Wills 20and 20Trusts Osborn Spring 202009 by 2rwZZG


									                                       WILLS + TRUSTS OUTLINE – Osborn Spring 2009

         Don‟t care abt Uniform Probate Code (UPC) or Restatement – only focus on California Probate Code

         Probate: Process where estate goes thru a court + judge supervises handling of estate (gathering assets, paying taxes, distribution)
             o   Method to get supervision while distributing assets of someone‟s estate
                         Provides extra level of protection to ensure assets are distributed via D‟s wishes
             o   Purpose: Collect D‟s assets, satisfy creditors, resolve conflicts btwn beneficiaries, + distribute residuary 2 appropriate places
                         Ultimate fail-safe  if no other theory authorizes a shift of property from D to another, probate occurs
             o   Doesn‟t affect or avoid taxation of an estate --> Probate may avoid some costs, but IRS doesn‟t care if estate is probated
             o   Is probate necessary?
                         Depends on circumstances – when possible divisions seem complex, probate may be appropriate
                         Probate is not that onerous – can be valuable if fighting family members b/c judge can impose self in the middle
                         If probate is needed to accomplish certain goals, we should use it; if not, we shouldn‟t
             o   Only some property interests are subject to probate:

            Non-probate asset (Contracts + Property devised in Wills/Trusts)                               Probate asset (everything else)
        DOESN‟T GO THRU PROBATE  is transferred based on the terms of the agmt                                GOES THRU PROBATE

Has tag saying “in the event of my owner‟s death, send me here”                                 Has no tags – don‟t know where it‟s going +
   Life ins - $ paid by 3d-party at death of D – no probate b/c $ treated as contract rt of    something must pick it up + move it
    beneficiary                                                                                   Regular kinds of property
   Property held in joint tenancy – surviving joint tenants own entire property when 1           Ordinary bank account (as opposed to a
    JT dies  D effectively transfers wealth at death + no probate b/c of legal theory             “payable on death” bank account)
    that survivor owned property all along
   Retirement benefits                                                                         Goes thru probate unless total (cumulative) value
   Property held in Living Trust                                                               is less than $100k (see below)
   Payable on Death (“P.O.D.”) Accounts

         Wills + Trusts
              o   Function – provide orderly way to pass assets on; alternative is disorder w/ others trying to seize assets after D is dead

                                Will                                                               Trust

Definitions     A will can pick up a probate asset      Future interests are only used in modern times as trusts
+ Terms         + distribute it per the will‟s terms:     Ex. To put $ away for child‟s college, make trust to preserve $ until child gets older
                “pick up all of my assets and             Fallback exam answer: “create a trust” (b/c a trust solves everything)
                distribute them equally to my
                children”                               Every trust has a name given upon creation of the trust  Osborne Family Trust of 2009
                  If estate only has a will on it,
                    estate will go thru probate (a      Most trusts set up by living person are irrevocable trusts – creator can‟t take it back
                    will goes thru probate)               Exception in CA Code: A living trust – a revocable intervivos trust can act same as
                  See will example on pg. 8               a will but avoids probate
                                                          See pour-over will/trust below – must title assets in will in the name of the trust
                                                           you want the will to pour them into – otherwise NOTHING will transfer

Differences     Goes into effect when T dies            Can go into effect right now

                Picks up everything you want it to      Cannot pick up anything – you must put things into it
                (ex. “Give all of my estate to my         To put $ into the trust you convert the ownership of the $ in the name of the trust –
                spouse” + will does it)                    just change the asset‟s title + transfer it to the name of the trust
                                                              Ex. You transfer title in the name of the trust  “Owned by the Osborne Family
                                                                Trust of 2009”

                Subject to probate                      Property held in trust doesn‟t go thru probate

                Revocable                               Revocable – operates just like a will (but lets you avoid probate!)
                Upon death, will transfers assets +     Upon death, trust transfers assets + becomes irrevocable
                becomes irrevocable                       But while alive must change title of assets + attach them to the trust for this to happn
                                                          If it is not in living trust, it can’t be distributed by living trust upon death

         Opening an estate
             o   When person dies w/ or w/o a will, personal rep (executor, if named in will, or administrator, if not named in will) oversees
                 identifying assets, paying debts, + distributing excess to survivors  Probate court appts personal rep
             o   Admitting will to probate
                          Begins w/ a petition to the probate court to admit will to probate
                          Will is proved by testimony of witnesses; parties can challenge this (“will contest”)
                          If court determines will is valid, it signs order admitting will to probate
             o   Administration of estate – Personal rep collects + manages D‟s property, pays creditors‟ claims, + distributes property
                          Formal administration – supervised by court
                          Informal administration – requires only reporting of completion of the administration
     History – Congress imposed estate tax in 1916; Gift tax followed
          o   1976 – Estate + gift tax were unified into 1 system which taxes cumulative lifetime transfers + individual‟s estate at death
          o   1986 – Congress added a separate generation-skipping tax (GST) – imposes a wealth transfer tax on each generation of our
              wealthiest families

     Purpose  FET developed to stop large amounts of wealth sitting w/in a limited number of families: Stops such families
      from controlling politics – democratic idea to break up + redistribute pools of wealth to protect democracy – ensures a middle class

     The Estate (“Death”) Tax – Gross estate (all assets D owns at death) contains an individual‟s “taxable estate” – deductions are
      assessed against the gross estate to determine the “taxable estate”  Death tax is taxed against D‟s taxable estate at death

          o    1 way to avoid “death tax” is to GIVE assets away  Gifts over a lifetime can reduce/eliminate death tax

                       The Gift Tax – IRC taxes “transfers of property by “gift” (person making the gift is taxed)
                               What constitutes a “gift”?
                                    o   An irrevocable gift  Donor must part w/ all “dominion + control” – can‟t give w/ strings
                                                Ex. If M sets aside $ for D, but retains a power to revoke or wants $ paid back  no gift
                                                May be outright or in trust, as long as it is complete – donor can‟t revoke or change
                                    o   Note  All $ given to a child by parent is a support obligation, not a gift – so not
                                        included in Gift tax

                                2 Exemptions: (deductions that also reduce individual‟s gross estate to „taxable estate‟ for estate tax
                                     o   (1) The Annual Exemption  $12k/yr in gifts to anyone is not taxed
                                                Applies only to unrestricted rts to use, possession, or enjoyment of property
                                                         Ex. Donor can‟t apply exclusion to gifts given to be divided among various
                                                For married couples, 1 spouse can give $24k/yr if the other spouse gives nothing

                                     o    (2) The Marital Deduction  spouse can give unlimited amounts of property to other
                                          spouse w/o incurring taxes
                                                 Law treats a married couple as a unit, not as individuals
                                                 2 ways D can give $ to spouse:
                                                          (1) Give property outright to surviving spouse
                                                                o   But this may be undesirable if surviving spouse needs mgmt a trust
                                                                    provides or D wants to ensure kids from earlier marriage get a share
                                                          (2) Give property in a QTIP Trust – limits spouse‟s use of the property 
                                                           requires spouse to pass the property onto kids
                                                                o   Helpful if D wants to ensure $ goes to kids from a prior marriage
                                                                o   Gives only a life estate to spouse
                                                 If you want to avoid use of the marital deduction, consider a “bypass trust” – puts $ in a
                                                  trust that bypasses spouse + instead goes to kids

          o    After deductions reduce the gross estate to identify the taxable estate, the tax tables provide for a “tentative” tax due
                       Then the Unified Credit applies against the tentative tax to produce the actual tax owed

                       The Unified Credit  All taxable gifts up to $3.5m over giver’s lifetime are not taxed, but gift tax
                        applies to all gifts over lifetime above cumulative value of $3.5m
                               Like a beaker w/ a scale printed on the side: Every time taxable transfer is made, pour a little water into
                                beaker  start paying taxes once $3.5m of beaker fills up
                                     o    Bits of “unified credit” offset tax otherwise owed + amount passing tax free is an “exemption”
                               Congress started phasing out FET system in 2001  Will be phased out in 2010, but reinstated in 2011
                                     o    2009 – $3.5m
                                     o    2010 – FET disappears
                                     o    2011 – FET comes back at original rate, which was much less
                                                   Likely, b4 2010 Congress will fix FET at a stable rate of $5m
                               Exam tip: Married clients should try to maximize the use of both of their unified credits

          o    Exam tip: We always want to maximize our exemptions  always try to use them all to best avoid taxes

     The Generation-Skipping Transfer (GST) Tax – imposes a wealth transfer tax on each generation b/c govt doesn’t want
      ppl finding loopholes to get out of paying transfer taxes
          o    GST tax is triggered by a transfer to a “skip person” – someone > 2 generations below transferor‟s generation  both
               transferor + transferee are taxed
                       ie. Father G is taxed, then daughter P is skipped, then granddaughter T is taxed, etc
          o    3 types of transfers are subject to GST Tax:
                       (1) Direct Skip – transfer directly to a skip person – ie. grandfather gives property to grandchild
                       (2) Taxable termination – occurs when property passes to a skip person b/c of termination of a trust
                       (3) Taxable distribution – occurs when trustee of a trust distributes trust income or principal to a skip person
          o    GST Tax is subject to the same exemption/exclusion rules + amounts as the Estate Tax + Gift Tax above

     See FET hypos document + work thru these problems
     Lawyers owe clients duty to avoid estate taxes as much as possible  otherwise liable in tort + contract for malpractice
          o  Blair v. Ing – Atty failed to set up a trust  liable for legal malpractice in tort + contract when estate incurred over $200k in
             estate taxes (Work thru problems on pg. 38)
     Terminology
         o   Heirs – those ppl identified by statute to take the estate if D dies intestate
         o   Ancestors – parents, grandparents, etc. extending back into history
         o   Issue + descendants (mean same thing) – children, grandchildren, extending forward
         o   Collaterals – Ppl related to D thru an ancestor such as a parent or grandparent (ie. siblings, aunts, nieces, cousins, etc.)
         o   “Dead”? Many wills/trusts require heir to survive D by 30-60 days before qualifying as a beneficiary

     Applicable if:
         o    (1) D died w/o will, (most ppl die w/o a will)
         o    (2) Will didn‟t devise all property, or
         o    (3) Beneficiary disclaims property no where else for it to go

     Attack   Plan:
          o     (1) What is share of surviving spouse?
          o     (2) What are shares of D‟s issue entitled to?
          o     (3) If no issue, who else can claim D‟s property?


     Surviving “spouse” (SS) includes:
          o   (1) “Putative spouse”: Person who entered into an invalid marriage w/ good faith belief that it was valid
                      Ex. When 1 party‟s prior divorce wasn‟t yet final (bigamy) or the marriage wasn‟t properly formalized
          o   (2) Domestic partners have same rts + responsibilities as married couples in CA – can inherit same
                      “Domestic Partner” in CA:
                               Same- + oppose-sex couples where 1 partner is over 62
                               Must share same residence, not be married or partnered w/ anyone else, not be related by blood, be 18+
                                yrs old, + capable of consent
     SS does NOT include: (in CA)
          o   Divorced or annulled parties
          o   Common law or same-sex marriage
                      In re Estate of Gardiner – Court found property couldn‟t pass to D‟s wife, who was a post-op transsexual female b/c
                       wife was biologically still a man + state law didn‟t recognize gay marriage

     When SS succeeds to D’s entire estate, probate is avoided

     Division of community property
          o   (1) SS owns ½ community property + ½ quasi-community property during D‟s life
                     Quasi-community property (QCP) – All persnl property anywhere, + all real property in CA, acquired by D
                      elsewhere that would have been CP had D been domiciled in CA at time of property‟s acquisition (§ 66)

          o     (2) On D‟s death, SS recovers D‟s ½ of CP + other ½ of QCP via intestacy  SS now has 100% of CP/QCP (§§ 100 + 101)
                (None of the CP/QCP goes to D‟s issue)
                       Spouses may agree to divide CP + QCP in a different manner  via a non pro rata division of the aggregate
                        value of QCP, or via division of each individual item or asset of QCP, or partly on each basis (§§ 100, 101)
                                 A written agmt is not required to permit/recognize non pro rata division of QCP

          o     (3) If 1 spouse improperly transfers CP + QCP to which SS had an expectancy, under certain circumstances SS may
                recapture ½ of such property, its proceeds, or value at time of transfer (§ 102)
                         (a) So long as:
                                  (1) D died domiciled in CA;
                                  (2) D transferred the property to someone other than SS w/o receiving consideration of substantial value
                                   + w/o written consent of SS; AND
                                  (3) The transfer is one where at time of death:
                                        o   (A) D retained possession/enjoymt of, or right to income from, the property;
                                        o   (B) D retained a power to revoke, consume, invade, or dispose of principal for D‟s own benefit;
                                        o   (C) Property is held by D + another w/ rt of survivorship
                         (b) Transferee doesn’t have to restore: life ins, accident ins, joint annuity, or pension payable to someone
                          other than SS;
                         (c) All property restored belongs to SS as tho transfer had not been made

     Division of separate property
          o   Upon D‟s death, SS gets: (§ 6401)
                     (i) ALL of D’s intestate estate if D didn‟t leave any surviving issue, parent, brother, sister, or issue of a
                      deceased brother or sister; OR
                     (ii) ½ of D’s intestate estate if:
                              (1) D leaves only 1 child or the issue of 1 deceased child; OR
                              (2) D leaves no issue, but leaves a parent or parents or their issue or the issue of either of them
                     (iii) 1/3 of D’s intestate estate if:
                              (1) D leaves > 1 child;
                              (2) D leaves 1 child + the issue of 1 or more deceased children; OR
                              (3) D leaves issue of 2 or more deceased children

        D’s issue take portion of separate property that doesn’t pass to SS (either portion, or ALL if no SS) (§ 6402)
             o   Issue take equally if they are all of the same degree of kinship to D (§ 6402(a))
                         If issue are of unequal degree, those of more remote degree take as specified under CPC § 240 (§ 6402(a))

        Eligible issue include:
              o   (1) Non-Marital Children – kids born out of wedlock (common law  couldn‟t inherit from anyone)
                         Non-marital children have same rts as any other children (Uniform Parentage Act – adopted by CA)

             o    (2) Adopted Children or Adults – treated same as natural children
                         Can inherit from adoptive parent, but not from biological parent – adoption severs that relationship
                                  Unless 2 requirements are met: (§ 6451)
                                        o   (1) Natural parent + adopted child lived together at any time as parent + child, OR natural
                                            parent was married to or cohabiting w/ other natural parent when child was conceived
                                            + died b4 child’s birth; AND
                                        o   (2) Adoption was by the spouse of either natural parent or after death of either natural
                         Same result in cases of:
                                  Adult adoption – 1 adult can adopt another adult  creates a legally-recognized family relationship
                                        o   Creates/secures inheritance rights, decision-making authority in case of emergency or incapacity
                                            of partner, visitation rights upon hospitalization or imprisonment, + recovery in tort actions
                                        o   Disadvantages: Adoption is irrevocable + destroys legal relationship w/ natural parents
                                  Equitable adoption – judicially-created equitable remedy that protects child‟s interests when foster/step-
                                   parents agree to adopt child but never finalize adoption

             o    (3) Half-bloods – Treated same as whole-blood children

             o    (4) Step- + Foster-children
                          Can recover from intestate step-/foster-parent if: (§ 6454)
                                  (i) Parent-child relationship began while child was a minor;
                                  (ii) Relationship continued throughout joint lives of parent + child; +
                                  (iii) Parent would have adopted child but for a “legal barrier” – ie. natural parent stopped adoption from
                                   going thru  legal barrier must continue until step-/foster-parent dies

             o    (5) Posthumous Children – Children born after one parent‟s death
                          Treated as if alive at time of D’s death

        3 different methods of dividing separate property among issue:
             o    For exam – either mention the § number here, or say name of distribution type (ie. “strict per stirpes” or “§ 246”) + explain
                  what happens

             o    Diagram 1:                           D
                                             A                    B
                                             E                    C      F

             o    Diagram 2:                           I (dead)
                          A (dead)                     B (dead)          C (dead)
                          J (dead)           K         L (dead)          M (dead)          N (dead)         O
                          U        V                   W                 X                 Y        Z

             o    Diagram 3:                           D
                                    H                  A                 B
                                    I                  E                 C        F        G

Strict per stirpes (default method in        Per capita w/ representation (CA‟s default              Per capita at each generation (default
other jxs)                                   method)                                                 method in other jxs)

CPC § 246  Divides estate into as           CCP § 240 – CA’s basic method of intestate              CPC § 247 – Begins w/ 1st surviving
many shares as there are surviving           distribution  heir takes the share (or stands in       generation + add # of survivors plus # of
children or deceased children who left       the shoes) of his/her immediate predeceased             those who died w/ living descendants, then
surviving descendants + start w/ first       ancestor  Go to 1st generation that leaves living      divide equally among generations, favoring
stock closest to D                           issue, then divide by # of living issue + deceased      those closest to D
                                             issue who leave living issue, then distribute equally
Focus on tribes – views families in          by generation                                           Focus on generations  views family
vertical terms  concern for fairness in                                                             horizontally
equal division between each bloodline        Compromise interp of “representation”  “per              Concern for fairness in equal division
(A‟s tribe + B‟s tribe)                      capita” at 1st living generation, + “w/                    between living ppl in each respective
   As a result, ppl in same generation      representation” after that                                 generation – rewards equally at each
     may get widely differing shares            Response to strict per stirpes‟ uneven                 generation: “Your life is just as valuable
                                                  distribution of shares                                as mine – it doesn‟t matter who your
Examples                                                                                                parents are”
For diagram 1:                               Examples:
   For distribution of D‟s property if D,   For diagram 1:                                          Examples:
    A, + B are dead                             (i) For distribution of D‟s property if B + D are   For diagram 2:
        A‟s ½ goes to E (1/2)                    dead                                                 For distribution of I‟s property
        B‟s ½ goes to C + F (1/4 each)              A gets 1/2                                           K + O get 1/6
                                                     B‟s ½ goes to C + F (1/4 each)                       U, V, W, X, Y, Z, divide remaining
For diagram 2:                                   (ii) For distribution of D‟s property if D, A, + B          2/3 evenly among selves (each gets
   For distribution of I‟s property              are dead                                                    1/6 of remaining 2/3)
        A‟s 1/3 goes to J + K (1/6                  E, C, + F each get 1/3
         each), J‟s share goes to U + V                                                                For diagram 3:
         (1/12 each)                        For diagram 2:                                               For distribution of D‟s property, if D, B,
        B‟s 1/3 goes to L + on to W           For distribution of I‟s property                          + A are dead
         (1/3)                                    J‟s 1/6 goes to U + V (1/12 each)                         H gets 1/3 + other 2/3 is split evenly
        C‟s 1/3 goes to M + N + O (1/9           K gets 1/6                                                 between E, C, F, + G
         each), M‟s goes on to X (1/9),           L‟s 1/6 goes to W (1/6)                             Thus, we combine the remainder of the
         N‟s goes to Y + Z (1/18 each)            M‟s 1/3 goes to X (1/6)                             estate + split it evenly at each generation
                                                  N‟s 1/6 goes to Y + Z (1/12 each)
                                                  O gets 1/6
                                            So differences among great-grandchildren‟s shares
                                            have narrowed compared w/ per stirpes

            o    Differences between the various approaches
                         Per stirpes v. PCWR + PCAEG – major difference is where you start
                                  Per stirpes – start at first stock right below T + branch into tribes
                                  PCWR + PCAEG – start at first stock w/ survivors + divide there
                         Per stirpes + PCWR v. PCAEG – major difference is distribution among generations
                                  Per stirpes + PCWR  Split among grandchildren may be UNEVEN – focus is on tribes + each individual
                                   tribe‟s share is divided among that specific family
                                  PCAEG  Split at each generation horizontally is EVEN – focus is on generation + each generation‟s share
                                   is divided equally among living members

       If a beneficiary disclaims a property interest, + result is property passes under intestacy  disclaimant does not
        inherit, but for division purposes under § 240 they are NOT treated as tho they predeceased D (§ 282(b)(1))
             o   Ex. if D has 2 kids A (who has 3 kids) + B (dead w/ 1 kid)  if A disclaims, division starts at A + B‟s generation, not at the
                 kids‟ generation  A‟s kids each get 1/3 of ½ and B‟s kid gets 1/2


       If D leaves no surviving issue, the portion that does not pass to SS goes to: (§ 6402)
            o    (1) D‟s parent or parents equally; (§ 6402(b))
                         Parent can inherit from:
                                 A non-marital or adopted D child
                                 Biological child who has been adopted by someone else ONLY if: (§ 6451)
                                       o   (1) The natural parent + adopted child lived together at any time as parent + child, AND
                                       o   (2) Adoption was by spouse of that parent
                                                    Note – if these requirements aren‟t met, parent‟s relatives cannot recover from such
                                                     deceased adopted child – except for the whole-blood siblings or issue of the adopted

            o    (2) If this fails, to the issue of D’s parents; (§ 6402(c))
                          Issue take equally if of equal kinship – otherwise, via the manner specified in § 240

            o    (3) If this fails, to D‟s grandparents in equal shares – or to their issue (§ 6402(d))
                          Issue take equally if of equal kinship – otherwise, via the manner specified in § 240

            o    (4) If this fails, to issue of predeceased spouse (§ 6402(e))
                          Issue take equally if of equal kinship – otherwise, via the manner specified in § 240

            o    (5) If this fails, to “next of kin” (nearest common ancestor) (§ 6402(f))
                          Issue take equally if of equal kinship – otherwise, via the manner specified in § 240

            o    (6) If this fails, to parents of a predeceased spouse or the issue of such parents (§ 6402(g))
                          Issue take equally if of equal kinship – otherwise, via the manner specified in § 240

            o    Example:
                       A(dead) -----------------------------------------------------------------------------------B (dead)
                                  I (dead)                    C (dead)                      D (dead)
                                                                        E                             F                 G
                       For distribution of I‟s estate
                                 A + B are both dead
                                 First surviving generation is E, F, + G  they each get 1/3

       Aliens  Modern trend: unless a statute provides otherwise, noncitizens are generally able to inherit property


       When probate court distributes D’s estate, any balance not distributed to known heirs/beneficiaries (or that remains
        unclaimed for a designated period) escheats to the state

       Do problems on pg. 50, 62, 65, 72, 77 + See mini-review – my notes pg. 96
IV. WILLS – Document that disposes of property owned at death (typed, holographic/hand-written, or oral)
       Personal representative – Executor (administers testate estate)
       Fiduciary – includes personal rep, trustee, conservator, guardian, atty-in-fact under pwr of atty, + custodian
       Can validly dispose of: T‟s SP, T‟s ½ of CP, + T‟s ½ of QCP


