Wills & Trusts Outline I. OVERVIEW & BACKGROUND A. Public Policy Considerations 1. Upholding testator=s intent 2. Protection against fraud 3. Efficiency and lower cost of administration B. Terminology 1. InheritanceBgift taken through intestacy 2. DeviseBgift taken through a will GENERAL INTESTACY SCHEME: Who takes your property when you die depends on.... A. NON-PROBATEBthe decedent has to take affirmative steps for the property to qualify as non-probate property 1. Start here b/c it is easier to distribute the property 2. Not automatic...Must opt into a. Examples Include... (1) Joint TenancyBUpon the death of one JT, his or her fractional share is extinguished and they shares of the surviving JT are recalculated (a) Decedent does not have the right to dispose of property held in joint tenancy b/c of right of survivorship (2) Life Insurance or other Payable-on-Death (POD) Contracts (3) Inter vivos TrustsBArtificial Legal Entity that holds and manages the property placed in the trust (4) Life Estate and Future RemaindersBWhen the party who holds legal life estate dies, the transfer is the result of the original grantor=s division of the property and therefore is outside of probate B. PROBATE 1. TESTATEBlook to the Will for distribution of the property a. A properly executed Will constitutes an expression of a person=s intent as to who should take his or her property when he or she dies 2. CALIFORNIA DEFAULT SCHEME (Sec. 6400): If a decedent fails to dispose of all of his or her property through a non-probate instrument or validly executed Will, the property passes pursuant to California=s hierarchy of inheritance; which is... a. SURVIVING SPOUSE (1) Community Property (Sec 6401a)Bsurviving spouse will take all of decedent=s half (a) Community property is the earnings acquired by either spouse during the marriage in a community property state i) EXCEPT: property acquired by gift, devise, inheritance or property acquired before or after the marriage (b) Also includes quasi-community property which is all earnings acquired by either spouse in a non-community property state i) Will NOT transmutate until divorce or death of the spouse that earned the property a) HYPO: Geri earned $1000 in MO then moved to CA and earned another $1000. W dies leaving all his property to Pepperdine. Pepperdine only takes $500. Money earned in MO does not become quasi-community b/c Geri did not die. ii) Treat the same as community property (2) Separate Property (Sec 6401c): 1
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Wills & Trusts Outline Spouse takes... i) 100% if there are no surviving Issue, Parents or Issue of Parent ii) 50% if one Child or no Issue, but Parent or Issue of Parent a) Child is the first generation of decedents and counts if they are alive or survived by issue III. count the number of children and NOT issue IV. Issue may come from another spouse/partner a) Issue includes all possible descendants i) 33% if more thank one child (a) Will also apply to registered domestic partners as of January 2005 i) Will NOT be retroactive a. SURVIVING ISSUE (1) Surviving Issue will take equally (APPLY RECAPTURE) b. PARENTS--Will take equally c. ISSUE OF PARENTS--Will take equally d. GRANDPARENTS--Will take equally e. ISSUE OF GRANDPARENTS--Will take equally f. ISSUE OF PREDECEASED SPOUSE--Will take equally g. NEXT OF KIN--Will take by degree of relationship (1) THREE different approaches h. PARENTS OR ISSUE OF PARENTS OF PREDECEASED SPOUSE--Will take equally i. ESCHEAT TO THE STATE Doctrines that overlap with the default intestacy scheme include.... 1. MARRIAGE REQUIREMENT a. To qualify as a spouse, the couple must have a legal ceremony, or register as domestic partners (1) EXCEPT in the case of putative spouses, which declares if either party has a reasonable good faith belief that the marriage is valid, the parties qualify as putative spouses and are treated as spouses for intestate schemes b. CohabitantsBnon-married couples who live together generally do not qualify as spouses and have no inheritance rights (1) Some states apply common law marriage in which a couple is treated as legally married if they have lived together for the requisite period of time (a) DOES NOT INCLUDE CALIFORNIA c. Separation of Marriage (1) With community propertyBthe marriage ends when the couple separates and communicates that there is no intent to get back together (2) General Intestate/Testate SchemesBcouple will still be treated as legally married for purposes of intestacy/testate schemes until the court enters a final divorce decree. (a) NOT enough that the couple is separated and/or filed for divorce 2. SURVIVAL REQUIREMENTBin order to take under intestacy scheme, beneficiary must actually AND legally survive the decedent a. If a spouse does not actually or legally survive the other spouse, they are treated as if they are predeceased (1) BUT...look at each spouse separately; i.e.Bif one spouse is treated as predeceased, that does not mean the other spouse is automatically legally surviving. 2 (a)
