about the estate- and inheritance- taxes? Are these just debts?
SECOND: Spouse as “executor” does an accounting and makes a distribution. But naming the spouse may not be a good thing. What if Wendy dies first or is incompetent at that age? Identify alternative executors and administrators. “not required to give bond”—one of the values of having a will, is that you will not have to post a bond.
FIFTH: “authority of the executor”—“sell and convert cash and real estate” but there might be things other than cash and real estate. give the executor as much power as possible, so they can do what they want without court supervision.
TX gives you broad authority without court approval, in an undisputed cases.
THIRD: “remainder interest in mother’s house in Delaware.” CN: when he passed away, he left the home “to Mom for life, then to the kids, Howard and Carol.” H owns a vested remainder, which he can devise. He is a tenant in common with his sister Carol. So they have to out-live mother, and then Howard’s children have to,....but in SIXTH it says the Wendy gets all if she out lives him.
FOURTH: “gives, devises, and bequeaths all the rest”-- ‘gives’ is sufficient.
“to my wife” what if he dies and she remarries? What if she decides to disinherit the children?
Who will be guardian if both parents are killed in a common accident?
“should she survive me” what does this mean? Survival by how long?
“Should she not survive me, then to my children.” If Howard dies first and Wendy a few days later, Wendy’s assets pass to her children, but she has three children, not two.
If Wendy dies first, then Howard inherits all her property, and then he dies, it all goes to his children and Michael will be left out entirely. Both parents probably want Michael to take, but because of the wording of the will, he’s out.
Transfer of Decedent’s estate, p. 34
1. Probate and non-probate property.
All of the following are non-probate:
a. Joint tenancy property.
b. Life insurance, paid to beneficiary upon receipt of death certificate.
c. P.O.D. Payable to beneficiary upon death.
d. Trusts. assets are distributed directly by the trustee to the beneficiaries named in the will and do not go through probate.
A B C
A, B, C, D Take Blackacre as tenants in common. When D passes, leaving all assets to E, E would step into D’s shoes. Had it been joint tenants w/ ROS, then A B C would own it, and E would get nothing.
D sells D’s interest to E? this severs the joint tenancy. if A dies, then B and C will be JT with respect to each other, but tenants in common with respect to E. Had it all been a JT w ROS, then there would be no probate.
Assets and liabilities: Summary, p. 58
What is tangible personal property? cloths, cat, artwork, junk.
Residence --- joint tenancy (non-probate).
Lake property --- in Howard’s name, (probate asset). different states will treat the ownership in differently.
Carol and Howard own a remainder interest. The executor has to figure what all this is worth.
IRS is concerned about taxing it. executor has to deal with taxes.
Savings account --- Wendy’s name, (probably probate).
CD (joint tenancy), ---nonprobate.
IRA (P.O.D.), ---nonprobate.
Insurance policy, pay the beneficiary: nonprobate.
Pension plan --- non-probate.
Not much goes into probate. The Lake property, remainder of mother’s house, and the stock funds. The will doesn’t affect much of it.
Managing a Minor’s Property--Guardianships, p. 132
reasons for having a will:
· appoint a guardian for the children.
· management of the child’s property.
If not provided in the will, a guardian will be appointed by the court.
Guardian or conservatorship. (18) A guardian cannot change investments without a court order. Strict court supervision over the guardian’s acts is burdensome and time-consuming. convervatorship given the powers of a trustee. Custodianship. (21) property may be transferred to a person as a custodian for the benefit of the minor. Custodian is a fiduciary and not under the supervision of the court. Good for small amounts. Trust. Good for large amounts. The most flexible.
SIXTH: Guardians: Lucy is appointed as a guardian, but guardian of what?
guardian of the estate;
guardian of the children.
Guardianships are very inefficient. What if Lucy is dead or doesn’t want to serve, there’s not alternative. He needs to specify alternative and guardian of the estate.
§ 676(e)—the court shall appoint the person designated in the will . . . unless the court finds that the designated guardian is . . . dead.
§676--If more than one ascendant exists, the court must appoint the ascendant considering only the best interest of the minor.
§680—A minor who reaches 12 may choose the guardian.
§681—who can serve,
Intestacy, p. 71
Governing law, generally:
where domiciled at death
Homestead, p. 476: Generally, the surviving spouse has the right to occupy the family home for her lifetime. The decedent has no power to dispose of a homestead so as to deprive the surviving spouse of statutory rights therein. UPC §2-402 (1990), says up to $15k.
Homestead rights of the surviving children are the same, whether separate property of deceased or community property. The homestead shall not be apportioned among heirs of the deceased during the lifetime of the surviving spouse, or so long the survivor elects to use or occupy the same homestead. The spouse gets the homestead regardless of whether there are children or not.
Problem, p. 134
Howard is survived by his wife, two children and stepson.
HANDOUT, day 5
Colorado: common-law, Distribution under the UPC?
Under the old UPC, Wendy would get $25k + half; under the new UPC she gets 250k + half.
If Wendy dies, Howard gets less than she, because Wendy has a child who is not also a child of Howard. Under the new UPC, Howard would get only the first 100k; under the old he gets half.
The distinction between the 100k and 150k has been criticized.
Problems, p. 76
2. H &W have been married for one year. H dies intestate, survived by W and a brother, but no parent..
Under the Tex. PC it all goes to the wife
What if there were a will and the brother chose ...
3. Legal Marriage. Henry dies intestate. What if it’s a bigamous marriage? Most courts recognize only the lawful spouse, which means that his current wife would get nothing. What do you tell partners who are not married? If they are not married the intestacy statutes will not apply to them.
After peeling off the first 150k, the remaining 37k is divided by two, and the other half goes to the daughters. But the daughters are minors and they can’t take the money themselves, guardians have to be appointed. The daughters would get $18.5 each. The mother is the guardian of the person, but the $18.5 is the property of the children.
§676— the mother is the guardian of the person and can be the guardian of the estate. But since it says ‘can’ she would have to go to court to get approval.
Personal property set aside. p. 477--The surviving spouse has the right to have set aside certain tangible personal property of the decedent up to a certain value (UPC: $10k) (Tex: $60K): household furniture and clothing, car, farm animals. The decedent may have no right to deprive the surviving spouse of the exempt items. UPC §2-403 (1990).
§271—the executor has to inventory all the assets and get them appraised, get claims of the estate, then the court is to set apart for use and benefit, for the surviving spouse and unmarried children. “for the use and benefit” -- not to pay creditors. The intent here is that the probate process may take a long time, so this sets aside so that they can’t be used to pay for the ... note: the ‘unmarried children living with the family’ only applies to the “benefit and use,” but not the homestead.
Texas Exemption. §271 - an affidavit to be filed immediately after the inventory, after which the court shall by order set apart for the use and benefit of the surviving spouse and minor children property exempt from the forced sale of creditors. The applicant, spouse or minor children must show by preponderance of evidence that it needs the support.
The support should be submitted to a) children, or surviving spouse or guardian. If after final settlement it appears that the fund is solvent, then the property will be divided accordingly.
Personal Property Exemption, Property Code § 42.001 and 42.002 --
Personal property is exempt from garnishment, attachment or seizure if:
the property is provided for a family has an aggregate value up to $60,000 or
the property is provided for a single adult who is not a member of a family and has an aggregate value (FMV) not more than $30,000.00.
(Besides section (a), and (b), (current wages, professionally prescribed health aids, and alimony, are not subject to garnishment, and it is not included in the limits of §§. a & b).
§ 273. If the deceased does not have homestead and personal property that the wife and children can exempt, then the Court shall allow the sale of property up to $15k for homestead and $5k for personal property from the estate to provide for the spouse and children, Exclusive of the allowance for the support of the surviving spouse and children provided after by the court under § 282.
Texas Property Code
§42.001—personal property exemption. If the creditors couldn’t reach these items during lifetime, they shouldn’t be able to get them after death.
§42.002 –“personal property.” A lot of personal property can be set aside for ‘use and benefit’.
§42.001--cap of $60k> UPC $10K.
Hypo: T left Pickup truck to son, from a prior spouse. T had a new wife (W2). H dies. Under a will, he left everything to his son except a homestead interest. W2 got a court order under §271 to set aside the pick up truck for her “use and benefit.” §271 is to help the surviving spouse to get by while the estate is being probated, but once it’s been probated, you have to carried the testators wishes.
Solvent estate. §278: there were assets left and the estate was solvent, so the truck has to go to the son.
Insolvent estate. §279: if it was insolvent, then by law, the property would go to the survivor, despite the testator’s will.
UPC § 2-404
The court can award a family allowance for maintenance and support, up to a certain amount over a certain period of time. This is in addition to whatever may pass to the surviving spouse. But once the Estate is closed, the allowance cannot continue.
§288--the court should not make a family allowance if the spouse has adequate separate property. But the presumption is that it is community property. How much will depend on their needs.
§ 286 "unless an affidavit is filed, and a list of claims has been approved, the Court shall fix a family allowance for the support of the surviving spouse"
This allowance shall be in an amount sufficient for the maintenance of such surviving spouse and minor children for one year from the time of the death of the testator intestate.
Community Property Laws, p. 521
Husband and wife own the earnings and acquisitions earned during marriage in undivided equal shares, and whatever is bought with those shares is also community property.
Separate property —acquired before marriage or during marriage by will, devise or bequest.
Income from separate property in Tx, is community. This includes interest.
Presumption: the property is community property.
Conversion by agreement. By agreement spouses can change community to separate, or separate to community.
EX: T dies; division of property.
½ à T’s estate (can devise)
½ à surviving spouse
Sale of community property. Ok.
Gift of community property. Not ok. fraud on the spouse.
EX: life insurance names your mother beneficiary. If the policy was bought after marriage, the wife is entitled to half of the proceeds. The presumption that H and W own equal shares in the community property.
Method of distribution: UPC on p. 73, ftnt
Begin by inventorying all probate assets, as determine whether they are community or separate property. Distribution of the community estate is governed by §45, while distribution of the separate property is governed by §38.
children from prior marriage?
50%à all children
all same children?
life estate in 1/3àW
Problem: Howard’s estate Community property State, UPC (Idaho)
When acquired?, 135
All probate assets.
Tangible personalty $20k (community, acq during marriage)
Lot & Cabin, Lake Murray (in idaho)—75k (community, acq during mrg, though title is in Howard’s name, H’s earnings and Ws’ earnings are community)
Mama’s house, 20k (acq by inheritance so separate)
general corp. 80k (acq by gift, so separate)
Varoom funds 30k (separate)
Tracing Principle: I buy an IRA before the marriage for 8k, and during the marriage I contribute to the IRA. When you deal with a divorce or estate, you start with the presumption that it is community. You have to trace back. As dividends earned were reinvested into the IRA. Suppose the acct earned $200 in dividends?
Stock. If this value has increased from $10 /share to $15/ share, then it doesn’t change the character of the asset. so it would still be separate. But in an IRA, you don’t know what’s dividend and what is increase in value.
So the ‘general stock’ might require some tracing. If it is separate, how do you distribute it?
Wendy gets the first $150k under the UPC. Here, there is only $130k so she gets it all. “All community property passes to the surviving spouse whether or not the decedent is survived by issue or parents.”
Equitable lien, p. 6 supplement: W purchases a home for 100k while single. Ergo, the home is her separate property. Down payment 10k. She paid down the note another 10K. Then she gets married. The separate-ness of the title does not change because of the inception of title. When she marries its worth $120k. But she has 40k equity in the house. From the day of the marriage, she’s paying the money from the community estate, the monthly salary. To what extent did the community contribute to the reduction in debt, and the increase in value?
Equity in the property: 300. See equation.
Survivorships, p. 11-15--JT w/ ROS in Texas, §451.
Problem class 6: When Fred dies they had a right of survivorship probably controls, including Sageacre.
BUT: JT ROS is very rare in Texas.
“all interest in Sageacre to brother Robert, and all the rest of his property to his wife Molly.” If it was jt w ROS, could he will it to his brother? No, because the moment he dies it become his wife’s.
3. Named his sister as independent executor.
§460(b)(1)—would allow him to take clear title if bought without knowledge. Innocent purchaser more than 6 months out.
But there was only authority to sell one half of Sageacre, not the whole thing. After 6 months you treat the ROS as though it didn’t exist and apply what would have existed without it, which makes it community property, so he can only dispose of half of it in his will.
Revoke, §455 allows revocation if both parties, sign and deliver.
§§38, §45 Howard and Wendy in Texas,—
Tangible personalty: $20
Lake Murray is now in Texas: $75k
IRA?? (POD) What if this was POD to a stranger? Half of it is Wendy’s.
Life insurance??? (POD)—community asset, but by contract it names Wendy as beneficiary, but had it been a stranger, Wendy would have a claim because paid for by community funds.
Howard’s ½ interest: $127,500
What are the separate assets?- acquired by gift; real and personal property is distributed under different statutes.
Momma’s house (real property)
General Corp. (personal property)
Varoom funds, (personal property)
Community property: §45(a)(2)—if all of Howard’s children are also children of Wendy, so she gets all of the community.
Separate property: §38 distinguishes between personal and real property.
§38(b)(1)- Wendy, as the spouse, takes 1/3 of the separate personal property. The remaining two thirds (2/3) goes to the decedent’s children, not Wendy’s child. the surviving H or W shall also have—Wendy gets a fractional life interest along with Howard’s sister, with remainder to H’s children. It’s not a possessory interest, so they can’t move in.
How would Wendy’s estate be split up under §45 and §38?
Separate Property, controlled by §38
Union Nat’l Bank: 90k. §38(b), 1/3 goes to Howard, and 2/3 goes to her three children.
Community property: Apply only §45
Tangible personally – $20k (community)
Resident $160k (Community)
Lot & Cabin $75k
IRA? $30k (community presumption-1/2)
Life insurance/ cash value $20, 500 (community)
Total: $305, 500
You put it all in one pile and divide. Howard gets only ½ and the children get ½.
CN: what’s the state of the title of the house? Howard still owns 1/2. Each of the children own an undivided 1/6 interest. CN: There are issues of co-ownership if Michael is estranged and says I want my sixth, or wants to move in. Normally, a co-owner could get a partition in sale; but here we have homestead protection.
Homestead with regard to Howard:
Tx Probate Code §§ 282, 283, 284, 285; Property Code 41.002;;
§282—same rule applies to the homestead whether separate or community property
§283—the homestead descends and vests.
§284—homestead cannot be partitioned as long as H uses it.
§285—when H sells, dies, or no longer uses, then homestead can be partitioned.
CN: Texas enjoys the right to declare homestead, rural in up to 200 acres, and urban up to 10 acres. Consequences of real property held as homestead: It will pass free of most claims of decedent’s estate, except taxes, mortgage. Also, there is the right of occupancy by the surviving spouse.
Homesteader’s obligations. A Surviving spouse who has asserted his homestead rights has the duty to certain expenses:
· taxes and
· mortgage interest (not principal),
· but not insurance.
NOTE: Insurance and principle on the mortgage have to be paid by the remainderman. If its ‘community property’ then the W would be one of the remaindermen, and she would have to pay half of it. Hill v. Hill
NOTE: Homestead right is extinguished when spouse moves. The homestead right is only as good as long as the widow/er is alive and is using it.
W&H2 bought 200 acre farm: H2 doesn’t get along with C1 and C2
H2 can assert his homestead rights.
Shares of Descendants, p. 86
§43-Determination of per capita and per stirpes Distribution.
By representation. the child’s descendant’s shall represent the dead child and divide the child’s share among themselves.
N.B. In-laws--take nothing: sons-in-law and daughters-in-law take nothing, they are excluded as intestate successors in virtually all states.
English distribution per stirpes (“strict per stirpes”)(minority): divide the property into as many shares as there are living children of the designated person and deceased children who have descendants living.
A______ Divide by two: D=1/2; E&F=1/2 B C
D E F
Modern per stirpes (majority, Tex): divide decedent’s estate into shares at the generational level nearest decedent where one or more descendant’s of the decedent are alive and provide for representation of any deceased descendant on that level by his or her descendants.
EX2: See Ex 1 : Divide by three: D=1/3;E=1/3;F=1/3
Per Capita at each generation (UPC (1990) 2-106), p. 88: the initial division is made at the level where one or more descendants are alive, but the shares of the deceased person on that level are treated as one pot and are dropped down and divided equally among the representatives on the next generational level.
A______ ____________ B C
D <-Divide total by three: D=1/3
D E F <-Divide 2/3 by three: D, E, F=equal shares
C-H D- H
| | | |
F G H I J K L MNO
English per stirpes: Look at the first living generation: E=1/4; F&G=1/4; HIJ=1/4; MNO=1/4. In-laws get nothing.
Per capita at each generation, UPC: E takes ¼;. the remaining ¾ gets divided equally by 7. the treat all grandchildren equally
What if E were dead?
English rule, still ¼ each because they all had children.
Modern per stirpes: go to the first line where there are living descendants. There are ten, so they all get a tenth each.
Same under the UPC.
A_____________________ B __ C__
| | | | | |
F_ G H I
| | |
I K L
English: divide at first generation
Modern: divide at first living generation
UPC: re-pool at each living generation.
| | |
No descendants: EX 4, see 1 on p. 96. Surived by mother, sister, two nephews.
§38 (§45 doesn’t come into play). Half goes to siblings: Sis=1/4;
Texas has no laughing heir statute. there’s no limitation. you keep hunting for an heir before it escheats to the state. §38(a)(4).
Negative disinheritance, p. 90
Old Rule: not enough to say “my son John shall receive nothing.” You had to devise the entire estate to others.
New Rule: You can just say “John gets nothing.” UPC
Shares of Ancestors and collaterals, p. 90: All persons who are related by blood but who are neither ancestors or descendants are collaterals.
Half Bloods, p. 96
Some states treat inheritance rights differently for half bloods. §41(b)—half blood inherits only half of what a whole blood would. If all are of the half blood then they all take equally.
| | |
Mother’s side. A B and C would all take equally from mom, because they’re all mom’s children.
Nonmarital Children, p. 115
Howard and Wendy. Michael had a non-marital child.
| | |
presumption of parentage. Fam. Code §160.204—: if born in marriage, if born on the 301st day after marriage terminated; if the child lived with father’s house and father held him out to be his own. These presumption can be rebutted.
D1 and D2 would take half.
All states permit inheritance from the mother, some from the father.
Establishing paternity by:
1. subsequent marriage of the parents,
2. acknowledgement by the father,
3. adjudication during the life of the father,
4. c&c proof after his death.
Parent/child relationship. Uniform Parentage Act – confers rights and obligations on the parent/child relationship, whether or not there is marriage. Once the father has taken the child into his home and openly holds out the child as his natural child, or acknowledges paternity in writing, filed in court, a parent/child relationship is presumed.
Expectancy, p. 131--No living person has heirs; only heirs apparent, who have an expectancy. A transfer of expectancy, for adequate consideration, can be enforceable in equity as a contract to transfer if the court views it as fair under all the circumstances.
Gifts to Descendants, p. 755
Gifts to “children” or “issue”?
To my children: The law presumes that the word “to my children” means immediate offspring, not “grandchildren.”
Had it said, “to my children per stirpes” then it kicks you back to the intestacy law.
1. Per stirpes distributions
General Rule: “per stirpes’ in a will is interpreted to mean apply the intestacy statutes of the given jx.
Ex: T devises fund to “my daughter for life, then to her surviving children.” Daughter has two children, B and C. C has one child, D. C dies. Daughter dies. B takes all, D, the grandchild takes nothing.
How to avoid: Use ‘issue’ or ‘descendants’. If “descendants” extrinsic evidence is sometimes admitted to bear on testator’s intent.
If ‘to the issue of A,” is it per capita or per stirpes?
Per capita: all issue born before the period of distribution take an equal share. EX: I have two children, D and G; and three grandchildren by D. All five descendants take equal shares.
Per stirpes (by representation): the children of a child of the designated ancestor can take nothing if their parent is alive, and if the parent is dead, the children take from the donor by representation. EX: under the English rule: I have 2 children, D and G; and 3 grandchildren by D. Divide estate into two; D’s children will divide D’s share by three.
EX: “to A for life, then to A’s issue.” A has two children, B and C, living. Then B dies, leaving one child, D. Then C dies, survived by two children, E and F. Then E dies, survived by two children G and H. Then F dies, survived by a child, I. Then A dies.