       (1) Gathering Information  Questionnaire – planner needs info abt client, beneficiaries, + possible fiduciaries
            o   (a) Obtain client‟s personal + financial info  Lawyer acts as detective  How many accounts? What is in them?
                        Personal info – age, domicile, marital status, children or other issue, dependents
                        Financial info – do client‟s assets exceed predictable future needs? Can client tolerate making lifetime gifts?
                                  Visit client‟s house + double check client is not omitting any assets from questionnaire
            o   (b) Determine what client would like to do w/ those assets  beneficiaries + fiduciaries
                        Lawyer acts as a psychologist  How do you know your daughter-in-law is a spendthrift?
                        Identify:
                                  Beneficiaries  need names, descriptions to distinguish them, personal info, contingent beneficiaries
                                  Fiduciaries  who will be executor of estate? Trustee of any trust? Guardian of any minor children?
                                  Property involved: Client‟s property, manner in which title is held, + value; assets of beneficiaries
                                  Client‟s goals
       (2) Make estate plan + draw up documents
            o   Estate plan should be written on paper – take 10 pgs from same ream + save in case of fixing mistakes
            o   Exam Tip  Every estate plan should include a will – names personal reps + guardians + simplifies probate process
       (3) Have pre-meeting w/ client b4 you meet w/ witnesses


        1. THE MENTAL ELEMENT - Required for execution of a valid will, consists of 2 principle requirements in CA:


       T must have intended for this document to be his/her will
           o   Usually, D‟s intent is clear – ie. document says “WILL” at top, or “give my watch to Anne”  But sometimes not
           o   When intent is present, courts will do whatever possible to uphold will + T‟s intent
                       In Re Estate of Kuralt – man living double life left letter, separate from formal will, bequeathing property in MT to
                        mistress whom wife never knew abt; Court found ltr was holographic will b/c signed, dated, + testamentary intent

            b. TESTAMENTARY CAPACITY – Rebuttable presumption of testamentary capacity  T must have (§ 6100)

       (1) Legal Capacity – must be at least 18-yrs-old; AND

       (2) Mental Capacity – must be “of sound mind”  To be found mentally competent in CA, Testator (T) must:

            o   (i) Not have a mental deficiency (§ 6100.5(a)(1))
                        T must understand:
                                (a) The nature of the testamentary act  what s/he is doing as s/he executes the will;
                                (b) What property s/he owns + its situation; AND
                                (c) Relations to living descendants, spouse, parents, + ppl whose interests are affected by the will
                                      o    Prof: Understand + identify the natural objects of his/her bounty
                        Mental capacity is determined at time of will execution
                                If T suffered from mental deficiency when will was executed, entire will is invalid; But if T fades in + out,
                                 but executes will during a lucid interval, will valid
                        Burden of proof is on party asserting T’s mental incapacity

            o   (2) Not suffer from an insane delusion (§ 6100.5(a)(2))
                        Insane delusion: Specific beliefs unsupported by rational explanation
                                 Symptoms  delusions/hallucinations causing T to devise property in way which T wouldn‟t ordinarily do
                                      o    Ex.s  T believes wife is unfaithful, child is illegitimate, brother is robbing him, + recently
                                           reemployed nurse is actually a long-term friend
                                 False belief must: (Schmidt)
                                      o    Have its source in T’s mind;
                                      o    Have no fact to support it; +
                                      o    Be firmly held by T despite unequivocal ev to the contrary

                        Delusion must affect dispositive will provisions
                               Will provisions that result from a delusion are void  sometimes means entire will fails
                                     o   In Re Estate of Strittmater – Court found D‟s devise to Nat‟l Women‟s Party resulted from an
                                         insane delusion that men were evil  will was thrown out + intestacy governed distribution

            o   The following DOES NOT alone establish mental incapacity: Illiteracy, old age, illness, physical weakness, committing
                suicide, lapse of memory, inability to transact biz, idiosyncrasies + peculiarities of behavior, acute alcoholism, cruelty or
                unfriendly acts toward family, or prejudices/false beliefs re relatives

       2 Exceptions to rule of testamentary capacity:
            o  (1) Emancipated minor (considered an adult for making/revoking a will)
            o  (2) Conservatorship – conservator may make a will on behalf of conservatee who lacks TC, but must have court approval

       Lawyer who prepares a will for someone who clearly lacks testamentary capacity is committing fraud – an act prohibited
        by tort law + ethical rules

   Execution or revocation of a will or part of a will is ineffective if procured by duress, menace, fraud, or UI (§ 6104)

             i. DURESS – will is void when brought abt thru threats of harm to T

             ii. FRAUD – will is void when brought abt thru lies told to T  2 kinds of fraud:

   (1) Fraud in factum – T signs a document that s/he thinks is 1 thing, but in fact is something else
        o   T thinks she is the will she discussed w/ lawyer, but it actually is will + other provisions lawyer added; OR
        o   T thinks she is signing an application, but it is actually her will

   (2) Fraud in the inducement – T is lied to abt the facts, which affects what T puts in his/her will
        o   T is told her son is dead to get her to omit him from her will, when in fact her son is alive + fine

   Question: Is it an innocent misrepresentation or mere slight exaggeration? Or is it something more serious?
   See problem on my notes pg. 35

             iii. UNDUE INFLUENCE (UI) – broader than fraud/duress – will void when it is the result of any axn that subverts T‟s
             intended will + replaces it w/ a will of the influencer (Where T makes change that differs from/is contrary to what T
             would‟ve otherwise done)

   Factors to determine existence of UI: (No B/L Test)
        o   (i) T‟s susceptibility to influence – ie. T‟s condition

        o    (ii) Existence of independent advice – Did T consult w/ ppl other than influencer?

        o    (ii) Influencer‟s shady behavior, including:
                       A confidential relationship – T put special trust in influencer for advice + reasonably believed influencer was
                        acting in T‟s best interest  Gave influencer access to + sway over T
                                 Confidential relationship means ability to talk in secret: ie. Priest + penitent; Lawyer + client; Doctor +
                                  patient; Accountant + customer
                       Participation in will’s preparation – ie. Setting up appt w/ + taking T to lawyer, etc.
                       Secrecy + haste – “Don‟t tell anyone we are talking together – this is just btwn us!”

        o    (iii) Undue benefit to influencer, including:
                     Extent that new plan changes earlier plans – Clear if T has earlier will + new will is substantially changed
                     Extent that beneficiary’s benefit is unwarranted or unfair in light of other possible claimants
                             Undue benefit flowing to influencer or someone/something allied w/ influencer
                                   o    Ex. Olsen v. Corporation of New Melleray – Court found UI when farmer made a will, witnessed
                                        by atty who also represented Society which farmer left his entire estate to, + prior to making will,
                                        T had never heard of the Society
                                                 Prof: “Whenever you have a farmer isolated on a lonely farm in the middle of IA being
                                                  driven out of his mind by his spinster sister, you have possible UI issues”

   If UI is shown  invalidates only the will portion that was unduly influenced

   Burden Shifting Framework
       o   (i) Burden starts on will attacker to demonstrate UI was present – Contestant must prove the UI destroyed T‟s free agency
                   Direct ev of UI difficult to find  look for indirect ev (also hard to find since UI usually occurs in secrecy)
                   Presumption of UI  Confidential relationship
                   Presumption of NO UI  Gifts among family members

        o    (ii) Burden then shifts to will proponent to prove UI wasn‟t present (Prof: If UI is shown, almost impossible to rebut here)
                      Proponent must prove by either a preponderance of the ev or by clear + convincing ev that s/he didn’t
                       unduly influence T
                              Ev that T received independent advice is usually enuf to overcome the presumption

   Will/trust invalid if makes any transfers to: (§ 21350)
        o   (1) Atty who drafted the instrument or anyone w/ interest in atty‟s law firm – ie. partner, shareholder, or employee
                    Prof: But I can sue the estate for the cost of my time spent drafting the will – or just send a bill
        o   (2) Someone w/ a fiduciary relationship w/ transferor, including conservator or trustee, who transcribes the instrument
        o   (3) A care custodian of a dependent adult who is the transferor
        o   (4) Anyone tied to drafter, fiduciary, or custodian by virtue of being related by blood/marriage (includes relatives w/in
            3d degree of person or person‟s spouse, or such relative‟s spouse), domestic partner, cohabitant, or employee

   But such transfer stated above is valid IF: (§ 21351)
        o  (1) Transferor is related to, lives with, or the registered domestic partner of transferee or drafter; OR
        o  (2) The instrument is reviewed by an independent atty who:
                   (i) Counsels transferor abt the consequences of the intended transfer;
                   (ii) Attempts to determine if the transfer is the result of fraud, menace, duress, or UI; +
                   (iii) Signs + delivers to transferor an original certificate of independent review; OR
        o  (3) The court determines transfer wasn‟t the product of fraud, menace, duress, or UI
                   If court finds transfer was the product of fraud, menace, duress, or UI, the disqualified person shall bear all costs
                    of the proceeding, including reasonable atty fees; OR
        o  (4) The transfer doesn’t exceed $3k
        o  This provision is in CPC b/c relatives often give $ to relatives + common for parents to ask relative attys to draft their wills

   See problems on my notes pg. 34; see also my notes 2 pg. 92
C. WILL EXECUTION – Will is validly executed if it complies w/ CPC or CA Statutory Will Form (may be typed or holographic)

    1. FORMALITY REQUIREMENTS – Consistent w/ Statute of Wills

   3 functions of formalities
        o   (1) Protection Function – Formal requirements are designed to protect T
        o   (2) Evidentiary Function – Writing requirement ensures written will that helps court determine T‟s intent
        o   (3) Ritual Function – Compliance w/ ceremonial requiremts shows T wasn‟t acting in a casual or haphazardly fashion
                    Prof: Look at will handout + see the attestation clause – it tracks what we‟ve been talking abt

        a. FORMALLY EXECUTED WILL – “attested” or “witnessed” will  Will must be: (§ 6110) (See codebook pg. 87-88)

   (1) In writing; (§ 6110(a)) – Writing does not have to be by T; wills in foreign languages ok
        o   Oral wills NOT valid in CA – depends on attn, intelligence, memory, + honesty of ppl gathered by D‟s bed  mistake/fraud
                     Types of oral wills
                              (i) Oral will uttered during T‟s last illness b4 witnesses + soon after is reduced to writing
                              (ii) Soldier‟s or Sailor‟s will – soldier or sailor disposes of personalty + usual formalities not necessary
        o   Currently no state allows probate of a videotaped will
        o   Whether email messages or website could qualify as a valid will hasn‟t yet arisen in case law

   (2) Signed by T (or in T’s name by someone else in T’s presence + at T’s direction); + (§ 6110(b))
        o   T can sign nickname, initials, or just a mark if T can‟t write – Doesn‟t have to be at end of will or in T‟s formal name
        o   Person who forges T‟s signature on a testamentary instrument is subject to criminal liability

   (3) Witnessed by at least 2 ppl present who: (§ 6110(c))
        o   (i) Are present at same time  invalid if T‟s acknowledgment made 1 morning to 1 W but later same day to other W

        o    (ii) Witness T sign (or acknowledge signature of) will;
                      Witnesses in “constructive presence” of T ok
                               In re Demaris‟ Estate – Court found Ws were “in the presence of” T when Ws signed in adjacent hospital
                                room w/ doors open  b/c T knew Ws were signing (“harmless error” v. “substantial compliance”)
                      Order of signatures doesn’t matter, so long as signatures were part of “1 transaction”

        o    (iii) Sign will before T‟s death;
                       Witnesses usually sign attestation clause at end of will – “X appeared to us to be of sound mind + memory,
                        understood the nature of the testamentary act, knew the relationship of her property, + remembered + understood
                        her relationship w/ her living descendants”
                                 Work thru problems pg. 121
                       But signatures don’t have to be at END of will
                       T doesn’t have to see witnesses sign will b/c funxn of witnesses is evidentiary value – ie. to prove T signed will
                                 But can‟t bring T to court to prove witnesses signed b/c T dead

        o    (iv) Understand instrument they sign is T‟s will
                     Witnesses can get this understanding by any means – ex.T‟s conduct + surrounding circumstances

        o    (v) Are competent at time of will execution; AND (§ 6112(a)) – W must be able to testify in court to establish will‟s validity

        o    (vi) May be interested (will beneficiaries), so long as at least 2 other disinterested witnesses are present (§ 6112(b))
                     Otherwise  rebuttable presumption that an interested witness procured devise by duress, menace,
                      fraud, or UI (§ 6112(c))
                              Note – presumption doesn‟t apply to witnesses who are given a devise solely in their fiduciary capacity,
                               such as a trustee or executor
                     If interested witness fails to rebut the presumption, will is NOT invalid, but witness’ share is reduced to
                      what they would have received under intestacy (as if there were no will) (§ 6112(d)) (Punishes W, not T)
                              Interested witnesses can‟t disclaim gift after will executed in order to solve interest problem b/c witness
                               wasn‟t disinterested at time of will execution
                                    o    Estate of Parsons (1 interstd W couldn‟t disclaim $100 so other interstd W could get T‟s house)
                                    o    Concern that witnesses would collude – ie. Ws make agmt to share property after T dies
                     Prof: Don‟t use lawyer from your own office b/c can cause conflict of interest problems  ANYONE else ok
                     Work thru problem pg. 117


   Codicil (Will Amendment) – a document that amends a will (sometimes may only revoke a prior will)
       o     Must be executed w/ same statutory formalities
                     Prof: Codicils are out of favor since must go thru all formalities of a regular will + w/ modern word-processing all
                      you have to do is print a new copy  so, codicils no longer makes sense
                     If you are going to write a codicil, call it a “codicil” on its face so your intent to make a codicil is clear
       o     Benefit of codicil over a will  Codicil can incorporate later-created documents into the will, but will can‟t (see Simon below)

        c. STATUTORY WILL – Exam Note  by the end of this class, you should be able to write a simple will form

   Permits Ts to fill in blank spaces for beneficiaries, guardians, children, trustees, + executors of the estate to create a
    “simple will” (Legislative effort to accommodate the large # of ppl who would otherwise die intestate)
        o   Requirements:
                    (i) Completed + signed by T, who is competent + over 18-yrs-old (§ 6221(a)); AND
                    (ii) Signed by 2+ witnesses, who see T sign + sign in T‟s presence (§§ 6222 + 6221(b))
        o   Contents of CA statutory will + CA statutory will form  see §§ 6223 + 6240
   Domestic partners have same right as spouse to make a statutory will that names his/her partner
             d. HANDWRITTEN (“HOLOGRAPHIC”) WILL – aka. “Informal Will”  un-witnessed + in T‟s handwriting

       Valid if:
            o     (1) Material or dispositive provisions are in T‟s handwriting; AND (§ 6111)
                          “Dispositive provisions” state where property goes
                          “Surplasage Theory – CA courts give effect only to those handwritten portions that make sense standing alone,
                           + disregard immaterial, non-holographic portions (Estate of Black)
                                    If will makes no sense w/o typed provisions  holographic will is invalid
            o     (2) Signed by T (§ 6111) – in formal name or nickname; AND
            o     (3) Testamentary intent – may be set forth in T‟s handwriting or a formally printed will (§ 6111)
       Not required:
            o     Witnesses  that will is in T‟s handwriting serves as a mark of authenticity
            o     Date on will
                          If lack of date raises doubt re which will is controlling  holographic will is invalid to the extent it is
                           inconsistent – UNLESS the time of its execution is established to be after the date of execution of other will (§
       Work thru problems pg. 122


                  Courts won’t remedy                                                        Courts will remedy

Mistake in omission – T accidentally omits giving a gift to     Mistake in execution – T is mistaken re what instrument T is executing
someone T intended to give gift to                              (Ex. H executes W‟s will, + vise versa)
   Courts probate will as written – won‟t fix
                                                                Mistake in misdescription – an ambiguity in the will
Mistake in the inducement – mistake induces T to                 Latent ambiguity – emerges in attempting to apply will to a particular
execute a will                                                    person or property  only discoverable by considering extrinsic ev to the
   Usually courts won‟t remedy b/c mistake is subjective +       document
    what T would have done absent mistake too conjectural        Patent ambiguity – obvious from face of will – ex. same gift given to 2
                                                                  different ppl in will
                                                                 See problems on my notes pg. 56-57
                                                                 Court will remedy either via use of extrinsic ev

       Mistakes most often occur in complicated tax-savings provisions – b/c language must be so specific + very complicated
            o  SOLUTION  Insert a guidance/interpretation clause for courts: “These provisions shall be interpreted to save the minimum
               amount of estate tax. That was our intention when we drafted them.”

        3. 3 EXCEPTIONS TO FORMALITY REQUIREMENTS  Court want to effectuate T‟s intent

       (1) Substantial compliance – parties do almost everything required  very “close” to meeting statutory requirements
            o  Ex. T got out of bed, peeked around corner, kind of saw witnesses sign  Key ?: Was it close enough?

       (2) Harmless error – if testamentary intent is clear, error is harmless (In re Demaris‟ Estate (above))
            o  In re Estate of Hall (H + W executed Joint Will; atty said draft joint will could serve as final copy until atty sent final version
                H + W signed + atty notarized w/ no witnesses; at home, H told W to tear up original will, which W did; then H died;
               Court upheld admission of draft Joint Will into final probate since there was clear ev of H‟s intent for this to be his real will)
                       Harmless error b/c parties went 2 lawyer‟s office 2 draft will; lawyer notarizd  shows intent for formal will
            o  Consider  Is the document preparation for the will or the actual will?
                       Estate of Sky Dancer (T left a doc, which was argued to be a will, containing 4-typed pages w/ incomplete portions,
                        a blank page at the end, + signatures + attestation clause were on a separate page from any testamentary trust;
                        Court found D‟s “will” didn‟t show sufficient intent to be D‟s will  these were mere preparatory documents)
                       Prof: As a lawyer, you should always give your client a clean copy of the will to “doodle” on

       (3) Reformation of the document – courts will reform/rewrite will, w/o analyzing substantial compliance/harmless error when
        there are mere clerical errors, but when T‟s intent is clear courts will reinterpret or construct will in a different way (not reform)
            o    Most common example – husband + wife sign each others‟ wills by accident
                        Ex. In re Snide (Husband + wife signed each others‟ wills; court admitted H‟s wife even tho names were switched;
                         court reformed will by substituting H‟s name wherever W‟s name appeared + vice versa)

             o   Rationale: Lawyer‟s sins should NOT be visited upon T  Courts should find a way to honor T‟s intent
                         In re Estate of Eugenia Herceg (D‟s will listed residuary clause, but didn‟t name beneficiary to it; Court held this a
                          simple mistake, + D intended residuary clause to read same as D‟s prior will – so court corrected the will)
                         Prof: Allowing courts to correct wills doesn’t make lawyers less careful (lawyers are just sloppy!)

             o   Traditional Rule was courts would not reform, a will  BAD b/c destroys T‟s intent
                         Flannery v. McNamara (H left entire estate to W, but failed to name contingent beneficiary or residuary clause; W
                          died 1st, survived by H + W‟s 2 sisters; H died intestate, survived by distant cousins; W‟s 2 sisters challenged will,
                          claiming H desired to leave $ to them; Court refused to reform will + $ passed to distant cousins via intestacy)
                                  Prof: Court got it wrong here  should have reformed the will

             o   Work thru problems pg. 122 (+ see my notes pg. 49 for answers) + pg. 132
D. INTERPRETING WILLS – Requiring strict compliance w/ formalities can cause results contrary to T‟s intent; so courts create several
exceptions to fulfill T‟s intent

   Will provisions must be interpreted + construed b4 terms can be put into effect  concern for effecting T‟s intent
         o   Interpretation is the process of determining T‟s intent, usually by reliance on T‟s language in will or extrinsic ev

    1. MEANING

   T’s intent is controlling
         o   (1) Courts first look to the language of the document for ev of T‟s intent
                     Rules of construction:
                               (i) Every expression should be given effect, rather than making any expression inoperative (§ 21120)
                               (ii) Preference is given to an interp that avoids intestacy or failure of a transfer (§ 21120)
                               (iii) Will should be read as a whole (§ 21121)
                                      o    If meaning of part is ambiguous/doubtful, can explain by reference to any part of the instrument
                     Note  these same rules of construction apply to interpretation of trusts (below)

        o    (2) If language is unclear, courts may examine extrinsic evidence
                      Old Rule was extrinsic ev only admissible to resolve latent, not patent, ambiguities
                               Courts traditionally reluctant to admit extrinsic ev b/c T not alive to present ev of intent

                     Courts now reject this distinction + allow extrinsic ev to resolve either latent or patent ambiguities
                             Altho ? posed is usually whether extrinsic ev is “admissible,” court usually hears the ev + its strength (ie.
                              if shows T‟s intent) determines the outcome
                                   o   In re Estate of Gibbs (Couple devised 1% of estate to Robert J. Krause + listed his address; but,
                                       Robert J. didn‟t know couple, + Robert W. Krause, at another property, worked for the couple for
                                       years; Court found a latent ambiguity, + since Ts‟ intent was clear, court reformed will to allow
                                       gift to go to intended person)
                                                Prof: No actual ambiguity in the will – court just defers to T‟s intent
                                                         Would be a latent ambiguity if said “to Robert Krause” or “to my longtime
                                                          friend, Robert J. Krause”

    2. WILL COMPONENTS – 3 doctrines assist in determining what the will components are:

   (1) Integration – Physical components of the will – piecing together all of T‟s intended wills, codicils, + other testamentary
    instruments: What pieces of paper were meant to be in the will? Problems arise when papers are loose, unstapled, scattered, etc.
         o  Solutions: Attestation clause may specify # of pgs, or words may carry over btwn pgs to show no new pgs inserted later
         o  Prof: Don‟t initial each pg b/c if parties miss 1 pg, entire will invalid

   (2) Incorporation by Reference – Method to give testamentary effect to words not physically present at the execution ceremony,
    since we can‟t put everything in the will – so must incorporate things by referencing them
         o   Requirements:
                     (i) Writing must be
                               (a) In existence when will is executed – Cannot incorporate by reference a document created after the will
                                – but a later codicil republishes the will + allows incorporation of the document
                                     o   Simon v. Grayson – D‟s will found in safe deposit box mentioned ltr that would also be found in
                                         the box, but actual letter found in box was not of date mentioned in will + was dated after will‟s
                                         execution date; Box also contained a codicil dated after date on ltr; Court incorporates doc
                               (b) Accurately described in the will – sufficient to identify the document
                      (ii) Will must show intent to incorporate the writing into the will