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Wills & Trusts Outline Two California Standards for Legal Survival (1) Probate Intestate: beneficiary must survive for at least 120 hours (5 days) by clear and convincing evidence (2) Non-Probate & Probate Testate: beneficiary need only survive for a millisecond by clear and convincing evidence UNLESS written instrument provides for a different standard (a) Most instruments include a boilerplate 6 months in order to avoid double probate (b) In Joint Tenancy if it cannot be shown that one tenant actually and legally survived, severe the property and treat as tenants in common c. How is death determined? (1) Common Law-Time of death is determined upon the irreversible cessation of heart and lung activity (2) Modern TrendBWhere circulatory or respiratory functions are maintained artificially, time of death is determined upon the irreversible cessation of total brain activity (a) Definition changed b/c of technology=s ability to sustain someone on life support for longer than the statutory requirement (5 days) RECAPTURE DOCTRINEBif there is a predeceased spouse, upon the second spouse dying intestate, recapture all of the qualifying property 2 nd spouse received by virture of the 1st spouse=s death in order to assure the community wealth does not end up solely on one side of the family a. ONLY apply if there is no surviving spouse or issue b. Property to be recaptured includes... (1) RealBrecapture all real property if the first spouse died within 15 years (2) PersonalBrecapture personal property if the first spouse dies within 5 years, aggregate of property is $10,000 or more AND there is a written record of ownership for each piece of property c. Once property is recaptured it is redistributed in the hierarchy of... (1) Issue of Predeceased Spouse (a) could be from a previous relationship (2) Parents of Predeceased Spouse (3) Issue of Parents of Predeceased Spouse (4) And if nothing else...DO NOT APPLY DOCTRINE d. Does not matter whether predecease spouse died testate or intestate TAKING AEQUALLY@ a. Three Issues...... (1) Where does the first division take place? (a) First Tier Always (b) First Tier with Live Taker (2) How many shares should the property be divided into at each tier? (a) One share for each party alive or dead but survived by issue (3) How do we treat dropping Shares? (a) Blood-LineBdivide one share by how many surviving issue i) takers of the same degree of relationship may end up with varying amounts of property ii) issue take Aby representation@ (b) Pooling ApproachBadd together all dropping shares and divide equally among the eligible takers at the next generation 3 b.
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Wills & Trusts Outline b. Three Possible Ways of Taking Equally...... (1) Per Stirpes: first division is made at the first tier always with dropping shares distributed by blood-line. (2) Per Capita (with Representation): first division is made at the first tier with live taker with dropping shares distributed by blood-line. (a) DEFAULT for California (3) Per Capita at Each Generation: first division is made at the first tier with live taker with the dropping shares distributed by pooling c. HYPO: W leaves property Ato issue by representation@ (1) In California....assumed to be per stirpes (a) in other states, may be language for per capita QUALIFYING AS A CHILD a. Half-BloodsBchildren from a previous/subsequent marriage that only share one common parent (1) Common law: half-bloods were treated differently, and wholly excluded from the intestate scheme (2) Modern Trend: half-bloods ARE NOT treated different and would have the same rights as whole-bloods in the intestate scheme b. Posthumous ChildBas long as the parents are married, if the child is born within a certain number of days after the death of the natural father, it is presumed the child=s father is the mother=s husband and paternity does not need to be proved (1) When will the child have the benefit of the presumption? (a) Common LawBpaternity is presumed if the child is born within 280 days (b) Modern TrendBpaternity is presumed if the child is born within 300 days (2) If parents ARE NOT married, the posthumous child may still be able to take, but must first prove paternity (a) do not get the benefit of the assumption c. Child CONCEIVED after death of the fatherBthe courts have ruled that a male does have the right to devise his sperm deposited in a sperm bank, but is the post-conceived child be treated the same as the posthumous child? (1) Uniform LawBNO, unless expressly provided for in a written instrument, the posthumously conceived child IS NOT a child of the decedent (2) California LawBYES, as long as the child was conceived within one year of the father=s death they WILL be considered the child of the father and will have the right to inherit FROM and THROUGH the father (a) BUT...still subjected to the rule of convenience which states the moment one member of the class is entitled to take the property, the class closes and any later parties are not eligible to take. d. Managing a Minor=s PropertyBif a child is not of legal age, they do not have the capacity to manage property (1) Three possible arrangements for managing a child=s property (a) Guardianship (CL DEFAULT)Bduties are to preserve the property and deliver it to the child upon reaching the age of majority. i) Guardian DOES NOT take legal title and can only use the income earned from the property ii) Strictly regulated by the court, who must approve ALL actions taken by the guardian a) Because of high cost of administration courts may 4