G H I
English per stirpes: D=1/2; G&H=1/4; I=1/4
Modern per stirpes:
UPC per capita at each generation
| | |
EFG | |
The term “child,” “issue,” “descendent” under the Family Code all means offspring.
“Bodily issue’ will be construed to include the adopted child. Only if it expressly states “not my adoptive child,” will adopted children be excluded.
Adopted Children, p. 759
Adopted children are presumptively included in gifts by T to the ‘children’ ‘issue’, ‘descendants’ and ‘heirs’ of A. Texas treats adopted children about the same as natural children for inheritance purposes. See § 40.
NOTE: the natural parents shall not inherit from the child, but the child can inherit from the natural parents. Does the Family Code conflict with this?
J adopts A; G dies. A can inherit from Granny, because A is still her granddaughter. But A would also be able to inherit from J’s ascendants.
But G cannot inherit from A.
EX: un-married teenager puts her child up for adoption. Often courts will put something in the document which severs the inheritance rights.
Adopted wife--Minary v. Citizen Fidelity Bank (Ky), p. 760
The trust was for the three sons, James, Tom, Al, and on their death “to be distributed to my then surviving heirs according to the laws of descent of Kentucky.” James died without children; Tom had two children. Al married Myra then adopted her as his child to ensure her financial security.
R: Although adults can be adopted just like children, adopting an adult makes him the heir of the adopting party only. Here, the estate is directed to “my heirs.” Although the adoption laws allow an adopted person to take as an heir, allowing someone to adopt someone who was clearly not intended to come under the provisions of the will thwarts the intent of the ancestor whose property is being distributed and cheats the rightful heirs. Held, the adopted wife may not take as an heir.
S1—wife Tom James
wife 2 kids no issue
Compare: Same facts except mother’s will directed the estate to be paid to the ‘heirs at law of Al.” Held, the wife should inherit the same as an adopted child, because the will directed payment to Al’s heirs, not mother’s heirs.
Power of appointment. Emilia could have given her sons the power of appointment, so that her son’s spouses could have taken a portion of the estate.
‘Surprise’ child. Howard leaves “to his children.” If another daughter shows up and can establish paternity, she can inherit.
/ \ \
S D1 D2 M
Class Closing Rule, p. 777
Class-closing rule/rule of convenience: class will close whenever any member of the class is entitled to possession and enjoyment of his share, and includes all children then alive or in gestation.
Immediate gifts. “to the children of B.” B is alive at testator’s death.
No children are born at testator’s death. It is assumed the testator intended all class members, whenever born, to share. The class would close on B’s death.
EX1: T “to the children of B who reach 21.” B has children alive, but none 21 at T’s death. The class will close when a child of B reaches 21.
EX2: T “to the children of B, to be paid to them in equal shares as they respectively reach 21.” The class will close when the eldest reaches 21, or if he dies, when he would have reached 21.
Postponed gifts. A gift to a class of remaindermen will not close until the life tenant is dead, and it will not then close under the rule of convenience unless one remainderman is entitled to possession.
EX: “to A for life, then to the children of my daughter B.” The class will not close in any event until the death of A. If B survives A, the class will close at A’s death if (a) a child of B is then alive, (b) a child of B predeceased T and the gift did not lapse but went to such child’s issue under an antilapse statute, or (c) a child of B was alive at T’s death or was born after T’s death and such a child predeceases A. In each case, a child of the child’s representative can demand payment at A’s death. If B does not have any children when A dies, the class closes at the death of B.
Gifts in Specific sums (per capita gifts), p. 785
If a specific sum is given to each member of the class, the class closes at the death of the testator regardless of whether any members of the class are then alive.
EX: T bequeaths 1k each to A’s children. A has no children when T dies. The class closes and none of A’s children can ever take.
Future Interests, p. 710
Types of Future Interests (no present entitlement to possession).
1. Interests in the transferor:
b. possibility of reverter (fee simple determinable, automatic)
c. Right of re-entry (fs subject to a condition subsequent )
2. Interests in a transferee:
a. vested remainder: 1) given to a presently ascertained person, and 2) not subject to a condition precedent,
b. contingent remainder: 1) not given to a presently ascertained person, or 2) is subject to a condition precedent.
A remainder given to a class of persons, some but not all of whom are ascertained, and not subject to a condition precedent, is vested in the present members of the class subject to partial divestment by additional person coming into the class.
c. Executory interest.
PROBLEM 1, p. 714
O conveys a fund in trust “for A for life, and on A’s death to A’s children in equal shares.” A has three children, B, C, D. B dies intestate, then A dies.
CN: At the time of the conveyance A had B and C are alive. Then D was born. Classify the interests at the time of the grant, then reclassify at time of a new event, like a death or birth.
At the time of the grant B and C had vested remainder subject to partial divestment. There’s no condition or contingency, they are identified and in being. Then D is born. So the class expands. Still vested remainders subject to partial divestment. B dies. B won’t take, but what happens to B’s heirs, because it was a vested interest, so is alienable, it could have been parked in a will.
Transferability and Taxation, p. 726
Remainder are transferable. Federal govt subjects any transfer of property interest to estate taxation.
Posthumous Children, p. 97
280 day presumption. There is a rebuttable presumption that the date from conception is 280 days. This is rebuttable: a child born 322 days after death of husband was shown to have in fact been the child of the death father, thereby rebutting the presumption.
Texas: §41(a)—Persons not in Being. You have to be alive at the time of death of the decedent, unless you are a lineal descendant.
Simultaneous Death, p. 77
“Sufficient evidence” test.. Uniform Simultaneous Death Act (1953).
120 Hour Survival Requirement—Texas. §47. this is the default rule. It can expanded to 30 or 60 days, or two seconds. The beneficiary of an insurance policy or a devisee must survive by 120 hours or else is deemed to have predeceased the decedent.
EX: “To my wife Wendy if she survives me.” this kicks out the 120 hour rule, and Wendy will take if she survives by even a second. It can be expanded, or contracted. If will says ‘survival’ then the 120 hour rule doesn’t apply, the time is collapsed. §47(f)
EX: H and W. W has two children from a prior marriage. But H and W have no children in common. H has a living sister. Boating accident. H dies instantly, W dies at the hospital. Under the old rule, there is “sufficient evidence” of survival so she would take, but she soon dies, so her children will take. If her will says, to H if he survives me, then to children, the children would get the entire estate. What if H died in the hospital? The estate would go to his sister.
Under the 120 hour rule. There’s clearly a survivor here by two hours. What do we do with the estate in Texas?
Disposal of community property §47(b)– if neither husband or wife survived the other by 120 hours; treat half as though he survived, and half as though she survived.
Disposal of separate property §38. This rule avoids the probate of the assets and the litigation over who died first.
Alternate takers. §47(c)— If none of the alternate takers survives by 120 hours, divide gift into equal portions and distribute as though they had survived.
The Probate Process
§5—Which Court.--determine what kind of court the county has before you file. Bigger counties have statutory probate courts. Mid-size counties have county courts at law. Small counties have only constitutional county courts. County judges have an array of administrative duties as well as legal duties. County judges don’t have to be lawyers, yet they have probate jurisdiction.
§5- county which has statutory courts at law will have concurrent probate jurisdiction with the constitutional county courts. In contested matters however, they need to go to the district courts. same with guardianship proceedings.
Venue--§6—which county to file in. File in the county where the person died if they have a domicile or fixed place of residence, where they have property...
§5B(b)—if personal injury type case the Civil practice and Remedies Code will control.
Administration of Probate Estates, p. 35
(a) Duties of Personal representative
1) inventory and collect the assets of the decedent,
2) manage the assets during administration,
3) receive and pay the claims of creditors and tax collectors, and
4) distribute the remaining assets to those entitled.
5) reflect the passage of title.
Dependent administration-dependant on the court.
Independent administration- §145—with a will, he can serve without bond,
Directed by the will [§145(a)]
If distributees agree [§145(c)]
Even no will, if there are agreements [§145(e)]
(b) Duties of administrator
-apply for and obtain LETTERS testamentary: official statement by the court authorizing the collection of assets from the banks.
- inventory the Property, including appraisals [§250]
-compile a list of claim of the estate [§251]
§181--orders granting letters testamentary or of administration.
Fiduciary duties: not to commingle funds, manage it appropriately. Grounds for removal. . . .
What actions must executors within 120 of receiving the letters of credit?
- notice of administration posted in a newspaper of general circulation.
- Inventory the assets
- notice to charitable beneficiaries.
(d) permissive notice to unsecured creditors.
- the administrator may give notice to unsecured creditors which gives them 4 months to respond. Look at statutes of limitation.
Secured creditors have to get actual notice in two month period.§295
Matured secure claim or preferred debts & lien.
EX: Jane died and she hadn’t paid off all her debts and there was a 30 yr mortgage with 10 years to go when she dies. This will likely be a secured note. Decedent owed Big Bank $50k. Big Bank can either present the claim as a matured claim and demand their money, and if Jane died with a sizeable estate, then they can get paid.
§320—who feeds at the trough first [a favorite for the Bar exam].
§322: federal lien goes at the top of all of these. These are matured secured claims.
They may opt for a preferred debt and Lien. If the decedent took out a loan with a high interest rate and never refinanced, they may want to wait.
Exoneration of liens, p. 468:
(a) Take from residuary before specific bequests. Under this common law doctrine, when a will makes a specific devise 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 paid out of the residuary estate. Not all jx follow the doctrine. UPC— “a specific devise passes subject to any mortgage interest existing at the date of death without right of exoneration, regardless of the general directive in the will to pay debts.”
EX: T dies, specifically leaving Blackacre to Bill. Big Bank wants a preferred debt lien. Bill wants Blackacre free and clear. If there are assets within the residuary to pay off the debt, Bill can demand that he get Blackacre free. Big Bank will have to accept the full amount even though they want preferred debt status. If the will says that Bill takes subject to the lien then there’s no exoneration of liens.
(b) Exonerate liens to the extent that there are assets in the residuary.
EX: There’s a specific bequest to Bill and a specific bequest to Alice, and the rest to Sue. If there’s nothing in the residuary, then there’s no exoneration of liens. If there’s only 50k in the residuary, then ....[???]
Problems, p. 46
Collection of assets. This is a small estate which requires fewer formalities. The duties to file an income tax return would be required regardless. The first function is to collect the assets. The furniture is at home; the savings account is a jt w/ ROS, so it doesn’t go through probate.
Joint checking acct, both authorized to write checks. Just because it’s a joint account doesn’t mean that it’s ROS, but this is likely community property. So half this is his and half is hers. Gathering this is not going to be a challenge.
§445—Payment of joint account after Death--informal.
Pension plan is non-probate
Govt bonds is contractual , non-probate
Life insurance, contractual, non-probate,
Car, title is probably in his name, but its still community property.
So there would be no problem gathering the assets.
utility bill $40
Visa card $300
departments store $125
Funeral bill $1,225
Cemetery lot $300
Most people will just collect these debts and right a check, so there’s no problem.
Some of these assets could probably be protected under some of the statutory protections, such as the set aside, and homestead. Most people won’t know about these protections, so they’ll just pay them off.
Taxes. Executor needs to take care of the taxes. If T dies before April 15, she will have to file for last year and this year, plus there will be income to the estate.
Title Clearing function. you can just file an affidavit of heirship, which is pretty informal. So the will probably will not have to be probated.
If you don’t probate the will, she died intestate.
§155—makes things flexible: when someone dies intestate and the community passes to the survivor, then you don’t need estate administration.
§75—The person having custody of the will must deliver it to the court house. But §155 says if intestate, you don’t need administration. How do you square these? §75 just says deliver the will, it doesn’t say it need to be probated. It’s just a filing requirement. This is to prevent people from hiding,
§94—a will is not actually effective unless probated. A person is still intestate even his will is filed with the court, if it’s not probated.
Hypo: What if the two adult sons were Greens son’s from a prior marriage. Where do the assets go under §45? The community property: she keeps her half, the other half goes to the adult sons. Can we still have an informal resolution? If the stepsons are adults, they may not need or want their share. But the stepsons may not get along well with the sons. With this size estate, how much would it cost to pay a lawyer to do any litigation?-- it would eat up the assets.
- small estate administration [§155]
- muniment of title
- heirship proceeding
- affidavit of heirship
§137—Small estate administration. Elements:
· decedent died intestate, and
· estates of less than 50k.
· not including homestead and personal property
· no representative needed
· two disinterested witnesses
NOTE: $50k not as small as you think. A $2 million house is the homestead, plus personal property set aside. And with community property, it would only be one half.
3. Same facts except the Greens own their own home. The title function, the deed shows his name, at some point she may want to sell, it so under §137 she might was to clear the rights.
subsection (c), the use of an affidavit filed with the court, very simple. §137—he has to have died intestate, but here he died with a will, unless the decision is made not to probate. Here, there’s two pieces of property, a home and a lot.
Muniment of title. [§89-89C].
· A will
· no debts owed, except mortgage
Statutory heirship Proceedings [§48]—
· no will, (“dies intestate”)
· clears title
Nonstatutory affidavits of heirship (unique to tx).
· affidavits identifying chain of succession and ownership.
· used in rural property
· no will
4. Does he need a will at all?
It’s always better to have a will.
Motor vehicles—affidavit of heirship for vehicles, on the DPS website, tex.gov.
Rights of survivorship ownership agreements for a motor vehicle.
Bars to Succession, p. 141-57, §37A, 41(b), disclaimers--22 sw3d 392
In re Estate of Mahoney.-- Wife killed her husband and was convicted of manslaughter. By the statute of descent, under intestate laws, the wife should have gotten the estate. But the statute had no provision for passing to a slayer.
Three different approaches:
1. Legal title passes. Legal title passes to the slayer and may be retained by him in spite of his crime. (legislature decides, and if it hasn’t spoken, the court shouldn’t engage in legislative activism. Moreover this would just be an added punishment.)
2. Can’t profit from own wrong. Legal title will not pass to the slayer because of the equitable principle that no one would be permitted to profit from his own fraud, wrong or crime.
3. Constructive trust (Tex). The legal title passes to the slayer but equity holds him to be a constructive trustee for the heirs or next of kin of the decedent. What does this mean? Does she have management authority? no. she never sees the money. It’s make-believe. There is no real difference between version 2 and version 3.
Here the widow is convicted of manslaughter not murder. The critical distinction, however, is whether it was voluntary or involuntary manslaughter. Voluntary v. Involuntary manslaughter: looking at the Restatement of restitution, makes the distinction between murder and manslaughter, deliberate v passion killing. Involuntary might be reckless. If its
Texas: Constructive trust.
§41(d)—Convicted person and suicides, only addresses life insurance. Texas Courts have construed on equitable grounds, and have taken the constructive trust approach. Texas courts have not made distinctions between types of homicide, murder, negligent homicide.
2. Disclaimer, p. 148
CN: People generally disclaim for reasons of estate tax or creditor worries.
States have enacted disclaimer statutes, which treat the disclaimant as having predeceased the decedent.
1. Avoiding Estate Taxes.
Under Internal Revenue Code, only ‘qualified disclaimers will avoid gift tax liability by the disclaimant; If the disclaimer is not ‘qualified’, gift tax will result.
Time limit. The disclaimer must be made within 9 months after the interest is created or after the donee reaches 21, whichever is later. If you wait a year after O’s death to disclaim you are treated as having taken.
Lawyer liability. A lawyer can be held liable for failure to advise a client on the advantages of disclaimers.
2. Avoiding creditors.
UPC—a disclaimer relates back for all purposes to the decedents estate. So A’s creditors cannot reach her share in O’s estate because the statute provides that the disclaimer relates back for all purposed to the date of death of the decedent.
O has two children, A and B. B dies, survived by one child, C. Then O, a widow dies intestate. O’s heirs are A and C. A has four children. A disclaims. What distribution is made of O’s estate?
If A had really died, you’d divide by 5. So A’s line would get a larger piece of the pie. Under the UPC, this kind of manipulation is not allowed. “the disclaimed interest passes by representation.”
§37A—though the statute doesn’t speak to this, courts have taken the same approach as the UPC, and prevent the manipulation of the statutes.
Avoiding federal tax---Drye: Mother dies with an estate of $233K. The estate was supposed to pass to son, but the son had had a few problems with paying his taxes, and the IRS had imposed a tax lien, so any money he got would go directly to the IRS. The son decides to disclaim, so it would pass straight to granddaughter. The granddaughter put it into a trust that should benefit the father, the mother and herself. Held, this was not a proper use of disclaimers, it was subject to a federal tax lien.
Avoiding Creditors. Badouh v Hale, 22 S.W.3d 392 (Tex. 2000) -- will bequeathed home to her daughter, Elaine Badouh Hale. Elaine later pledged her expectancy in the property as security for a note to Charles B. Gorham. A few years later when Mother died and her will was admitted to probate, Edward Badouh, Jr., who held a judgment against Elaine, applied for a turnover order of Elaine's interest in her mother's estate. Elaine then filed a disclaimer of her entire interest in her mother's estate. See . But property may not be disclaimed if it has been accepted. See id. § 37A(g). Acceptance occurs if the person making the disclaimer has previously taken possession or exercised dominion and control over the property "in the capacity of beneficiary." Id.
Held, while we agree that Edward did not violate the no-contest clause, we hold that Elaine accepted the property by pledging it as security and could not thereafter disclaim it.
CN: Held, once she pledged her estate she could not disclaim because she exercised dominion and control. Even though it was not a real property interest because the will could be changed.
Avoiding Medicaid. Troy v. Hart, p. 151
F: Lettich was in a nursing home receiving Medicaid when his sister Alta Mae died intestate, survived only by Lettich and two sisters, Hart and McGlaughlin. Hart , the administrator, visited Lettich and helped him execute a disclaimer of his inheritance so he would continue to receive Medicaid.
Once he disclaims, the sisters would get an extra 50k each. A month later, the Hospice told Troy, the attorney in fact, who hired an atty to get Mildred bounced as an executor. So Mildred hires atty Veil. Veil goes directly to Paul and tries to get him to drop the lawsuit. The hospice is troubled by this and calls troy.
What was Paul’s obligation? to notify the Medicaid folks within 10 days upon learning that the could inherit. There are rules against spinning off assets to make yourself destitute. The State has an interest in being paid. If he had inherited the $100k there would be reimbursement to Medicaid.
R: To receive Medicaid, the applicant must disclose all available assets. Lettich therefore violated the Medicaid law and deprived the State and federal govt of reassessing his eligibility. The disclaimer or renunciation of a potentially available asset was the functional equivalent of a transfer of an asset since by refusing to accept it himself, he effectively funneled it to other familial distributees. To permit disclaimed property to pass to transferees free and clear of any obligation would be a violation of public policy. Therefore, the disclaimed interest received by the sisters should be taken subject to any claims the state may have against Lettich’s estate.
CN: its not uncommon in elder planning to try to keep funds in the family. Had Alta Mae before she died, been mentally competent, and recognized the situation of her children, she could have just left it all to these two sisters. If she leaves it to all three siblings, the money will go to Medicaid.
NOTE: Criminal Sanctions p. 156. The Kennedy-Kassebaum Health Reform Bill criminalizes the behavior of a person who ‘for a fee knowingly and willfully counsels or assists an individual to dispose of assets” in order to become eligible Medicaid “if disposing of the asset results in the imposition of a period of ineligibility.”
CN: here lawyer Veil has tried to get Paul not to rescind the disclaimer, not to dispose of assets.
Wills: Capacity & Contests
Mental capacity, p. 159
1. Why require mental capacity?
2. Test of Mental capacity, p. 163
Requirements for mental capacity: know the:
1) nature and extent of the testator’s property,
2) persons who are the natural objects of the testator’s bounty,
3) disposition the testator is making, and
4) how these elements relate so as to form an orderly plan for the disposition of the testator’s property.
Evidence of capacity relates to the time of the will. If the person had a short term psychiatric treatment six months before the making of the will. Even if the person has trouble they can have a lucid interval.
3. Insane delusion, p. 165
A person may have sufficient mental capacity to execute a will but may be suffering from an insane delusion so as to cause a particular provision in a will – or perhaps the entire will—to fail for lack of testamentary capacity. This is a legal, not psychological, concept. It is a false perception of reality. If there is any factual basis at all for the testator’s delusion, it is not deemed insane.