   (3) Independent Significance – Testator can validly reference info outside of a will
        o   But cannot use independent significance to write a will for T  Courts won‟t do “will-writing”
        o   Hypos:
                    “I leave everything to my wife”  can reference material outside will to determine who wife is
                   “The automobile I own at my death”  valid bequest?
                             YES – can use extrinsic ev to see what auto, if any, I own at my death
                   “The contents of my safe deposit box at Last Nat‟l Bank” (found inside was cash + jewelry)  valid bequest?
                             YES – using extrinsic ev, can find safe deposit box, open it, + see what‟s inside
                             Similar to car in that, prior to death, you can change both what is in box + your car to change the gift
                   “The contents of my safe deposit box at Last Nat‟l Bank, to the individuals indicated on the envelopes contained
                    therein”  valid bequest?
                             NO  key difference is that you can change names on envelopes/who gift goes to w/o using will
                              formalities (goal of formalities is to avoid fraud)

    1. STANDING – Estate plan challenger must have standing to sue

   Only those who would benefit from invalidity of will + w/ interests that aren’t too remote have standing (Ex. heir whose
    share under will is less than it would be under intestacy)
        o   No standing if
                      There is > 1 will  person left out of 1st will has no standing to challenge 2nd will
                      Challenger is a contingent beneficiary/trustee – A contingent trustee doesn‟t get paid unless something
                       happens to the actual trustee (at which time, contingent trustee becomes trustee)  so contingent trustee‟s
                       interest is too remote


   (1) No-contest Clause – denies gifts to any beneficiary who challenges the will
        o   Only works if will gives $ in will to potential contestant – give gift large enuf so they have something to lose by challenging
                   Don’t entirely disinherit potential contestant, or they have nothing to lose by bringing a will contest

        o    If they still challenge will:
                      If will contest is successful, no-contest clause will have no effect
                      If will contest fails, theoretically challenger gets NOTHING
                                 But courts are divided over extent of enforcement – many construe no-contest clauses narrowly

   (2) Explanations – if T wants to leave out a family member or reduce their share, T can explain reasons for doing so
        o   What otherwise would have looked like unjustified favoritism or a mistake now is understandable
        o   But could also spark anger + fuel a will contest

   (3) Lifetime Trusts + Gifts – Gets property to a favored beneficiary w/o risking a will contest

   (4) Family Law Options
        o  Marriage – marriage ensures transfer btwn spouses upon death
        o  Adoption – ensures estate will go to that adopted (non-family member) person (or adult adoption)

   (5) Conduct of Lawyer
        o  (1) Revoke all prior wills – see revocation of wills below
        o  (2) Lawyer should make a record  Notes/ev to show client was acting competently + on their own during will execution
                   Meet w/ T alone + encourage T to get independent advice  to reduce risk of UI challenge
                   Encourage explanations for disinheritance of parties
        o  (3) Choose witnesses that are young enuf to survive T + who will come across as strong/independent at trial (if necessary)

   Work thru problem on my notes pg. 52
    F. REVOCATION OF WILLS  T may revoke his/her will at any time after executing it

        The will or any part is effectively revoked if: (§ 6120)

             o    (1) A subsequent will revokes all/part of the prior will expressly or by inconsistency; OR
                          Subsequent instrument must be valid – ie. must comply w/ statutory formalities
                                  Subsequent instrument may do nothing more than revoke prior will
                                  Holographic will or codicil may revoke all or part of a formally attested will
                          Express revocation best way to avoid ambiguity (“I hereby revoke all prior wills + codicils”)
                                  Prof: Often codicils are created, but not labeled “codicil”  confusion abt is this a new will that revokes old
                                   will? Or a mere codicil/addition to old will?
                          See problem on my notes pg. 61

             o    (2) Will is burned, torn, cancelled, obliterated, or destroyed:

                          (a) W/ intent to revoke it; AND
                                  Intent to revoke + actual revocation must be concurrent
                                  Lost Will:
                                       o     Previously executed will can’t be found  rebuttable presumption of intent to revoke if:
                                             (§ 6124)
                                                     (i) Will was last in T‟s possession,
                                                     (ii) T was competent until death, +
                                                     (iii) Neither original will nor a duplicate original (not XEROX copy, but duplicte originl 
                                                      signed, sealed, + deliverd) can b found aftr T‟s death
                                       o     Presumption rebutted if
                                                     (i) T wasn‟t of sound mind when he cut into paper dolls; or
                                                     (ii) T had no intent  he was just bored all by self out on farm
                                                     (iii) Suspicious circumstances can help overcome presumption
                                  See problem on my notes pg. 64
                                       o     Prof: Lawyers like to keep originals of their clients‟ wills b/c this ensures lawyer gets paid for
                                             probate work later  if lawyer has original will, beneficiaries are required to come back to
                                             lawyer‟s office
                                                     But to ensure happy client, best to give the original to the client + have them put it in
                                                      their safe deposit box

                          (b) By T or another person in T’s presence + by T’s direction
                                  Same “presence” issues as discussed under “witnesses” above
                                  Long list of formal requiremts for executing will, but law casually allows revocation by physical act
                                       o     Justification: Will takes us from intestacy (law makes difficult), but not difficult to get back, +
                                             easier to see intent when T tears up his/her will

   Effective Revocation                                    Ineffective Revocation                                        Unsure

T scissors signature off             T scissors will into a string of paper dolls, or scissors off
bottom of will                       margins, but actual text is left unharmed + readable
 Bakhaus (D‟s will found in             So long as scissoring doesn‟t touch writing  not revoked
  drawer in harness shop on
  legal paper, but T‟s               “VOID” written across right-hand margin of both will pages
  signature had been                    So long as word doesn‟t touch writing  not revoked
  scissored off the bottom of
  the will; Court found this         Nephew’s name lined out in pen or pencil                              T’s signature lined out in pen or
  an act of revocation done             No intent to revoke  likely just a doodle or T making notes to   pencil
  by T as will had been in his           self, rather than a change or codicil                               Statute requires obliteration or
  possession + control                                                                                       cancellation
  Court implies intent to            Horse eats T’s will                                                     Need to know what line looks like
  revoke)                               No intent to revoke; lawyer still has original                        is it highlighter? Blacked out?
                                                                                                              Slashed thru? Or just a thin line
T scissors will in half, thru        “This will is null + void” written on cover page                         or an underline?
the text                                “Null + void” would have to be written on signature page in T‟s     Maybe T just didn‟t like his/her
                                          handwriting to be effective                                         signature

                                     Revocation procured by duress, menace, fraud, or UI (§ 6104)

                                       See problems my notes pg. 63-64

             o    (3) Revocation by operation of law: Even if T doesn‟t act, law may revoke a will where legislature thinks a typical T would
                  have wanted that result
                         Ex. marriage/divorce/birth of issue, where parties fail to amend their will  By operation of law, ex-spouse may be
                          removed from will, + new spouse/kids may then obtain rts to claim intestate shares if will omits them

        If attempted revocation is ineffective, D’s estate passes according to the will
G. REVIVAL – How revoked wills can be brought back to life


   T may intentionally revive a revoked will in 2 ways:
       o    (1) By reexecuting the former will so that it complies w/ all statutory formalities; or
       o    (2) By executing a new testamentary instrument via statutory formalities expressly providing the old will is effective again


   If T executes Will 1, then subsequently executes Will 2 (which revokes Will 1), then subsequently revokes Will 2 
    rebuttable presumption of anti-revival of Will 1
         o  (1) Will I is not revived unless ev shows T intended this effect; otherwise, Will I stays revoked + T dies intestate (§ 6123)
                     (a) T’s intent to revive Will 1 must be evident from:
                               (i) The circumstances of revocation of Will 2, or
                               (ii) From T‟s contemporary or subsequent declarations
                     (b) If T executes Will 3 revoking Will 2, Will 1 will only be revived if it appears from Will 3’s terms that
                      T intended Will 1 to take effect

                     Hypo – Under Will I in NY, heiress gives $ to Museum; later, heiress signs new will in CA giving same $ to Museum
                      + expressly revoking Will I; but Will II is found to have a fatal error + is now invalid
                             What are our arguments that Will I should be revived?
                                   o   (1) Will II was never valid – so it had no legal effect on Will I
                                   o   (2) Will I was only revoked on the presumption that Will II was valid

        o    (2) If Will 2 merely superseded Will 1(+ thus only revoked it partially), revocation of revoking instrument automatically
             reinstates the superseded prior will
        o    See problems my notes pg. 65 + 68


   Sometimes courts disregard revocation based on mistake  Dependent Relative Revocation (DRR) – A doctrine for
    correcting mistakes – allows court to disregard a valid revocation of a will in some cases
        o    Courts pretend revocation of Will 1 was actually dependent on fulfillment of a condition: When b/c of mistake that condition
             is not met, courts treat the mistaken revocation as tho it never really happened + Will I stands
                     If revocation was dependent on, or relative to, a mistake, court may disregard revocation based on T’s
                      presumed intent
                              Ex. T bequeaths $10k to each of 3 kids (A, B, C) of his best friend; later, T crosses out the $10k bequest
                               to A + instead inserts $15k  T‟s cancellation of the $10k to A is effective revocation, but the $15k
                               „codicil‟ fails b/c it doesn‟t comply w/ requisite formalities
                                    o     Court may apply DRR based on T‟s presumed intent: Court may disregard T‟s revocation of the
                                          $10k to A + hold that the revocation was dependent on + relative to a mistake (the effectiveness
                                          of the later bequest)  court presumes T would prefer A to have $10k than nothing

        o    Issue is whether T would rather have Will I (old will) revived than have estate go thru intestacy b/c Will II is invalid
                     DRR can only be applied where ev of T’s intent to revoke Will 1 conditioned on Will 2’s validity is clear
                      + convincing
                              In re Estate of Patten (Will I validly executed; Will II invalidly executed 2-yrs later; but at D‟s death, only
                               Will II was found; Court didn‟t know whether T wanted – Will I or Will II, so Court revived Will I)
                                    o    Prof: Court used incorrect logic  question is not whether T prefers Will I over Will II; question is
                                         whether T prefers Will I over intestacy
        o    See problem my notes pg. 67

   Note – you can use the doctrine of revival to revive a subsequent will – doesn‟t just have to revive Will I


   Will contracts  generally valid in CA
        o   People can execute contracts to: Make (or not make) a will, make a particular devise or bequest, die intestate, revoke (or
            not revoke) a will, not contest a will
        o   Ppl usually have contracts in a will to protect children from a previous marriage

   Contracts not to revoke a will are almost always a bad idea
       o   They lock survivors into an estate plan which may not become effective until a time when its terms are inappropriate

   A contract is unilaterally revocable during lifetimes of all contracting parties
        o   Some states require the breaching party give notice to the other so the latter has opportunity to change his/her will
        o   Courts won‟t enforce contracts to make a will until promisor‟s death  promisee can‟t sue b4 then to compel compliance


   Breach of will contract contests arise most frequently in 2 situations:
       o   (1) T promises to make a devise in favor of a 3d person in consideration for that person‟s services (often “Life-care
           contracts”  caretaking for T for rest of T‟s life)
                    Contract breached when T fails to make agreed will or provisn  relying party discovers upon T‟s death
       o   (2) Spouses make joint or mutual wills w/ reciprocal provisions that (allegedly) contain a contract not to revoke their
           respective wills
                    Contract is breached when surviving spouse disposes of his/her estate differently than previously promised
   To prove a valid will contract, proponent must show one of the following: (CPC § 21700)
        o  (a) A will/other instrument that:
                    (i) States contract‟s material provisions; OR
                    (ii) Expressly references contract + extrinsic ev proving contract terms;
        o  (b) A writing signed by D evidencing the contract;
        o  (c) Clear + convincing ev of an agmt or promise, enforceable in equity

   If parties didn’t contract to leave property as specified in will, survivor can change their will at any time
        o    Oursler v. Armstrong (H + W made reciprocal wills 4 property 2 pass 2 their 4 kids from prior marriages; H died, W made
             new will leaving everything to her 2 kids + nothing to H‟s 2 kids from a prior marriage; Court found it couldn‟t enforce the
             prior reciprocal will – wife could give her property to whomever she chose; Court denied imposition of a constructive trust)
                      Courts can’t enforce prior reciprocal wills based merely on a confidential relationship

                    In CA, execution of a joint/mutual will does not create the presumption of a contract not to revoke the
                     will (CPC § 21700(b))
                             Joint + mutual wills: When 1 spouse writes a will leaving everything to other spouse + other spouse writes
                              a mirror image will (aka. “reciprocal wills”)
                                   o   Prof: Joint/reciprocal wills breed litigation b/c after death of 1 party, other party can change will

   Remedies for breach  will contracts are governed by law of contracts, not law of wills  remedy is money damages,
    not a change to the will
        o   If promise is enforceable under contract law, it may be enforced against breaching promisor‟s estate
                    Ex. T promises to leave his home to X; when T dies, X discovers T left his home to Y instead; in breach of the
                     contract, T‟s will is subject to probate + X must pursue a remedy under the jx‟s applicable contract law
                             Means surviving spouse has ability to revoke his/her will even tho this would constitute breach of contract


   Agreements waiving marital rights  Ppl w/ kids from prior marriage may want to prevent new spouse from taking over kids‟ $
       o  Prof: If someone comes to you + they want to waive their marital rights, tell them to go see someone else

   Pre- or Post-marital Agreements
        o   CA Family Code  Premarital Agreements (Prof: “Barry Bonds approach to prenuptial agreements”)
                   Formalities: Must be in writing + signed by both parties; enforceable w/o consideration
                   Subject matter of premarital agmt
                           (a) Parties to a premarital agmt may contract re essentially anything re rights in + after the marriage
                           (b) Child support rts may not be adversely affected
                           (c) Provisions re spousal support, including a waiver of it, not enforceable if:
                                 o    (i) The party against whom enforcemt of the spousal support provision is sought wasn’t
                                      represented by independt counsel at time agmt was signed, or
                                 o    (ii) The provision re spousal support was unconscionable at the time of enforcement
                   Aftr marriage, agmt may be amended/revoked only by a signed, written agmt
                   Enforcement
                           (a) Agmt is not enforceable if:
                                 o    (1) Party did not execute the agmt voluntarily; or
                                 o    (2) Agmt unconscionable when executed + b4 execution:
                                               (A) No fair, reasonable, + full disclosure of property or $ obligations of parties;
                                               (B) Party didn’t voluntarily + expressly waive, in writing, any right to disclosure of the
                                                property or financial obligations of the other party beyond the disclosure provided
                                               (C) Party did not have, or reasonably could not have had, an adequate knowledge
                                                of the property or financial obligations of the other party
                           (b) Presumptn agmt not executd voluntarily UNLESS court finds in writing or on record all the following:
                                 o    (1) The party against whom enforcemt is sought:
                                               (i) Was represented by independent legal counsel at time of signing or, after being
                                                advised to seek independent legal counsel, expressly waived in writing such
                                               (ii) Had > 7 days btwn time party was 1st presented w/ agmt + time agmt was signed
                                               (iii) If unrepresented by legal counsel, was fully informed of terms + basic effect of the
                                                agmt + rights + obligations s/he was giving up by signing, + was proficient in the
                                                language in which both explanation was conducted + agmt was written
                                                          The unrepresented party shall, on or b4 signing, execute a document declaring
                                                           s/he received the info required by this paragraph + who provided that info
                                 o    (2) The agmt + writings weren‟t executed under duress, fraud, or UI, + nor lack of capacity
                                 o    (3) Any other factors court deems relevant

   Courts won’t second-guess prenuptial agmts so long as requirements above are met
       o   In re Estate of Grieff – H (77) + W (65) entered into reciprocal prenuptial agmts, then married; H died 3 months after the
           marriage; agmt waived statutory right to elect a share in the estate, but after H‟s death W petitioned for a statutory elective
           share; Court upheld the prenup agmt + denied W‟s petition  helps that they were only married for 3 months!
       o   Simeone v. Simeone – Doctor (39, neurosurgeon) + nurse (23) agree to marry; just prior to wedding ceremony, D tells N if
           she wants to marry she must sign a 600-pg prenup agmt, but that atty had looked it over so it was ok; N signs; N later
           claims she didn‟t know what she was signing; Court held prenup valid + enforceable  this women was a competent nurse
           – she didn‟t HAVE to sign it
V. WILL SUBSTITUTES – Non-probate transfers allow T to name where property passes at death
      Reasons ppl choose will substitutes: To benefit donee, retain some secrecy re family assets + plans, defeat claims of creditors of
       donor‟s spouse, minimize or eliminate taxes, avoid dealing w/ lawyers or delays/expenses of probate
           o    Increased use of will substitutes shows probate is declining in importance

      Creation of these interests does NOT require usual will formalities to be valid (§ 5000) (Ex. can change beneficiary of
       retirement plan by sending an email to Vanguard)
            o  Justifications:
                        (1) The present-interest test – legal fictn that b/c u have pwr to revoke the designation, don‟t need formalities
                        (2) The alternative formality test – altho no witnesses, etc, diff. formalities r required to change beneficiaries
                                 Company (holder of retirement plan) can decide what formalities they want to require
                        (3) The transferor’s intent – transferor should be able to choose what they want
                                 If u choose to have a will  u choose formality; if u choose a will substitute  u choose to be informal
            o  Law justifies lack of formalities by denying that will-substitutes are will-like + by validating them as gifts
                        Langbein suggests that these doctrines should be extended to will substitutes – Law of Wills has been developed
                         over many years, so it makes sense
            o  See problem on my notes pg. 98

      Divorce invalidates revocable non-probate transfers to former spouse (§ 5600)
           o   UNLESS:
                       (1) Clear + convincing ev shows transferor “intended to preserve” transfer to former spouse; OR
                       (2) Court orders transfer be maintained for former spouse
           o   If non-probate transfer fails, property is treated as tho former spouse failed to survive transferor
           o   This rule is not applicable where a nonprobate transfer is irrevocable upon execution

   A. GIFTS – transfer of personal property made voluntarily + w/o consideration (§ 5700)


      Requirements for valid lifetime gifts:
          o   (i) Donative intent – Donor must have capacity to contract + make an unconditional gift
          o   (ii) Delivery – so as to relinquish dominion + control by donor; +
                       3 types of delivery
                                (a) Manual or actual delivery
                                      o     Donors may give property to an “escrow agent” to hold property as agent for donee  allows
                                            delivery to be complete w/o notice to donee
                                (b) Delivery by signed writing – writing indicates donor‟s intent to give the gift
                                      o     If T writes check, but dies b4 check is cashed  no valid gift
                                (c) Symbolic or constructive delivery – certain things can‟t be “delivered” (ie. real property) – but you can
                                 deliver the deed to the real property
          o   (iii) Acceptance  presumed (even if donee lacks notice of the gift), unless gift doesn‟t benefit donee (as when it is subject
              to unfavorable restrictions or conditions)

      Completed lifetime gift is irrevocable
          o   Henkle v. Henkle (T executed a deed conveying most of the Henkle Farm to her grandson – but soon after, grandson died
              intestate + Farm passed via intestacy to his wife; T tried to set aside the deed, but Court upheld the deed b/c there was
              testamentary intent, delivery, + acceptance of the deed + there was no unjust enrichment)

      Exceptions: Gifts of clothing, apparel, jewelry, or other tangible articles of personal nature used solely by donee spouse + not
       substantial in value


           a. GIFTS IN CONTEMPLATION OF MARRIAGE – an engagement ring  Most states use a fault-based rule:
      Man can recover ring if woman unjustifiably ended engagement or if couple mutually dissolved it
      Man can‟t recover ring if he unjustifiably terminated engagement

            b. GIFTS CAUSA MORTIS (GCM) – a gift made by someone in contemplation, fear, or peril of imminent death + w/
            intent that gift shall be revoked if giver recovers (§ 5702)
      Gift made during giver’s last illness (or where giver would naturally expect a speedy death) is a GCM (§ 5703)
            o    GCM is not invalid if the death is a suicide

      Requirements  donative intent + delivery
          o   Delivery is effective to 3d person who is requested to give property to donee at donor‟s death

      Methods of revocation: (§ 5704) (main difference btwn GCM + intervivos gift is revocability)
          o   (1) Donor‟s express act at any time, or expression in donor‟s will
          o   (2) Giver‟s recovery from the illness or escape from the peril
          o   (3) Death of donee b4 death of giver

      Limitations
           o   GCMs can‟t dispose of land
           o   GCMS of either community or quasi-community property is subject to donor‟s spouse‟s rights
           o   GCM may be subject to a creditor‟s claims, if there are insufficient estate assets to pay creditors‟ claims (§ 5705)
                      This is true even despite giver‟s revocation  When GCM has been delivered to donee, the rts of a purchaser or
                       encumbrancer, acting b4 the revocation in good faith, for a valuable consideration, + w/o knowledge of the
                       conditional nature of the gift, are not affected by the revocation (§ 5704(d))
      See my notes pg. 80-81 for questions
    3. GIFTS TO MINORS  3 methods:

   (1) Guardianship – Court appts guardian for someone who can‟t handle own affairs (at request of someone else)
        o  Types
                  Guardian of the person – has responsibility + authority to care for the child/person
                  Guardian of the property – cares for the child/person‟s property
                  Guardian ad litem – protects child‟s/person‟s interests in litigation
        o  Problems: Court-supervised, burdensome, + expensive

   (2) Set up trust for a minor
        o   Benefit: You can schedule times when minor gets principle of the funds: Ex. “We‟ll give M 33% when she turns 21, 33%
            when she turns 30, + the remainder when she turns 35”  then if M loses first 33% via financial mistakes, M does better w/
            rest when she gets it later
        o   Problems: Costs for creation + administration of trust