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Wills & Trusts Outline modernly look to a Conservatorship which is a slight modification of guardianship V. Still appointed by Ct, but has more flexibility and power b/c the Ct requires only an annual accounting of the property (a) CustodianshipBestablished by the Uniform Gifts to Minors Act. i) More powerful and flexible than a guardian because the custodian can use the property for the benefit of the child, and only have to do an accounting upon the child reaching the age of majority. (b) TrustBtrustee takes all the powers accorded to a reasonable person i) The trustee takes LEGAL TITLE to the property which does not have to be handed over to the child upon reaching the age of majority ii) Trustee only has to provide an accounting to the beneficiaries a) Court DOES NOT get involved VI. lowest cost of administration (1) DEFAULT is a guardianship...any other arrangement must be opted into by the decedent though a separate written instrument QUALIFYING AS A CHILD/ISSUE THROUGH ADOPTION a. Nothing more than a series of Parent-Child relationships that can be established in two ways (1) NaturallyBnatural father gives sperm and natural mother gives egg and birth to the child (a) Determining a natural mother is not as simple today b/c the same person giving the egg may not be the birth mom. (2) LegallyBrelationship is established through adoption or step-parent b. Overall, there are EIGHT different relationship determinations, but using Aarrows@ to signify inheritance rights, a child may never have more than two arrows going up to parents, but may have UNLIMITED arrows going down from the parents (1) Natural ParentsBMarried (a) If the women is married at the time she gives birth, there is a STRONG rebuttable presumption that her husband is the father of the baby. (b) Child=s Rights: can inherit FROM and THROUGH the parents (c) Parent=s Rights: can inherit FROM and THROUGH the child. (2) Natural ParentsBNot Married (a) Because the parents are not married, the male or the child must prove paternity i) If proved during life, only need to show paternity by preponderance of the evidence ii) If not proved until AFTER like, paternity needs to be shown by clear and convincing evidence a) creates an incentive to bring all claims intervivos (b) Child=s Rights: can inherit FROM and THROUGH the mother and the father once paternity is proven (c) Mother=s Rights: can inherit FROM AND THROUGH the child (d) Father=s Rights: cannot inherit through the child, and in order to inherit FROM the child must also prove... i) NF or relative of NF acknowledged the child a) If a relative acknowledges the child, but the father does 5
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Wills & Trusts Outline not until the child=s death, the father may still inherit but may hold the property in a constructive trust for the benefit of the relative as a principle of equity ii) NF or relative of NF contributed to the support or care of the child Classic AdoptionBthe moment the adoption occurs, it creates a parent-child relationship between the child and the adoptive parents and establishes inheritance rights as to the child and the AP. The rights of the NP are COMPLETELY SEVERED. (a) Rights of Natural ParentsBNONE i) rights of relatives of the natural parents are also severed (b) Rights of Adoptive ParentsBCan inherit FROM and THROUGH the child (c) Rights of ChildBcan inherit FROM and THROUGH adoptive parents i) Most states declare the child=s inheritance rights COMPLETELY SEVERED from the natural parents In California even after an adoption, child may be able to retain right to inherit FROM AND THROUGH natural parent through TWO EXCEPTIONS: i) Post-Death Adoption--Child must show they lived with the natural parent they are trying to inherit from and through, and adoption took place post death of either or both natural parents ii) Step Parent AdoptionBin order to inherit from and through the natural parent affected by the adoption, the child must show they lived with the natural parent they are trying to inherit from and there was an adoption by a step parent a) When does the legislation/court want to deny the NF the relationship? VII. Artificial Donor...BUT ONLY in medical situations. If there is no doctor involved, the NF is still responsible for the child VIII. Rape a) A person becomes a step-parent by marrying a natural parent b) Once the marriage is complete, the step-parent legally becomes a natural parent and the natural parent of the same gender loses their rights IX. DOMESTIC PARTNERSBneed to co-adopt the child at the same time b/c adoption will sever the NP rights (same gender), but the NP can come back as an AP. Non-Step Parent AdoptionBif the NP does not marry the AP, all rights between the child and the NP of the same gender are completely severed (a) Does not fit into the post-death or step parent adoption exceptions. (b) Punishing the child for the NP living out of wedlock. Attempted Adoption (Sec. 6454)BChild will be able to inherit FROM and THROUGH the attempted adoptive parents (AAP) if relationship with the AAP began during the age of minority and continued throughout the joint lifetimes and there is clear and convincing evidence the AAP would have adopted but for a legal barrier 6