EX: In Re Honigman, p. 166--Was T acting under an insane delusion? T takes his wife out of most of the will because he thought she was cheating on him. He did leave her something, but there was evidence she was already well provided for. He gave her the smallest outright share under the elective share statute. The rest goes to other relatives. Her evidence: a number of disinterested person testified that he was obsessively jealous. His evidence: that his suspicions were well grounded. She once got a card from Mr. Krauss. one time he left the house, and saw Mr. Krauss enter the house. There was testimony that wife was independently wealthy and they people he left the estate to had financial need. Held, he was delusional. The will is set aside and the estate passes by intestacy. CN: ct seems to focus on fairness. In NY, which was not a community property state, after a 40 year marriage, they thought that it was unfair to leave her so little.
NOTE: had this been in Texas his will would have controlled just his half.
NOTES, p. 171
1. NY has changed its law to give the wife a greater elective share.
2. Mistake. Distinction between insane delusion and mistake. An insane delusion is a belief not susceptible to correction. courts do not reform or invalidate will resulting from mistake, which is susceptible to correction. EX: if T believes his son is dead and so leaves him out of the will, when in fact he is alive. The will is entitled to probate.
3. Jury v. Bench trial. Studies indicate that on a contest of incapacity or undue influence, there are a legion of appellate decision reversing juries who invalidate wills based on nothing more than ‘their own concepts of how testators should have disposed of their properties. If a trial judge, not the jury, finds facts in a will contest, appellate courts rarely reverse the trial judge’s decision in undue influence cases. Juries are more favorable to contestants than judges.
B. Undue Influence, p. 175
Elements of Undue influence: p. 181:
Control over the mind of the testator to overcome her free agency and free will and to substitute the will of another so as to cause the testatrix to do what she would not otherwise have done but for such control. Is the effect to overpower the mind, and was the will a product of it? Mere opportunity to exert is not enough. Mere susceptibility is not enough. Was it an unnatural disposition?
Libber v. Weslow, p. 177
Frank and Irene were her children from the second marriage, Julian from her first marriage, who was deceased. The plaintiffs were the three grandchildren of her deceased son, Julian, who were cut out. The will favored Frank and Irene, esp. Frank, who was a lawyer and will drafter. The will cut out the other grandchildren. CN: Frank lived next door to her and had a key to her house, there were ill feelings, she never even read the will. She didn’t discuss its terms with anyone before she executed it. What other evidence was there of undue influence? The jury found it was undue influence. “Gonna fix it up so Bernice don’t get a dime.” It’s a substantial burden to show undue influence.
Held, no evidence to support the jury’s finding of undue influence. Court says ‘no evidence,’ which actually means ‘insufficient’ evidence, so it can reverse and render and avoid the jury on remand.
Juries are much more likely to find undue influence when there are questions of fairness. Why did the jury find this unfair? The jurors found in favor of the grandchildren. What else is off-putting? She never read the will so it looks like it’s Franks work; plus Frank is getting a larger share than he would if it had passed through intestacy.
Ethics. There’s nothing wrong with an attorney drafting his mother’s will, in and of itself. But he got a bigger share than he otherwise would have. Perhaps there was an unnatural disposition, taking more than he would have under intestacy makes it fishy. The thing to do is get another attorney to write it.
Other ways of avoiding will contest. What about Paragraph 9, p. 178? the will is not a good place to talk about your disappointment. The lawyer should have the testator to write something out in handwriting which the lawyer can keep in his office, but not included as part of the will. The legal language left open the question of whether it was really her will. A will is a public document. Statements of disappointment have to be accurate otherwise it opens the door to other testimony rebutting how many times they sent cards, etc.
NOTE: Testamentary LIBEL, p. 550
Providing the reasons for excluding someone from a will may lead to testamentary libel. In Brown v. DuFrey, the testator had married her husband in 1901, divorced her in 1917. He remarried in 1924. The testator died in 1951 leaving a will which gave the reasons for leaving ‘John Brown, my husband’ out of her will: during my lifetime he abandoned me, made no provision for my support, treated me with complete indifference and did not display any affection or regard for me.” John Brown sued and won approximately one half the estate.
§10—persons who can contest proceedings
§10C—effect of filing or contesting pleading
No Contest Clauses, p. 184-- Designed to discourage will contests. If beneficiary contests the will, he gets nothing.
majority approach: enforce unless there is probable cause for the contest. CN: there may have been enough here to uphold the no contest clause.
minority enforce unless the contestant alleges forgery or subsequent revocation by a later will or the beneficiary is contesting a provision benefiting the drafter of the will or any witness thereto.
Texas has never decided whether the probable cause rule is followed, leaving the law unclear.
Baiting the trap: In Wislow the clause was worthless because the will didn’t leave them anything, so they had nothing to loose. You have to bait the trap, i.e., give them something for the no contest clause work. These no contest clauses are strictly construed.
Avoiding contests, p. 209
1. If a will contest is foreseeable, what precaution can he take
a. Having the testator make a detailed letter regarding his disposition which the atty keeps as evidence. Maybe include a statement that “I’m not including my daughter because [she’s disappointed me, etc]. . .” but you need to be accurate so there’s not testimony of how many times they visited grandma.
CN: have the testator handwrite it-- but if the penmanship is bad there may be questions of capacity if it’s in a feeble hand.
b. Videotaping or recording a discussion between the testator and the attorney before witnesses wherein the testator explains the disposition.
c. Substantial documentation of testator’s mental capacity each time he signs a will after his health begins to fail. Failure to do so could lead to malpractice. Have the client examined by a psychologist or psychiatrist and have them witnesses it.
d. Include a no contest clause, by which any heir forfeits his inheritance if he contests the will.
e. Revocable trust—instead of waiting for the assets to be transferred on death. Make it revocable in case they break up, he can get his assets back. But these can also be challenged on grounds of undue influence.
CN: Kim (56) and Terri (32) met when Terri was 20; they’ve been together for 12 years. Kim’s family is not fond of Terri.
Should it matter in today’s day and age? We have knowledge of Kaufman or in re Moses, where you have untraditional relationships.
The time to win a will contest is in the preparation stage, when it is draft.
Categories of potential challenges:
1. the unnatural will, children being cut out of the will.
2. Subsequent marriage, children from a prior spouse
3. When there are no close family, legal heirs and cousins.
4. alternative lifestyles
Bequest to Attorneys, p. 185
Undue Influence. Generally, there is a presumption of undue influence when an attorney–drafter receives a legacy, except when the attorney is related to the testator. The presumption can be rebutted only by clear and convincing evidence provided by the atty.
§58b—Devises and bequests that are void. A lawyer can’t name himself beneficiary unless he’s a relative or spouse. (c) is related within the three degree of consanguinity. See p. 92. Also the heir or employee of the attorney, such as paralegals and law clerks.
Presumption of undue influence. In re Moses, p. 188
T left everything to her lover/atty in a will drafted by another atty. Held, the trial court did not err by finding that a presumption of undue influence arose as the evidence showed that at the time the decedent executed the document she was ill, disfigured by surgery, addicted to alcohol, and was involved in a romantic relationship with the attorney who was 15 years her junior. The presumption was not rebutted even though the attorney was not present when she executed the document because the evidence showed that it was drafted by the attorney's partner who gave the decedent no advice but merely wrote down her instructions.
A relationship existed at the time the will was made, and a relationship gives a presumption of undue influence, which could be overcome only by evidence that in making the will, Mrs. Moses acted upon the independent advice and counsel of one entirely devoted to her interest.
1. Sexual relationship and undue influence. Sexual relationship casts a suspicion of deceit and cautions the court to examine the evidence with unusual care.
2. What if the roles were reversed and Frannie were the man and Clarence were the woman? Launius held it did not give rise to a confidential relationship because the testator was strong willed and emotionally and physically sound at the time the will was executed.
CN: the gender of the testator and the beneficiary seems to play a role in how the courts will decide. How do you prepare a will to avoid contest when you have nontraditional relationships, older/younger, gay, non-married?
Homosexual. In re Kaufman’s Will, p. 193--In a homosexual relationship, Kaufman leaves everything to his lover Robert. The court finds undue influence.
Fraud, p. 213
Fraud occurs where the testator is deceived by a misrepresentation and does that which the testator would not have done had the misrepresentation not been made. The misrepresentation must be made with both the intent to deceive the testator and the purpose of influencing the testamentary disposition. A provision in a will procured by fraud is invalid. If justice cannot be done by refusing probate, the will may be probated and then the court with equity powers can impose a constructive trust on the wrongdoing.
Fraud in the inducement.
EX: daughter tells daddy that she was a witch and she would turn him into a frog unless he leaves everything to her and cut out all the other daughters. The other siblings can assert fraud. Daughter made a false representation, knew it was false, the chief element in fraud is intent, scienter, this is a tough tort claim.
Reasonableness, but would a reasonable person change his will based on this representation? Probably not. So they may not prevail.
EX: An attendant at a hospital has developed a rapport with one of the ailing patients, telling him that “I have a poor, sickly child,” this might be considered fraud.
Fraud in the execution:
EX: if you have a blind performer, Ray Charles, and someone comes up after a show and says “I want an autograph” and it’s a will.
EX: Will devised everything to .... nurse knew that Jean was alive, so it would be fraud.
Physically restraining execution of will--fraud. Latham v. Father Divine, p. 215--T was involved in a religious group, cut out some her heirs. She left everything to Father Divine. Right before she died she prepared a new will to leaving it to the relatives, but Father Divine prevented her from executing the will by physical force. Held, it would be fraud for a will beneficiary to prevent someone from executing a new will. The remedies might be a constructive trust, this protects the intended legacy which they would have had but for the prevention of the new will.
Tortious interference with an expectancy, p. 221--Physically preventing her from signing a new will. Or getting the doctor to perform an unnecessary operation, and kill her.
§10C—merely filing a will contest is not tortious interference with an inheritance. It’s not a tort to challenge a will.
Formalities and Forms
Execution of wills, p. 223
Today, our ceremony is signing a will. There’s a dignitary function, and evidentiary function.
Acknowledgement requirement.--Groffman, p. 227
W claims the will was improperly executed as should be set aside, then all would go to her. She challenges is whether he acknowledged the will by all the witnesses at the same time.
F: the Block and the Lee were visiting the Groffs. Groff asks the others to witness his signing of the will. Groffman takes the witnesses, one at a time, into the next room. Block, witness #1, signs the will in front of the testator. Then Lee, witness #2, puts his signature on the will in the presence of the testator. The witnesses were not in the presence of each other at the same time.
p. 231 “present at the same time.” the problem is not so much that they didn’t sign in each other’s presence. The problem is that the testator is not acknowledged in the presence of the two witnesses at the same time.
Under the UPC,—“signed by two individuals within a reasonable time after the signing of the will. But no language about signing in the presence of each other. The witnesses need not be in the presence of each other. But many states still require this. (p. 226-7: UPC § a3)
§59-- No requirement the witnesses be in each other’s presence, but they must be in the testator’s presence. Two or more credible witnesses above the age of 14.
§61, §62—who can be witnesses. Testator need not sign in the presence of the witnesses. You’re witnessing the signing, but also the acknowledging.
Contemporaneous transaction. If one witness signs before the testator signs, courts have held that its ok as long as its all part of a contemporaneous transaction.
HYPO: T types out a will, has a line for witnesses. T takes the will across the street and gets his neighbor to sign. The neighbor signs, then T signs. His handwriting is barely legible.
ISSUE 1: neighbor signs before T. The witness is supposed to be witnessing the signing of the will or attesting the signature. Texas has upheld this when its part of a contemporaneous transaction.
ISSUE 2: The witnesses don’t even know it’s a will. An attestation clause would help. A witnessing is either witnessing to the signing of the will or attesting the signature, so she doesn’t need to know it’s a will.
ISSUE 3: The signature is illegible? This shouldn’t matter, any mark should work.
ISSUE 4: The witnesses are not in each other’s presence. Doesn’t matter in Texas.
Interested Witnesses:--If an interested person serves as a witness, any bequest to that person is void. However, if the interested witness is an heir, he can still take the lesser of the bequest or what he would have taken under intestacy. §61. The bequest can be saved, however, if the (interested) witness’s testimony is corroborated by one or more disinterested credible persons. See §62.
HYPO: Widow has will bequeathing 50k to her two sons, rest to church. She has a $500k estate. $50k to son #1, $50k to son #2 and $400k to the church. The will is witnessed by a neighbor and one of her sons. The will is still valid, even though both of the witnesses had been interested. But the bequest to the interested witness can be void. Here the 50k would have been upheld, because it is less than he would have taken under intestacy. If the will said 400k to son #2, 50k to son #1 and 50k to the church, then it wouldn’t pass the smell test.
Presence p. 233. some jx require a witness to sign in the presence of the testator.
Line of sight test, the testator does not actually have to see the witness sign but must be able to see them were the testator to look.
Conscious presence test (Tex): if the testator through sight, hearing or general consciousness of events, comprehended that the witness is in the act of signing.
UPC does not require the presence of the testator at all.
a. On the Phone. What if the attorney witnesses over the phone? There is no line of sight. The testator can’t see the witness. What else is wrong? This is a will prepared by an atty.
UPC, p. 226--
b. Drive-up bank teller. What if the testator sits in his car at a driver up window and signs the will? The bank president then takes the will inside and the teller then signs it, all the time within sight of the testator? Held, T could see the teller, but not the pen on the desk when signed.
5. Order of signing. T is on his death bed in a hospital. T begins to sign his name in front of a nurse an another patient. Halfway through signing, the nurse is called away. T finishes his signature without her present. The first witness then signs. The nurse returns; both T and the patient acknowledge their signatures and the nurse and signs. Held, the will cannot be probated. The signature is not sufficient because T did not finish his signature while both witnesses were present. The later acknowledgement does not suffice because the testator must sign or acknowledge his signature before either of the witnesses attest.
6. Signature. Any mark is sufficient, as long as there are witnesses in Texas. Even “your brother Ned,” was sufficient.
Trouble holding pen. Mangeri has trouble holding the pen, the witnesses says, “here I’ll help you.” What if Mangeri had been offered help to sign his name? What if he asked for it? Then it would be upheld, the testator can even ask the
7. Addition after (below) signature. Some states require the signature to be “at the foot or end’ of the will. T’s write in interlineations. What if T signs and then handwrites a note to give his “Diamond ring to Karen”? Can the will go to probate? yes, but the added gift is ignored. First, it depends on whether it was written before or after the T signed. If after, then the will would be admitted to probate, but the line would be ineffective. What if the writing was to “appoint Emily as my executor?”
CN: Clark case, ignored. If it was hand written with a signature, it might be treated as a holographic codicil.
Recommended Method of Executing a Will, p. 242
Procedure to make the will valid in all states, p. 243:
(1) Make sure pages are fastened together securely. Then specify the exact number of pages. Have T sign each page.
(2) Make sure T has read the will--avoids claims of undue influence and capacity.
(3) The lawyer, the testator, two disinterested witnesses and a notary public are brought together in a room from which everyone else is excluded. The door to the room is closed. No one enters or leaves the room until the ceremony is finished. CN: A notary is not required in Texas and in many states, but it helps with the self proving affidavit.
(4) Ask the testator, “is this your will? Have you read it and do you understand it? Does it dispose of your property in accordance with your wishes?” CN: Some states require ‘publication’; not Texas. A “publication” is not required in Texas.
(5) Ask T “Do you request ____and____ to witness the signing of your will?” T should answer “yes” in a voice audible to the witnesses.
(6) The witnesses should be positioned so they can see the will.
(7) Attestation clause. Not required in any state, but good to have, because (1) you might have a forgetful witness. The court will treat it as prima facie proof that formalities took place. 2) the hostile witness, who says it never took place.
(8) get their names and addresses. [see bluebook]
(9) self-proving affidavit. §84(b)you need some sworn testimony or affidavit of one or more of the witnesses. Texas was one of the leaders in establishing a self proving affidavit. Then no other proof is necessary.
UPC provides that if a will is self proved, compliance with signature requirements for execution is conclusively presumed.
Substantial compliance. Will of Ranney, p. 252
I: Should an instrument purporting to be a will that includes the signature of two witnesses on an attached self-proving affidavit, but not on the will itself, be admitted to probate? yes. The will failed to comply literally with the formalities of the statute. Strict compliance often undermines the intent of the testator. held, harmless error.
Cf. TEXAS: The signature can count for one purpose only. It will save the will, but not the self proving affidavit A signature to a self proving affidavit is sufficient if necessary to prove the will. But then the will is not self-proved. See also §59(b).
Safeguarding a will, p. 246
(1) at attorney’s office. There are concerns of overreaching. Courts looked down upon it as trying to solicit business. In case something happens to the atty the client usually gets a photocopy.
(2) with clerk at probate court. Many states permit the deposit of the will with the clerk at the probate court, but this is rarely actually done.
(3) Safe-deposit box—but expensive to maintain, keys can be lost.
(4) With testator. Not good because clients sometimes try to modify it, or hide it so well that it can’t be found.
Mistake--Pavlinko’s Estate, p. 247
Helen and Vasil, husband and wife, wanted to leave everything to the other. They mistakenly signed each other’s will instead of their own. Helen’s will stated: “I, Helen Pavlinko ,... declare this as my last will and leave everything to my husband, Vasil.” Signed “Vasil Pavlinko.” It’s the brother bringing the action, because he was the alternative beneficiary under either will. Their joint intent was that when the other was gone, it would go to the brother. Held, statute requires it be signed by the testator. This case show the rigidity of the courts on these issues. There was no showing of fraud or wrongdoing. The court could have imposed a constructive trust.
Holographic Wills, 262
Elements of a holographic will:
· written by the testator’s hand and
· signed by the testator;
· testamentary intent (gift element)
· No witnesses required.
§84C—if not self proved, a will wholly in the handwriting.
Written by testator: UPC requires only the material portions to be handwritten, other states require the entire will to be handwritten, in which case, if there is anyone else’s handwriting on it, it will not be probated.
Signed by testator. Doesn’t need to be at the foot. anywhere on the document.
EX: Gunn v. Phillips—the taker N.L. PHILLIPS was not in cursive. [see bluebook In Gunn, none of the witnesses were sure whether the block-print was his handwriting.
no date requirement.
1. Was the document intended to be a will?
see, p. 273, written on plaster wall. Was it written with testamentary intent? “Genevieve, you take care of all my belonging. this gives you all the authority. Love Herman.” If she tries to probate it: If it’s in handwriting, then witnesses are not required. It doesn’t say, “I leave everything to Genevieve.” He just says “you take care of all my stuff.” Is he just making her executor? There’s no ‘gift’ element.
Bluebook: Price v. Huntsman—probably not.
Estate of Richardson—probably not.
But Gunn’s “everything to N.L. PHILLIPS.” is pretty clear.
“and I request that he handle my affairs.”
Construction issues. The problem with holographic wills is what do they mean?
“N.L. Phillips or his family.” What does this mean?
Fill in the blank—material provisions handwritten. Johnson, p. 264
Rule: the handwritten portions on a printed form do not satisfy the requirements for a holographic will which require that it be entirely in the hand of the testator.
T helped himself, got a book, filled in the blanks in his handwriting. under the states laws, it had to be entirely in T’s handwriting. The intent is clear. The signature and dispositive provisions were in his handwriting. They could be stricken as parts of the will but still be evidence of the testator’s intent, and yet the court refused to allow this. The court denies probate.
The will was a printed fill-in-the blank form.
R: Elements of a holographic will, UPC,
· whether or not witnessed,
· if the signature and
· the material provisions are in the handwriting of the testator.”
· a testamentary intent.
Here, the only words which establish this requisite testamentary intent are found in the printed portion of the form. But the testamentary part must be wholly written by the testator. Therefore an instrument may not be probated as a holographic will where it contains words not in the handwriting of the testator if such words are essential to the testamentary disposition.
Held, the will cannot be probated.
TEXAS: wholly in the writing of the testator. §60
Texas courts have held that the non holographic parts won’t kick out the will, but will be treated as surplusage.
Maul v. Williams.[bluebook]. Check was held to have testamentary intent.