   (3) CUTMA Account – California Uniform Transfers to Minors Act, based on the Uniform Transfers to Minors Act (UTMA) (§ 3900)
        o  What it does (can be set up at any bank)
                   Enables adult to give substantial gifts of property to a child w/o child having to assume control
                           Donor gives property to a “custodian” who manages it on behalf of minor + may use it to benefit minor
                   Allows any kind of property to be transferred to custodian
                           Permits transfers by inter vivos gift, trusts, estates, guardianships, 3d-party debtors of minor w/o a
                            conservatory (ie. parties against whom a minor has a tort claim or jgmt, + depository institutions holding
                            deposits or ins cos issuing policies payable on death to a minor)
                           Delivery not required
                           Transfer is irrevocable + indefeasibly vests ownership of the property interest in the minor

        o   Custodians
                   A person 21+ is eligible to serve as custodian, including trust company or minor‟s conservator (§ 3911(d)-(f))
                   Custodian must exercise authority according to a high standard of care observed by a prudent person
                    dealing w/ another’s property
                             Custodial property shouldn‟t be commingled w/ custodian‟s personal property + can‟t be placed in joint
                              tenancy w/ right of survivorship
                             Custodians have broad discretion to use custodial property for minor‟s benefit
                   Death/incapacity of custodian doesn‟t invalidate property transfer  just appt a successive custodian
                   Liability
                             UTMA limits claims of 3d-parties against custodial property, + insulates minor from personal liability
                              UNLESS s/he is personally at fault, + insulates custodian UNLESS s/he is personally at fault or fails to
                              disclose his/her custodial capacity in entering into a contract
                             Remedies against custodian:
                                   o   Removal + apptmt of successor custodian
                                   o   Damages for breach of fiduciary duty causing loss of custodial property + minor‟s atty fees

        o   Transfer to Minor
                    CA allows transferor to vary age of distribution w/in ages 18-25  CUTMA applies to transfers that benefit
                     ppl who haven‟t reached 18, but provides for later termination (21 or 25) (§§ 3901(k) + 3920.5)
                             At age designated for distribution, custodianship terminates, + custodian may distribute the property
                    Transferor’s choice
                             Transferor who is both transferor + custodian can choose to eliminate his/her authority as custodian to
                              distribute property for minor‟s benefit, except pursuant to a court order (§ 3914(d))

        o   Venue (§ 3921)
                   If minor resides in CA, venue is county where minor or custodian resides
                   If minor doesn’t reside in CA, venues is
                           (1) The county where transferor, custodian, or parent resides;
                           (2) Where the estate of a deceased/incapacitated custodian is being administered; or
                           (3) If none of the above, then in any county

        o   Limitation on CUTMA Account
                    CUTMA funds can’t be $ parents are required by law to give minor (ie. $ to feed child)
                    CUTMA accounts are 1-size-fits-all  you can‟t make special requests of the bank to fit your needs

        o   Problems w/ CUTMA Account
                   If beneficiary doesn’t know abt the $, beneficiary won’t get the $  bank won‟t notify the minor of the $
                   Hard to ask someone to be a trustee for 20-30 yrs
B. JOINT INTERESTS – when 1 holder dies, property passes immediately to other holder (beneficiary is NOT changeable)

   Creates a right of survivorship – when 1 owner dies, her interest disappears by operation of law  survivor(s) own the whole

   Creation is irrevocable  after creation, can’t change where the property will go
        o   Gross v. Gross (Father placed property in joint tenancy w/ son to avoid probate, then asked son to reconvey the property
            but son refused; Court refused to declare joint tenancy deeds null + void b/c Father‟s gift had already been given to son)
        o   Must choose beneficiary (other joint tenant) when you are alive + this choice is permanent (no contingencies)


   Creation  created by a single transfer or will that expressly states the intention to create a JT
        o   May be created in real or personal property (including motor vehicles)

   If JTs are married (Prof: married couples should NOT hold property as JTs, but as CPWROS)
         o   Presumption that property acquired by spouses during marriage is joint tenancy

   Severance
       o   Is accomplished if:
                  (1) JT devises the joint tenancy interest to a non-JT
                  (2) Divorce
                  (3) JT “slays” another JT – slayer acquires no rt of survivorship
                            JT who feloniously + intentionally kills another JT effects a severance of property  D‟s share then passes
                             to D‟s heirs or beneficiaries + slayer retains his/her interest but takes no rights by survivorship
       o   Can be accomplished unilaterally by 1 JT, + even via JT conveying the deed to him/herself (Estate of Probst)
       o   Cannot be done by devising JT‟s interest by will (b/c interest disappears at JT‟s death, so nothing to transfer in will)
       o   Effect
                  Extinguishes the rt of survivorship + converts JT into TIC
                            Ex. If property is held in joint tenancy w/ right of survivorship by A + B, + A executes a deed of her ½
                             interest to C, B + C are now Tenants in Common  effectively cuts off B‟s right of survivorship


   NO Tenancy by the Entirety  instead, CA has “community property w/ a right of survivorship” (CPWROS)
       o   Property passes at death to SS w/o administration + is subject to same procedures as property held in joint tenancy

   Better than JT b/c on death, entire CPWROS gets stepped-up basis so SS pays lower taxes on the property at D’s death
        o   Example:
                   Marc + Regina bought a home in 1989 for $100k; at Marc‟s death, Regina sells the property for $300k
                           If M + R were JTs, R would inherit M‟s ½ of $100k ($50k) + R already owned ½ of the $100k ($50k)
                                 o   The ½ R already owned is stepped-up in value to match what her ½ of the property was sold for
                                     at Marc‟s death ($150k)  R‟s basis is $200k, the rest ($100k) is taxable
                           If M + R had CPWROS, 100% of the basis is stepped up to match the value at date of death  R‟s basis is
                            now $300k, so none of it is taxable

    2. MULTIPLE PARTY ACCOUNTS – Jointly-held stocks, bonds, mutual funds, + bank accounts; Courts struggle w/ these b/c don‟t fit
    into traditional boxes  Joint account is neither a JT, an ordinary inter vivos gift, a trust, nor a will – yet it shares same features

   Convenience Accounts – jointly-held account can be opened, not as a gift to the added party, but for the “convenience”
    of the depositor  usually enuf to overcome usual presumption of joint-ownership established by 2-party account
        o   Franklin v. Anna Nat‟l Bank (Sick widower‟s [W] sister-in-law [S], moved in to care for W; to make it easier for S to get $,
            W had S‟s name placed on his savings account he had w/ his wife; after W‟s death, S claimed the account $; court found
            clear + convincing ev that W hadn‟t intended to make a gift to S, but had added her for his own convenience  this ev was
            enuf to overcome the usual presumption of joint ownership established by the bank‟s signature card)

   “Totten Trust” (aka. “Payable on Death” [P.O.D.] Accounts) – aka. “savings account trust”
        o   How it works:
                   Depositor opens bank account + deposits $ in depositor’s name “as trustee” for someone else
                    (“beneficiary”); but no real trust relationship established(§ 80)
                   Depositor can w/draw funds at any time + “beneficiary” gets what is left when depositor/trustee dies

        o    Revocable until depositor dies or makes the gift irrevocable (In re Totten)
                    Methods of revocation:
                              (1) Manifestation of such intent to revoke or to change the beneficiary; or
                              (2) W/drawal of all of part of the funds in the account;
                    Methods of making account irrevocable:
                              (1) Manifestation of such intent;
                              (2) Delivery of the passbook or notice to beneficiary; or
                              (3) Depositor predeceases beneficiary w/o revoking  presumptn of irrevocable trust as to the balance

        o    Totten trust property is subject to the rights of:
                     (i) Donor’s spouse (or SS), if property is community or quasi-community property
                     (ii) Creditors of depositor;
                     (iii) A guardian or conservator, where the fund is necessary for the ward or conservatee‟s welfare

   Transfer on Death (T.O.D.)  allows same thing you can do w/ Totten Trusts to be done w/ securities accounts (§ 5500)
        o   Allows owner of a security to designate beneficiary(s) to become owner(s) of security upon owner‟s death
        o   Securities registered in T.O.D. form pass to beneficiary w/o probate
                    So you can transfer securities by naming a beneficiary w/o complying w/ the requirements for wills
C. REVOCABLE LIVING TRUSTS – avoid probate by creating a trust before death (for more on trusts, see trust section below)

   Advantages
       o   Avoids probate
       o   Secrecy – Allows you to pass your property secretly
                   Ex. if you have a will + I want to see what‟s in it, I just have to down to the probate court to see it
       o   Revocable living trust + community property together spread property among a couple (important for tax purposes)

   Disadvantages
        o  Settlor (creator) technically still “owns” the trust property  unable to shield trust assets from creditors + tort lawsuits
                    Settlor’s ownership makes trust property subject to creditors’ claims both b4 + after settlor’s death –
                     even after trust becomes irrevocable (§§ 18200 + 18201)
                             State St. Bank + Trust Co. v. Reiser (D‟s probate estate wasn‟t large enuf to cover D‟s debt, so creditor
                              bank sought D‟s trust assets; Court held creditors can access settlor‟s trust funds after settlor‟s death to
                              satisfy settlor‟s debts to the extent not satisfied by settlor‟s estate)

        o    Revocable living trust can‟t vacuum up property  settlor must either put assets in OR title all assets in name of revocable
             living trust + rely on pour-over will to pour them in

   Revocable  Settlor who experiences a change of heart can simply end the trust + take the property back
       o   CA presumes the trust is revocable, unless trust document says otherwise (§ 15400)
                  Most other state statutes presume trust is irrevocable
                  Trust document should say whether + how trust is revocable

   Methods of revocation (§ 15401)
       o   Revocable in whole or part by:
                   (i) Compliance w/ any method provided in the trust instrument; or
                   (ii) By a writing (other than a will) signed by settlor + delivered to trustee during settlor‟s lifetime, unless
                    trust instrument specifies method specified in trust instrument is ONLY method of revocation allowed
       o   Unless otherwise stated in trust instrument:
                   If trust is created by 1< settlor, each settlor may revoke portion of trust contributed by that settlor
                   Trust can‟t be modified/revoked by an atty in fact permitted under pwr of atty

   Trustee has duty to notify beneficiaries + heirs (+ anyone else if trustee so chooses): (§ 16061.7)
        o   When trust becomes irrevocable by only 1 of 2 methods: (§ 16061.7)
                   (1) 1+ settlor of trust dies; or
                   (2) If trust’s express terms state that the trust becomes irrevocable w/in 1-yr (b4 or after) of a settlor’s
                    death b/c of a contingency related to the death of 1+ trust settlors
                            Point is that beneficiaries don‟t always need notice of everything + settlors should have some privacy
        o   Need not notify heirs/beneficiaries who can‟t be located after reasonable diligence or are unknown to trustee
        o   Notice:
                   Shall be served no later than 60-days aftr the event requiring notification or 60-days after trustee
                    becomes aware of existence of such person entitled to notification
                   Must contain the following info:
                            (i) Settlors‟ identity + date of execution of trust instrument
                            (ii) Name, address, + phone # of each trustee
                            (iii) Address where principal place of administration of the trust is
                            (iv) Any addtnl info expressly required by the trust
                            (iv) Notification that recipient is entitled to receive a copy of the trust, at request of trustee
                            (v) A warning that trustees can‟t sue to contest the trust > 120 days from the date of notification
                   Settlor cannot waive the notification requirement

   Where intent is to create a revocable living trust, court will try to honor T’s intent re trusts, even if T didn’t comply w/
    trust formalities
        o    Farkas v. Williams (F, veterinarian, died intestate, but stock certificates issued by Investor‟s Mutual in F‟s “as trustee for
             Richard J. Williams” were found in F‟s safe deposit box after his death + other securities, some in the name of W alone;
             Court found F manifested intent to hold the stock in trust for W [“stock certificates were created in a solemn + formal
             manner”] + W had same rights as any beneficiary under a trust)
                     Prof: Problem was that since F never gave the stock to W, they weren‟t gifts  only way to save them for W was to
                      make them part of a trust (make a present interest in the estate)
D. LIFE INSURANCE – contracts w/ provisions construed according to contract law; functionally similar to a will

   How it works: Insurance co (insurer), in return for payments of premium(s) by policy owner (policy-holder/insured), agrees to pay
    an identified person or entity (beneficiary) specified death benefits upon death of policy-holder (person whose life is insured)
         o   Insured can make proceeds payable either to a designated beneficiary or to insured‟s estate
                     Insured may put life ins proceeds into a trust (a “life insurance trust”) by 2 methods:
                               (i) Have proceeds paid directly to trustees who have been designated in insured‟s will; or
                               (ii) Create a living trust + designate trust as beneficiary of the policy

   To take out life insurance, applicant must have an “insurable interest” in whomever they desire to insure (obvious
    financial interest)
        o   Means you can take out a life ins policy on yourself or your spouse, child, or parent
                     Irony is that you can still SELL your life ins policy to a 3d party who doesn’t have an insurable interest
                      in the insured  so can just use a straw-person to get around this requirement
                               Here, transferee recovers on the policy whatever insured might have covered  Means if transferor dies,
                                transferee recovers on transferor‟s life

   2 basic features:
        o   (1) Covers risk of death (present in all policies)
        o   (2) Provides a savings option (present in some policies + in a variety of forms)

   Purposes: To provide support for dependents whose breadwinner died prematurely, or to supply ready cash to pay estate taxes or
    buy out shares of biz, savings for retirement, or make charitable gifts

   Benefits:
       o    Proceeds are insulated from creditors‟ claims b/c they pass outside the probate estate
       o    Provides substitute income replacing D‟s wages
       o    Beneficiary isn‟t required to pay income tax on the proceeds
       o    Proceeds may enable heirs + beneficiaries to pay immediate expenses at D‟s death (funeral, medical, taxes, etc)

   Change of Beneficiary
       o   Insured usually has the right to change beneficiary of policy
                  Thus, during insured’s life, beneficiary has only an expectancy of a gift that is revocable by the insured
                    beneficiary only acquires a vested right if policy reserves no right to change its terms

        o    To change beneficiary, insured must comply w/ policy requirements, which usually require a request from insured to be filed
             w/ ins co + indorsement of policy change by ins co
                     Exceptions – beneficiary is changed even if policy requirements aren’t complied w/ when:
                              (i) Carrier has waived its own rules + issued a new certificate pursuant to insured‟s request;
                              (ii) It was beyond insured‟s power to comply w/ formalities; or
                              (iii) Insured pursued the policy requirements + did everything possible to change beneficiary, but died b4
                               new policy was actually issued
                     Can’t change beneficiary via terms of a will
                              Written notification of a change of beneficiary doesn‟t constitute a will

   Effect of Homicide: Policy is payable as if slayer predeceased the insured

   Effect of Simultaneous Death: If unclear whether beneficiary survived insured  policy payable as if insured survived beneficiary

   Insurance co. is usually exempt from liability if insured commits suicide (eliminates recovery under the policy)
        o   Insurer has burden of proving death was by suicide + must prove the act causing death was committed w/ “suicidal intent”
   See my notes pg. 94 for problems


   Retirement plans used largely b/c FG has created irresistible tax incentives to encourage ppl to conduct much retirement
    saving in a “tax-qualified pension plan”

   Private Sector Benefit Plans – employers offer retirmt + death benefit plans, or ppl buy their own plans
        o   Tax-benefits for individuals: Employee contributions from their income are invested “pre-tax,” then taxation is deferred until
            distribution at retirement age (when taxpayer will likely be in a lower (retirement-level) tax bracket)
                     IRA: Required to take $ out when you reach 71-yrs-old – govt won‟t let you keep pilling $ on tax-free forever
                               But if I die b4 I reach 71, I can give the retirement acct to someone else + that person‟s life extends the
                                71-yr period (Ex. If acct accumulates tax-free for 60-yrs, I can then give it to my son who is 21-yrs-old +
                                it will accumulate for another 50 yrs until he turns 71)

        o    2 types of plans:
                     (1) Employer-provided Plans  Defined Benefit Plans: Provides you will get a certain amount of $ guaranteed
                      for life at a certain distribution rate – establishes each employee‟s benefit according to a formula
                                Employer funds plan based on calculations re age, life expectancy, current salary, etc
                     (2) Personal Pension Plans  Roth IRA, etc. – these allow self-employed ppl + certain employees some tax-
                      deferral advantages otherwise available under employer-financed plans
                                If employee is covered by an employer-provided retirement plan, IRA tax benefits may be restricted

   Public Retirement Plans – Taxes fund Social Security + retirement plans for federal/state/local govt employees

   See problems on pg. 217
VI. CHANGED CIRCUMSTANCES – In writing a will/trust  ultimate ? is “what if?”  What if something changes btwn time will
was written + death of transferor?



                           Advancement                                                                Satisfaction

Advancement: An inter vivos gift given by D to be charged               Satisfaction: An inter vivos gift given by D to be charged against the
against the amount recipient would received under D‟s intestate         amount recipient would receive under a will
estate                                                                    Can be given to anyone
  Only given to bloodline or spouse (b/c intestacy favors families)
                                                                        Is it a satisfaction? Only if: (§ 21135(a))
Is it an advancement? Only if: (§ 6409(a))                                (1) The will says so
  (1) D declares so in a contemporaneous writing; OR                          Ex. “My son‟s share shall be reduced equal to the amount of
  (2) Heir acknowledges so in writing                                          the college tuition I have provided”
       Note – common law assumed such a gift was an                      (2) Transferor says so in a contemporaneous writing;
        advancement – CA law reverses this presumption –                  (3) Transferee acknowledges gift is in satisfaction; OR
        advancement must be expressly stated                              (4) Property given is same property as is given under the will
                                                                               YIVO Institute for Jewish Research v. Zaleski – D left $100k for
If recipient dies b4 D, property isn‟t taken into account in                    YIVO in D‟s will, but b4 D died he gave YIVO lifetime gifts of
computing the intestate share to pass to recipient‟s issue, unless              exactly $100k; Court found this was a satisfaction b/c D‟s
the declaration or acknowledgment provides otherwise (§ 6409(d))                intent for satisfaction was clear b/c D gave exactly amount left
                                                                                in will for YIVO, even tho there was no writing by D
How to calculated donee’s receipt of property upon D’s                         See my notes pg. 102 for problems
  Donee‟s share of donor‟s estate is reduced to compensate for         History:
   the advancement                                                        Traditionally courts presume gifts of $ from parents to kids after
  Courts conduct a “hotchpot” calculation: (process of                    will‟s execution are in satisfaction of any legacies under the will
   equalizatn)                                                            Modern view is to allow lifetime gifts to replace testamentary gifts
      (1) Add amount of each advancement to total property                of a different character where that is the intention
       value given away (inheritance)
      (2) Divide the pot by the total number of shares                 If recipient dies b4 D, the gift is treated as a full or partial
      (3) Credit each donee w/ the $ already received                  satisfaction of the gift, unless transferor‟s contemporaneous writing
      See my notes pg. 99 for problem + explanation                    provides otherwise (§ 21135(d))

        Value of advanced or satisfaction property: (§§ 6409(b)-(c) + § 21135(b)-(c))
             o   Property is valued as of the time heir came into possession or as of time of D‟s death, whichever occurs first
             o   Any value of property expressed in the writing of D or heir in acknowledging the advancement is conclusive

         2. DIVORCE – revocation by operation of law

        Effect of divorce/annulment  Former spouse is treated as if s/he predeceased D (§ 78)
             o    Revokes joint interest – JT or CPWROS
             o    Prevents SS from recovering under a will or trust – even if D never changed terms (in absence of express contrary intent)
                         Clymer v. Mayo (W named H as beneficiary of a lifetime trust funded pursuant to her pour-over will; W + H later
                          divorced; Court found ex-H couldn‟t claim trust proceeds b/c of divorce, even tho he was still named beneficiary)
             o    Removes general or special power of appointment
             o    Removes nomination as executor, trustee, conservator, or guardian

        Such revocation is revived if the parties later remarry (§ 78)

        Legal separation is not treated as dissolution or annulment (§ 6122(d))

        Revocation-by-divorce rule doesn’t apply to beneficiaries who are not the ex-spouse (ie. ex-spouse’s relatives)
            o   CA assumes ppl may end a marriage on OK terms w/ ex-spouse‟s family + may still want to make gifts to those ppl
            o   See my notes pg. 104 for problem

        Does NOT terminate ex-spouse as D’s beneficiary under an insurance policy – must change it yourself (§ 5600)
            o   Vasconi v. Guardian Life Ins. Co. of America – NJ Court found divorce is may not revoke ex-spouse‟s beneficiary status
                under D‟s insurance policy
            o   Justification: Life ins is usually paid to the family unit – it was part of the marital bargain, so divorce shouldn‟t change this



                  i. POWER OF APPOINTMENT – See below under trusts

                  ii. DISCLAIMER – a beneficiary‟s refusal in writing to accept the property interest given by T (§ 265: Any writing which
                  declines, refuses, renounces, or disclaims any interest that would otherwise be taken by a beneficiary)

        To be valid, a disclaimer must: (§ 278)
             o   (1) Be in writing + signed by person disclaiming (“disclaimant”);
             o   (2) Identify creator of the interest; +
             o   (3) Describe the interest to be disclaimed + the extent of the interest to be disclaimed; +
             o   (4) Be filed w/in a reasonable time after beneficiary acquires knowledge of the interest (§ 279)
                          Reasonable time presumed if party files w/in at least 9 mo.s of interest‟s vesting or T‟s death
   Beneficiary must disclaim PRIOR to receiving the interest – once you‟ve taken the $, disclaimer is ineffective

   Disclaimer is irrevocable (§ 281) – once you‟ve disclaimed, you can‟t go back
        o   Disclaimant is then treated as tho they pre-deceased T
                    UNLESS property would then pass under intestacy – under § 240 disclaimant does not inherit, but is
                     not treated as tho they predeceased D for division purposes (§ 282(b)(1))

   How T anticipates disclaiming beneficiaries: D gives property to beneficiary via will or trust + specifies where property will go if
    beneficiary disclaims
        o    Where does property go if it is disclaimed?
                      (1) Where T specifies  disclaimer trust
                              Disclaimer Trust: “All the property to my spouse, but should she disclaim any property, the disclaimed
                               property will go to my children in the following disclaimer trust”
                      (2) If no disclaimer trust is set up  residuary clause: “Anything left goes to X; if X is dead, to this charity”
                              Prof: If there is no residuary clause, we will be sued for malpractice
                              Note – a pour-over will dumps everything into living trust  means residuary clause is now in living trust
                                    o    Then if trust is somehow found invalid, residuary clause is back in the will

   Disclaimant has NO power to decide where the property goes – otherwise, they would have a power of apptmt
        o   In re Estate of Holden – Sons tried to take back already made disclaimer of property b/c thought they could direct all
            disclaimed property to go to their mother; in fact, disclaimer allowed distant relative to claim property; Court held Sons
            couldn‟t direct where disclaimed property passed to, but act of disclaiming was irrevocable, even tho they did it under a
            mistaken belief of what the law was

   Primary use of disclaimer  To reduce tax liabilities (but can also be used to avoid creditors or to allow needier ppl to take)
        o   Ex. Wife can disclaim amount necessary to fill unified credit trust if she needs to do so to save taxes; but if W doesn‟t need
            to, no trust is created  simple + T loses no property interest while alive
   See problems in my notes pg. 108

        b. ASSIGNMENT – see Transfers of Beneficial Interests in Trusts below (but spendthrift clauses only go in trusts, not wills)

   You can sell your right to get your hoped-for inheritance
       o   BUT expectancy sales have a major drawback – they are not binding on the heirs of the person who sells it
                   If seller of expectancy dies b4 receiving expectancy, purchaser never gets expectancy – it will go to seller‟s heirs

        c. MISCONDUCT

   (1) Homicide  “slayer” is disinherited
        o  Killer must actually have intended to kill T (§ 250: “a person who feloniously + intentionally kills a decedent”)
                   (i) Murder conviction proves intent; OR
                   (ii) Intent can be proven by preponderance of ev that killing was felonious + intentionl
                             Acquittal has no effect on this subsequent proceeding
                             Prof: May not have been convicted in criminal court, but can still lose inheritance in a probate case
                   Other states have a more lenient standard:
                             In re Estate of Safran – Son was convicted of causing his mother‟s death by reckless conduct; WI court
                              found killer must intend the action that killed T, not necessarily intend to kill T – in other words, must
                              have intended to perform the reckless acts that ended up killing T

        o    “Slayer” is treated as if they predeceased T, w/ 2 exceptions:
                     (i) Killer can recover for property held in JT – get their ½ share, but not the ½ share of person they killed
                               This denies wrongdoer a gain, but recognizes wrongdoer already owned an interest in the property b/c
                                slayer could‟ve converted JT into a TIC at any time
                     (ii) Killer’s KIDS can recover per usual – the sins of the killer are not placed on the killer‟s children

   (2) Abuse of an elder or dependent adult – physical abuse, neglect, or fiduciary abuse of an elder or dependent adult (§ 259)
        o  (i) Party must have acted in bad faith + w/ reckless, oppressive, fraudulent, or malicious behavior (§ 259(a)(2)-(3))
        o  (ii) Elder/Adult was unable to manage his/her financial resources or to resist fraud or UI (§ 259(a)(4))

        o    Abuser is treated as tho they predeceased D

        o    See my notes pg. 111-112 for problems

   (3) Duress – threat-induced fear – often includes violence or threats of violence which induce T to make a will in favor
    of wrongdoer or 3d party (but can also be threats re life + limb, unjust civil imprisonment, criminal prosecution, imprisonment of
    D or a close relative, wrongful seizure or damages to D‟s property, economic duress, or biz compulsion)
        o    Requirements:
                      (a) Clear + convincing ev of duress  D‟s axn must not have been taken but for the coercion
                      (b) An “unlawful” threat (Rubenstein v. Sela – H‟s threat 2 leave W if she didn‟t make deed not unlawful)

        o    Duress may be prevent T from executing, changing, or revoking a will

        o    Remedies: Will not admitted to probate; imposition of constructive trust in favor of legatees under prior will
    B. CHANGES IN PROPERTY – What happens when certain property is given in a will, but disappears or multiplies b4 T dies?