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Wills & Trusts Outline Legal barrier usually involves one NP refusing to give consent i) BUT...once the child reaches the age of majority, they no long need the NP=s consent and they can go through with the adoption a) If the don=t, the child WILL NOT get inheritance rights from the APP (b) Rights of the AAPBNONE i) The APP cannot inherit from or through the child because a parent-child relationship HAS NOT been established (c) Rights of the NPBCan inherit FROM and THROUGH the child i) nothing has taken place that would sever the relationship with the child and the NP (3) Equitable AdoptionB (a) THREE VIEWS i) Common LawBbased in contract law. The party arguing equitable adoption must show: 1)Agreement between the NP and AP; 2)Full performance by NP in relinquishing custody; 3)Full performance by the child in moving in with AP and behaving appropriately; 4)Partial performance by the AP in taking child in and treated them as their own; 5) AP died intestate. X. CALIFORNIA APPROACH XI. Agreement does not have to be in writing. Some Cts also says the agreement can be implied. XII. EAP only has partial performance b/c they often forget or don=t follow through with the necessary paperwork i) Equity TrendBtreat as a cause in equity and don=t sweat the details a) Ct will find an equitable adoption if the facts lead them to believe there should be an adoption XIII. AEquity regards as done that which ought to be done@ i) Modern ViewBan equitable adoption is found where the child has been led by the AP to believe they were validly adopted, and the AP died intestate a) Really only an academic view...has not been accepted by many of the states XIV. still make a good faith argument (a) DOES NOT establish a full parent-child relationship i) Child can only inherit from the equitable AP but from and through the NPs a) i.e.Bcannot inherit from the EAP=s relatives unless provided for in a Will b) Child will not get the actual property, but only damages that are equal to inheritance rights ii) Equitable Adoptive Parent has NO RIGHTS to inherit from or through the child iii) Nps can still inherit FROM and THROUGH the child NEGATIVE DISINHERITANCEBHow does a decedent effectively disinheritance an heir-at-law? a. Common LawBa person cannot negatively disinherit an heir-at-law. To prevent a person 7 (a)
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Wills & Trusts Outline from taking any property, the decedent must affirmatively disinherit by giving away all of their property to other people in a testamentary instrument so that nothing falls to intestacy (1) California follows the common law approach b. Modern TrendBA decedent can disinherit an heir by properly executing a will that expresses such an intent, even if some or all of the decedent=s property pass through intestacy and the heir otherwise would have qualified to take some of the property (1) Heir is treated as if he or she predeceased the decedent (a) issue will take by representation unless the instrument expressly disinherits them as well (2) i.e. ANone of my property will go to Paul b/c of his behavior@ SHARES OF ANCESTORSBHow to distribute property to the Next-of-Kin a. Parentelic ApproachBThis approach goes out by collateral lines until there is a line in which there is a live taker. Property is then distributed to the decedent=s relatives in that parentelic line. (In CA...by per capita) (1) focuses on whether the relative falls under the same or close to the same head of the decedent=s parentelic line. (a) i.e.Bparents are the head of the all their issue (parentelic line) b. Degree of RelationshipBw/o paying attention to parentelic lines, count the number of degrees between the decedent and the relative, and those relatives of the closest (lowest) degree take to the exclusion of more remote degrees (1) i.e.Bone degree between parent and child, two degrees between grandparent and child (a) HINT...when counting to the right, count only the males (fathers) and when counting to the left, count only the females (mothers) c. Degree of Relationship with a Parentelic Tie-BreakerBuse the degree of relationship approach and if needed, look to the closest parentelic line for a tie-breaker (1) CALIFORNIA APPROACH ADVANCEMENT a. Addresses the issue of whether inter vivos gifts a decedent made to an heir should count against the heir=s shares of the decedent=s probate estate (1) Common LawBir-rebuttable presumption that an intestate share will be diminished by all intervivos gifts (a) applied strictly would need to include all b-day and Christmas gifts (2) Modern Trend (CALFORNIA)BRebuttable presumption that intervivos gifts DO NOT count against any intestacy share, unless a writing indicates that the donor intended the gift to constitute an advancement (a) In order for an intervivos gift to count as an advancement... i) the DONOR must contemporaneously create a writing specifying the advancement at the time the gift is given; OR a) does not have to qualify as a valid Will, only needs to show decedent=s intent XV. UNLESS...the writing was made AFTER the gift was made, in which the donor=s writing must qualify as a valid will i) the DONEE must have created a writing specifying the advancement (a) Advancement WILL NOT be applied against the issue of the donee unless specified in the writing 8