Nuncupative wills. §64
Could be entirely in the attorney’s handwriting as long as there is a signature and witnesses.
NOTES, p. 268
1. Some courts have held that handwritten changes to a typed will cannot constitute holographic wills if they do not make sense without reference to the typed will.
UPC—provides that testamentary intent can be established for a holographic will by looking at portions of the document that are not in the testator’s handwriting.
4. Malpractice. An atty can be sued for malpractice in delaying to prepare a will and secure the clients signature.
Conditional wills. p. 273. What if the will is written to become operative if death from a stated even occurs, such as surgery?
EX: T writes “I am going on a journey and may not return. If a do not, I leave everything to my adopted son.” Testator returns and dies. Held, probate it. There is a presumption that the language of condition does not mean the will is to be probated only if the event happens but is merely a statement of the inducement for execution of the will, which can be probated upon death from any cause.
Revocation of Wills, 276
1. Revocation by writing or Physical Act
A will is subject to modification or revocation by the testator during his lifetime.
1) Subsequent writing executed with testamentary formalities, witness or holographic documents. The typical “writing” is usually accompanied with a new will.
2) physical act, i.e., destroying, obliteration or burning the will. Oral revocation, without more, is inoperative in all states.
Hypo: in 1995, T executes a will that gives all her property to A. In 1997 . . .
Prevailing rule is that if there is no intention of revoking the previous will, the old will stands.
(b) here the old will is destroyed. Codicils offered for probate should be given effect. If you just revoke the codicil . . . But here the intent is to revoke the will and all the codicils, unless it can be shown that the codicil’s can act on their own.
UPC—executing a subsequent will the revokes the previous one, or by performing a revocatory act, if done with intent to revoke. This includes burning, tearing or canceling, whether or not it destroys the will or touches any part of the words on the will.
Presumption of revocation—will not found at death--Harrison v. Bird, p. 277
If the testator had possession of the will before her death, but the will is not found among her personal effects, she is presumed to have destroyed the will. If she destroys the copy of the will in her possession, a presumption arises that she has revoked her will and all duplicates, even though a duplicate exists that is not in her possession. The burden of rebutting the presumption is on the proponent of the will.
EX: T made a will with two original copies: One kept with her attorney, one with Harrison. Later, she called her atty and told him she wanted to revoke it. Atty tore it into four pieces, and sent the pieces to T along with a note that she was without a will. After she died, the note was found but the will was not. Held, Harrison has not rebutted the presumption that the will is revoked.
Revocation must be in testator’s presence. The lawyer’s action in tearing up the will was not enough to revoke her will, because it wasn’t done in T’s presence. also, when the will is known to have been in the possession of the testator but can’t be located, it is presumed revoked.
The presumption of duplicates: when one is revoked, the others are revoked too.
Problems, p. 279
Opportunity for heir to destroy not enough. Travers—opportunity of disinherited heir to destroy will does not rebut presumption of revocation.
Probate of lost wills, p. 280-- will can be admitted into probate even if it’s lost, or is destroyed without the consent of the testator, or is destroyed with the consent of the testator but not in compliance with the revocation statute, if its contents are proved (by a copy, testimony of the secretary who typed it, or other clear and convincing evidence.)
Formalities of revocation—failure to complete physical act.--Thompson, p. 280
T told her atty to destroy both her will and codicil. Instead of destroying them, the atty turns them over, and writes “revoked” on the back.
R: Elements: 1) physical act, 2) intent to revoke. there was intent to revoke. But the writing is not wholly in her handwriting, and no attesting witnesses. The faces of the two instruments bear no physical evidence of any cutting, tearing, burning, obliterating, canceling or destroying. Held, if the writing does not mutilate, or erase, or deface, or otherwise physically come in contract with any part of the written word of the will, it is ineffective as a cancellation or revocation. Though she intended to revoke her will, the writing does not in any way physically obliterate, mutilate, deface, or cancel any written parts of the will.
CN: There was a writing which she signed, but the witnesses didn’t sign, so they didn’t follow the formalities of a revocation. It’s not a holographic revocation because it was the lawyer that did it, not her own handwriting. Canceling: the words have to touch the words of will.
TEX: §63—No will in writing . . . shall be revoked, except
· by a subsequent will, codicil, or declaration in writing, executed with like formalities, or
· by the testator destroying or canceling the same, or causing it to be done in his presence.
NOTES, p. 283
4. What if Mrs. Kroll had written on the margin of each page of the will “Canceled. Date. M. Kroll”? this still wouldn’t be sufficient because the writing hadn’t come into contact with any of the writing.
BLEUBOOK, “class 20”
Had he written out a full sentence in the margin of the will probably would have been upheld as a holographic codicil. But as it is, the handwritten portion standing alone is insufficient.
Partial revocation by Physical act-Not allowed in Texas, p. 284
TX has never recognized partial revocation of the will, so the act of crossing out “brother Bill” would not be valid.
In many states, a will can be revoked in part only by a subsequent instrument (not act). Reasons:
1) canceling a gift to one person necessarily results in giving it to someone else, and this new gift can be made only by an attested writing.
2) Permitting partial revocation by physical act offers opportunity for fraud. If the partial revocation by act is not recognized, the will must be admitted to probate in the form in which it was originally executed if the original language can be ascertained.
UPC does recognize a partial revocation (“a will or any part thereof is revoked by . . .”). p. 276
PROBLEM, p. 285
T leaves her estate to four named relatives. After she dies her will is found and one of the names is stricken though with a pencil.
Estate of Malloy –a partial revocation by physical act would not be permitted where the intent and effect of the change would result in a substantial enhancement of another bequest.
(b) What result in a state that does not allow partial revocation by physical act?
(c) What if T’s will is holographic in a jx that permits holographic wills?
Dependent Relative Revocation (DRR) and Revival, p. 286--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.
EX: T executes a will devising his property to “Peggy,” then learns that her legal name is actually “Margaret” not “Peggy.” T decides to correct this mis-description, and cancels his old will by writing “VOID” across it and executes a new will devising his property to “Margaret.” Unfortunately, Margaret is one of the witnesses to the new will, and the law precludes a beneficiary from being a witness. Since it is clear T wants Margaret to take the property, the doctrine of dependent relative revocation applies and the revocation of the first will is not given effect, and the first will is probated.
CN: Class 20 problem 3. he clearly intended for her to have something, so if he changed the will under the mistaken belief that the larger gift of 5k would be effective.
However, with Brother Bill, it looks like his intent was not to give more to “Brother Bill” but to give it to “Brother Norman.” What happens with Blackacre?
The will has a residuary clause, so it would go to Martha, under article 9. And if Martha predeceases...
TEXAS: No partial revocation, so the cross out has no effect; nor would be recognize the $5k or the ‘nephew Norman’. Nothing changes
Just because a will is destroyed doesn’t mean it is revoked when there is no intent to revoke. §85-Proof of written will not produced in Court. With testimony of a credible witness who has read the will or heard it read. if the whole will is gone, the will can be proved with a copy.
PROBLEMS, p. 290
1. T crosses out “1,000” of his typewritten will and writes in “1,500” to my nephew Charles Blake.
(a) What result in a state the recognizes holographic wills?
(b) What result in a state that does not permit partial revocation by physical act?
(c) What result in a state the permits partial revocation by physical act? Independent relative revocation doctrine apply?
(d) What if the substitution was for “500” instead of “1,500”?
2. In his typewritten will, which contains a legacy of $5k to “John Boone”, T crosses out “John” and writes “Nancy”. Nancy cannot take because the gift to her is not attested. In a state permitting partial revocation by physical act, should the legacy to John be given effect under the doctrine of dependent relative revocation?
In state recognizing holographic wills, the change from John to Nancy is not a valid holograph even though T signs his name on the margin. Standing alone, the handwritten words are insufficient to constitute a will. On the other hand, if T’s will were entirely handwritten and a valid holograph, the chance from John to Nancy would be permitted.
3. DRR applies only 1) where there is an alternative plan of disposition that fails or 2) where the mistake is recited in the terms of the revoking instrument or, possibly, is established by clear and convincing evidence.
NOTES, p. 291
1. What if T writes “VOID” across his will, shows it to his lawyer and asked his lawyer to draft a new will. Before the lawyer is complete, T dies. Held, DRR does not apply because the lawyer’s testimony was insufficient evidence of a definite alternative plan of disposition.
Components of a Will, p. 301
1. Doctrine of Integration of Wills: All papers present at the time of execution, intended to be part of the will, are integrated into the will.
2. Republication by Codicil, p. 302--a will is treated as re-executed as of the date of the codicil. Equitable doctrine to carryout the testator’s intent. Does not have to be followed.
EX: T revokes the first will by a second will and then executes a codicil to the first will. The first will is republished and thus the second will is revoked by implication.
3. Incorporation by Reference, p, 303--Any writing in existence when a will is executed may be incorporated by reference if the language of the will manifests this intent and describes the writing sufficiently to permit its identification.
Incorporation by reference and republication. Clark v. Greenhalge, p. 303
RULE: A will may incorporate by reference any document not so executed and witnessed, if it was in existence at the time of the execution of the will.
EX: “everything to Green except items I designate by memorandum.” T wrote in a notebook the ‘picture hanging over the fireplace should go to Ginny Clark.’ Green refuses to give painting to Clark.
1972—memo written (no reference to painting)
1976—memo amended (no reference to painting)
1977—will written, “Frederick take all except items in the memo.”
1979—notebook (not yet incorporated by reference)
1980—notebook entry, re painting
1980—will codicil (will is republished, this become effective date of will)
Held, the notebook was incorporated by reference. Though its not certain when in 1980 the entry into the note book was made, the court is trying to carry out T’s intent.
NOTES and Problems, p. 309
1. Re Greenhalge, if the entry into the notebook were made after the 1980 codicils, would it have effect? under UPC 2-503? or substantial compliance doctrine? UPC 2-523, p. 311?
2. T deeds his farm to his niece. In his will he provides that “Since I have already deeded my farm to my niece, I do not do so in this will.” The deed is held invalid because it was not delivered to niece during T’s lifetime. Was the deed incorporated by reference?—probably.
4. Acts of Independent significance, p. 318
If the beneficiary or property designation 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 under the doctrine of acts of independent significance.
EX: T will devises the ‘car I own at my death’ to her nephew. At the time the will is executed, T owns an old Toyota. T then buys and new Cadillac, so the car she owns are her death is worth 30k instead of 3k. The gift is valid. Because it is unlikely that the gift was motivated by a wish to increase the value of her gift to N.
EX: T’s will devises 1k “to each of my employees at the time of my death.” One year before T dies, she fires two longtime employees and hires three new ones. The gift is valid, because it was prompted by business needs rather then a desire to unmake beneficiaries under the will.
Problems, p. 319
1. bequeath the contents of the right hand drawer to A. Safety deposit boxes are often upheld, but desk drawers might be too much opportunity for fraud.
2. Barney educational trust. Incorporation by reference can’t work because his trust came after the will, but acts of independent significance could save the gift.
Contracts Relating to Wills, p. 319
CN: H and W are in a common law state. They move Texas. The character of the property as ‘separate’ doesn’t change by moving to a community property state. If H dies, W gets nothing, even though in her own state she might have (i.e., elective share, dower, etc.). She might make moving to Texas conditioned upon H leaving everything to her in his will. Contract law applies. The contract beneficiary is entitled to enforce the contract by having a constructive trust impressed for his benefit upon the estate or devisees of the defaulting party.
1. Contracts to make a will, p. 320
These arise, for example, in exchange for an agreement to marry, to serve as a nurse, or not to contest a will. These must be in writing.
Problems, p. 320
1. T contracts with A for A to take care of T for life, and T will leave everything to A. T makes a will. A quits. T rescinds the contract. Can A take upon T’s death?
2. After A dies, B produces a document typed by B and signed by A and one witness devising one half of his estate to B. bargain upheld.
3. Pre-existing legal duty for W to care for H. W promises H to take care of him for life in consideration of H devising her Blackacre, and instead he leaves it to someone else. Held, No contract; no consideration; Wife had a legal duty to care for H.
2. Contracts not to Revoke a Will, p. 322--Usually arise when H and W have made joint or mutual wills. Joint will—an instrument executed by two or more persons as the will of both; probate the same will for each spouse. Mutual will—separate wills that contain reciprocal provisions. Joint and mutual will—refers to a joint will that devises the property in accordance with a contract.
CN: generally, these are same piece of paper, mom and pop will forms, ‘in consideration of the other not revoking their will after the first one died;” intent was to protect the will.
A contract not to revoke a will is generally not enforceable unless it is proved by clear and convincing evidence; the mere execution of a joint will or of mutual wills does not give rise to a presumption of contract.
§59A. In Texas, a contract to make a will or not to revoke a will, can be established only by a binding agreement, or a will stating that a contract exists, and what the provisions are.
Enforcement. Via v. Putnam (Florida), p. 323
SUM: Court holds that for public policy reasons, the second wife should take under the pretermitted spouse statute despite a mutual will between the first wife and father not to do anything to defeat the distribution of the will, which remarriage by the husband did.
F: “neither would do anything to defeat the distribution schedule.” W died. H remarried and died without executing a new will to provide for his new wife. The children claim that by marrying Wife 2, H breached his contract not to defeat the distribution schedule in the mutual will. The spouse claims a share under the pretermitted spouse statute.
Held, the children should not be given creditor status as third party beneficiaries under the mutual wills of the parents, when their interest conflicts with the pretermitted spouse statute.
CN: Children try to bolster the claim by saying that the pretermitted statute doesn’t apply because, we were the intended beneficiaries. Other jurisdictions impose constructive trust to uphold the provisions of the contract.
Interpretation of wills. p. 409-10
Plain meaning—exclusion of extrinsic evidence. Mahoney v. Grainger, p.410
T makes direct statements to the scrivener: “I’ve got about 25 first cousins, let them share it equally.” After she dies, it turns out that there was only one lawful heir, under the state’s law. The cousins wanted to introduce the statements that they should all be treated individually. Plain meaning rule prevents this extrinsic evidence coming into interpretation. Had it said, “I leave everything to my nearest kin...” There are differing kinds of evidence that might be introduced. There was no evidence why she would want to disinherit that aunt. Facts and circumstances evidence—what was going on at the time of the creation and interpretation of the will. Malpractice: today, there might be actions on this.
Notes and problems, p. 412
1. No extrinsic evidence if not ambiguous. Gustafson v. Svenson. Will devised to Enoch Anderson or his heirs per stirpes. Enoch Anderson left only a widow, no children. The widow was an heir under Massachusetts law. Held, the testimony of the drafting atty that the testator did not intend Enoch’s devise to go to his widow was inadmissible because the phrase ‘heirs per stirpes’ was not ambiguous.
2. Estate of Smith—“to PERRY MANOR, INC. Pinkneyville, Illinois.” A Nevada corporation, Lifecare Inc., bought it. Held, the bequest goes to the Nevada corporation, and the “Pinkneyville, Illinois, merely described the location of the named devisee at the time of execution. There was no ambiguity ; extrinsic evidence of the testator’s intent was inadmissible.
Scottish National society for the prevention of Cruelty to Children v. The National society for the prevention of Cruelty to Children.
T devised 500k to the “National Society ....”. He was a Scottsman who lived in Scottland all his life. The National Society was a London Charity which he had never heard of. Held, the London Charity should get it because it was named in the will.
Leng—After T left the “real property” to a charitable foundation in her will. She sold some of the property. The Charity claimed that the...held, first is to determine if there is an ambiguity. Here there was no ambiguity in ‘real property’.
3. Personal usage exception. If the extrinsic evidence shows that the testator always referred to a person in an idiosyncratic manner, the evidence is admissible to show that the testator meant someone other than the person with the legal name of the legatee.
CN: T tells lawyer “I want 300 shares of Dell stock to X.” The lawyer writes “200 shares . . .” No ambiguity, so no extrinsic evidence. But if he wrote “All my 200 shares” when in fact he has 300, then there might be some ambiguity.
“to my Nephew Norman” when he has three nephews Norman. Then maybe some facts and circumstances could come in.
“I leave two hundred Fifty Dollars ($25000) to Bill.” Was it intended to be 250 or 250k?
“I leave $100,000 to my best friends.” This may not be enforceable. Moreover it’s ambiguous on its face—patent ambiguity.
“All to Sister Sue’s Family.”—patent ambiguity.
Patent and latent ambiguities p. 424.
Latent ambiguity appears when the terms of the will are applied to the testator’s property or designated beneficiaries.
EX: T to “Mr. and Mrs. Wendell Richard Hess, presently residing at No. 17 Barbara Circle.” Glenda and Wendell divorce and sell No. 17 Barbara Circle. Wendell marries Verna. T dies. Verna claims to be the only one who meets the description of Mrs. Hess. Held, Verna did not reside at No. 17 Barbara Circle. So it is ambiguous and extrinsic evidence should be admitted. Glenda should take.
Patent ambiguities appears on the face of the will. Because inadmissible, courts construe the language without the aid of extrinsic evidence.
EX: T devised entire estate, giving 25% to each of three charities. Held, construe to give one third to each of three charities because T intended to devise entire estate.
EX: 80 acres of Blackacre to A, 140 acres to B. Patent ambiguity is: which 80 acres? Held, A and B were tenants in common in fractional shares in Blackacre.
3. Determination of patent or latent.
EX: To the University of Southern California known as the UCLA. Held, ambiguous, but latent not patent, therefore extrinsic evidence could be admitted to resolve it.
4. Equivocation. When a description fits two or more external objects equally well, e.g., to my niece Alicia (T has two nieces names Alicia). As long as the extrinsic evidence merely made the terms of the will more specific and did not add anything to the will, then extrinsic evidence could be admitted to resolve the ambiguity.
5. Mis-description of property or persons. A false description does not make the instrument inoperative. A false description of property or the intended recipient may be stricken.
EX Property: T devise lot no. 6 in 403 to my brother. T only owns a lot No. 3 in 406. Held, strike the mis-description and the lot owned by T should pass to his brother.
EX Person: To Raymond Smith and Mabel Smith, his wife. Raymond’s wife is Evalyn, not Mabel. Held, Strike “Mabel” and pass to ‘his wife.”
6. Malpractice. Some courts have held a lawyer be liable for drafting an ambiguous will, if the designated beneficiaries lose their legacy as a direct result of the atty’s negligence, but not for drafting an ambiguous document when the ambiguity could be the result of a deliberate choice by the testator.
Interpretation of Wills: Death of Beneficiary before death of testator, p. 438.
Lapsing interests: If a beneficiary does not survive the testator, the devise lapses, unless the testator specifies otherwise through the designation of alternative takers. You should have an alternative taker, then an alternative to the alternative, then to a Charitable Foundation.
Common law rules regarding lapsed devises:
1. Specific or general devise. If a specific or general devise lapses, the devise falls into the residue.
a. EX case 1: T bequeaths her watch (specific) to A and 10k (general) to B, residuary to C. A and B predecease T. Both the watch and 10k go to C. General lapse rule: it falls through to the residuary.
b. In Texas, gifts lapse only if the person is not related. §68(a).
i. If related, then to descendants of devisee. If A and B are a descendants of T, or T’s parent, their children will take.
ii. If no related, then to residuary. If A and B are friends of T, then the gift lapses and falls to the residuary. This is a statutory transfer independent of A and B’s wills.
2. Residuary devise. If the entire residue lapses, the heir of the testator takes by intestacy. If a share of the residue lapses, the lapsed residuary share passes by intestacy to the testator’s heir rather than to the remaining residuary devisees (no-residue-of-a-residue rule—rejected in most jx).
a. EX: same as in (1), except instead of ‘to C’, it is ‘to C and E equally”; E dies before T. E’s one half share passes to T’s heirs, not to C. If E has predeceased T, there couldn’t be a residue of a residue, and E’s half would pass by intestacy, not to C.
b. TEX: §68(c)—E’s half would go to C, subject to §68(a). So if E had children, then the children would take.
3. Class gift. If the devise is to a class of persons, and one member of the class predeceases T, the surviving members of the class divide the gift.
a. EX: $10k to the “children of A.” One child of A, named B, predeceased T. At T’s death, T is survived by another child of A, named C. Because this is a class gift, C takes B’s share, or the entire 10k.
b. §68(a)—If B is a descendant of T or descendant of T’s parents. If A is a sister, then the grand nieces would be sub’ed in. The half that would have gone to B would be split between E and F.