        1. GIFTS

       4 classes of gifts:
            o   (1) Specific gift – a gift of an identified/specified thing (§ 21117(a))
                         Ex. “My oak desk;” “my 100 shares of GM Preferred Stock;” “my house + lot on Derby Street in Pullman”
                         Note  the word “my” is usually enuf to make it a specific bequest
            o   (2) General gift – a gift from the general assets of the estate  usually gifts of money (§ 21117(b))
                         Ex. “$3k to Marsha;” “100 shares of Dana Corp common stock to Jess”; “1/2 of my personal property”
            o   (3) Demonstrative gift – a gift that comes from a specific source (a cross btwn a specific + general gift – gift of $ but from a
                specific source) (§ 21117(c))
                         Ex. “$6k to come first from my credit union account, but if the account is too small, from my other funds”
            o   (4) Residuary gift – a catch-all gift of everything that is left (§ 21117(f))
                         Ex. “Everything else that I own I give to the American Cancer Society”

       These labels determine what happens if gift isn’t there or if not enuf property in estate to make all promised gifts
            o   Note – taxes always get paid  then beneficiaries fight amongst selves for what is left
       See problems on my notes pg. 114

        2. STOCKS + DIVIDENDS – If wealth grows btwn will execution + T‟s death, does the specific gift include the gain?

             Follows the stock (goes to beneficiary)                                           Does not follow the stock

Stock splits – merely reallocate the same amount of capital among         Cash dividends - $ company hands out if you buy their stock
more shares  owner still owns same % of the corporation                     If dividend was declared but not paid b4 D‟s death, that
     Ex. if will gives you 100 shares of Dana Corp stock, then stock         dividend returns to the estate in CA
      splits b4 T‟s death  you get 200 shares                               If dividend was declared after D‟s death, beneficiary can claim it

Stock dividends – some companies give 1 share of new stock for
every 100 shares you own as a 1x thing
     Justification: Hasn‟t changed you share in the company – only
      changes the value of your shares

        3. ADEMPTION – What happens when wealth/property changes in form btwn will execution + T‟s death?

       Events   leading to ademption:
           o      D made a gift of the property during his/her lifetime (to recipient or another person)  Ademption by satisfaction (above)
           o      The gift was destroyed during D‟s lifetime (“ademption by extinction”)  Ademption by extinction; or
           o      The property changed in form

       If the gift designated in the will is not in the estate at D’s death:
             o   Traditional rule  beneficiary loses out under the “identity” theory
                         The Identity Theory – a specific gift fails if it is not in D’s estate asset at death (Prof: if it‟s gone, it‟s gone)
                                  Wasserman v. Cohen – T executed a trust when she owned the building, but sold the building b4 placing
                                   the building in the trust; Court chose to ignore T‟s intent + instead apply the “identity” theory to hold that
                                   if the property is not in the estate, the specific gift fails
                                        o    Often defeats T‟s intent  CA doesn‟t like the identity theory

       CA has created several exceptions to application of the “identity” theory:
            o   (1) If stocks changed in form after execution of D‟s will: (§ 21132)
                         If D intended to make a specific gift of the securities, recipient is entitled to:
                                  (i) any other securities of the same company owned by the D:
                                         o   If the corporation initiated the axn; OR
                                         o   As result of a reinvestment plan
                                  (ii) any securities of another company acquired via a merger, consolidation, reorganization, or similar axn

             o     (2) If property is not in D‟s estate from sale, eminent domain, an insurable loss, or foreclosure, beneficiary gets: (§ 21133)
                           (a) Any unpaid balance of the purchase price or eminent domain award;
                           (b) Any unpaid insurance proceeds; or
                           (c) Any property acquired as a result of foreclosure
                           Note – this list is not exhaustive – means court can do what it chooses to eliminate harsh effects of identity theory

             o     (3) If D was placed under conservatorship after executing the instrument + conservator sold the specific property:
                           Transferee gets a cash award equal to the property’s sale price, UNLESS conservatorship terminates b/c
                            transferor regained competence + transferor survives for at least 1 yr (§ 21134)
                                    Absent this rule, conservator would be able to determine distribution of the estate
                                    After transferor regains competence, can execute a new instrument to account for the change

       Otherwise, so long as T intended beneficiary receive something, ademption will apply to replace the changed gift

       See also “ademption by satisfaction” doctrine above

       See problems on my notes pg. 116-117

        4. EXONERATION – Common law doctrine that gifts transfer free from outstanding mortgage, which is paid by residuary estate

       CA does NOT follow the exoneration doctrine  If you were given a gift subject to a loan, you take it subjct to a loan (§ 21131)
       See problems on my notes pg. 118-119
    5. ABATEMENT – a method by which beneficiaries‟ shares are reduced when not enuf $ to go around  Arises when estate has been
    depleted by payment of debts, expenses of estate administration, taxes, expenses of last illness, funeral and/or burial costs, or the
    assertion of statutory rights by a spouse or pretermitted heir

   (1) If testamentary instrumt specifies order of abatement or if statutory abatement trumps clear intent of T, shares
    abate as necessary to effectuate the instrument, plan, or purpose (§ 21400)

   (2) If not  gifts “abate” (fail) in the following order (§ 21402)
        o   (1) Property not disposed of under the instrument (that would otherwise pass via intestacy); then
        o   (2) Residuary gifts; then
        o   (3) General gifts to ppl other than transferor‟s relatives (ie. charities, friends, etc.); then
                    For purposes of this section, “relative” of transferor is someone to whom property would pass from transferor
                     under intestate succession if T died intestate + there were no other person having priority (§ 21402(b))
        o   (4) General gifts to transferor‟s relatives; then
        o   (5) Specific gifts to ppl other than transferor‟s relatives; then
        o   (6) Specific gifts to transferor‟s relatives
                    If a specific gift must be abated, distributee can satisfy the obligation from beneficiary‟s other property (doesn‟t
                     have to come from the specific gift)
                    For abatement purposes, demonstrative gifts are treated as:
                               Specific gifts to the extent they are satisfied out of property designated by grantor for that purpose, but
                               General gifts to the extent they are satisfied out of other property

        o    Multiple gifts in the same class abate proportionately (ie. each gift reduced by same fraction – ex. by 1/4)

   Process: Court fixes the amount each heir should contribute; then personal rep reduces each person‟s share as designated by court

    6. LAPSE – At common law, if T left a will giving his car to B, but B then predeceased T  B‟s gift would “lapse” – car would pass
    under the residuary clause or (if no residuary clause) by intestacy

   Lapse may arise if beneficiary is deceased or disqualified (ie. due to disclaimer, divorce, or homicide, or if beneficiary is an
    interested witness)
         o   But lapse is contrary to T‟s intent  “anti-lapse” statutes give property to specified alternative takers

        a. CA‟s ANTI-LAPSE STATUTE – applies to wills, trusts, deed, + other instruments

   (1) Lapse only occurs when instrument expresses intent for lapse or a substitute disposition (§ 21110(b))  Examples:
        o   Stated requirement that designated beneficiary survive transferor at all, for a certain amount of time after T‟s death, or until
            a future time related to administration of T‟s estate;
                    A devise to a person “if living” or “who survives me”  person must survive D by 120 hours (§ 6211)
                             Survival by 120 hrs must be proven by clear + convincing ev; otherwise, party deemed to have
                              predeceased D
        o   Other examples of contrary intentions:
                    “I give my car to Mary or Joe”  interpreted to make 2d person an alternative beneficiary  if Mary dies,
                     gift goes to Joe
                    T expressly states intention of lapse: “This gift will go to Joe, + if Joe is deceased, this gift will lapse.”
        o   Prof: So we want to draft in our wills a provision saying what happens to the property if beneficiary predeceases T

   (2) Otherwise  courts presume anti-lapse:
        o   (i) If a “kindred” beneficiary predeceases T, transferee‟s issue take in transferee‟s place under § 240 (§ 21110(a))
                      “Kindred” means blood relationship  marriage does NOT make parties “kindred” (Estate of Dye)
                                Must be “kindred” to transferor or to a surviving, deceased, or former spouse of transferor (§ 21110(c))
                      Goal is to protect T‟s intent (Estate of Kehler – Brother predeceased T  B‟s property to B‟s child to prevent lapse)

        o    (ii) If that fails, property passes under the instrument‟s residuary clause, OR, if that fails, back to D‟s estate (§ 21111)
                       If a residuary gift or future interest is transferred to 2+ ppl + 1 transferee’s gift fails, the share passes
                        to the other transferees in proportion to their other interest in the residuary gift or future interest
                                  A transfer of “all my estate” or similar words is a residuary gift

        o   (iii) If T intends a class gift + a class member predeceases D: (ie. “to my children, nephews, + nieces”) (§ 21110(a))
                       W/o issue  the class member’s share passes to other class members
                       W/ issue  the issue take the share
   See my notes pg. 122-123 + notes 2 pg. 1 for problems

    7. CHANGES IN DOMICILE – Couples who move face problems re their rights to property – ie. moving btwn a community property +
    common law state

   Choice of law rules:
       o    (1) For real property, the law of the situs of the real property (state where real property is located) controls;
       o    (2) For personal property, the law of the marital domicile at the time property was acquired controls (ie. whether it is
            community or separate property);
                    Estate of Hanau v. Hanau – couple married in IL + H purchased sep property during marriage while in IL; then
                     couple moved to TX (community property state); when H died, W argued the IL sep property was community
                     property now, kids from other marriage claimed it was sep property; Court found property which was separate
                     in the state of matrimonial domicile (ie. IL) when acquired retains that character for probate purposes
                             In CA, this property would have been “quasi-community property” + thus treated as com property
       o    (3) The law of the marital domicile at death determines the surviving spouse‟s rights
                    See CA CP + QCP rules under “Intestacy” above

         In CA, you can disinherit anyone you want – Prof: You can disinherit a child but they can‟t disinherit you  shocking!
              o   But disinheritance may not be wise:
                          May prompt a will contest based on lack of capacity or UI; or
                          Disinheriting 1 child may put enormous strains on the favored children, precluding reconciliation

         To disinherit an heir:
              o   (1) T‟s will must expressly disinherit the heir; +
                          Be explicit b/c courts don’t like disinheritance: “I have intentionally not provided for David b/c I have done so
                           otherwise outside of this document.”
                                    Courts often hold that general provisions aren‟t explicit enuf to show intent to disinherit (ie. those
                                     excluding “heirs living at the time of T‟s death” or “any legal heir of mine” or “all my heirs who aren‟t
                                     specifically mentioned herein”)
              o   (2) Will must dispose of all of T‟s property – any property not devised may pass to heirs via intestacy laws

         Best to   inform child of the plan to disinherit them b/c:
             o       (1) Notice gives child time to adjust financial plans;
             o       (2) Knowing ahead of time avoids confusion that a surprise disinheritance creates;
             o       (3) Telling child he has been cut out of your will may motivate him to shape up + may lead to reconciliation


         Many attys refuse to represent ppl who want to disinherit spouse – Healthy families should want to give spouse property
             o   Law is moving from “protecting” or “supporting” the survivor toward recognizing each spouse‟s ownership interest in the
                 couple‟s assets
                         See also “Agreements Waiving Marital Rights” under “Contracts Regarding Wills” above


              a. COMMUNITY PROPERTY – property earned during marriage belongs to both spouses; assumes both spouses contribute equally

         CA’s mechanism to prevent 1 spouse from disinheriting the other (must be in CP jx for it to count as CP)

        Community Property                         Separate Property                                       Part CP, Part SP

Property acquired thru efforts of      If wife owns land as separate property +       When someone uses both SP + CP funds to acquire an
either spouse during marriage          rents it out  what is the income from that    asset overtime
                                       property rental?
Income or proceeds from sale of          Separate property – b/c all separate        If spouse owns biz b4 marriage, then owns biz after
CP                                         property remains separate                  marriage + works in biz after marriage
                                         Unless husband + wife begin to                 Spouse earns only a portion of the $ earned after
Property purchased with                    commingle funds to pay for expenses or         marriage + all income earned b4 marriage
community or comingled funds               work on upkeep, etc – ie. if husband
                                           was property mgr                           Couple separates but doesn‟t divorce  are their earnings
Compensation for loss of earnings                                                     separate or community property?
(damage to both spouses)               Compensation for personal injuries + pain        All $ earned while living together is CP; all $ earned
                                       + suffering suffered during marriage              while separated is SP
                                       (damage to the individual)

         Good b/c protects CP from creditors: If 1 spouse goes in debt, only ½ is owned by debtor  other ½ is owned by spouse

         Each spouse has a present interest in CP  In general, each spouse can manage CP; but transfers of real estate or substantl
          gifts to 3d parties usually require consent of both spouses
               o    1 spouse can block an attempted transfer of CP by other spouse
                            Ex. when $ has gotten into exclusive control of 1 spouse (ie. retirement plan or single bank account)  looks like
                             separate property  if controlling spouse writes a check, theoretically other spouse could void the
                             transfer b/c it was part of her community property
               o    But a 3d party who deals in good faith w/ the spouse who claims it is separate property is protected from other spouse
                    voiding the transfer (Family Code § 1102)
                            Spouse can sue other spouse, not the 3d party, for spending the CP

         CP principles do not apply unless the couple is married or domestic partners  no “common law marriage”
              o   Oliver v. Fowler – WA court found couple who had lived together for years + had children had a “common law marriage” +
                  thus community property principles applies, even tho they weren‟t legally married
              o   WA is the only state that applies community property principles to non-marital couples in the absence of something more,
                  like registration

         Parties can change the nature of their property by:
              o   (i) A writing w/ an express declaration changing the property from CP to SP or vise versa; or
              o   (ii) Co-mingling SP w/ CP
                           Prof: If we mingle property, it is now community property; but then we can change it back w/ a writing
                            to separate property; then we can co-mingle again back to community property; etc
                                    In re Kobylski – W owned house, but H took care of + made some improvements to the house; W died;
                                     Court found house was NOT transformed into community property b/c H didn‟t do anything that actually
                                     made the value of the house appreciate  he only did routine maintenance
         See my notes 2 pg. 4-5 for problems
        b. ELECTIVE SHARE – gives SS a right to elect a % of the deceased spouse‟s estate  Prof: “Rather than taking the piece of coal
        given to me in the will, I will elect 30% of my deceased spouse‟s estate.”

   Elective share is NOT a viable substitute for community property, as it is held out to be in NY
        o   Community property creates a present interest – that is your $ right then + other spouse can‟t touch it
        o   Elective share gives other spouse chance to gamble the estate away – so no real protection

C. PRETERMITTED HEIRS – forgotten spouse + children  Overlooked person is called “pretermitted”

   Law protects families by guaranteeing a minimum share to family members omitted from a will
       o   Usual scenario: Someone makes a will + later marries or has a child, but neglects to amend the will

   Pretermitted Spouse
        o  If instrument was written before D married SS, omitted SS receives 1 share of D‟s estate consisting of what SS would have
           received under intestacy (§ 21610)
                   SS does not receive a share if omission was clearly intentional

   Pretermitted Child – receives less protection than pretermitted spouse
        o  If will was written before child‟s birth or adoption, omitted child can inherit what child would have received under intestacy
           (§ 21620)
                    Child does NOT get a share if: (§ 21621)
                             (i) It is apparent from instrument that D‟s failure to provide for child was intentional;
                             (ii) D has > 1 child + gave substantlly all estate to pretermitted child‟s other parent; OR
                             (iii) D provided for child outside of testamentary instrumts intending it in lieu of provisn in such instrumts

        o    If will was written after child‟s birth, child can only recover if D thought child was dead or was unaware of child’s
                      Such child gets 1 share equal to what child would have received had D died intestate (§ 21622)

   Manner of satisfying pretermitted spouse or child’s share (order of abatement): (§§ 21612 + 21623)
       o   (1) Share is first taken from portion of D‟s estate not disposed of by will or trust, if any
       o   (2) If that is not sufficient, amount is taken proportionally from all beneficiaries of D‟s testamentary instruments based on
           value at date of D‟s death
       o   (3) If D‟s obvious intent would b defeated by the above distribution method, a specific devise/gift/provision may b
           exempted from apportionment + a different apportionment mr consistent w/ D‟s intent may be adopted

   See problem on my notes 2 pg. 10 + 11 + 11-12

D. CHARITABLE GIFTS – Mortmain statutes used to restrict charitable gifts  But today, all mortmain statutes have been banned


   Courts invalidate will provisions that violate public policy
       o    Traditional explanation: Certain restraints continuing past T‟s death exert influence when no longer amenable by appeal to
            transferor‟s reason + reflection upon changed circumstances
       o    “Continuing influence” rationale:
                    (i) A conditn purporting 2 influence legatee‟s conjugal or religious choices aftr T‟s death is against public policy, but
                    (ii) A similar condition that exerts no posthumous influence is perfectly acceptable

   Instructions to destroy property violate public policy

   Instructions to artificially inseminate T’s unmarried gf do not violate public policy
        o   Hecht v. Superior Court (CA Ct of Appeal) – T explicitly requested to leave sperm to gf for artificial insemination after T‟s
            death; T‟s sons challenged this + claimed only married women should have children; Court upheld T‟s request as not
            violative of public policy

   But in CA you can pretty much do whatever you want  CA is very liberal in allowing such restrictions

   See my notes 2 pg. 15 for problem
VIII. PLANNING FOR INCAPACITY – Med technology keeps severely incapacitated ppl alive – so clients should plan for incapacity
   A. POWERS OF ATTORNEY  When you create an estate plan, you should ALWAYS create a durable power of attorney

      Power of Atty: An agency relationship under which 1 person (principal / person executing the power) gives another
       person (agent or atty-in-fact) power to act on behalf of the principal

      Creation requirements 
           o   (1) Use statutory form – can use form, fill in blanks, name principle/agent, + execute w/ signatures + notarization; or
           o   (2) Create your own  must: (§ 4121)
                       (a) Contain date of execution;
                       (b) Be signed either by principal, or in principal‟s presence + at principal‟s direction; AND
                       (c) Be either:
                                 (i) Notarized; OR
                                 (ii) Signed by at least 2 witnesses who are adults (§ 4122)
                                        o   (i) The atty-in-fact may not be a witness; AND
                                        o   (ii) Each must witness signing of instrument by principal, OR principal‟s acknowlgmt

      Option of Uniform Statutory Form – can use form, fill in blanks, name principle/agent, + execute w/ signatures + notarization

      Principal can grant multiple powers of atty (§ 4130)
           o   But if inconsistent authority granted to > 1 attys-in-fact in 2+ powers of atty, the authority granted last controls to the
               extent of the inconsistency

      Atty-in-fact has as much power as principal gives them – can be very broad or narrowly tailored, including pwr over any
       matter, including real + personal property, principal‟s personal care, or any other matter: (§ 4123)
           o    Atty-in-fact has a general obligation to acquiesce to principal‟s wishes
                        In re Estate of Ferrara – Elderly man wrote will devising everything to the Salvation Army (charity) + nothing to
                         family members; several months later man gave pwr of atty jointly to brother + nephew (pwr of atty gives holder
                         [atty-in-fact] the rt to make gifts, including gifts to themselves); Nephew then transferred $820k out of uncle‟s
                         estate into own estate; court found against nephew b/c held that this violated the intent of the creator of the
                         power (uncle)
                                  Is this the proper result?
                                        o    Perhaps pwr of atty is given to someone T wanted to take $ at will + give to anyone they want;
                                        o    Or perhaps nephew was just taking adv of the situation
           o    The principal‟s designation of the power provides the extent of the agent‟s authority

      Certain   acts of atty-in-fact must be expressly authorized in the power of atty, such as agents ability to: (§ 4264)
           o     (a) Create, modify, or revoke a trust;
           o     (b) Fund w/ principal‟s property a trust not created by or on behalf of principal;
           o     (c) Make or revoke a gift of principal‟s property;
           o     (d) Exercise oh behalf of principal rt to disclaim a property interest;
                         But atty-in-fact can disclaim a detrimental transfer to principal w/ court‟s approval
           o     (e) Create or change survivorship interests in principal‟s property;
           o     (f) Designate/change designation of beneficiaries to receive any property, benefit, or contract rt on principal‟s death;
           o     (g) Make a loan to the atty-in-fact

      Pwr of atty CANNOT authorize atty-in-fact to make, publish, declare, amend, or revoke principal’s will (§ 4265)
          o    Ferrara – arguable that nephew violated § 4265 b/c he amended T‟s will by pulling out a bunch of $ + redistributing it

      Where grantor gives express authority to sign grantor’s name on the deed – signature is deemed to be grantor’s, even
       when agent signs instrument outside of principal‟s presence