4. Void devise. Where a devisee is dead at the time the will is executed the devise is void. Treat like a lapsed devise.
a. If T leaves all to Sister Sue, and Sue is dead at the time the will is executed, then it is void.
b. §68(a)—not void, Sue’s children take. BUT look at class gift language. If you make a class gift, the person is presumably of the one’s that are alive.
§68(e) trumps the application of 68(a). Allen v. Talley, p. 441
When executed, T has 3 brothers and 2 sisters alive—A, B, C, D, E; on death, only two are alive. All the deceased siblings left children.
| | |
kids kids kids
Maryà “living brothers and sisters”
§68(e) the will provides otherwise; “living” connotes survivorship, and class gift, therefore only A and B take; the class reduces in size.
Maryà “bothers and sisters.
Then, no words of survivorship and, 68(a) would allow the children of C, D, E to take by representation.
‘Or’ and ‘and’ may be substituted for each other. Jackson v. Schultz, p. 446
H’s will read: “all my estate to my wife, to her and her heirs and assigns forever.” W dies. Children of W, contract to sell to a house formerly owned by their stepfather, H. H had no children of his own. The buyer of the land is using this to try to avoid going forward with the deal. Held, the words ‘or’ and ‘and’ may be substituted for each other in arriving at a proper construction of a will when it carries out the testator’s obvious intent. Therefore the children can take as ‘her heirs’.
CN: Why didn’t the antilapse statute help? Because he didn’t have any descendants.
TEX 68(a) W’s children could only be substituted for W if they were descendants of T. If the antilapse statute won’t help, then it escheats to the state. The Court construes it to mean “and’ or ‘or’, so it’ll be a contingent remainder. “All to W or her heirs.” At common law “to W and her heirs” meant fee simple. The court was engaging in some judicial activism, to prevent it from escheat.
Alternative devisees--, p. 448. H devised 1/2 of his estate to W and 1/2 to charity. H’s two children, A and B, are mentioned in the will but not provided for. W predeceased H. Who takes H’s estate?
§68(a) would not come into play because W is not a descendent. We can’t substitute A and B because they’re not the children of W. All will go to the charity. §68 says if you have two or more alternative takers, it goes to the other alternative.
Class gifts. If a class member predeceased T, the surviving members of the class divide the total gift, including the deceased members’ share. But what is a class? Labels are not required, only ‘class mindedness.’
General class description: “children, nephews or issue.” Dawson v. Yucus, p. 449
F: “I received an interest in my husbands farm, and believing as I do that those farm lands should go back to my late husbands side of the house, I give ½ of my interest to Stewart, a nephew, and ½ my interest to Gene, a nephew, the rest to Mae.” Gene died before T.
The antilapse statute doesn’t apply because the children aren’t descendants of T or parents of T.
· If it is a class gift; and the full interest should go to Stewart.
· If not a class gift, then Gene’s share falls into the residuary, and Mae would take Gene’s share.
Held, the will did not create a class gift; and the gift to Gene lapsed and passed into the residuary. The gift is not made with the usual generic class description such as ‘children’ ‘brothers, nephew’s cousins, ‘issue’, or family, but names two individuals.
CN: What is the intent of the testator? The will said she wanted the land to go back to her husband’s side of the house. But the court doesn’t agree that it was considered a class gift. There was no class label. She just picked out two of her husbands nephews, when in fact he had several nephews and nieces. The two who were the closest to the family. She could have put in some survivorship language.
See BLUEBOOK problems. class 23.
Determine intent by looking at the will as a whole. In Re Moss, p. 454
T to W for life, then the Elizabeth and Emily’s five children. Residuary to W. W’s residuary to Kingsberry. Was it a class gift?
“to W for life, then to Fowler and the children of my sister Emily equally as tenants in common.”
Held, this is a class gift. Fowler was only intended to share as one of a class, and because she did not survive, her share lapsed, and the rest of the class takes the whole of the property.
CN: Looks at the intent of the testator; looks at overall scheme at who was to take and what. The testamentary scheme left everything, as the residuary, to the W, except this newspaper. The intent seemed to be that W take the income from the newspaper for life, then to other people, unlike everything else in his estate. The court looks at the whole scheme. This may have helped the people in the Yucus case, because there W wanted it to pass to her “husband’s side of the house.” Here, T may have wanted Elizabeth to have half, or 1/6th. Court decides 1/6th.
CN: TEXAS: no way of knowing how this would be decided in Texas.
Changes in Property After Execution of will: Specific and general Devises, p. 459
Ademption by extinction. EX: T leaves Blackacre to A. T sells Blackacre and used the money to buy Whiteacre. T never changes the will. The gift of Blackacre is adeemed: A has no gift and no interest in Whiteacre.
Specific—Ademption applies only to specific devises, such as “Blackacre” instead of “my real estate.”
General devise—Ademption does not apply to general devises, e.g., $10k (if this amount is not left at death, other assets must be sold to satisfy the gift.).
Demonstrative devise—A general legacy payable from a specific course, e.g., 10k payable from the proceeds of GM stock.
EX: Ademption. Wasserman v. Cohen, p. 459
R: When a testator disposes of the subject of a specific devise in his will during his lifetime, that devise is held to be adeemed, whatever may have been the intent or motive of the testator for doing so. To be effective, a specific devise must be in existence and owned by the testator at the time of his death.
EX: T creates a revocable trust and then transfers assets into it. The trustee was to convey Blackacre to Plaintiff. But T never transferred the Blackacre by deed into the trust, but rather sold it before her death. There were proceeds from the sale, but the property had never been in the trust. Held, Blackacre was adeemed.
Avoiding the harshness of Ademption, §70A. p. 463
a) Classify the devise as general or demonstrative rather than specific. EX: T bequeaths “100 shares of Tiger Corporation” to A, and T owns no shares of Tiger at death; the court will declare this to be a general devise if Tigertail Corp. as widely held stock traded in a major exchange. Had it said “my 100 shares of Tiger” then the court would hold it to be a specific devise. But a bequest of “$10k, more or less, entered on my bank book” might be held demonstrative and not adeemed.
b) Increase in the securities §70A, a devise of securities include:
a. same organization-actions initiated by the organization
i. stock split,
ii. stock dividends, etc
b. different organization as a result of
c. but not cash distributions before death.
c) Classify the inter vivos disposition as a change in form, not substance. Merger: T gives “my 100 shares of Tiger Corporation” to A, and Tiger merges into Lion Corp., which issues 85 shares of Lion for every 100 of Tiger; merger is a change in form and A should get the 85 shares of Lion.
d) Construe the meaning of the will as of the time of death rather than as of the time of execution. Ex: T devises “my Lincoln to A” at the time of execution, T owns a 1984 Lincoln, but at time of death a 1989 Lincoln.
e) Create exceptions. If the conservator of an incompetent or insane person transfers the item, most courts have held the legacy not adeemed on the theory that ademption requires a voluntary act of the testator.
Divorce or Marriage after will execution; elective share statutes, p.298
(1) Revocation by operation of law: change in family circumstances.
Divorce revokes any will provision for the divorced spouse §69, unless the will provides otherwise. These apply only to wills, not life insurance, pension loans or other nonprobate transfers. UPC §1-201—applies to both wills and nonprobate transfers. severs the interest of the former spouses in property.
EX: Jane give “all to husband Frank,” excluding her children, Ann, from a former marriage. Frank has a son, “Bill” from a prior marriage. After the will is drafted, Jane and Frank divorce. The provision with regard to Frank is void. Treat Frank as if he predeceased Jane. If there is no other residuary taker, it goes to Jane’s child, Ann.
1. Stepchildren not revoked, p. 299.
EX: T leaves all his property to his wife, and if his wife does not survive him, to his wife’s son (T’s stepson). T divorces W then dies. T has children by a prior marriage. A state statute revokes all provisions in a will for a divorced spouse and treats the divorced spouse as having predeceased the testator. Held, §69 only applies to the prior spouse, not the alternative. Wife is treated as having predeceased, therefore Stepson is the residuary and he should take.
UPC the relatives of the former spouse as well as the former spouse. Does Stepson take under UPC?—no: they are treated “as if the former spouse and relatives of the former spouse disclaimed all provisions revoked by this section. §2-804(d). Many states have not adopted this, because they think that if the person took the time to include an alternate, their will should control.
ERISA— Just be aware that you can’t rely on the state provisions which exclude ex spouses because ERISA may preempt it.
preemptive effect over contrary state law. state law cannot void pension plans.
9.301, 9.302—of the family code have preempting provisions regarding insurance and retirement fund. But most retirement and pension will be covered by ERISA.
Eagelhoff—Federal law trumps state law. Divorce attys need to look at this, and inform their client to make changes to their retirement policy.
Texas Supreme Court Case- Keen v. Weaver—ex wife waived her interest in the retirement plan. But husband never changed the designation in the retirement plan. Texas Fam. Code says the ex wouldn’t take. But ERISA says go by the policy. But as part of the divorce decree the ex agreed to waive any interest in the plan.
2. Life Insurance. Absent a statute, life insurance proceeds will pass to the divorced spouse, unless the divorced property settlement expressly provides that the spouse surrender all right to collect insurance proceeds.
(2) Rights of Surviving Spouse to a Share of Decedent’s Property, p. 280
EX: John executed as will leaving Blackacre, worth 100k, to his son, Sam, and residue to Sue. John remarries, Wanda. John is survived by Wanda, Sam and Sue.
UPC §2-301—Entitlement of Spouse; Premarital Will, p. 534
If T makes a will and then gets married, W is entitled to an intestate share, unless the will was written in contemplation of marriage, or the will expresses the intention that it be effective notwithstanding any later marriage or the testator already provided for the spouse outside the will.
CN: Who would take under UPC? Total estate after paying off debts is 600k. If you give 100k to Sam, then that leaves 500k to sister share. Wife would take under intestacy. p. 73: Wanda’s share, peal off the first 100k, plus 200K, UPC 2-102(4).
Texas doesn’t have an omitted spouse statute. In theory, because of community property, half would be the wife’s anyway. But what if John owned a lot of separate property before the marriage, worth 580k. They are married but not for very long, They accumulate 40k during their marriage. So she would take $20k. Sam gets Blackacre, and Sue would take all of the 580K. All the separate property would pass by his will. So, if you advise newly married couple, where one has a large amount of separate property before marriage, advise them to make new wills to protect the new spouse.
a. Elective Share-no elective share statute in Texas.
Separate property states give the surviving spouse an elective share in the decedent’s property. The spouse can take under the decedent’s will or renounce the will and take a fractional share of the decedent’s estate.
Texas: no elective share. H leaves all to Bubba. W is displeased. H only has power to will half of his property. But there can be problems where H is trying to give away her property as well.
b. Property subject to the Elective share, p. 500
(1) Judicial Decisions, p. 500
Avoid elective share with a trust. Sullivan v. Burkin-- H intentionally left nothing to W, from whom he had been separated for many years. H creates a trust of which he was the trustee.
R: the surviving spouse has no claim against the assets of a valid inter vivos trust created by the deceased spouse, even where H alone retained substantial rights and powers under the trust instrument.
CN: Mass had a statute by which if she was not satisfied with the disposition, she could assert an elective share. But the statute applied only to probate property, and a trust is not a probate property. W claims that this was just a sham and the elective share laws should apply. From this point forward people won’t be able to skirt the elective share statutes of Mass.
Birth (or adoption) of a child after will is executed
Though a parent has the right to disinherit a child, the law does not favor this when the testator leaves no spouse. “lack of capacity” “undue influence” and “fraud” are sometimes used by judges to rewrite wills, when they feel sympathetic to the child.
Pretermission child statutes. §67-- If a child is born after the execution of the will, and the will does not provide for him, and the child is not mentioned in the will.
If there are children at the time the will is executed. §67(a)(1). Child takes an equal portion of what the other children take.
If there are not children at the time the will is executed. §67(a)(2).
Children born after will is executed by not mentioned cannot take. Azcunce v. Estate of Azcunce, p. 537
F: 1983—will + codicil executed, “to W, then living children, L, N, G.”
1984—Patricia is born
1986—codicil executed (2d), expressly republishing all the terms of the original will.
Held, T’s execution of a codicil to the will after Patricia was born destroyed her prior statutory status as a pretermitted child, because she was alive when the second codicil was executed. If T wanted to provide for her, he would have done so in the codicil. She was therefore, in effect, disinherited.
CN: The court applied the doctrine of republication as though it was mandatory, but it’s an equitable principle designed to carry out the testators intent.
Lawyer liability for failure to advise about pretermitted child laws. Sparber, p. 540
Child lacks privity. Patricia cannot sue the drafting lawyer for malpractice because she lacks privity, nor will it admit extrinsic evidence to prove she was an intended beneficiary.
CN: Had she been an intended third party beneficiary then she could bring an action. But this court limits the evidence to the will. This is a narrower approach than the ‘Homestead” -Roberta case. They don’t want to admit extrinsic evidence. If someone were named, but the amount is wrong then she can, but not if not mentioned.
NOTE: In Texas, no malpractice for the third party beneficiaries. Only the estate could bring an action, but only if harmed. The only damages that could be awarded were the legal fees in executing the negligently executed codicil; as well as legal fees incurred in pursuing the earlier lawsuit.
Tortious interference with expectancy – must show intent to cut her off. p.221.
Constructive trust. p. 221: CN: the court could have applied the doctrine of constructive trust to do justice. Then three of the children would have it legally, but they’re holding it in a constructive trust for Patricia’s benefit.
Contrast. McAbee v. Edwards: W executes a will leaving everything to her daughter. W remarries and consults her atty to make sure everything goes to her daughter. Atty assures her that nothing will change. Held, atty liable for malpractice.
§67—IF the will doesn’t provide for any child then, children take by intestacy. If some children are mentioned in the will, then the pretermitted child will be treated as a class with the other children.
What result if Texas law applied? Should republication by codicil apply? No. Assume we don’t have the second codicil.
§67(a)(1)(B)—the court would have treated the bequest as to a class.
EX: grant from H “all to wife if she survives me, and then to my kids.” There are three kids then living, then a fourth one is born. Look at §67(a)(1)(B) “Whether vested or contingent.” Here, the remainder is contingent, so we would still apply the statute. Patricia will fall into the contingent group.
§67(a)(2)—had Monica died intestate, without a spouse, under §38, where would this go? It wouldn’t have gone to Sister, she gets bumped out, the statute will trump this bequest. Had she died single and intestate there will be a forced share.
If a will is structured to say “ to my kids” then there’s not problem. If is says, to my spouse and then to my children. then the intent is for the parent to take. But what if there is a ‘stranger to the marriage.
§67(d)(2)—a child is viewed as having been provided for, if there is a provision, whether vested or contingent.
No. 4: do you want to rely on the statute? No. Include something in the will which mentions or refers to ‘my existing children” or any other children, whether adopted or later born.
What if Howard had been a rock star or a politician, and tell you there might be other children? Some jx, in order to exclude them you have to mention them. But Texas doesn’t require specific mention of unknown children to exclude them. But had he said “all the rest and remainder to my children,” then an unknown child can show up and take.
You can’t claim an omitted child’s share if you’ve already be provided for in the will.
Will substitutes: Non probate transfers, p. 331
(1) Contracts with Payable on Death provisions, p. 331
Testamentary gifts are not allowed in contracts other than life insurance. Wilhoit v. Peoples Life insurance, p. 331
Traditional Rule: Payable-on-death (POD) designations in contract other than life insurance contracts are invalid.
If this were an insurance contract then the gift would have lapsed, and the beneficiary is named in the contract. Most courts say that a later will cannot trump a POD provision. They are different animals.
W, the beneficiary of her husband’s life insurance policy, gets a receipt for the funds, but then elects to have the company keep the money at 3.5% and payable to her Brother. The company agrees to her conditions. Brother dies before W. Will leaves the proceeds to Robert, a son of her stepson. The company refuses to recognized Robert’s claim.
Held, for Robert. The contract to leave the money with the company was not an insurance contract, therefore contract law, not insurance law, should apply; it was an independent agreement. Though the agreement said to pay on her death to Brother, this was not a valid disposal because it did not comply with the Wills Act. After Brother died, her will said that the fund should pass to Robert, evidencing an intent that the fund pass, not to the heir of Brother, but to Robert.
POD’s cannot be changed by will. Cook v. Equitable Life Assurance Society, p. 339
R: Majority rule: an attempt to change the beneficiary of a life insurance policy by will is ineffectual. There are three exceptions: (1) If the insurance company has waived strict compliance; (2) it is beyond the power of the insured to comply literally with the regulations, (3) the insured does everything to change the beneficiary but dies before the new certificate is issued. These procedures serve the interests both of the insurer and the beneficiaries.
EX: While married, Doug names W#1 as beneficiary in his life insurance policy. They Divorced. Douglas marries Marg. Doug makes a holographic will leaving policy to Marg. Held, only if the insured has done all within his powers to comply with the policy provisions respecting a change of beneficiary, but through no fault of his own he was unable to achieve his goal. Here Doug had fourteen years between his divorce and his death, to change the beneficiary of this life insurance policy. W#1 should take.
(2) Multiple-Party Bank Accounts, p. 344
These include a joint and survivor account, a POD account, and agency account and a savings account trust. The joint account can be problematic because its is not always clear if the other named person is to be able to draw from it during the depositor’s life time or only after, or whether or not he is entitled to the balance upon death of depositor.
Convenience account, not a gift. Franklin v. National Bank
While undergoing eye surgery, T opened an account so Mrs. Goddard could get money when she needed it. The card was signed by both and provided that the funds were owned by the signatories as joint tenants with ROS. Nine months later, T attempted in a letter to remove Mrs. Goddard’s name and substitute Mrs. Franklins.
R: T’s attempt to change the account shows his view of that the account was his own; his use of the account for his own health and giving access to the funds to Mrs. Goddard was for that purpose, and not as a gift.
Held, the account was solely for the convenience of decedent and not a gift and it belongs to his estate.
CN: Is it a convenience account, or a jt account with ROS?
In Texas the card will control. Uniform Single Party or Multiple Party Account Form §439A—Single party acct with no POD; with POD; with ROS; convenience account. Most banks follow this. This eliminates litigation. The card will be strong evidence but not controlling. TEXAS supreme court ruled that extrinsic evidence is inadmissible to contradict a signature card.
§322B-Abatement of Bequests- What if there’s not enough money in the estate to fill the bequests. Specific bequests are favored. Order in which you take from some parts to provide for others:
· First, any partial intestacy,
· Second, personal property,
· third, real property.
EX: T doesn’t have much cash assets, but has a
50k painting to A;
10k cash to B;
5k to C;
all else to D.
After all the debts are paid there is 20k in cash and the painting. This is easy. A=painting; B=10k; C=5k; D=5k.
But what if there is $20k in cash $12,500 in debts, then there’s only $7,500 leftover. You have to pay off the debts. Then look at 322B. D will take nothing.
§321—if there’s not enough to pay, then pay it out pro rata. B was supposed to take twice as much as 5k. B=5k, C=2,500. But the painting is not touched, because it’s a specific bequest, not a general bequest.
Advancements and Satisfaction
Advancement. §44—if someone dies intestate, but during the lifetime gave a lot to the child. We’ll only treat these as an advancement if there is some contemporaneous writing which indicate that it’s an advancement on the will, to reduce the person’s share later on.
Satisfaction of Devise. §37C—a parallel statute covers Satisfaction of devise. If property has been given during T’s lifetime. A contemporaneous writing is to be deducted from or is in satisfaction of the devise.
Planning for incapacity, p. 396
1. Durable Power of attorney—agency—deals with financial matter’s only.
An ordinary power of attorney terminates on the incapacity of the principle; a durable power continues through the incapacity of the principal until the principal dies. The instrument creating it must contain language expressing the intent of the principal that the power not terminate upon incapacity. Governed by the law of agency, thus the principal, if competent, can terminate the agency at any time.
§481—a springing power of durable atty
§482—power of atty effective upon the death of a testator.
§490—statutory form. wide powers. If a client doesn’t want to grant with respect to any of these provisions, they can cross them out.
When dealing with a client over this, know that these are very wide powers and they should not appoint a someone unless they have complete trust in them.
§679—Designation of Guardian. a springing guardianship that only kicks in when you die. Health care decisions are another thing the client may want to think about.
2. Advance Directives regarding Health care and Disposition of the Body, p. 403
a. Living Wills
A living will contains directive concerning termination of medical treatment, providing that the signer’s life shall not be artificially prolonged when there is no reasonable expectation of recovery from extreme physical or mental disability.
Pregnancy exception: this does not apply when the patient is pregnant.
Chapter 166, p. 271:
166.033—Form of Written Directive. This is an advance directive saying don’t keep me on a breathing tube.
166.064, p. 295: medical power of attorney. You’re letting someone make the medical choices in the last illness.
b. Durable Power of Attorney for Health care, p. 404
Alternative to a living will. appoint an agent to make health care decision in case of the person’ incompetency. The Uniform Health Care Decisions Act authorizes a person to give instructions as to future health care (a living will) or to grant to an agent a durable power of attorney to make all healthcare decisions. The healthcare provider must follow the instruction of the agent except where contrary to his conscience or generally accepted medical practice. Elder Law. Deals with (1) health care and (2) income and asset preservation.
c. Disposition of the Body, p. 405
Courts exercise a ‘benevolent discretion’ to carry out the wishes of the deceased. But if the person dies by violence or suspicious circumstances, the body will be autopsied regardless of the person’s wishes.
Cadaver organ transplantation. Uniform Anatomical Gift Act permits a person to gift his body to any hospital, physician, medical school or body bank for research or transplantation. It is however, illegal to sell organs.
Most states have ‘routine request’ statutes, to encourage organ donation.
Some jx in the world follow a ‘presumed consent’ approach, whereby organs are routinely removed from cadavers unless there is an objection.
CN: In Texas Anatomical Gift Act. The donor card must be signed in presence to two witnesses. There are various types of organs.
1. Exercise in using tx code §73.
3. If there was a killing involved. Mom still inherits subject to constructive trust. TX has never drawn a distinction between negligent and intentional homicide.
4. decide whether this is a class gift or not. Probably not, its not “brothers” or Brother’s and sisters. These are just friends. A is a friend not a descendant of testator or testator’s parent.
5. There’s not ‘publication’ requirement in Tx. one of the two witnesses to the will is an interested interest. The fact that a witness is an interested witness does not meant that a will could not be probated. There are three different ways that an interested witness can still recover. Debbs intestate share is greater than she could take under the will, so she can take the lesser of the intestate share, or the amount in the will.
6. §45 W takes her half of the community. None of it goes to her, but the kids split his half. There’s no minor children involved.
7. Texas in the minority in this issue, it retains the privity rule.
8. In Texas you go to the first generation where there are takers who survive and divide per capita.
9. If C and D are alive, then we have survivors at this generation. so divide by four.
10. One of the functions of probate are to clear up title: you can use either a statutory heirship proceedings, or a non-statutory affidavit of heirship. For muniment of title, you need a will.
11. community property v. separate. She uses separate funds to by the shares, it splits, but the character has not changed. The dividends are community. But inception of title.
12. A co-owned car is a probate asset.
13. When does the class close? What’s Jenny’s ownership interest at the time of the grant, is nothing. When she’s dies it’s contingent interest. It’s contingent on surviving sally. When jenny dies her contingent interest is gone because its never vested. When does the class close? At the death of sally because she was the measure.
14. Texas has not omitted spouse statute.
15. Not a good holographic will because there is not signature. But he thought it was a good holographic will, to he destroyed the old will. But the court will apply the doctrine of DRR. dependent relative revocation.
The grantor must transfer a res to the trustee, who controls the trust. But If it’s not funded then its not a trust.
The parties in a trust, p. 557
a. The Settlor (Grantor/trustor):
b. The trustee—holds legal title, p. 559
A trust won’t fail for want of a trustee. the court will appoint one.
Standard of conduct: he must act solely in the interest of the beneficiaries. He must preserve the property, make it productive and pay income to beneficiaries. The trustee must have duties. NO DUTIES NO TRUST.
No “delivery’ required for self-settled trusts. PROBLEM, p. 559
O creates a document declaring a trust, for which she is the trustee, “income to herself for life, then to A.” Now the trust owns the property. But O never transfers anything into the trust, by deed or physically. the grantor must deliver property to the trustee. Grantoràtrustee
But here, O is the grantor and the trustee and the beneficiary. She can’t be the sole beneficiary. There has to be a delivery; but if it’s from O to O, then there doesn’t have to be a delivery, just a declaration. She never changed the title; the trustee is supposed to keep her funds separately. Held, a valid trust is created through the declaration.
Requirements for a trust:
· beneficiary other than the grantor
· mental capacity
· delivery to the trustee
· trustee with legal capacity, over 18,
· trustee posts bond.
What if trustee transferred trust funds or property to another person? The beneficiary will have a cause of action against the trustee.
Oral declaration invalid in Texas.
Trust can be created only with a writing. Statute of frauds, §112.004. EXCETPION: you can have an oral trust for personal property if delivered to a third party as trustee, who is neither settlor or beneficiary, if there is a transfer to a different trustee, not to herself.
See case 7, p. 557—In texas we need a writing.
p. 561, problem
He parks it in his own safety deposit box? This is commingling. This is not a good investment. If D and E had any knowledge of the existence--the beneficiaries can come after the assets. The trustee doesn’t have to take the gift.
Procedures for quitting the trust position. Can X, trustee, just quit? No. Once he accepts the money and the trust instrument, he has taken on those duties. He will have to go through the procedures. If he does quit (or die), the court will appoint a new trustee, unless the trust instrument contains alternative trustees.
c. The Beneficiaries—equitable title.
Beneficiaries have a personal claim against the trustee for breach of trust. If the trustee wrongfully disposes of the trust property, the beneficiaries can recover the trust property unless it has come into the hands of a bona fide purchaser for value.
CN: life estates are actually very rare today, because they are cumbersome. Life interests are typically held in trusts. Trusts are used to avoid probate.
Reasons to create a trust: couples with minor children. You still want to identify a guardian over the person, but a trust for the guardian of the estate.
Remarriage issues: H and W, people park assets in the trust, out of concern for remarriage if they die.
Property managements issues.
Use of Revocable trust in estate planning, p. 386
(1) by declaration of trust, whereby the settler becomes the trustee of the trust property. A successor trustee should be named to take over on the settlor’s death or incompetence, which would occur automatically,
(2) by deed of trust, naming a third party as trustee.
Revocable trust: grantor can bring it back any time. In an irrevocable trust you can’t pull the property back.
Pour over trust. §58a—a trust doesn’t fail for creating a trust during you’re life time and not putting anything into it.
life insurance policy—“to the trustee named in my will.”
Consequences during life of Settlor, p. 387
Pour over wills, p. 371
EX: First, O sets up a revocable inter vivos trust naming X as trustee. O transfers to X, as trustee, his stocks and bonds. Second, O executes a will devising the residue of his estate to X, as trustee, to hold under the terms of the inter vivos trust.
Two useful theories:
Incorporation by reference: A will can incorporate by reference a trust instrument in existence at the time the will is executed, but not trust amendments made after the will was executed. If the trust is amended after the will is executed, the probate assets will be disposed of in accordance with the trust as it was when the will was made, or, by intestacy.
Doctrine of independent significance. A will may dispose of property by referring to some act that has significance apart from disposing of probate assets. This act can be referring to an inter vivos trust that deposes of assets transferred to the trust during life.
EX: A gets everything in the living room. Before T dies, he puts his Picasso paintings in the living room. Because placing the painting in the living room is an act of independent significance, A gets the painting. With Pour over Wills, instead of saying that A can have everything in my livingroom, T sayings, A can have everything in my trust.
While independent significance requires that the inter vivos trust have some property transferred to it during life, incorporation by reference requires that the trust instrument be in existence at the time with will is executed.
No formal execution of a pour-over trust.
No need for witnesses. Bar exam Q: $500k onto the trust payable to G for life, then to her son. Signed by her and by her brother. Never witnessed. Is it valid? Yes. Trust law is governed by a trust statute. We don’t need the formalities of execution.
No need for a res. EX: in her will, she left the residuary to the trust. The gift into the trust is a pour over gift. This is valid. Normally, in order to have a trust you need trust property, but not Texas, see §58a.
Trust law controls a will. EX: Suppose shortly before G’s death, she delivers to her brother a signed typed note, not witnessed. “This is intended to amend my trust agreement with you.” Instead of distributing all my assets to my sons, distribute all to the church.” The effect is that, because the will puts all lot of assets into the trust, trust law controls, and you don’t have to have two witnesses.
EX: A life insurance policy. If you create a will in a trust,--to the trustee named in my will. Instead of having it go to my minors, the assets go into a trust.
Revoking a revocable Trust
Where the Settlor reserves a power to revoke the trust in a particular manner, he can revoke it only in that manner. Trust of Pilafas, p. 361
The beneficiaries are some of his children but it expressly omits three of the disfavored children. Then he gets divorced. He amends the trust to cut the ex wife out. He also executes a will. The disfavored children claim that they came back into his favor and he died before he could make the change. He was a fastidious fellow who kept good records. But the will and the new version of the trust could not be found by one of the disfavored children. This omitted son files for an adjudication of intestacy, saying father also revoked the trust. He’s trying to gain an interest through intestacy. He would take nothing under the trust, so if there is intestacy he will inherit; and the charities will be excluded, so all the children will have an enhanced share.
Revocation provision: “Settlor, and no one else, may revoke at any time.”
R: Where the Settlor reserves a power to revoke the trust in a particular manner, he can revoke it only in that manner. Thus, trust not revoked.
CN: The will should be presumed revoked if not found in G’s possession. But this doesn’t apply to trusts. Under the terms of the trust, G had to have some writing delivered to the trustee. But G was the trustee. But there is no evidence that he did that. Had there been no provision on revocation, then the statute would have applied.
TX—112.051(c)—Revocation-only in writing, if the trust was created by written instrument, then the revocation must be in writing. So, it probably could have been decided the same way in Texas.
Transfer: The trust assets transferred are still in the name of the trust.
Problems, p. 367
Revocation in will and delivery when settlor and trustee are one. 1. What if the settlor, Pilafas, expressly revoked the trust in his will, which is later found among his papers at death? Is the trust revoked?—The will is a written instrument, but is it delivered to the trustee? If the trustee were a third party, then there might require some delivery of the document. Under the facts of Pilafas, this would be sufficient for revocation.
2. Undue influence irrelevant to revocation. Ann (76) marries Mark (32) creating a will with income to herself and on her death to persons other than her husband. National Bank is the trustee. They divorce and remarry. Ann sends a letter to the National Bank wishing to revoke her trust. Bank refuses, claiming undue influence. Held, a settlor of a revocable trust has an absolute right to revoke if she is competent; undue influence is irrelevant.
CN: Undue influence can be raised for trusts, but it is rarely successful. With a trust the settlor has lived under the trust for a number of years.
Creditor’s rights reaching revocable trust assets -- Reiser, p. 368
RULE: Creditor’s can access the funds in a revocable trust to satisfy debts created by the settlor during his lifetime, because they should not be denied after his death what they could have reached during his life.
Dunne transferred his corporate stock into the trust. His will left the residuary estate to the trust. Then he borrowed 75K from Bank, unsecured loan. When he died his estate had insufficient assets to pay off the loan.
R: During the lifetime of the settlor, the bank would have had access to assets of the trust. When a person creates for his own benefit a trust, his creditors can reach the maximum amount which the trustee, under the terms of the trust, could pay to him or apply for his benefit. Dunne had had all the income and principal at his disposal under the terms of the trust. Held, the bank can reach the assets of an inter vivos trust in order to satisfy its debt.
CN: One function of probate administration is to pay debts. So the lender wants to get into the trust to get paid. The court agrees because the G would have had to pay had the bank sued him during his lifetime. Because it’s a revocable trust, he’s the trustee, he can pull back at any time. Had it been an irrevocable trust, then it’s out of his control, even if he is trustee.
Creation of a Trust, p. 567
1. Intent to create a Trust
The only thing required is for the grantor to manifest an intent to create a trust relationship. He need not use the words “trust” or “trustee.”
EX: G conveys property to a grantee to hold “for the use and benefit” of another, is sufficient to create a trust.
Jimenez v. Lee
Bond: Grandmother buys a US savings bond, registers in Betsy’s father’s name, which was to provide funds to be used for P’s educational needs. Father later cashes the bond and buys stock of Bank of Salem, registered as “Jason Lee, Custodian under state law for Betsy Lee.”
Savings account: A friend deposited a $500 gift to Betsy into a savings account in the name of the father and his children. Later, father invests $500 into Commercial Bank, as “custodian” for his children.
R: While the donors did not expressly direct the Father to hold their gift ‘in trust’, this is not essential to create a trust relationship, as long as the transfer of the property is made with the intent to vest the beneficial ownership in a third person. Here, both donors gave the gifts ‘for the educational needs of the children.”
Father breached his duty to beneficiary “to administer the trust solely in the interest of the beneficiary.” Betsy was entitled to impose a constructive trust or an equitable lien on the stock acquired with the savings account money. Father is personally liable for that amount which would have accrued to Betsy had there been no breach of trust.
Trustee’s duties: to maintain and render accurate accounts; if he does not, the presumptions are all against him.
CN: Court holds that it was a trust, and given it was a trust, he has duties as a trustee. He can’t get out of it without consent or a court order. Things he did wrong: didn’t keep an accounting, poor record keeping. He could offset the expenditures if they could be traced. He has a duty to keep accurate records.
NOTES, p. 575
1. Precatory language. If a testator expresses a wish that the property be disposed of in a particular manner, and it creates only a moral obligation, not a legal obligation, it is called precatory language.
EX: “to A with the hope that A will care for B”;
“Devise land to C and it is my wish and desire that D should be able to live on the land during her life.” To avoid litigation, clearer drafting should be used: “I wish, but do not legally require, that C permit D to live on the land.”
Necessity of Trust Property (res), p. 581
The elements of a trust: (a) a trustee, (b) a beneficiary, and (c) trust property. The trust property may be any interest that can be transferred: $1, 1¢., contingent remainder, leasehold interest, chose in action, royalties, life insurance policies, anything called property, can be put in a trust.
Need for a res. Unthank v. Rippstien, p. 581
Craft wrote a letter to Mrs. Ripp: “I will send you 200 cash each month for five years, provided I live that long.” On the back he wrote: “I have stricken out the words provided I live that long and hereby bind my estate to make the $200 payments monthly provided for on page one of this letter.”
Mrs. Ripp tried to show it was a holographic codicil, that this was will-like. Court held that it didn’t look like testamentary intent.
R: A trust requires a res. Held, this was a gratuitous promise to make a future gift. No consideration. He hadn’t separated any of his assets from his general assets. If ‘estate’ means ‘will,’ then it should be probated; if ‘estate’ means property, then it should be a trust. The lesson is to make sure that some property is placed into an instrument to start with.
Resulting trust: Ripp claimed that all of Craft’s property would be put into a trust and pay off her amount over 5 years, and the rest, the amount of his estate which was not paid out would revert to his estate. A resulting trust is like a reversion.
Questions, problem and notes, p. 583
2. CN: A tries to set up a trust, tries to fund the trust by giving some checks to fund it. The signer dies before the checks are cashed. Bank refuses the checks. Given the legal nature of check, no property has been transferred, so nothing has gone into the trust.
CN: Pilafas: the property that was supposed to be transferred by will would pass by intestacy. So the omitted children would have gotten something because the will was considered revoked.
Resulting and Constructive Trusts, p. 584
A resulting trust is a trust that arises by operation of law in one of two situations:
(1) where an express trust fails or makes an incomplete disposition, or
(b) where on person pays the purchase price for property and causes title to the property to be taken in the name of another person who is not an natural object of the bounty of the purchaser—also called purchase money resulting trust. A resulting trust doesn’t contemplate an ongoing fiduciary relationship wherein the trustee holds and manages the property for the beneficiary.
Case 12: Daddy pays $10k to buy a lot, takes title out in daughter’s name. Under common law property rules this is a gift. What if instead of daughter’s name, he takes out the title in Lulu’s name, who is not a natural object of daddy’s bounty, but a stranger to the trust, then it’s not considered a gift. Then it is considered held in trust for the father by Lulu.
Pour over trusts terminated by divorce. Clymer v. Mayo, p. 375
Will Pours over into inter vivos revocable trust, Clara and Hill as trustees.
Trust B: “to Mayo for life, for the benefit of the nephews and nieces of Clara.”
Trust not funded when made. Clara and Mayo divorce, Mayo remarries.
I: What is the effect of the Divorce on the dispositions provided in decedent’s will and trust?
Validity of “Pour Over” Trust: under common law there had to be a res for a trust to exist. The statute says a trust is valid regardless of the existence, size or character of the corpus. Thus, a trust can be valid even though it is not funded.
Trust interest revoked by divorce: statute provides that a divorce revokes a will. Because the trust was not funded, and only became funded upon decedent’s death, through a pour over from the will’s residuary clause, the decedent’s will and trust were integrally related components of a singled testamentary scheme.
CN: Court determines that the trust should be governed under the same overarching plan as with will.
Texas –§69—divorce revoking will. But Texas doesn’t have a statute for a spouse and no Texas court has decided the impact of divorce on a trust.
There’s no ERISA issue because the retirement plan just say ‘trustee named in my will,”
Was there a trust res for Trust B? Unthank said that you have to have a res for a trust to exist.
§58a—No res required for testamentary trust.
But there was a contingent interest because it said “paid to the trust.”
No future trusts--Brainard v. Comm’r, p. 586
In 1927 G orally declared a trust of his stock trading during 1928 to his wife and mother, to pay profits to his wife, mother and two children, after deducting a fee for his services. At the time of the declaration, G owned no stocks.
R: An interest which has not come into existence or which has ceased to exist can not be held in trust. An expectancy cannot be the subject matter of a trust. While one can contract to create a trust not yet in existence, but it will fail if there is no consideration. This was merely a promise to create a trust in the future with no consideration.
CN: Was there trust res? the court is unwilling to accept that future profits create a trust res. There was nothing in the record to suggest that he even owned stock at the end of 1927. If he had stock at the time of the creation which he placed into the trust then there would have been a trust.
The disturbing part of the courts analysis is that we do sometimes have instances were future property can be put into a trust. Such as contingent remainders or future royalties, as in the Pascal case.
Had he even put the declaration in writing, “I own shares of stock, even without identifying a dollar, the court might have upheld it.
CN: here there was a declaration that all ensuing stock would go to the trust. Ct held that you can’t have future profits has recognized in the law.
Future royalties can create a trust. Speelman v. Pascal, p. 589
Pascal wrote a letter to his lover, Mrs. Kingman: To giver her a share of the future profits to his musical, My Fair Lady.
I: Did the delivery of this paper constitute a valid complete present gift to Kingman by assigning future royalties when and if collected from the musical? yes.
R: no consideration was necessary. At the time of the delivery there was no musical in existence, but Pascal was negotiating the rights.
Delivery? All that need be established is an intention that the title of the donor shall be presently divested and presently transferred.
CN: Here the court seems to recognize that future profits can be recognized under the law. But how can future profits in Brainard not be recognized as property, but here in Speelman they do.
Field v. Mayor—Bell assigned $1,500 of any moneys that might be made form printing work. Eventually they got work and money became due them. Held, even though there was merely a possibility of a chose in action, and the possibility ripened into a realized creating an equitable title which could be enforced. There must be a completed and irrevocable gift beyond cancellation by the donor.
NOTES, p. 593
1. What is the difference between Brainard and Speelman?---
CN: “Delivery” requirement for a gift. If there is just an oral statement then there is no delivery, but in Speel man there was a writing.
(b) O orally declares himself trustee for one year of all stock he own with any profits from stock trading to go to A. --- here there is a trust res.
Cf. Texas there has to be a writing; an oral declaration wouldn’t hold up.
(c) notorized writing. Same facts as Brainard but there is a writing, and it is put out there in front of a third party. The IRS was concerned that this was an after the fact oral statement
(d) O orally declares himself trustee for the benefit of A of 5% of the profits, if there are any, of a musical play that O is writing, based upon Shaw’s Pygmilion.