      Revocation or termination of power of atty
          o   (1) Principal can revoke pwr of atty in accordance w/ its terms OR by a writing (§ 4151)
          o   (2) Events that terminate authority of the atty-in-fact (§ 4152)
                       (a) In accordance w/ terms of power of atty;
                       (b) Extinction of the subject, or fulfillment of the purpose of the power of atty;
                       (c) Death of principal, except re authority permitted by statute to be exercised aftr principal‟s death;
                       (d) Atty-in-fact’s removal (revocation of atty-in-fact‟s authority), resignation, death, or incapacity
                        (temporary incapacity only suspends authority during period of incapacity); OR
                                Methods of revocation of authority of the atty-in-fact  revocation occurs: (§ 4153)
                                     o    (i) In accordance w/ terms of power of atty;
                                     o    (ii) Where atty-in-fact is notified so or notified of circumstances under which revocation occurs:
                                                   Orally or in writing by principal; or
                                                   In writing by principal‟s legal representative, w/ court approval
                       (e) Dissolution or annulment of marriage of atty-in-fact + principal
          o   (3) An atty-in-fact or 3d person who doesn‟t have notice of the revocation or termination is insulated from liability

      Note – to prevent atty-in-fact from accessing your funds, set up an irrevocable trust + put someone else in control of it
        beneficiary can‟t challenge it + no one can get their hands on it, except trustee
    1. DURABLE POWER OF ATTORNEY – a pwr of atty that is not affected by disability of the principal (“durable”) (traditnl pwrs of atty
    extinguished when principle became incompetent)

   Same creation requirements as above

   You know it is a durable power of atty when: (§ 4124)
       o   (1) Principal designates another person as atty-in-fact in writing; AND
       o   (2) Language used shows principal‟s intent that authority be exercised even if principal becomes incompetent
                    Ex. “This power of atty shall not be affected by subsequent incapacity of the principal”; “This power of atty shall
                     become effective upon the incapacity of the principal”

   Durable power of atty can come into effect via 2 methods:
        o   (1) Being signed + executed – Principal must execute while legally competent; OR
        o   (2) Upon occurrence of an event  “springing power of atty” (Ex: “Power comes into effect upon principal‟s incapacity”)
                    Springing power of attorney takes effect when the 1+ parties designated by principal to determine that
                     the specified contingency/event has occurred have done so by written declaration (§ 4129)
                             Any person may act in reliance on the written declaration w/o liability to principal or anyone, regardless of
                              whether the event/contingency has occurred
                    Benefits: Can protect creator from a bad atty-in-fact trying to steal creator‟s $ - ie. so atty-in-fact doesn‟t start
                     using pwr of atty to write checks + buy fancy things
                    Problems:
                             (1) Atty-in-fact doesn‟t get to handle your affairs until you are incapacitated – if they are untrustworthy,
                              your incapacitation just gives more opportunity to take your $
                             (2) How is “incompetency” defined?
                                   o   Atty-in-fact may try to use your $ b4 you are actually incompetent
                                   o   Or bank may not recognize pwr of atty if unsure if you are incompetent
   See my notes 2 pg. 19 for problems

    2. ADVANCED DIRECTIVES – Instructions re health care in event of incapacitation (“durable pwr of atty for health care”)

   Living Will – oldest form of adv directive: written instruxns re health care (ie. end-of-life decisions) in the event of incapacitatn
        o   Speaks for patient to potential care-givers, tries to identify med situatns that could arise + types of care patient would want
                    Ex. of woman who had her advanced directive tattooed on her stomach for fear of 1 day being on life support

        a. DURABLE POWER OF ATTORNEY FOR HEALTH CARE – written document permitting a person to appt a surrogate to make
        health care decisions on behalf of declarant who became incapacitated (authorized in CA‟s Health Care Decisions Law)

   Same creation requirements as above – principal must be competent to execute

   Powers granted: May pertain to principal‟s personal care – including, but not limited to, determining where principal will live,
    providing meals, hiring household employees, providing transportation, handling mail, + arranging recreation + entertainment

   Incapacitated persons have the right to refuse medical treatment under the following circumstances:
        o  (a) If a surrogate decisionmaker determines such refusal is in patient‟s best interests; +
                    Upon marriage, legal relatnshp of parent/child is severed + spouse gets surrogate decisionmaking pwr
                             Schaivo case – Spouse + guardian allowed to determine that feeding tube shld be taken out; Court
                              affirmed the rights of informed consent + of a surrogate to refuse treatment for an incompetent patient

        o     (b) Court considers patient‟s prior informal stmts re life support + med advice re treatment that is in patient‟s best interests

        o     (c) Other states may require higher standard of clear + convincing ev of patient‟s wishes to be taken off life supprt
                      Cruzan v. Director, Missouri Dept of Health – Cruzan was incapacitated after car accident; family sought to remove
                       feeding tubes, but state found insufficient ev of Cruzan‟s desire; USSC found no adv directive + no clear ev of
                       Cruzan‟s intent  state can imposed heightened evidentiary requirements for proof of incompetent person‟s intent

   Duty of health care providers  comply w/ /health care instruction made by patient or surrogate decision-maker –
    unless can‟t comply for reasons of conscious or b/c health care instruction is medically ineffective – otherwise possible crim liability

   Patient   who has capacity may revoke an advanced directive
        o     Revocation requires a signed writing or oral notification to health care provider
        o     Divorce revokes designation of former spouse as agent to make health care decisions – but revived if parties remarry
        o     A later adv directive revokes an earlier one only to the extent of any conflicts btwn the 2 directives

   See my notes 2 pg. 22 for problem
     See example trust  my notes 2 pg. 33-33
     See explanation of pour-over will  my notes 2 pg. 33


     Classic trust: “All the income to beneficiary for life, + at income beneficiary‟s death the remainder goes to the principal beneficiary.”

     2 cardinal features of modern trusts
          o   (1) Divorcing equitable interest from legal interest  creates fiduciary relationship btwn trustee + trust beneficiary
                      Trustee has legal title – gets actual legal ownership of trust (can open bank accts, etc)
                      Beneficiary has equitable title – beneficiary is one for whom trustee is acting
          o   (2) Fiduciary duty imposed on trustee to deal w/ the property for beneficiary‟s benefit
                      Trustee‟s legal title is subject to enforcement rights in beneficiary

     How a trust works: Example of sending a letter in the mail
         o   A trust has been created during this process
                     Settlor/Creator – person who sent the letter; Beneficiary – recipient of letter
                     Trustee – post office (not mail person) – b/c PO is responsible for getting letter safely from SF to NY
                              Mail person is the “agent” of the post office; Post office is the “principal”

     Reasons why ppl create trusts
         o   (1) Avoid probate – b/c of delays + costs
                     Since no probate, trusts are private – no one can see where your assets are going
         o   (2) Provide for asset management for minors + incompetents
         o   (3) Save taxes
         o   (4) Provide for successful enjoymt of property over several generations
         o   (5) Insulating trust property from beneficiary‟s creditors

     Choice of law rules –
         o    Trust is validly created if it complies w/ law of jx where: (§ 403)
                       (1) Trust instrument was executed; OR
                       (2) At time of creation:
                                 Settlor was domiciled, had residence, or was a national; OR
                                 Trustee was domiciled or had its place of biz; OR
                                 Any trust property was located
                       Means trust drafter determines which law we want to govern the trust by specifying in the instrument,
                        but you can‟t choose to another state to try to limit SS rights to CP or to violate public policy (§ 21103)

          o     Real property is governed by CA law (Cal. Civ. Code § 775) –can‟t choose law of another state to govern CA real property

          o     CA trust law is the most widely followed trust law in the country  CA trust law became effective 1937
                        Restatement of Trusts + case law of most other states is based on CA trust law
                        In CA  Simple statutory law re trusts, but HUGE body of case law that is incorporated as the law in CA
                                  § 15002 – expressly brings in the case law: “Except to the extent that the common law rules governing
                                   trusts are modified by statute, the common law as to trusts is the law of this state”

     Trusts are usually irrevocable  exception is revocable living trusts
          o   See my notes 2 pg. 34 for revocable inter vivos trust example



     Creation requirements  trusts must be notarized (but no witnesses required!)
          o   Trust conveying real property must be in writing (cannot be oral) AND signed by trustee or settlor, or by
              trustee‟s/settlor‟s agent if authorized in writing to do so (§ 15206)

          o     Trust conveying personal property can be oral, so long as existence + terms of oral trusts can be proved by clear +
                convincing ev (§ 15207)
                        Proof can be indirect, as evidenced by circumstances surrounding trust‟s creation
                        But the oral declaration of settlor, standing alone, is not sufficient ev of creation of a trust of personal property

     Creation methods: (§ 15200)
          o   (1) A declaration by property owner that owner holds the property as trustee – No need for transfer from owner to trustee
              b/c here owner becomes trustee

          o     (2) Transfer of property by owner to another person as trustee:
                       (a) During owner’s lifetime – (“living trust” or “inter vivos express trust”); OR
                                Trust created by transfer from settlor to trustee during settlor‟s life
                                     o    Grantor reserves trust income for life, power to revoke, + other benefits of continued ownership
                       (b) By will or other instrument taking effect upon owner’s death (“testamentary trust”);
                                Trust comes into effect when T dies + will creates trust
                                     o    Property in new trust created by will would go thru probate b/c trust was created by will
                                                  Note – had this property been tagged in a living will, it wouldn‟t go thru probate

          o     (3) An exercise of a power of appointment to another person as trustee; OR

          o     (4) An enforceable promise to create a trust

        b. INTENT – Settlor must properly manifest an intention to create a trust (§ 15201)

   Intent must be express, clear, + unequivocal  ex. document is labeled “Trust Agreement”
       o   When intent is unclear, court may find a GIFT instead of a trust
                  Burton v. Irwin – D died w/o any children + left siblings + nephews as heirs, but no children; in will, D apptd
                   brother as executor + trustee of estate  will said he would know what her wishes were + would carry them out;
                   Brother claimed entire estate for himself; Court found that D lacked sufficient intent to create a trust + didn‟t know
                   meaning of legal-sounding language, so all property rightfully belonged to Brother as a GIFT/bequest from D

   How does a court find intent?
       o  (1) Language used in trust document helps
                 Mandatory language creates a trust – expressions of direction or an obligation  commands
                           Ex. “It is my wish that my wife give $100k to our son John”  language imposes a duty on the wife
                 Precatory language doesn’t create a trust
                           “Precatory” language: Words that express a hope, recommendation, or request
                                 o    Ex. “Please use your judgment, kindness, + honesty in order to provide as you see fit for my
                                      nieces”  not a valid trust b/c completely precatory language
                 “Trust” or “Trustee” don’t create a trust if intent is otherwise
                           Settlor need not know the relationship is called a “trust” to understand the nature of a trust relationship

        o   (2) Court can also consider parties‟ conduct + surrounding circumstances
                    Precatory language + surrounding circumstances may show sufficient intent: If surrounding circumstances
                     show clear intent of settlor to create mandatory obligation, court will find valid trust
                    Courts consider:
                             (i) Relationship of settlor w/ putative trustee + beneficiaries (major players)
                                    o   Good relationship  likely intent for a trust; Bad relationship  maybe not
                             (ii) History of gift-giving  have other gifts been given from S to B?
                             (iii) Extent to which beneficiary took other gifts from settlor, even if not made in trust
                                    o   In re Estate of Zuckerman – Trustee + Beneficiary both killed in same car accident; had been
                                        living together for 12-yrs; prior to dying T had a $125k bond reissued in name of T “as trustee
                                        for” B, + T instructed Bank to change title on a $75k FMC bond in same way, but title change
                                        didn‟t go thru b4 deaths; Court found clear intent for a trust b/c every single factor was met
   See my notes 2 pg. 32 for problems

        b. TRUST PROPERTY – a trust is created only if there is trust property (§ 15202)

   Property may be anything that may be the subject of ownership, including both real + personal property

   Property must be:
       o   (1) Definite or definitely ascertainable – if trust property cannot be identified, trust fails; AND
                   Ex. “All of my personal property”  definitely ascertainable b/c we can find out what the personal property is
                   Ex. “All of the property that I have left at the time of the trust”  definitely ascertainable
                   Ex. “All of the property that I have that can pass tax-free under the IRC”  definitely ascertainable
                   Mere expectancy interest is not sufficient to constitute trust property (Kully v. Goldman – Can‟t put
                    expectancy of annual season tickets purchased thru 3d person purchaser from U. of NB b/c tickets weren‟t
                    guaranteed to 3d party; if UN was sold out in any given year, K couldn‟t sue G to enforce a property interest)
                             “Mere expectancy” means it is in settlor‟s control to put into the trust  can turn it on or off at will, so
                              no set property right in the beneficiary
                   Expectancy is not the same thing as chance  you can put a chance into a trust – ie. a raffle ticket

        o    (2) In existence when the trust is created

   Owner of property must divest self of a property interest in the property – but beneficiary may receive a futr interest b/c
    property interest is presently vested in settlor
        o    Reservation of a life estate by settlor of an inter vivos trust + retention of a pwr of revocation does not invalidate a trust
        o    Settlor may not retain full equitable + legal ownership  OTHERWISE the doctrine of merger applies

        c. VALID TRUST PURPOSE – A trust may be created for any purpose that is not illegal or against public policy (§ 15203)

   In CA, almost anything can be a valid trust purpose (Ex. to protect minor, or to avoid taxes, or to make money, etc.)
        o   But trust‟s general purpose must be certain
                    A trust that is for an infinitely broad or general purpose can also be viable, so long as some purpose (“a
                     particular use of the property”) w/in the broad purpose is legit (§ 15204)

   Invalid purposes:
        o   Performance involves commission of a criminal or tortious act by the trustee;
        o   Settlor‟s purpose in creating the trust was to defraud creditors or others;
                     In re Marriage of Dick – ex husband appealed award of spousal support of $35k/month based on husband‟s access
                      to assets in corporations + trusts  court found ample ev of his ability to pay based on his access to “a labyrinth of
                      trusts + corporations designed by him to shield + protect him from creditors”
        o   The consideration for the creation of the trust was illegal;
        o   Perpetuities violation  settlor can‟t make a trust non-terminable beyond the perpetuities period;
        o   Providing financial incentive for person to obtain a divorce
                     But see Hamilton v. Ferrall – CA court upheld a trust paying out to daughter in event of divorce or husband‟s death
                      b/c purpose wasn‟t to encourage divorce, but to protect her by providing $ support b/c of divorce or H‟s death
        o   Racial discrimination – But trusts that discriminate on the basis of sex have generally been upheld
   If any provision violates public policy, only that provision is invalid, not entire trust – trust still valid if some valid purpose
        d. BENEFICIARY – trust must designate at least 1 beneficiary (§ 15205)

   Trust must provide for either:
        o  (i) An ascertainable beneficiary or class of beneficiaries (need to know who falls w/in the class)
                   Morsman v. Commissioner – M set up trust + put shares of stock he owned in trust; M was trustee, but after
                    certain period of years trust company became trustee; Trust property was supposed to be paid to either M‟s
                    surviving issue or surviving spouse, but when M died he in fact had no surviving heirs nor surviving spouse; Court
                    found no valid trust b/c no beneficiaries when trust was set up
                            Prof: Morsman court got it WRONG  M essentially had created an equitable life estate w/ contingent
                             beneficiaries – no beneficiary now, but possibility that there would be one or more in the future  this
                             should have been found to be a real interest w/ contingent beneficiaries
                                  o    Commentators have also declared the Morsman decision invalid  “It is unsound + ought not to
                                       be followed. The settlor of a private trust can be the sole trustee + the only presently
                                       ascertainable beneficiary so long as the other beneficiaries will be ascertainable w/in the period of
                                       the rule against perpetuities.”

                     Trust beneficiary may be:
                              Unborn, so long as there is a possibility that s/he may come into existence
                              A minor
                              Legal entities – such as corporations or partnerships
                              Class members: “my children” or “my nephews + nieces”

                     “Ascertainable” – Beneficiary who isn‟t specifically named in instrument may be identified by extrinsic facts

                     See § on Status ?s below – ie. class closing rules

        o    (ii) A grant of pwr to trustee or some other person to select beneficiaries based on a standard or in that person‟s discretion
                      Ex.: Trust gives property to trustee “to dispose of as he may see fit”  not valid trust b/c no ascertainable
                       standards – void + uncertain as to beneficiaries
                      Ex.: “To do w/ the property what you know I want to have done with it”  invalid for same reason
                      Must have standard to judge whether trustee has distributed trust benefits to the right persons
                               Relatives” + “friends” have caused some problems  where is line drawn?
                                     o    Clark v. Cambpell – T gave all personl property to trustees to distribute “to such of my friends as
                                          they, my trustees, shall select”  Court invalidated attempted trust + mandated a resulting trust

                     See § on Power of Appointment below

   The Merger Doctrine  Sole trustee + sole beneficiary cannot be same person (or legal + equitable interest merges)
        o  Rationale: Ensures separation of legal + equitable title that characterizes the trust relationship
                   Trustee must owe duties to someone – otherwise no one to enforce trustee‟s duties
        o  UNLESS: (§ 15209)
                   Trust is a living trust
                            Settlor, beneficiary, + trustee are all same person until creator dies  then beneficiary + trustee split; OR
                                  o    Settlor is beneficiary during settlor’s lifetime + income goes to settlor (living in house
                                       that goes in trust, etc.) + settlor can revoke living trusts at any time b4 settlor‟s death
                            There are multiple settlors, + 1 or mr is also a trustee, + 1 or mr is also a beneficiary

   If trust fails to name a beneficiary or merger happens  a resulting trust arises
         o   Only charitable trusts are exempted from the beneficiary requirement

        e. APPOINTMENT OF TRUSTEE NOT REQUIRED – trust creation does NOT require designation of a trustee

   Settlor does NOT have to name trustee for valid trust creation
        o   Vacancy is filled by agmt of adult beneficiaries or court appointment
                   Court will appt trustee if T intended to create a trust but didn‟t name a trustee, or if a sitting trustee dies or resigns

   But trust will fail if settlor intended trust to operate only while a specific person was trustee + that person then fails to
    serve as trustee
        o   Note – minors can‟t administer trusts b/c their contracts are voidable

   Trustee may be either an individual or a corporation

   What kind of trustee do we want?
       o   Need person willing to suffer thru while being only marginally compensated  Competent family members are always good
       o   When selecting trustee consider:
                   Compensation – would trustee be willing to work for little to no compensation?
                   Trust size – larger trust may be btr for corporate trustee; smaller may be best for individual trustee
                   Trust duration – will individual trustee be able/willing to serve for duration? Consider naming successor trustees
                   Personalities – will trust beneficiaries be difficult ppl for trustee to work w/?
                   Trust assets – Consider whether individuals will be comfortable or qualified handling the trust property
                   Co-Trustees – Settlors may appoint 1 corporate + 1 individual as co-trustees for expertise + personal touch

   Note – there is no limit on the # of trustees that a trust can have – Prof: But best to just have 1 or 2

   (1) Trusts created expressly (“Express Trusts”)
        o   (a) Private express trust – transfer of all legal title to property to trustee where transferor (settlor) imposes active duties on
            trustee for benefit of > 1 private beneficiaries
        o   (b) Charitable trust – a trust devoted solely to charitable purposes (see below)

   (2) Trusts created by operation of law
        o   (a) Resulting trust – arises when creator intends to create a trust, but for trust fails due to illegality, impossibility, or
            incomplete disposition  resulting trust arises to transfer property in trust back to creator
                    Ex. if mail person attempted to deliver ltr to recipient in NYC but recipient had moved  ltr is returned to sender
                    Transferee becomes a trustee w/ duty to return property to transferor or successors in interest
                             But court may imply a gift to avoid resulting trust
                    See my notes 2 pg. 37 for problems

        o    (b) Constructive trust – trust created/imposed by the court to prevent unjust enrichment
                    Wrongdoer becomes constructive trustee w/ duty to transfer property to its rightful owner
                    A party who seeks imposition of a constructive trust must show:
                              (1) An interest in the property;
                              (2) A right to that property; +
                              (3) D‟s gain of that property by some wrongful act (fraud, mistake, UI, violation of a trust, etc)

   (3) Pour-Over Will/Trust – will provision makes a gift of probate assets to an existing inter vivos trust (combines a revocable inter
    vivos trust w/ a will – trust is designated as a will beneficiary)
        o    Terminology
                     Will w/ a pour-over provision is called a “pour-over will”
                     Trust that will pours property into is called a “pour-over trust”
        o    Process:
                     (i) T creates lifetime trust, but intended as a shell to be activated later (not currntly funded or mgmt tool);
                     (ii) T creates a will naming the lifetime trust as a will beneficiary;
                     (iv) After client‟s death, will pours D‟s residuary probate property, + life ins policy pours ins proceeds, into the trust
                       trust then serves as a mgmt (+ sometimes tax-savings) device to care for survivors

        o    Relation to Probate
                     When pour-over happens, entire estate goes thru probate  no secrecy of a normal trust
                              But at least the property goes where T wants it to

                       EXCEPTION  if entire probate estate is under $100k, that estate does not have to go thru probate
                             Means you can take < $100k of assets + not put them in the living trust  at death, pour-over will picks
                              up the < $100k + deposits it into the trust upon T‟s death  no probate
                             2 caveats
                                  o   (1) Not everyone should get a living trust (Ex. Trust fund babies don‟t need one b/c they are
                                      continually over the $100k limit)
                                  o   (2) There are other exceptions to going thru probate
                                              Community Property Exception: If you leave everything to your spouse + everything you
                                               own is community property, your estate doesn‟t have to go thru probate – even if
                                               everything you own is worth more than $100k

        o    Benefits   to pour-over will/trust:
                       Inter vivos trust is easier to amend than a will (b/c will amendments must meet certain formalities)
                       Inter vivos trust can incorporate many different types of assets
                       T may pour over property into a trust that was created by a 3d party, such as a spouse

        o    Revocable (b/c exists as a will), but upon T‟s death trust becomes irrevocable

        o    Pour-over will could also work in reverse: “If the trust is revoked, its provisions are incorporated into this will”

   (4) Honorary trust – a trust for non-charitable, non-capricious purposes, such as trusts to care for pets, or to erect/maintain
    tombstones  so called “honorary” trust b/c trustee is honor-bound to carry out settlor‟s intended, but unenforceable terms
        o   A trust for the care of a domestic pet may be performed by trustee for animal‟s life (§ 15212)

   (5) Incentive trust – a trust designed to encourage specific behavior
        o   Valid unless encourages acts against public policy, even if acts themselves are onerous + stupid
        o   Ex. Trust provides for a child if she graduates from college w/ an overall B average, receives a law degree, has a child,
            marries b4 age 30, + is free from illicit drugs based on monthly testing arranged by trustee  likely upheld in CA