Though you typically need a res, Brainard was possibly concerned with the lack of objective witnesses and tax evasion.
An interest as small as an “evanescent hope.” – Farkas, p. 352
Farkas bought stock in the name of “Farkas, as trustee for Williams,” though he retained (1) the right to receive all the cash dividends during his life, (2) the right to change the beneficiary or revoke the trust; (3) the right to retain the proceeds for his own use upon the sale of any portion of the trust property (4) to act as sole trustee. Farkas died intestate and had a few heirs in law.
R: Williams must have acquired a present interest, otherwise the documents would be testamentary. If testamentary, they would be invalid for failure to comply with the statute of wills. So, did Williams acquire a present interest? Yes,
ISSUE 1: The interest William acquired need not be named because beneficiaries can acquire so small an interest as to be an “evanescent hope.” Another problem: “The decease of the beneficiary before my death shall operate as a revocation of this trust.” This creates a contingent interest in the beneficiary, but the trust is nonetheless valid.
ISSUE2: The retention by the settler of the right to revoke does not render the trust inoperative. The fact that Farkas could revoke should William raise any objection, doesn’t mean Williams had no rights, such as the right to hold Farkas estate liable for breaches of trust committed by Farkas during his lifetime. Therefore, it was a trust, though it had a ‘testamentary look.”
CN: Terms provide that Farkas retains a lot of control. He retains the right to cash dividends, retaining the right to sell, or change beneficiaries, and the right to revoke the trust. If it’s not revoked on his death it reverts to Williams. After his death, remote kin challenge it.
What is the nature in which he is holding the stock? If he owned it in fee, he could do whatever he wanted with it, which is virtually indistinguishable from what Farkas has. Nevertheless, Williams had an interest, though very limited, because Farkas could have revoked at any time. These types of trusts are common today. What rights did he have? He is a beneficiary, so in theory, if there is some questionable activity on the part of the trustee, so he could demand an accounting or sue the trustee. But if he did Farkas would probably revoke the trust and fire him.
CN: Here we do have a written instrument, which was delivered to a third party, his intention was clear. So it didn’t take much of a transfer of property to make the trust valid.
General rule: a trust must have beneficiaries, to whom the trustee owes duties.
Exception: beneficiaries can be unborn or unascertained when the trust is created.
Merger: trustee cannot also be the sole beneficiary of a trust: What if A puts all her money in a trust, naming herself as the sole trust and the sole beneficiary. This won’t be valid because there are no other beneficiaries. In Farkas, even though he was the settler, trustee and beneficiary, he created a remainder beneficiary after his death.
Tex. Property Code 112.034--Merger
Hypo1: A puts all money in trust with B as trustee and B as sole beneficiary. This would not be valid.
Hypo2: A puts money into trust for B as trustee and B and C as co-beneficiaries. This would be valid.
Hypo3: A into trust for B and C as co trustees, and B and C as beneficiaries. This will also be valid.
Definite and ascertainable beneficiaries required. Clark v. Campbell, p. 598
G’s will leaves “all my property to my trustees” to dispose of it to “my friends as they, my trustees, shall select.”
Held, the bequest for the benefit of the testator’s ‘friends’ must fail for the want of certainty of the beneficiaries.
R: The beneficiaries under a trust may be designated by class, but such a class must be capable of delimitation, as “brothers and Sisters,” “children” “issue” nephews and nieces,” etc. “Friends” has no statutory limitation and has no precise meaning. Even if there were an ascertainable class, it is defeated by the language to “such of my friends as the trustees may select.” There are not sufficient criteria for selection of individuals from the class.
CN: There have to be defined beneficiaries and “friends” is too indefinite a classification, and is no way to this a confined set. the trust fails and the assets falls into the residuary.
Notes, p. 600
1. Power of appointment. When no trust is created but the transferee has discretionary power to convey the property to such members of the class as he may select.
TEST: If the class of beneficiaries is so described that some person my reasonably be said to answer the description, the power is valid. If it cannot be determined whether the appointee answers the description, the power is invalid.
EX: T devises his residuary estate in trust “for my wife W for life, and then to distribute the trust assets to such of my issue as my wife appoints.” The power of appointment is discretionary and non-fiduciary. If W fails to exercise the power, the trust property passes to T’s heirs upon W’s death. But had it said, “for my wife W, as trustee,” then it would not be a discretionary non-fiduciary power.
CN: one can give further power to a beneficiary but not to a trustee. Why treat trustee and beneficiary differently? that’s the way it’s always been done.
You can say “I leave all my stuff to my friend Jane, and Jane can distribute to whom she sees fit.”
CN: there has to be a res, and a defined set of beneficiaries.
Honorary Trusts (non-human beneficiaries)--Searight’s Estate, p. 602
Honorary trust, one binding the conscience of the trustee, since there is no beneficiary capable of enforcing the trust. The general rule is that a trust fails if there are no beneficiaries
EX: G bequeaths his dog Trixie to Florence, directing his executor to deposit $1k in a bank and pay Florence .75¢ a day for the care of Trixie for as long as the dog lives, and any remainder to be divided equally among 5 named persons. Held, the one to whom the dog was given accepted the gift and indicated her willingness to care for the dog. Therefore, the bequest for the care of the dog is not unlawful. Also this doesn’t violate the rule against perpetuities because, even accruing interest, the entire 1k would be used up in less than three years at 75¢ a day.
CN: The problem is that the pet can not challenge the trustee. On one level beneficiaries have to be human, but courts have given effect to trust for animals as honorary trusts. Does it survive the RAP? (“no interest is valid lest it vest within the lives in being plus 21 years”). Here, there’s no measuring life. If there’s no life in being, then you use 21 as the measuring period. Here there wasn’t a problem, because the 1k would be used up in about 4 years anyway. What to do when a client wants its pet taken care of after its death? Give it to someone during its lifetime.
Necessity of a written Instrument, p. 608
General Rule: The statute of frauds requires interest vivos trust of land to be in writing.
Tex. Prop. Code 112.004—there must be a writing to create a trust.
a. Oral Inter Vivos Trusts of Land
EX: O to X as trustee, to pay income to A for life and upon A’s death convey land to B. This cannot be enforced, but does X get the land? A constructive trust for the beneficiaries will be imposed where the transfer was wrongfully obtained by fraud or duress, where the transferee, X, was in a confidential relationship with the transferor, or where the transfer was made in anticipation of the transferor’s death.
Constructive trust—confidential relationship. Hieble v. Hieble, p. 609
Mother, concerned with cancer, transfers legal title to her son with an oral agreement that once the danger had passed, he would retransfer the property back to her. Son refused to re-convey the property.
R: equity should impose a constructive trust where a donee who has received realty under an oral promise to hold and re-convey to the grantor and has refused to perform his promise.
Held, an agreement was made, there was no consideration, there was a confidential relationship. The purpose is to avoid unjust enrichment of the grantee through his unconscionable retention of the trust res. Held, the constructive trust was properly imposed.
CN: The basis for the mother’s claim is that it was a confidential relationship. This was a oral agreement for the transfer of property, which violates the Statute of Fraud. Court says that in notions of equity, they will uphold and constructive trust. The confidential nature, the close family relationship. Plus the court was satisfied that there wasn’t any fraud.
Compare: Pappas v. Pappas, p. 613—To avoid marital conveyance, Father conveys Land to son with promise that son will re-convey after the divorce. Father testifies at divorce proceeding that the land was transferred for consideration. After divorce son refuses to return the land. Held, not constructive trust because father did not have clean hands.
b. Oral trusts for disposition at Death, p. 614
Semi-Secret trust, no named beneficiaries—Olliffe v. Wells, p. 614--Ellen devises her estate to Rev. Wells, to distribute as she expressed to him or planned to express to him. Everything was to go to Wells to further distribute. It was set up like a trust, but there are no beneficiaries on the face of it. It only says ‘to people I’ve told you about.” The oral evidence is inadmissible; because the trust was facially deficient, they won’t allow extrinsic evidence.
Cf. secret trust: Had the will said, from Ellen to Wells, without more. Had they been able to prove an oral agreement, the court would have allowed the evidence. If just on the face of the will it looks like an outright grant, if there is evidence that he was supposed to redistribute it, courts would have allow this evidence of secret trust.
Note: in this case, both Ellen, Wells were dead and the Mission had burned.
NOTES, p. 616
1. Distinction between a secret and semisecret trust.
Secret trust: G gives legacy to Wells absolutely, but there’s an oral promise; a promise by Wells to G to use the legacy for Charity would be enforceable by a constructive trust imposed on Wells. Evidence of the promise will be admitted.
Semisecret trust: Will says that Wells is to hold the legacy in trust but does not identify the beneficiaries. Since the will shows on its face an intent not to benefit Wells personally, it is not necessary to admit evidence of Well’s promise in order to prevent unjust enrichment. Extrinsic evidence is excluded and the legacy to Wells fails.
CN: Restatement: a court can create a trust for both secret and semi secret. Some Jx don’t allow constructive trusts in either situation.
2. p. 617: Wendy Brown’s brother, Simon Preston, is your client. Simon has a longtime lover, named Camilla Bones, who lives out of town and whom he sees when he travels. Simone wishes to leave Camilla 10k at his death, without advertising the matter.
CN: What would you suggest to simon? A secret trust might not be recognized in some jx. May just recommend he doesn’t do it.
If Simon and his wife, Antonia, had both come to you for estate planning advice, and out of the presence of his wife Simon had told you of his desire to leave Camilla 10k, what would you do? CN: You could try to talk him out of it, but if he persists, then you have to withdraw.
Aunt Fanny Fox, and elderly lady with a house full of things and no descendants, Would a secret trust – an absolute devise by Aunt Fanny to Wendy, with an promise by Wendy to distribute in accordance with a memo to be left – be enforceable? Maybe not.
Mandatory trust: trustee must distribute all the income. EX: O transfers property to X in trust to distribute all the income to A.
Discretionary trust: Trustee has discretion over payment of either the income or the principal or both.
EX: (spray trust): O transfers property to X in trust to distribute all the income to one or more members of a group consisting of A, A’s spouse, and A’s children in such amounts as the trustee determines.
CN: Spray trust is to take advantage of tax related issues.
Discretionary trustee’s duty to inquire. Marsman v. Nasca, p. 618
I: Does a trustee, holding a discretionary power to pay principal for the ‘comfortable support and maintenance’ of a beneficiary, have a duty to inquire into the financial resources of that beneficiary so as to recognized his needs? (yes) If so, what is the remedy for such a failure?
F: W created a pour over trust for the benefic or her husband, for his ‘reasonable maintenance and support” at their sole discretion. Farr was the trustee and family lawyer. The one time Cappy asked for $300
to take out a mortgage to pay some bills, Farr required him to list the reasons. Cappy remarried Margeret and Farr drew up a will that left everything, including Wellesley house to Margaret. Due to his increasing financial difficulties, Sally agreed to pay all the mortgage payments in exchange for the house on Cappy’s death. Farr drew up the deed which conveyed the house to Sally and her husband, Marlette, as tenants by the entirety. Sally died in 1983, before Cappy, and her husband became the sole owner of the property. After Cappy died, he gave Margeret, through Farr, notice to vacate the premises.
2. Breach of trust by the trustee. The direction to the trustees was to pay Cappy such amounts ‘as they shall deem advisable for his comfortable support and maintenance.” A discretionary trust is not absolute. The duty to inquire into the needs of the beneficiary followed from an appreciation of trust responsibility. Had Farr used ‘sound judgment’ he would have made such payments to cappy as to allow him to continue to live in the home he had occupied for many years with the settler.
5. Personal liability of the trustee. The will contained an exculpatory clause; such clauses are generally held valid, absent any overreaching or abuse of fiduciary relationship by the trustee. Held, since there was no evidence that the insertion of the clause was an abuse of Farr’s fiduciary relationship with Sara at the time of the drawing of her will, the clause is effective.
lawyer’s ethics? first, there was no ethic problem representing Sara and Cappy both. but then he does Cappy’s will leaving everything to Margaret, and the deed leaving the house to Sally and Richard. Court says that had Farr carried out his duty properly, Cappy would never have lost the house.
KEY: Just because the trustee has discretion doesn’t mean he has unfettered discretion, such as the duty of inquiry. HE should have been aware of Cappy’s needs, his other sources of income.
Restatement’s the six factors of when to uphold exculpatory clauses: p. 626
1. had trustee been in a fiduciary relationship with Settlor [yes]
2. was trust instrument drawn by trustee [yes]
3. did settlor get independent advice re trust instrument [no]
4. is settlor experienced or unfamiliar with business affairs [no]
5. was the insertion of the provision due to undue influence [no]
6. the extent of reasonableness of the provision [probably no.]
CN: Here it was the lawyer who was named as trustee, also drafted the trust. You should give the client opportunity to seek independent counsel.
Trustees tend to be conservative with their investments, because they don’t want to be held liable to risky investments. Farr was extremely conservative demanding an accounting for the mere $300.
Creditor’s Rights: Spendthrift trusts, p. 631
Spendthrift trust: beneficiaries cannot voluntarily alienate their interests nor can creditors reach their interests.
CN: these provisions are generally upheld. But there are exceptions.
Alimony and Child support. Shelley, p. 633
Father created a spendthrift trust to benefit his son, Grant. Grant married and divorced two women, owing his first wife child support and his second wife both child support and alimony. Grant disappeared. Trustee bank files an interpleader.
R: The spendthrift trust provision of a trust is not effective against the claim of beneficiary’s former wife for alimony and for support of the beneficiary’s child.
Income (alimony and child support): the income for the Shelley Trust is subject to the claims of the former wives for alimony and child support. Alimony: Majority: a spendthrift provision will not bar a claim for alimony.
CN: Should the children and alimony be able to reach the income? yes. Both Child support and alimony should be able to reach the income as a matter of public policy. Public policy requires the exception to the spendthrift trust with respect to the income, otherwise the public will have to pay. Regarding alimony, courts are split, but here the court decides that public policy also demands an exception with respect to alimony.
Corpus (only child support): Because the corpus cannot be reached until the trustee has exercised his discretion and decided to invade the corpus, Grant would have no interest in the corpus and the corpus is not subject to the claims for alimony. But the children can take directly under the trust because the will provides for disbursements to be made to Grant and his children, in the trustee’s discretion there exists an emergency (an absent father qualifies as an emergency).
CN: Principle issue: child support, the trustee was authorized to make distributions to Grant or his children in a case of an emergency. So the children are taking directly as beneficiaries of the trust, not by trumping the spendthrift provision. If the income is insufficient they can take the principle. Alimony: this is different because the spouse is not named as a beneficiary.
Key: spendthrift provisions are largely upheld, except for a few exceptions such as child support, at least with respect to income.
Exceptions to the protections of a spendthrift trust: , p. 639
a. Self settled trusts. A spendthrift trust cannot be set up for the benefit of the settlor. Some states say that spendthift provisions are ok provided that they’re not included to defraud creditors. This seems strange because that’s pretty much what these are for.
Tex. Prop. Code 112.035(d)-- Creditors can reach the assets, If the settlor is also a beneficiary.
Bar EXAM Q: Grantor has $1million. Sets ups a self settled trust, “to me grantor for life, then to kids.” Puts a spendthrift provision. Then a creditor comes along, with a judgment saying grantor owes money to the creditor. Can the creditor get at the assets in the spendthrift trust?
Examine how was the trust created? Was it revocable or irrevocable?—Under Texas, it’s assumed revocable unless explicitly stated as irrevocable. Here, there is no mention that it is irrecovable, so the assumption is that it’s revocable. So this statute will come into play and the spendthrift provision will be invalid.
Had it been irrevocable, “to me as trustee, for me for life and then to my children.” At 1% interest it would make 10k a year in income. If it is irrevocable, then the creditor could get at his income interest for life. But G has parted with some of that money forever, the non-income interest. So you might have to look at a life expectancy tables. What’s the present value of a person with a million dollars with a life expectancy for 30 years?
b. Child support and alimony. Majority: spendthrift trusts are subject to claims of child support and alimony. Minority: they are not.
Tex Fam. Code. §154.005—child support will override a spendthrift provision.
TEX—doesn’t have a similar provision with respect to alimony.
Support Trusts. trustee makes payments of income to the beneficiary in an amount necessary for the education or support of the beneficiary in accordance with an ascertainable standard.
CN: A typical kind of support trust is “income to child for life, remainder to her children, if the income is insufficient to the child’s support, then the trustee may at her discretion pay out principal. If the child has needs, and the trustee doesn’t payout, then the beneficiary would have a cause of action. Also if the child beneficiary has a hospitalization, the doctors may be able to come after the trust for support.
Discretionary trust—no property interest. O’Shaughnessy, p. 643
Under a discretionary trust, a beneficiary is entitled only to so much of the income or principal as the trustee in his controlled discretion shall see fit to distribute. The beneficiary cannot compel the trustee to pay him or to apply for his use any part of the trust property.
EX: A trust give the trustee sole and absolute discretion to distribute or withhold trust assets during LP’s lifetime; but LP also has a limited power of appointment exercisable only by his last will and testament to a certain class of individuals. LP owes tax and the IRS is trying to come after the trust, which they can do only if LP has a property right in the trust. Property rights are governed by state law.
Held, ‘sole discretion’ given the trustees is ‘absolute and binding upon all persons in interest.” Therefore, the beneficiary of a discretionary trust does not have ‘property’ or any ‘right to property ‘in non-distributed trust principle or income before the trustees have exercised their discretionary powers of distribution under the trust agreement. Thus, the beneficiary has a mere expectancy in the undistributed amounts. Creditors, who stand in the shoes of the beneficiary have no remedy against the trustee until the trustee distributed the property.
Support trust compared. The beneficiaries of a support trust have a property interest, because they can compel the trustee to distribute assets, but the beneficiaries of a discretionary trust cannot.
Power of Settlor to Alter Trustee’s Responsibilities. §113.059—Exculpatory Clauses. These provisions were held not to apply to court made trusts. But now they get the same treatment.
1) “A Settlor may not relieve the trustee of liability for:
a) breach of trust committed
i) in bad faith
ii) intentionally; or
iii) with reckless indifferene to the interest of the beneficiary; or
b) any profit derived by the trustee from a breach of trust.
NOTE: cutting-off income. What acts constitute an exercise of discretion?: After such exercise by the trustee, the creditors may seize the property awarded to the beneficiary while it remains in the hands of the trustee. This can be avoided by a provision in the trust instrument permitting the trustee in its discretion to pay a third party directly for the support of the beneficiary instead of paying the beneficiary directly. In O’Shaughnessy, the trustees could pay him or ‘for his benefit” which means they could pay his bills directly, never creating a property interest in him.
Trusts for the State-supported, p. 648
Qualifying for Medicaid. Federal law draws a distinction between self settled trusts and trust created by third parties for the benefit of the individual.
Self settled trust. “Assets of the individual are used to form all or part of the corpus of the trust.” For revocable trusts, all the income and corpus are considered resources available to the individual. In irrevocable trusts, any income or corpus which could be paid or applied for the benefit ...are considered “sources.” Hence, in the case of discretionary trust, the Medicaid applicant will be deemed to have resources in the maximum amount that could be distributed to him, assuming full exercise of discretion by the trustee in his favor.
Exceptions: first, a trust created by the will of one spouse for the benefit of the other. Second, a trust established for a disabled person.
Trust Established by a third person. Mandatory and support trusts are considered other sources, but discretionary trusts are not.
Reimbursement for state–support trust beneficiaries.
Problems, p. 650
CN: 1. Barbara is developmentally disabled. Her mother, Edith, neglected Barbara and failed to provide for her with a social security benefits . ..if this individual has access to moneys to a trust account. Do the assets count in considering her ability to pay? If someone has a lot of assets, can you just park them in a trust with spendthrift provisions to prevent the state from considering them?
Who was the real settlor of the trust? If mother, then its a self settled trust. If it’s the daughter’s then there’d be a different result. Held, daughter was the settlor, because it was settled with money that belonged to her from the social security payments.
2. This gives you an example of the kind of planning you might be facing. Wendy and Howard Brown’s elder daughter, Sarah, has been injured in an automobile accident that left her unable to care for herself. 200k is settled for a lawsuit in which she was injured; this is daughter’s dollars and if put into a trust, then Sara is the settlor. These assets could be parked in a trust for the life for the daughter, with the remainder to Medicaid. this applies to self settlement.
Wills. H&W—normally they would leave their assets in equal third to their children. But if they leave any to Sara, then she will be viewed as having assets which will get eaten up pretty fast.
Supplemental trusts, to pay for the needs of Sara that Medicaid doesn’t cover.
There’s not a lot of housing for people with disabilities. If the parent left a house to her daughter, would it be viewed as an asset.
2) Modification and Termination of Trusts, p. 651
If the settlor and all the beneficiaries consent, a trust may be modified or terminated. The trustee has no interest and cannot object. But if the settlor is dead, the settlor’s intent cannot be set aside after his death.
No modification for mere advantage. Stuchell, p. 652
Where the purposes for which a trust has been created have been accomplished and all of the beneficiaries are in agreement, a court will, on the application of all of the beneficiaries or of one possession the entire beneficial interest declare a termination of the trust. A court may direct the trustee to do acts which are not authorized or forbidden by the terms of the trust if, owing to circumstance not known to the settlor and not anticipated by him, compliance would defeat the purpose of the trust. HOWEVER, the court will not permit or direct the trustee to deviate from the terms of the trust merely because such deviation would be more advantageous than a compliance with such direction.
EX: Harrel is mentally retarded and receives Medicaid. If the trust is not modified, Harrel’s remainder will be distributed directly to him if he survives the two life-income beneficiaries, severely limiting his ability to qualify for public assistance. Held, the modification’s only purpose is an advantage to the beneficiaries. Therefore, the amendment will not be allowed.
CN: The beneficiaries are trying to tweak the trust so that the sharel, instead of going to Harrel outright, would go to a supplemental trust.
Changed circumstances traditionally applies to being able to change the terms of the trust if the assets will be in jeopardy, like where the corpus might be in peril without come change; not just to keep the money out of the government’s hands.
At the outset of the trust, some
mechanism could have been included where the first generation of beneficiaries
have the special power of appointment : “This is in trust
for my children, and then they have the power to designate
notes, p. 654
2. Give a beneficiary the power to modify or terminate the trust. This can be done through the special power of appointment, i.e., modification for the benefit of anyone except the donee.
3. Unless all the remainder beneficiaries consent (which is usually not possible because the remainder may ultimately vest in persons now unascertained or unborn), the court will deny a petition to invade the principle for sufficient support of a widow to live comfortably unless the trust is construed to contain a power to invade, express or implied.
Claflin Doctrine (majority): p. 656:
A trust cannot be terminated prior to the time fixed for termination, even though all the beneficiaries consent, if termination would be contrary to a material purpose of the settler.
EX: the assets were in the trust for his son, as the sole beneficiary, to be paid out to the son absolutely when he turns 30. The son was the only beneficiary.
Generally a trust cannot be terminated if the beneficiary is not to receive the principal until reaching a certain age if it is a spendthrift, discretionary, or support trust.
No termination when purpose not accomplished. Estate of Brown, p. 657
An active trust may not be terminated, even with the consent of all the beneficiaries, if a material purpose of the settler remains to be accomplished.
EX: A trust was created for two reasons. The education of Nephew’s children, and the care, maintenance and welfare of Nephew and his wife. After all the children’s education had been paid for, Nephew got the remaindermen i.e., his children, to consent to the termination, asked the court to terminate the trust. Held, termination cannot be compelled here because a material purpose of the settlor remains unaccomplished. Though the education of Nephew’s children was accomplished, the second purpose, (providing for the “care, maintenance and welfare” of Nephew and his wife) was not accomplished. The settlor’s intention to assure a lifelong income to Nephew and his wife would be defeated if termination of the trust were allowed.
1. Duties of the trustee, p. 903
The duty of loyalty--The trustee must administer the trust solely in the interest of the beneficiaries.
Self-dealing. Hartman v. Hartle, p. 903
RULE: A trustee cannot purchase from himself at his own sale, and his wife is subject to the same disability, unless permission to do so has been obtained by the court.
EX: The executors, T’s in-laws, are entrusted to sell the estate and divide the proceeds among T’s five children. One of the sons bought the farm at auction for $3,900 for his sister, Mrs. Dieker, the wife of one of the executors, who in turn sold it for $5,500 to a third party.
Held, resale cannot be ordered because the property was sold to a bfp, but Mrs. Dieker can be compelled to pay her profits into the trust.
Notes, p. 904
1. Self dealing. Good faith and fairness to the beneficiaries are not enough to save the trustee from liability for self dealing. The good faith and fairness become irrelevant.
No further inquiry rule: A showing of self dealing is sufficient to hold the trustee accountable for any profit make on the transaction, or compel the trustee to restore to the trust property.
(a) settlor authorized the self dealing or
(b) beneficiaries consented after full disclosure.
Trust pursuit rule. Unless an bfp, the beneficiary is entitled to enforce a constructive trust on wrongfully disposing of trust property and treat it as part of the trust assets.
2. Duties relating to Care of the Trust property, p. 919
a. Collect and protect Trust property
b. Earmark Trust property, p. 920
c. Not Commingle funds
TEX. Chapter 117: Uniform Prudent Investor Act. §117.004
(a) Prudent investor. a trustee shall invest and manage trust assets as a prudent investor would.
CN: This gives a little leniency to a trustee if one investment goes bad.
(b) Overall portfolio. trustees decisions should not be on assets in isolation , but in the overall scheme. CN: So if one investment goes bad, Enron stock, then there’s not a ground for a law suit. But if he put it all in Enron that would be different.
Duty to diversify investments 117.005—Diversification.
Class Closing Rule, p. 781
Lux v. Lux
Philomena leaves all the rest and residue to my grandchildren to share and share alike. All the real estate shall be maintained for the benefit of the grandchildren and not sold until the youngest reaches 21. However, should it be necessary to sell any real estate to pay my expenses, it is my desire that it be sold to a member of my family. Philomena died with one child, and 5 grandchildren by that same child.
Issue: Did Philomena makes an absolute gift of the real estate to the grandchildren or did she place it in a trust for their benefit? Held, a trust.
R: No particular words are required to create a testamentary trust. A trust never fails for lack of a trustee, here it should be the executor. But who is in the class? Held, the class must remain open until the corpus is distributed. But What did Ph intent when she said that the corpus must be preserved until the ‘youngest grandchild” becomes 21?
Four possibilities of dates, depending on the meaning of ‘youngest”: distribution might be made
1. when the youngest member of the class in being when the will was executed attains 21 [rejected]
2. When the youngest in being when the will takes effect becomes 21 [rejected]
3. the youngest of all living class members [grandchildren] in being at any one time attains 21 even though it is physically possible for other’s to be born. I.e., if 21 yeas go by without any more children being born, the class will close.
4. when the youngest grandchild whenever it is born attains 21. [reject, because this would leave it open too long, if Anthony lives to 90 he could have a child then and tack on another 21 yrs]
Held, distribution of the trust corpus shall be made at any time when the youngest of the then living grandchildren has attained the age of 21.
CN: When Philomena died, her only child had “ all the rest and remainder” ...The will left everything to her husband but he was dead., The alternative gift favored the grandchildren. The rest and residue to the grand children, and the real estate to be maintained and not be sold.
Why not just identify the five grandchildren as the class? The son wanted to have more children. The problem is determining what Philomena intended. The ad litem argues that it made it an outright gift, cus then they wouldn’t have to share. Also, the class would close at Philomena’s death. But Clause 3, written right after clause two, suggests that it wasn’t an outright gift. Even though there was not words ‘trust’, it suggests that it was not intended to be held outright because it says thtat it shouldn’t be sold until they are 21. The will never says trust. Nor does it name a trustee. For a testamentary trust, the court appoints the executor of the will.
But you can’t tell when the trust will terminate. “Shall not be sold until the youngest of the grandchildren attain 21. We don’t apply the Rule of Convenience because we don’t have to.
Clause 3 says that the property shall not be sold, never the less the court approves the sale. The court recognizes changed conditions. The will says that if there is a sale, “I wish”it be sold to a member of the family. But this is precatory language.
CN: Maybe with the rule of convenience would not be necessary with a trust.
Gifts of specific sums: If a specific sum us given to each member of the classes, the class closes at the death of the testator regardless of whether any members of the class are then alive.
Part III—Gift and Estate tax
Income tax basis, p. 990
Loss---fmv at date of gift.
Bequest—stepped up basis, ie., fmv on date of death.
The annual exclusion. p. 991
TP is permitted to exclude from taxable gifts the first 11k given to any person during the year.
A donor must file a gift tax return only if gifts to any donee during the year exceed the 11k annual exclusion and must report on the return only gifts in excess of 11k to any person.
Unlimited exclusions if made directly to the service provider:
Gifts of future interests. p. 992. The annual exclusion is not available for gifts of future interests. Thus, remainder interests are not entitled to exclusion.
Gifts to Minors. Because gifts to minors are not usually outright, §2503(c) provides that no gift to a minor will be deemed a future interest.
§2503(c) Trust. to qualify for the annual exclusion, the donor must give the trustee power to expend all the income and principal on the donee before the donee reaches 21, and that unexpended income and principal must pass to the donee at 21,or if the donee dies under 21, to the donee’s estate or as the donee appoints under a general power.
Uniform transfers to minor’s act—permits transfer to a person (including the donor) as custodian for the benefit of the minor.
§2035: Transfers within 3 years of death, p. 1029
If it’s something that has a substantial increase in value; not market fluctuations. Any of the following, and only the following transfers made within three years of death is included in the decedent’s gross estate:
1. any gift tax paid by the decedent or his estate on gifts made within three years of death.
2. any transfer or release of an interest in property if, had such interest been retained, the property would have been included in the decedent’s gross estate under the following provisions:
a. transfers with retained life estate. §2036
b. transfers taking effect at death §2037.
c. revocable transfers.§2038
d. life insurance policy. §2042
3. EX: if O gives blackacre to A two months before O’s death, a taxable gift is made at the time of transfer, and Blackacre is not include in o’s gross estate at death. (the amount of gift tax, however, is included in O’s gross estate.
Problem, p. 1008
Decedent dies with 662 pounds of marijuana in a plane crash. The market value is included in his gross estate. Had it been seized before he died, then it probably woudn’t have been taxable to his gross estate.
Could you reduce your assets by burning them before she died?
Gifts Between spouses and from One spouse to a third person, p. 1003
One spouse can take an inlimited marital deduction for gifts to the other spouse. Any amount of property can now be transferred between the spouses, either during life or at death, without paying gift or estate tax. (However, it must be in a form that is subject to taxation when the property is transferred by the donee spouse to a third party, therefore anything short of a fee simple transfer, eg, a life estate, would not qualify.)
Fee simple or absolute ownership. W gives $1 million to H outright.
Power of appointment trust. W transfers $1 m in trust to pay H the income for his life and on his death to whoever H appoints by will. (must be general, no specific power of appointment).
QTIP (qualified terminable interest property) trust. W transfers 1m in trust to pay the income to H for life and upon his death to distribute the principal to W’s heirs.
Election to split. §2513. If the spouse consents, a gift to a third person may be considered as made one half by each spouse. This doubles the available annual exclusions.
Examples, p. 1004
1. W gives property worth 100k to A. H signifies his consent to splitting the gift by signing at the appropriate point on the gift tax return by the donor. Neither W nor H has made taxable gifts in any earlier year. What is the amount of taxable gift made by W? By H?
100/2=50; 50-11=39, SO each has made a taxable gift of 39k.
2. H and W have three children.
a) how much can they give each child tax free each year without using any of their unified gift tax credits?
Answer: $11k per child per spouse, SO 22k per child.
b) What is the maximum amount they can give the children tax free in one year, using their annual exclusions and their unified gift tax credits?
Answer: $33k each, so totally of 66k, with the §2513 election.
CN: In theory, the 66k, and 1 million each.
c) What if H dies after making these gifts, leaving all his property to W; Is any estate tax payable on H’s death?
Answer: no; §2523 allows unlimited marital deduction for gifts between spouses.
Life Insurance, p. 57
Difference between whole life and term life: Whole life has a cash value; term life has no cash value.
Under the term life, he already owns 25k, that’s his money.
Under the whole life, he’s put $20, 500, but will be worth $100k at death.
Estate of Cavenaugh v. Commissioner, 51 F.3d 597 (U.S. App. , 1995)
Respondent IRS imputed the full value of both of the interests in the deceased's estate. The appellate court affirmed only the interest in the residuary trust created by the deceased's wife's will, and reversed the deficiency attributable to the life insurance policy because settlement of the deceased wife's community interest in the policy was not made prior to the death of the insured, the wife's community interest was never extinguished and the policy retained its community status up to the time of maturity.
HN2To ensure that none of the property escapes taxation, I.R.C. § 2056(b) provides an exception to subsection (a)'s grant of an unlimited Marital Deduction for terminable interests. The language of § 2056(b) excludes terminable interests in property from eligibility for the Marital Deduction. But a number of particular exceptions to this general terminable interest exception are recognized among the particular types of terminable interests that are in fact deductible by virtue of being exceptions-to-the-exception is the Qualified Terminable Interest Property created by the Congress in 1981.
Qualified Terminable Interest Property § 2056(b)(7)(B)(i) defines
(i) which passes from the decedent,
(ii) in which the surviving spouse has a qualifying income interest for life, and
(iii) to which an election to exclude is made.
An election to claim a
marital deduction for qualified terminable interest property once made is
irrevocable. I.R.C. § 2056(b)(7)(B)(v).
The viability of a Qualified Terminable Interest Property election, in other words, presents a question of federal, not state law, and such an election, once made and approved by Internal Revenue Service, is irrevocable.
HN5A qualifying income interest for life is an interest in which the surviving spouse is entitled to all the income payable annually or at more frequent intervals and of which no person has a power to appoint any part of the property to any person other than surviving spouse. Consequently, the statute imposes two definitional elements :(1) deceased must be entitled to all of the income; and (2) no person can be authorized to appoint any part of the property to anybody but deceased. Applicable regulations incorporate state law to determine whether the income distribution requirements are satisfied.
HN6Whether the surviving spouse is entitled to all the income is not measured by an abstract principle of law but merely by reference to the decedent's intent.
However, life insurance proceeds payable to the estate are excluded to the extent that they belong to the decedent's spouse under state community property law.
HN9In Texas, the status of property is fixed at the time of acquisition or inception of title.
If the deceased's term life insurance policy is purchased initially with community property, ordinarily the spouse retains a one-half community interest in the policy and its proceeds: If life insurance is purchased during a marriage and paid for with community funds,the policy rights or incidents of ownership and the proceeds rights or the rights to receive the proceeds in the future constitute community property.
Under circumstances where the uninsured spouse predeceases the insured spouse, settlement of the decedent's community interest in the un-matured chose has ordinarily been resolved by allocating one-half of the cash surrender value to the deceased's estate and the other one-half to the surviving spouse.
HN12Where settlement of the deceased wife's community interest in the policies is not made prior to the death of the insured, the wife's community interest is never extinguished and the policies retain their community status up to the time of maturity. Consequently, the proceeds are community.
Divorce does not automatically divest either spouse of his or her interest in an insurance policy, that this interest is preserved in both benefits of ownership of the policy and the eventual proceeds from the policy, and the need to pay premiums subsequent to the divorce from separate funds cannot terminate either spouse's right to the proceeds. Furthermore, the tenancy-in-common is the proper prism to assess the legal relationship. After divorce each spouse owns an undivided one-half interest in that property as a tenant in common in the same fashion as if they had never been married.
Community interest is not commuted by a zero cash surrender value. Even though the policy provides only for term insurance and has no cash value, it is still a property right.
McCurdy v. McCurdy,
372 S.W.2d 381 (Tex. App. , 1963)
Appellant widow sought review of an order of a trial court (Texas), which determined the status of the proceeds of her late husband's life insurance policies.
OVERVIEW: The trial court determined in appellant widow's action against appellee executor, that the proceeds of appellant's late husband's life insurance policies constituted his separate estate, and the community estate was entitled to reimbursement on the basis of premiums paid with community funds. On appeal, the court affirmed, holding that the decision comported with community property law.
OUTCOME: The court affirmed the determination of the status of the proceeds of appellant widow's late husband's life insurance policies. The proceeds of appellant's late husband's life insurance policies constituted his separate estate, and the community estate was entitled to reimbursement on the basis of premiums paid with community funds.
HN1The right to receive insurance proceeds payable at a future but uncertain date is property. Such property is said to be in the nature of a chose in action which matures at the death of the insured.
HN2As to realty, title to which is acquired before marriage, and a portion of the consideration for which is thereafter paid from community, fixes the character of title at the time of its inception or acquisition. It depends upon the existence or nonexistence of the marriage at the time of the incipiency of the right in virtue of which the title is finally extended.
HN3Where a life insurance policy is acquired before marriage, payable to the insured husband's estate, under community property law the right to proceeds remains the insured's separate estate, as vested before marriage, notwithstanding part of the premiums are paid thereafter from the community.
HN4If either spouse before marriage procures a policy of life insurance on his own or another's life, in his favor or in favor of his estate, the policy and its proceeds are his separate property. His rights to the proceeds date from the policy.
Estate of Hanau v. Hanau, 730 S.W.2d 663 (Tex. , 1987)
Robert and Dorris Hanau were married in Illinois and later moved to Texas. After moving here, Robert prepared a will leaving his separate property to his children by a prior marriage, and his community property to Dorris.
stocks purchased in a
prior state of matrimonial domicile at the time of acquisition would not be
treated as community property for probate purposes as though they were acquired
in Texas. The court rejected petitioner's assertion that Tex. Fam. Code Ann. §
3.63 permitted the stocks to be characterized as community property in Texas
because the statute only applied to a decree of divorce or annulment. The
court held that where there was a valid will, it should have been enforced
regardless of the equity of the devises or bequests contained therein. The
court found that a specific stock was not co-mingled with others and could be
OUTCOME: most stocks as separate property ; separate property acquired in another state could not be characterized as community property in Texas for the purpose of probate, because the statutory scheme related only to divorce and not probate, because there was a valid will to be enforced, and because property was not co-mingled.
Parson v. United States, 460 F.2d 228 (5th Cir. 1972)
Parson and his wife were married
on 1926, and resided in Texarkana, Arkansas until January 1945, at which time
they moved to Texarkana, Texas. They remained there as residents of Texas until
decedent's accidental death on December 17, 1961.
OVERVIEW: Decedent had a number of life insurance policies at the time of his death. IRS assessed the proceeds of the insurance policies as part of decedent's estate and, thus, subject to estate taxes. Appellee brought an action for refund of the tax IRS claimed under I.R.C. §2042(2). The court affirmed the lower court's holding that decedent had effectively made a gift of his community property share of one policy to appellee by irrevocably transferring every incident of ownership to appellee, so the proceeds of that policy were not part of decedent's estate. The court reversed as to the other policies, finding the forum state's "inception of title" rule applied, that because the policies were acquired as separate property they remained decedent's separate property and part of his estate with reimbursement to the community for premium payments from community funds.
OUTCOME: Judgment holding proceeds of life insurance policy that decedent had irrevocably assigned was not part of decedent's estate affirmed; judgment that proceeds of policies decedent retained beneficial interest in were not part of decedent's estate reversed.
How do you include the homestead right into the estate tax?
Taylor, p. 859
To the children of the school payablejust before Easter and just before Xmas.
Charitable: If it is a charity trust, then it is exempted from the rule against perpetuities.
Benevolent: If it’s benevolent, then it is not exempted from the RAP.
Why wasn’t this for a relief of poverty? because it was an across the boeard gift, not just to needy children. What about ‘in furtherance of education”, because the gift was to be given on the last day before the xmas brake, so the court doesn’t belief it.
The court was probably correct in applying the law, but it is probably thwarting the testator’s intent.
But at the very least, the trust should have been given for 21 years, under the wait and see statute.
Neher, p. 870
T leave house and fund to Village
for the crfeation of a hospital. But another hospital is built nearby.
Trustee’s want a to reform the will to build a City Hall. Ct finds a general
intent to benefit the village, memorialize her husband, and finds the intent to
build a hospital.