   (6) Secret + Semi-Secret Trusts
        o   (a) Semi-Secret trust – The document shows a trust intention on its face, but the details of the beneficiary are oral
                   Courts exclude the oral ev + impose a resulting trust to deny beneficiary the rt to keep the property
                            Ollife v. Wells – T‟s will required W to distribute the property in his discretion “to carry out the wishes
                             which I have expressed to him or may express to him”; Court found the trust failed b/c the terms were
                             not shown in the will

        o    (b) Secret trust – The gift under the will is absolute on its face, but oral agmt on the side for donee to hold property in trust
             for beneficiary designated by T
                     To prevent unjust enrichment, a court must admit testimony of the oral agmt  once court has all
                      details it is likely to impose a constructive trust in favor of the intended beneficiaries

   See my notes 2 pg. 40 for problems
C. THE NATURE OF THE BENEFICIARY‟S INTEREST – The rts of beneficiaries vs trustee in mandatory, discretionary, + support trusts

   See also above abt notice requirements  trustee must notify beneficiaries under certain circumstances


   Mandatory Trusts – Trust w/ mandatory rights for beneficiaries
       o  (i) Right to Income Trust – income beneficiary has a right to trust income at least annually (tho distributions usually mr
                   Ex. “To Amos for life, remainder to Beth”
                            As income beneficiary, Amos is mandatorily entitled to receive from trustee income derived from the trust
                            As principal beneficiary, Beth is mandatorily entitled to trust principle on Amos‟ death
                   Problems – trustee must make investments that produce income

        o    (ii) Annuity Trust – current beneficiary has a right to a fixed $ amount quarterly or annually  “annuity”
                     No income/principal beneficiary distinction – current beneficiary gets fixed amount or % + futr beneficiary
                      gets rest
                     Fixed $ amount: Ex. “Arthur is entitled to $5k annually for life, w/ remainder to Bonnie”
                               Problems:
                                    o    (i) Beneficiary doesn‟t have a right to whole should beneficiary fall on hard times
                                    o    (ii) Inflexible – A will be entitled to same $5k in yr 1 + in yr 20  doesn‟t account for inflation

                     Unitrust –(a type of Annuity Trust) – current beneficiary has a right to a % of the trust assets – Ex. 4%
                             Ex. “4% unitrust for the life of Angela, w/ remainder to Barbara”  Trust provides that after 1st yr, Angela
                              will receive 4% of principal valued at end of preceding year; if at end of year 1, the trust principal is worth
                              $500k, Angela will be entitled to $20k in yr 2
                             More flexible than right to income or annuity trusts
                                    o   Trustee can invest freely w/ no worry of whether it benefits income or principal beneficiary
                                    o   Unitrust accounts for inflation, since % is based on actual value/amount of principal

        o    But mandatory trusts can hinder a trustee‟s ability to respond to change  discretionary or support trusts may b btr suited

   Discretionary Trusts – Settlor leaves an amount to be distributed by trustee – authorizes trustee to pay beneficiaries “such amount
    of income or principal as trustee in its absolute discretion shall deem advisable”
         o  Types:
                     Support Trust – A type of discretionary trust  Trustee must provide for the support of the beneficiary to keep
                      the beneficiary afloat
                               Emmert v. Old Nat‟l Bank – Father created trust for 2 sons; 1 son was in desperate need of $, but trust
                                denied his request for $; Court found trustee had to give son the $  trust‟s purpose was to care for sons,
                                not to protect + grow trust $
                               “Support” or “comfort” should be judged in context of level to which beneficiary “has become accustomed”

        o    Trustee‟s discretion
                     Doesn’t mean trustee can do anything they want – must still follow trust’s ultimate purpose

                     Even if trust instrument grants “absolute,” “sole,” or “uncontrolled” discretion or similar words,
                      trustee must still act reasonably – in accordance w/ fiduciary principles + not in bad faith or in disregard of the
                      trust purposes (§ 16081)
                              So trustee ALWAYS owes a standard of reasonableness to beneficiary
                                   o    2 ways to force trustee to give $ to beneficiaries:
                                              (1) Argue beneficiaries have a need + right to the funds, as in Emmert, OR
                                                       If trustee loses  they must pay out the funds
                                              (2) Attack trustee directly for violating trustee‟s duties or abuse of discretion  trustee
                                               usually responds quickly
                                                       If trustee loses  trustee can be subject to penalties
                                                       Prof: Ask them to show you their time sheets – “you kept a record, of course,
                                                        as to the time you spent as trustee, did you not?” OF COURSE trustee didn‟t do
                                                        that  “Do you remember the beneficiaries‟ names?” etc.

        o   In drafting a trust, we must be specific  “This is the kind of support that we want…”
                     If drafting an educational trust: “This is kind of education that you should fund + what you should NOT fund
   See my notes 2 pg. 44-45 for problems

    2. TRANSFERS OF BENEFICIAL INTERSTS IN TRUST  Assignment of beneficiary‟s interest

   Voluntary transfers: Beneficiary can sell their trust interest at any time to get the $ value NOW  sell for lump sum
        o  Beneficiary can give away or sell a life estate or a remainder expectancy interest in a trust – may give it away to save taxes
                   Purchaser of expectancy interest gambles on likelihood of settlor dying sooner rather than later

        o    Requirements for valid transfer: Beneficiary must manifest intent to transfer the interest by express words or otherwise
                    Beneficiary need not give notice to trustee – unless trust terms provide otherwise
                             But if trustee doesn‟t have notice of transfer, trustee is under no liability for continuing to pay original

   Involuntary transfers: Creditors can attach beneficiary’s unpaid interest in trust property to fulfill unpaid claims

   Spendthrift provisions– prevent both voluntary + involuntary transfers of beneficiaries’ trust interest (§ 15300)
       o   Spendthrift provision: Ex. “No interest of my wife or of any lineal descendants of mine in income or principal shall be
           anticipated, encumbered, or assigned. No such interest shall be subject to the claims of such person‟s creditors, spouse, or
           divorced spouse or others.”
                   Settlor may not want beneficiary to sell their interests b/c defeats entire purpose of creating a trust
                            Goal of most trusts is to protect beneficiary by protecting the $ from creditors + from being squandered

        o   ST provision prevents beneficiary‟s interest from being subject to enforcemt of a $ jgmt until paid to beneficiary
                    Broadway Nat‟l Bank v. Adams – This was the case that said spendthrift provisions are OK – can shield
                     beneficiary‟s assets from creditors
                     Trustee may postpone giving beneficiary $ until beneficiary’s debts are resolved + creditors can‟t force
                     trustee to pay them beneficiary‟s $

        o   EXCEPTIONS 
                  (1) Court may order trustee to satisfy claims for child or spousal support (§ 15305)
                          (i) Beneficiary can‟t use a spendthrift provision to justify not paying spousal support; +
                          (ii) Trustee can be forced to pay child support
                                 o   Shelley v. Shelley – Beneficiary‟s father created a discretionary support trust for beneficiary w/ a
                                     spendthrift provision; Former wives sued trust for alimony + child support, which F hadn‟t
                                     allocated; altho OR Court refused to provide for alimony (found wives to be just other creditors)
                                     [this wouldn‟t be law in CA], Court ordered paymt from trust for child support
                  (2) FG or State govt can reach a beneficiary’s spendthrift trust interest for paymt of unpaid taxes

        o   Criticism of spendthrift clauses:
                    (1) Law shouldn’t protect foolish ppl from themselves: “It is not the function of the law to join in the futile
                     effort to save the foolish + the vicious from the consequences of their own vice + folly”
                    (2) Law should allow donees to dispose of their own property as they choose
                              But law also protects freedom of donors to dispose of their property as they choose

        o   Beneficiary can disclaim an interest in a spendthrift trust  disclaimer doesn‟t constitute a prohibited voluntary transfer

   Other trusts that impose restrictions on ability of creditors to attach a beneficial interest
       o    (1) Discretionary trusts – Trustee has discretion re how much $ to give beneficiary at any given time  Only $ given to
            beneficiary is subject to creditors‟ claims

        o   (2) Trust for beneficiary‟s education or support – under CPC, if trust provides trustee must pay income or principal or both
            for beneficiary‟s education + support, beneficiary‟s interest (as necessary to education/support) is not subject to enforcemt
            of a $ jgmt until paid to beneficiary

        o   (3) Asset Protection Trusts (APTs) – another way to prevent creditors from reaching assets (Prof: Method of ppl in high risk
            occupations to protect their assets from lawyers)
                    APTs rely on favorable legislation in off-shore jxs – foreign countries have laws saying “creditors
                     cannot attach trusts created in this country” (Prof: They use special bank accounts + code words to ship their
                     $ overseas)
                              How it works: Settlor creates a trust over his or her assets, naming a 3d party friendly trustee; trust
                               terms employer the trustee to make discretionary distributions of trust income or principal to settlor
                    Prof: If someone came to you + wanted you to establish a foreign trust for them in the Camen Islands, you should
                     refuse  The only reason ppl set up foreign trusts is to avoid US taxes  this is a fundamentally illegal

   See my notes 2 pg. 45, 46 for problems

D. REFORMATION, MODIFICATION, + TERMINATION OF TRUSTS – Remember  revocable trusts can be modified/terminated at any time
– only irrevocable trusts have special rules

   CA presumes trusts are revocable unless expressly made irrevocable  so long as CA law governs the trust

   A trust terminates naturally when: (§ 15407(a))
        o    (1) Trust term expires – at last income beneficiary‟s death, at end of prescribed # of years, or when the purposes for the
             trust have been accomplished;
        o    (2) Trust purpose is fulfilled or becomes unlawful/impossible to fulfill: OR
        o    (3) Trust is revoked

        o   On termination of the trust, trustee continues to have powers (+ a duty) reasonably necessary under the circumstances to
            wind up trust affairs (§ 15407(b))

   Trust instrument may be reformed due to fraud, duress, undue influence, or mistake
        o   If MISTAKE 
                   Court can correct mistakes in living, but not testamentary, trusts
                   Any formula or provision in a trust designed to eliminate estate taxes is interpreted to eliminate or
                    reduce estate tax to fullest extent possible (§ 21503)
                           Means even if atty puts in an incorrect stmt, if it is clear what the purpose is  Court will reform it
                                o   Prof: Good b/c it means we won‟t be sued for malpractice!
                                o   See my notes 2 pg. 52 for example
    1. PREMATURE TERMINATION OR MODIFICATION – power to revoke usually includes the power to amend

        a. BY SETTLOR

   Trust can be prematurely terminated or modified if:
        o   (1) Settlor has retained such pwr, or has given someone else such pwr, + follows methods specified in trust instrumt
                    If settlor retains power to revoke, settlor‟s creditors may reach trust property during settlor‟s lifetime
        o   (2) Settlor gets consent of all beneficiaries
        o   (3) Settlor is sole beneficiary  settlor can revoke at will, even if purposes haven‟t been fulfilled or if trust has a
            spendthrift provision, or any other usual bar to revocation (b/c no concern abt hurting settlor‟s intent!)
        o   (4) If CP comprises trust property, either spouse may unilaterally revoke the trust as to the CP – but such a
            unilateral revocation doesn‟t alter property‟s CP character

        b. BY BENEFICIARIES – Trust can be revoked, modified, or terminated if:

   (1) All beneficiaries consent + petition the court (§ 15403); OR
        o    UNLESS:
                      (i) There is an unfulfilled material purpose to the trust (Claflin Doctrine), UNLESS court determines
                       reasons for termination/modification o/w the unfulfilled purpose; OR
                               Claflin v. Claflin (1889) – Father made testamentary trust giving son $10k at 21, 25, + 30 yrs of age;
                                Father died when son turned 24 + son sued for rest of $; Court held purpose of trust was not to give son
                                principal until he turned 30 to ensure son didn‟t blow $ b4 that time
                                     o     Courts protect the trust‟s purposes on the settlor‟s behalf
                               Example: A trust provides for payments until age 75 for educational purposes – but beneficiary seeks
                                principal at age 25  Court held she could not get the $ b/c still a material purpose that she continue
                                education till age 75
                      (ii) Trust is subject to a valid restraint on transfer of beneficiary’s interest
        o    If trust has uncertain or unborn beneficiaries:
                      (i) Court can appt a GAL to represent unidentified or incapacitated persons; or
                      (ii) The doctrine of virtual representation – one can speak for an unknown person who, if identified, would be
                       in same situation as speaker

   (2) Settlor + all beneficiaries consent (§ 15404)
        o   Here, courts don‟t care abt “material purpose” b/c settlor has acquiesced
        o   If any beneficiary doesn‟t consent
                    Other beneficiaries (w/ settlor’s consent) may petition the court + compel modification or partial terminatn
                     of trust if non-consenting beneficiary(s) interests will not be substantially impaired
                    If trust disposition is just to “heirs” or “next of kin,” court may limit the class of beneficiaries whose
                     consent is needed for modificatn or terminatn to beneficiaries most likely to take under the circumstances

        c. BY COURT

             i. EQUITABLE DEVIATION – where trust provisn must be changed to maintain trust’s purpose, court can change it

   Court can modify ANY provision – both administrative + distributive (ie. introduction or removal of beneficiaries, change of
    beneficiaries‟ interests, etc.) (§ 15409)
        o    (i) Trustee or beneficiary must petition court  Court may modify if continuation of trust as is would defeat or substantially
             impair purposes of the trust
        o    (ii) Court can consider a restraint on transfer of beneficiary‟s interest, but can ultimately exercise its own discretion to
             decide whatever court wants
        o    Mayo – Trust stated beneficiary couldn‟t invest in real estate or stocks, but beneficiary petitioned court that if mkt were to
             continue down current path, trust would lose 85% of its value unless beneficiary invested; Court found purpose of trust was
             to protect $ + if the provision would hinder that purpose, could would allow its modification
   See my notes 2 pg. 55 for problem

             ii. CY PRES – when a charitable trust purpose becomes impossible / impracticable to carry out, court can modify
             trust by substituting a charitable purpose which “as near as possible” carries out settlor’s intent

   (1) Original purpose has become impossible or impracticable, or unforeseen changed circumstances would defeat or
    substantially impair the accomplishment of trust purposes; + (Most courts interpret this requirement narrowly)
        o    Obermeyer v. Bank of Am. – Charitable trust set up to establish dental school at a university; when dental school was
             eliminated, court used cy pres power to modify trust purpose to establish a medical school at the university – court looked
             to settlor‟s prior pattern of behavior + found settlor‟s general intent to give to charity)
   (2) Settlor had a general charitable intent
        o    Ex. court can substitute computer technicians under a trust created to educate typewriter repairmen
        o    Courts won‟t apply cy pres if:
                      (i) Settlor would have preferred that gift fail if original purpose couldn‟t be accomplished, OR
                      (ii) Settlor provided for an alternative charitable disposition should the original purpose fail
        o    If original purpose becomes impossible or illegal + a court can‟t apply cy pres b/c it can‟t identify a general charitable
             purpose  trust fails + resulting trust arises
   Courts reluctant to use cy pres  often find trust purpose not impracticable/impossible to carry out (Beryl Buck Case)
   Different from equitable deviation
        o    Equitable deviation – Court makes changes in the manner in which the charitable trust is carried out
        o    Cy Pres – Court seeks to modify/redefine settlor‟s specific charitable purpose

        d. BY TRUSTEE – can modify/terminate trust only if expressly/impliedly authorized to do so by trust instrument
   Such power must be exercised in accordance w/ fiduciary standards + settlor‟s intent
        o   Even if settlor agrees, trustee can‟t terminate/modify unless power is given in instrument  otherwise transaction is void
   See my notes 2 pg. 53-54 for problems
E. CHARITABLE TRUSTS – a type of private express trust that has a charitable purpose

   Compared to private express trusts
        o   Similarities – both arise from intention of settlor to create a trust; charitable trust may be created via same methods as
            private express trusts + may be inter vivos or testamentary
                     CA trust law applies both to private express trusts + charitable trusts
        o   Differences  b/c of broad public policy favoring charitable work, charitable trusts operate under different rules:
                     Benefit the community, not the individual
                     Are not subject to the definite beneficiaries rule  should have indefinite beneficiaries
                              Beneficiaries of charitable trusts can be: the public at large, children of public schools, etc.
                     Are enforced by state Atty General, not beneficiaries
                     Are an exception to the RAP  may continue indefinitely
                     Receive tax advantages  tax-exempt status – organization doesn‟t incur tax liabilities on income earned or
                      assets held + tax advantages encourage donors to give $ to established charities
   See my notes 2 pg. 61-62 for problem


        a. INTENT – Charitable trust will only arise if intended by a charitably-minded transferor

   If the requisite trust intent is lacking  court may find transferor intended an absolute gift to a charitable organization
         o   St. Mary‟s Medical Center, Inc. v. McCarthy – D left $ to hospital to create a memorial chapel; chapel was built + used for
             50 yrs, when hospital decided to expand + knock down chapel; remote descendant of D sued; Court found there was a trust
             w/ purpose of hospital to use the $ to build the chapel, but once trust purpose was fulfilled, trust terminated; OR this was
             just a gift  either way, hospital could knock chapel down

        b. CHARITABLE PURPOSES – Must be dedicated exclusively to charitable purposes, even if only for a period of time (ex.
        charitable remainder trust)

   “Charitable purpose” – something that benefits the community in general
       o    Prof: charitable purposes can be almost anything – can be extremely broad (“to make everyone happy”) or very narrow
       o    Court decides whether a purpose is charitable  settlor‟s opinion of whether a purpose is charitable is irrelevant
       o    CA statutes address only a few charitable purposes: Gifts of property for founding, endowing, + maintaining w/in CA any
            university, college, school, seminary of learning, mechanical institute, museum, botanical garden, public park, art gallery, or
            public library

   NOT a charitable purpose:
       o   (1) A trust for too narrow a benefited class or benefiting only settlor
                   Ex. a trust to prove for the health + education of grantor‟s family; a trust to pay for med ins for employees of a
                    particular company
                   That only a few ppl will benefit from the trust, however, doesn’t prevent trust from being charitable if
                    many ppl could benefit from the trust
                             Ex. a trust to provide medical care for victims of a particular disease that could be contracted by many ppl
       o   (2) Benefits not tied to the charitable purpose – as when a trust instrument discusses a recognized charitable purpose,
           but the effect of the trust is not charitable
                   “Generosity” is not “charity” (Shenandoah Valley Nat‟l Bank v. Taylor – Court said T‟s leaving of entire estate to
                    be divided among local primary school children on last day of school in furtherance of their education was a
                    generous gift for schoolchildren, not a charitable gift to advance the social interests of the community)
       o   (3) A trust is established to disseminate beliefs that are irrational or inconsequential
       o   (4) A trust‟ whose purpose is illegal or contrary to public policy

   A charitable trust may be both charitable + non-charitable
        o   Ex. a private express trust for settlor‟s surviving spouse for life, followed by a charitable remainder trust devoting the
            remainder to a charitable organization

   Drafting hint: When referring to trust‟s purpose, use word “charitable” + avoid the word “benevolent”

             c. BENEFICIARIES – no requirement for definite beneficiaries
   In fact, the more narrow/specific the class of beneficiaries, the more likely charitable trust may be found invalid: “If
    trust provides for the distribution of charitable benefits to a single individual or small group the public or community benefit is
    nonexistent or so small as to be negligible”

             d. TRUSTEES – same requirements as in other trusts


   Who has standing to enforce a charitable trust or other charitable gift?
       o  (i) State Atty General or ppl hired by atty gen to act on state‟s behalf;
                    State Atty General is also authorized to investigate charitable trusts to ensure their charitable purposes are being
       o  (ii) Ppl w/ a special interest in the enforcement of a charitable trust
                    Ex. if a charitable trust is created to benefit a law school, the law school would have standing to sue
                    Ex. in McCarthy, the distant relative had standing to sue
       o  (iii) Not settlor, unless settlor has reserved the enforcement right in the trust instrument or in the deed of gift

   Courts may refuse to enforce charitable trusts that discriminate on race, b/c such trusts violate EPC (But w/ rare exceptions,
    courts have upheld gender-based charitable trusts) See my notes 2 pg. 60 for problem

    3. RESTRICTIONS ON CHARITABLE TRUSTS – Mortmain statutes have been abolished by all states
F. SUCCESSIVE TRUST INTERESTS  CLASS GIFTS – “children,” “nieces + nephews,” “grandparents,” etc

   From a planning perspective, creating gifts to classes offers flexibility b/c, overtime, classes can grow or shrink
        o   Ex. “Income to Gary for life, principal to his children who survive him”  if G later has mr kids, they will take; if some die
            b4 he does, they will drop out
   Drafting suggestion: Be specific re status Qs + put in your documents when class closes  at what pt class is complete, etc.


   Adopted + non-marital children included in class gifts to “children”
        o   First Nat‟l Bank v. King – T created trust interest in his “lawful descendants of his son, Alden, + daughter-in-law, Olivia” –
            but T‟s grandson adopted Martha  did Martha qualify to take under T‟s will? Court decided that based on today‟s society‟s
            general attitude, adopted kids + natural children are treated same under the law, so M could take
                     Also  valid adult adoptns re recognized to determine whether a person is a child under a will, trust, or other doc
   Drafters should ascertain client’s wishes re what does “descendant” mean? How should qualifying descendants divide property?
        o   Who are the “heirs”? At what time do we determine them? When instrument is drafted, or at T‟s death?


   Class closing rules set the maximum size of a class
        o   Since members can still drop out, class closing rules don‟t establish a class‟ exact size, but only its ceiling

   Classes can close in 2 ways:
        o   (1) Physiological Closing – class closes when all persons who feed the class are dead (no more members can come about)
                    Presumes that all living people can still procreate  Ex. even if 90-yr-old person is still alive, class can‟t close

        o   (2) The Rule of Convenience – class closes when any class member has a right to demand their share/possession
                    Ex. Phillip‟s will gives $10k “to Linda‟s children”  if Linda has a child, class closes at Phillip‟s death b/c that child
                     can then demand possession
                    See my notes 2 pg. 67-68 for more hypos
                    4 exceptions to the rule of convenience
                              (i) If no class member is alive at time 4 distribution, the class stays open for all members, whenever born
                                     o    In ex. above, if Linda had no kids when Phillip died, class remains open until Linda‟s death, even
                                          if she later has a child who otherwise would have closed the class
                                                   This exception is based on the theory that Phillip knew Linda had no kids, so he must
                                                    have intended to benefit all of her kids, whenever born
                              (ii) When T makes a gift of a specific sum to each class member, class will close at T‟s death
                                     o    Ex. if Helen‟s will gives $3k “to each of my grandchildren,” the total amount of the gift would vary
                                          w/ the # of grandkids. To avoid keeping the estate open until there can be no more grandkids,
                                          class closes at Helen‟s death. This result would follow even if Helen had no grandkids.
                              (iii) Under rule that conception, not birth, is key time – a child in gestation when class closes is a class
                              (iv) The rule of convenience doesn‟t apply to income interests
                                     o    B/c trustee can reallocate income as new class members arrive – no inconvenience to keeping
                                          class open
   See my notes 2 pg. 68, 69, 70 for problems


   Power of Appointment – D gives someone power to decide what to do w/ certain property after D‟s death
       o   Happens via “the miracle of a trust” – D puts property into trust for beneficiary‟s lifetime + gives beneficiary power to make
           a decision re where that property will go (“appoint” it) at a certain time (often beneficiary‟s death)
                   Classic power of appointment: “To Tom for life, w/ power to appoint among his nieces + nephews”
                            Classic usage: “Income to H during his life, power to appoint at death”
       o   Allows T to do post-mortem estate planning
                   I don‟t know who will get this $, but I will give it to someone who will have a better idea of that in 30-yrs

   2 types:
        o   (1) Special power of appointment – Where H could not appoint the $ to himself  $ is not taxed in H‟s estate
                    Ex. “I give H the power to appoint a trust among his brothers + sisters, but he may not appoint it to himself”
                    Most powers of apptmt are special powers
        o   (2) General power of appointment – Where H can appoint the $ to himself  $ is taxed in H‟s estate, even if H doesn‟t appt
            the $ to himself or appoint it at all
                    If donee dies holding a general power of apptmt, the property subject to the power will be included in
                     donee’s gross estate for estate tax purposes

   Parties:
        o    Donor – person who creates the power
        o    Donee – person who receives the power
        o    Objects – ppl that donee can give property to (aka. “permissible appointees”)
        o    Appointee – an object who has received the property from the donee
        o    The taker in default – where the property goes if the holder of the power doesn‟t exercise the power
                     Donee doesn’t have to exercise the power of appointment

   Methods of Exercise
       o   (1) Inter vivos powers – exercisable by deed during donee‟s lifetime
       o   (2) Testamentary powers – exercisable by will after donee‟s death
     Prof: Once you create a trust, your problems have just begun b/c someone must administer the trust…

  A. MANAGERIAL ISSUES – CA law on trustees‟ powers is adopted from the Uniform Trustees‟ Powers Act


     Trustee has a duty to administer the trust according to trust instrument’s terms + CPC – unless instrument provides
      otherwise (§ 16000)
          o   A well-drafted document is very important
                      A “simple” will covering modest assets should provide basic authority to act, usually w/o need for court approval
                      If biz assets are involved, more detailed provisions are appropriate
          o   How to decide what powers to give trustee?
                      Look at big picture: Who are the trustees? What protection do they need? What sorts of assets will trust hold?
     See my notes 2 pg. 79 for problem

          a. THE DUTY OF LOYALTY – trustee has a duty to administer the trust solely in beneficiaries‟ interests (§ 16002(a))

     Trustee must not place self in a conflict of interest where personal interest or that of a 3d party is adverse to

     No self-dealing
          o   Duty NOT to: (§ 16004)
                     (i) Use/deal trust property for trustee’s own profit or any purpose unconnected w/ the trust; +
                              Can‟t sell, lease, or lend trust property to oneself as an individual (or to one‟s family)
                                    o    In re Estate of Hines – D left a life estate to his wife w/ remainder to 3 kids; Charles had 3 kids
                                         (including Margery), + William had 2 kids (Karen + Gary); William + Charles died; Karen was
                                         appted executor of estate + decided to sell real property in the trust to herself + Gary; Court
                                         found self-dealing
                              Can‟t acquire an interest in trust property for oneself as an individual
                              If a corporate trustee, can‟t retain/acquire corporations own stock as a trust asset

                       (ii) Take part in any transaction where trustee has an interest adverse to beneficiary’s
                                Any transaction btwn trustee + beneficiary occurring during existence of trust or while trustee‟ s influence
                                 w/ beneficiary remains + by which trustee obtains an advantage from beneficiary is presumed to be a
                                      o    Prof: Trustee can‟t say to beneficiary: You have the right to income, do you not? Therefore, sign
                                           this release holding me free of liability + then I‟ll send you your check…

          o    Self-dealing is a breach of trust  no further Qs asked

     EXCEPTIONS to the self-dealing rule:
         o  (i) No self-dealing when: full disclosure by fiduciary, transaction is fair + reasonable, + all beneficiaries consent

          o    (ii) Institutional trustees (banks or trust companies) can invest estate $ in own investments for profit that they keep (§
               16015 – doesn‟t violate duty of loyalty)

          o    (iii) Trustee who administers 2 trusts can sell/exchange trust property btwn the 2 trusts, if full disclosure by fiduciary
               + transaction is fair + reasonable to all beneficiaries: (§ 16002(b))

          o    (vi) Trustee can (must) be reasonably compensated, including compensation for special services

          o   (v) In small towns, trustee can sell trust property to spouse, family, friends, etc b/c very few buyers in small towns
     See my notes 2 pg. 76, 77 for hypo

          b. INVESTMENTS

     3 main duties of trustee when investing trust property:

          o    (1) The Prudent Investor Standard: A trustee shall invest + manage trust assets as a prudent investor would under the
               purposes, terms, distribution requirements, + other circumstances of the trust (§ 16047 – The CA Prudent Investor Act)
                       Objective standard  Prudent investor engaged in similar biz affairs w/ objectives similar to those of
                        the trust in question
                                Harvard College v. Amory – Court said trustee must handle trust as a reasonably prudent man would
                                 handle an investment in the normal course of biz
                                First Alabama Bank of Montgomery v. Martin – P class of 1200 beneficiaries of individual trusts sued
                                 trustee Bank for investing entire trust property in own personal mutual funds + then forgets abt the trust
                                 – Bank sets up automatic program to send checks to beneficiaries every quarters + just turns over trust
                                 fees every year; Bank funds lost money; Court found the bank violated the prudent investor standard by
                                 making bad investments that a reasonably prudent investor wouldn‟t make under the circumstances
                       If trustee holds self out as having higher skill than average person  higher standard of care is
                                Ie. “I am an expert at managing money”  higher standard imposed
                                Professional trustees (ie. banks + trust companies) are held to higher standard
                                But trustee is NOT relieved of liability for claiming s/he possesses lower-than-normal mgmt skill
        o   (2) The Duty to Diversify  Trustee has an absolute duty to diversify trust investments, UNLESS it is imprudent to do so
            under the circumstances (§ 16048)
                    Courts interpret this as a positive duty on trustee to diversify – basically unless there is an absolute bar to
                     doing so, trustee better diversify
                             In re Estate of Janes – Janes created 3 trusts – 2 gave his wife “income for life, + remainder to charities,”
                              3d was a charitable trust only; 71% of the trusts was invested in Kodak stock when Kodak stock tanked;
                              Court held executor Bank had duty to diversity – holding 71% of stock in 1 company violated the prudent
                              investor standard
                                   o   Prof: Bank also failed to keep records – trustee has duty to provide their records for beneficiaries

                    “Prudent under the circumstances” is a fact/reasonableness test – look at state of the biz, etc.
                    “Imprudent” – when doing so would be too risky or trust property has sentimental value
                           In re Trust Created by Inman – sale of family farm not allowed b/c of special importance to beneficiaries

        o   (3) Duty to invest property impartially: Trustee has a fiduciary obligation to be fair both to income beneficiaries during
            mgmt of the trust + to remainder beneficiaries during termination of the trust
                    Settlor’s intent should be the guiding principle
                    Beneficiaries may challenge a trustee’s investment strategy b/c it is not impartial
                             In re Dwight‟s Trust – trustee surcharged for selling US Savings Bonds at a loss in order to purchase tax-
                              exempt securities for a high tax-bracket life tenant

   Courts consider totality of circumstances to decide whether any duty is violated
        o   Factors to consider:
                     (i) General economic conditions, including the possible effect of inflation or deflation
                     (ii) The expected tax consequences of investment decisions or strategies
                     (iii) The role of each investment or course of axn w/in the overall trust portfolio
                     (iv) The expected total return from income + the appreciation of capital
                     (v) Other resources of beneficiaries known to trustee as determined from information provided by beneficiaries
                     (vi) Needs for liquidity, regularity of income, + preservation or appreciation of capital
                     (vii) An asset’s relationship or value to trust purposes or to 1+ beneficiary
        o   Trustee‟s investment + mgmt decisions are evaluated in the context of the trust‟s portfolio as a whole + as part of an
            overall investment strategy w/ risk + return objectives reasonably suited to the trust
   See my notes 2 pg. 83-4, 85 for problems

    2. DELEGATION – Trustees can‟t do everything – so some duties must be delegated to accountants, lawyers, + financial advisors

   A trustee may delegate investment + management functions as prudent under the circumstances (§ 16052)
        o   Trustee shall exercise prudence in the following:
                    (1) Selecting an agent;
                    (2) Establishing the scope + terms of the delegation, consistent w/ trust‟s purposes + terms;
                    (3) Periodically reviewing the agent‟s overall performance + compliance w/ delegation terms
                             Trustee who complies w/ the requirements above is not liable to beneficiaries or to the trust for the
                              agent‟s decisions/axns
        o   Agent has duty to exercise reasonable care in complying w/ the terms of the delegation

   A trustee may NOT delegate matters concerning the beneficiaries
        o   Ie. How much $ do beneficiaries need? Is it necessary to invade the principal to pay beneficiaries?
        o   Prof: Thus, trustee can delegate stuff involving trust corpus, but not stuff involving beneficiaries

   See my notes 2 pg. 86 for problems

    3. DONOR‟S DIRECTIONS – Settlors can give specific directions abt proper investments

    4. PRINCIPAL + INCOME – Fiduciary must decide how to credit or charge receipts + disbursements among various beneficiaries;
    when trust/estate terminates, fiduciary must divide assets btwn income + principal beneficiaries  distinguishing btwn such
    beneficiaries can be difficult

   Income beneficiaries get trust income, principal beneficiaries get trust principal at income beneficiaries’ death
        o  So principal beneficiary wants maximum amount left at the end (maximize capital), while income beneficiary wants
           maximum income now  inherent structural problem

   Distinguishing btwn income + principal:

        o   (1) Look to the trust instrument – trust can define what income + principal will be
                    If unitrust, it gives a specific % to income beneficiary  eliminates the income/principal conflict

        o   (2) Then look to fallback provisions in CPC  CA has adopted the Uniform Principal + Income Allocation Act
                   In general, “income” means money or property that a fiduciary receives as a current return from a
                    principal asset (§ 16324)
                             This includes a portion of receipts from a sale, exchange, or liquidation of a principal asset
              Income                                        Principal                                                 BOTH
  Includes income, dividend, or an           Includes the balance of the payment not
   equivalent payment (§ 16361)              characterized as income, dividend, or an
                                                  equivalent payment (§ 16361)

Rental income – income b/c it is          Refundable rental deposit – principal b/c it       Royalties from drilling an oil well
current return from a principle asset     is to restore the principal (property) to the        Ex. “I don‟t want to lease you the land, I just
(§ 16356)                                 way that it was (§ 16356)                             want a % of the profits from the oil you take out”
   Ex. trust owns apt building +           Includes a security deposit or deposit that       90% is allocated to principal – b/c considered a
    ppl pay rent on the apt                   is to be applied as rent for future periods       return on selling the underlying asset
   Includes amount received for            Is not available for distribution to              10% is allocated to income
    cancellation or renewal of a              beneficiary until trustee‟s contractual
    lease                                     obligations have been fulfilled re that        Logging timber in a forest
                                              amount                                           Trees are the property
Returns on rental of an oil well                                                               Trees replenish themselves after cutting at a
   Ex. “I‟ll lease you my property       Property insurance – principal b/c the                certain rate
    in Santa Barbara + you can drill      purpose of it is to replace the principal in the     To the extent that logging diminishes this steady
    oil on it if you want”                event of destruction                                  rate of the forest, profits are paid to principal b/c
   Lease is a rental + allocated to                                                            the forest itself is diminishing
    income b/c this is just renting a     Stock split – principal b/c you aren‟t getting       To the extent that logging only takes excess
    chance to drill for oil, not giving   a return on your assets – it is the same              lumber not necessary to keep forest replenishing
    actual oil                            amount as you began with                              at a steady rate, profits are paid to income

                           If you can’t tell whether it should go to income or principal  split it 10-90 – 10% to income, 90% to
                            principal (§ 16361)
                                     If no part of the payment is characterized as interest, a dividend, or an equivalent payment, 10% of the
                                      part that is required to be made during the accounting period goes to income, rest to principal
                                     If no amount is required to be made during the accounting period, all goes to principal

              a. TRUSTEE‟S ADJUSTMENT POWER – Trustee can sometimes adjust payments btwn principal + income beneficiaries

        In allocating receipts + disbursements btwn principal + income:
             o   (1) A fiduciary must administer a trust or D‟s estate: (§ 16335)
                          (i) In accordance w/ the trust/will, even if it conflicts w/ CPC here;
                          (ii) Otherwise, in accordance w/ CPC if trust/will doesn‟t say otherwise or give fiduciary discretion;
                          (iii) Otherwise, impartially  UNLESS trust/will says fiduciary shall/may favor 1 of the beneficiaries
                                    The exercise of discretion under this chapter is presumed to be fair + reasonable
             o   (2) A fiduciary MAY administer a trust or D‟s estate by exercise of a discretionary power given to fiduciary by the trust/will,
                 even if it produces a result that conflicts w/ CPC here

        Trustee has discretn to make adjustments btwn principal + income as trustee deems necessary, so long as: (§ 16336(a))
             o   (1) Trustee invests + manages trust assets under the prudent investor rule; AND
             o   (2) Trust describes the amount that shall or may be distributed to a beneficiary by referring to a trust‟s income; AND
             o   (3) Trustee is unable to comply w/ requirement of impartiality (in § 16335 above)

        Trustee may NOT make an adjustment btwn principal + income under certain circumstances (see § 16336(b) –
         IMPOSSIBLE to memorize!)

        Trustee has discretion to convert a traditional trust (which allocates income to income beneficiary) to a unitrust, unless
         expressly prohibited by the governing instrument (§ 16336.4)
             o   Unitrust views assets a whole
                         No distinction btwn income + principal
                         Charitable unitrust requires a beneficiary annually receive a fixed % of fair market value of the trust‟s assets,
                          valued annually

        In deciding whether + to what extent to make an adjustment, trustee may consider: (§ 16336(g))
             o   (1) Trust‟s nature, purpose, + duration;
             o   (2) Settlor‟s intent;
             o   (3) Identity + circumstances of beneficiaries;
             o   (4) Needs for liquidity, regularity of income, + preservation + appreciation of capital;
             o   (5) Assets held in the trust + what they consist of;
             o   (6) Whether trust gives trustee power to invade principal or accumulate income;
             o   (7) The actual + anticipated effect of economic conditions on principal + income + effects;
             o   (8) The anticipated tax consequences of an adjustment

        See my notes 2 pg. 89 for problem

   Personal reps (executors) have duty to preserve capital so that it can be distributed
        o  They have authority to continue a business for the purpose of liquidating it, but quick liquidation may not be the best way to
           preserve value
        o  Prof: So ask  will it be more valuable to keep the business running? Or will it maximize the value to sell it quickly?

    1. DUTY TO INSPECT + Exercise reasonable judgment re results of investigation

   Trustee must know what is in the trust or estate – positive duty to inspect + find out the facts
        o   Estate of Baldwin – T had ex-wife + 3 kids, then remarried; T owned general store, died + Wife 2 took over; Bank as
            trustee told W2 to run the store for the benefit of the estate (of which Wife 1 was a beneficiary); inherent conflict of interest
            b/c if store becomes devalued, W2 can buy out the other beneficiaries (children from 1st marriage) at a lower price  W2
            had control over store‟s value b/c value + profit depended on her relationship w/ the customers (small general store); kids
            sue Bank for violating duties as trustee; Court said Bank failed to fulfill its duty to inspect + failed to exercise reasonable
            judgment – Bank didn‟t evaluate the facts, so Bank was held liable for the losses that the trust incurred
                     Prof: Bank majorly screwed up here  ordinarily, Banks don‟t agree to become trustee unless all trust property is
                      held in their own mutual funds or brokerage accts so they can make $ off of it  they don‟t become trustees of
                      mom + pop stores!
                               Instead, Bank should have hired an agent to do inspections – had bank done even just this, they would
                                have gotten off the hook – but they did absolutely nothing!
   See my notes 2 pg. 90 for problem

    2. DUTY TO ACCOUNT – Trustee has a duty to report to beneficiaries

   Trustee must make an accounting showing what is allocated to principal + income, + how expenses are being paid
        o   Jacob v. Davis – Bill was sole beneficiary of 2 trusts set up by his dad; Bill asks Davis (trustee) for an accounting – wants to
            find out how expenses were being paid (via income or principal); Trustee refused unless income beneficiary authorized it;
            income beneficiary (Bill‟s step-mother) refused to authorize it; Bill sues Davis (trustee) + Davis‟ law firm alleging violation
            of trustee‟s duties; Court held trustee had a duty to account to beneficiaries re how expenses were being paid

   Trustee must account to each income + principal beneficiary: (§ 16062(a)):
        o   (1) Annually;
        o   (2) At termination of trust;
        o   (3) Upon change of trustee; AND
        o   (4) On reasonable request from beneficiary (§ 16061)

   Waiver of accounting
       o   Any limitation or waiver in the trust instrument of the duty to account is against public policy + void (§ 16062(e))
       o   But beneficiaries can waive their own accounting – might do so to save $
                   Can’t waive an accounting for another beneficiary

   Accounting must contain the following information (pertinent to last complete fiscal year of trust or since last
    account): (§ 16063)
        o   (1) A statement:
                     Of receipts + disbursements of principal + income
                     Of trust assets + liabilities
                     That recipient may petition court for review of the account + trustee‟s acts; +
                     That claims against trustee for breach of trust can only be made < 3 yrs after date beneficiary receives the acct
        o   (2) Trustee‟s compensation;
        o   (3) Agents hired by trustee, their relationship to trustee, + their compensation;
        o   Prof: As long as the amount is said in the statement, a regular brokerage statement (like one from Vanguard, etc.) will
            serve as an accounting
   See my notes 2 pg. 91 for problems

    3. LIABILITY TO 3D PARTIES – Fiduciaries may be personally liable for torts or under contract
         o   Prof: This is another reason not to be a fiduciary
         o   See my notes 2 pg. 92 for problem

       Trustees who are willfully fraudulent get charged for trust property’s appreciation damages (ie. difference in value btwn
        what paintings were sold for + their value at date of trial [after maximum appreciation])
            o    Artist‟s work often appreciates substantially after artist‟s death
       Trustees who are merely negligent get charged for trust property’s lost capital only (ie. difference in value btwn what
        paintings were sold for + their value on the later sell date)
            o    In re Estate of Rothoko – Mark Rothoko was important painter + hoarded many of his painting while alive; when R died 
                 big stash of paintings in his studio; 3 trustees (fellow painters); R‟s estranged daughter had been written out of will + sued;
                 claimed breach of trust b/c trustees quickly sold of paintings + upped commission on each one; Court found 2 trustees were
                 committed wilfull + intentional breaches of self-dealing + commission of fraud; 1 trustee was merely negligent  breach of
                 duty to investigate + monitor agents hired by trust; Court found measure of damages for willful violators was difference
                 btwn what paintings were sold for + the value they had at the date of trial, while negligent violator was difference btwn
                 what paintings were sold for + their value on the later sell date
                          Point was – trustees should have held off on immediately selling the paintings + instead have an exhibition to build
                           interest + value in order to get the best possible price
                                   Value at death of Rothko + value at date paintings were sold right away by trustees  $
                                   Value of paintings had they been sold in proper manner described above  $$
                                   Value at time of trial (appreciated even more)  $$$

            o    Note  Can‟t just get the trust property back from buyer if purchased in good faith, even if sold in bad faith

       Grounds for removing a trustee  where: (§ 15642)
           o   (1) Trustee has committed a breach of the trust;
           o   (2) Trustee is unfit to administer the trust;
           o   (3) Hostility or lack of cooperation among co-trustees impairs administration of the trust;
           o   (4) Trustee fails or declines to act;
           o   (5) Trustee‟s compensation is excessive under the circumstances

       See my notes 2 pg. 94 for problem

        1. BARS TO RELIEF – Trustee‟s can be relieved of liability by…

       (1) Exoneration clause – Trustee can be relieved of liability for breach of trust by a provision in the trust instrument (§
            o  Trustee CANNOT be relieved of liability for:
                       (1) Breach committed intentionally, w/ gross negligence, in bad faith, or w/ reckless indifference to
                        beneficiaries‟ interests; or
                                In re Williams – Institutional trustee; trust had exculpatory clause limiting liability of trustee for
                                 wrongdoing of other trustees or for mistake/errors in jgmt made by trustee in good faith; trustees allowed
                                 40% of trust property to be invested in 1 company; 2 of 3 trustees voted not to diversify the stock, then
                                 that company‟s stock tanked; Court held investing 40% of trust property in 1 stock violated the duty to
                                 diversify + the exoneration clause didn‟t save any of the trustees b/c only insulated them from mere
                                 errors in jgmt, not gross negligence
                                       o   Whole pt of trustee is to protect trust property for beneficiaries – so there is a limit on what
                                           drafter can do
                       (2) Any profit that trustee derives from breach of trust

            o    A provision releasing trustee from liability if beneficiary fails to object w/in a specified period of time is effective only if:
                         The period specified in the trust instrument for the beneficiary to object is not less than 180 days
                                  Prof: 180-day rule: Trustee can‟t get rid of all liability by having beneficiary sign letter saying: “If you do
                                   not object w/in 30-min of receiving this report, you will be held to have waived all of your rights”  can‟t
                                   do that – it must be at least 180-days
                         Example
                                  Wood v. U.S. Bank – Trustee banks had relationship w/ settlor; trust was mostly invested in Bank‟s stock;
                                   trust instrument said trustee could invest in Bank‟s stock to the extent that trustee thought was ok 
                                   attempted to override the duty to diversify; Court finds Bank violated duty to diversify; if case was in CA,
                                   ? would be whether Bank acted w/ gross negligence, in bad faith, or w/ reckless indifference to the
                                   beneficiary‟s welfare

       (2) Beneficiaries have the power to forgive  can let trustee off the hook if they want
            o  Prof: This almost exclusively happens where there is a family relationship btwn beneficiary + trustee(s)

       See my notes 2 pg. 95 for problems

       Estate Planning hypos:
            o   See my notes pg. 48-49, 67-68, 74-75, 105-106, 119-120
            o   See also my notes 2 pg. 15-16, 16-17, 96-97

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