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Wills & Trusts Outline a) does not have to be contemporaneous with the gift a. In order to apply the advancement doctrine, place the entire probate estate AND ALL advancements into a Hotchpot. Then divide the total amount in the hotchpot among the eligible takers. If the share is larger then the advancement, heir takes the difference btw the share and their advancement (1) If the share is smaller than the advancement, the donee DOES NOT have to make up the difference, but they will not participate in the distribution of the estate. 1. TRANSFERS OF AN EXPECTANCY a. An expectancy is an expectation to inherit something when a person dies. Assuming the person will qualify as an heir-at-law, they are currently an heir apparent. (1) Expectancy IS NOT a property interest (a) However, if an expectancy is sold or transferred, and the agreement seems fair and reasonable under the circumstance, a court of equity may enforce the agreement i) HYPO: W goes to Vegas and loses all of his money, but sells his expectancy in his mother=s estate (worth $25,000) for $2,000 a) this may not be a fair and reasonable deal BARS TO SUCCESSION 1. HOMICIDEBLook to State statutes to determine how homicide is treated in the intestacy scheme a. If there is no statute...there are THREE basic approaches when an heir intentionally and feloniously kills a decedent: (1) Heir is still allowed to take (2) Heir is NOT allowed to take (a) do not want the heir to profit from their illegal act i) treat as if the heir predeceased the decedent (3) Heir takes Legal Title in a constructive trust for the benefit of other heirs who take equitable title b. IN CALIFORNIA (Sec. 250)Ba person who feloniously and intentionally kills the decedent IS NOT entitled to any property (1) Applies to Non-Probate, Testate and Intestate (a) Split in jurisdictions over Joint Tenacy i) MajorityBkiller has no right of survivorship so property transmutates into Tenants in Common and decedent=s 2 passes through intestacy ii) MinorityBall of the joint tenancy is passed to the decedent b/c the killer is treated as predeceased. (2) Killer is treated as if they disclaimed the property (predeceased) (3) What is the standards of proof required to find felonious and intentional killing? (a) If heir is CONVICTED in criminal court, the statute will apply and the heir would be barred from taking any property (b) If the heir is ACQUITTED in criminal court, but CONVICTED in civil court, the statute will apply and the heir would be barred from taking any property i) OJ Simpson Case (4) Statute DOES NOT affect the possibility of the killer=s issue taking (a) Issue may be able to take under the anti-lapse doctrine as long as there is not an expressed instrument with contrary intent i) Written instrument may however have an expressed gift over 9
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Wills & Trusts Outline clause allowing the issue to take a) i.e. ATo A and in case A predeceases me, to A=s issue.@ 2. ELDER ABUSE a. Under California Statute (sec. 259), a person will be deemed predeceased and not take property if ALL of the following requirements are met: (1) it proven by clear and convincing evidence that the person is liable of physical abuse, neglect, or fiduciary abuse (2) person was found to have acted in bad faith (3) person was reckless, oppressive, fraudulent, or malicious in committing these acts against the decedent (4) decedent has been found to have been substantially unable to manage finances or resist fraud/undue influence b. Applies to probate AND non-probate property DISCLAIMER a. A disclaimer is a refusal to accept any type of a testamentary gift (probate and nonprobate) (1) In other to disclaim whole or part of a gift, Person disclaiming must do so in writing within nine months of the decedent=s death (a) If the disclaim takes place AFTER the nine months, the heir benefitting from the disclaimed property would have to pay gift taxes (2) Person disclaiming is treated as if they predeceased the decedent (a) If the decedent died with a Will, the gift would lapse and the court would look to see if the anti-lapse doctrine applied (b) Any disclaimed property will relate back to the date of death of the decedent (3) Creditors of a disclaiming party CANNOT reached the disclaimed property (a) EXCEPT in the case of a public creditor (gov=t or medicare) i) A public creditor cannot invalidate the disclaimer, but can sue the parties that benefitted by the disclaimer under constructive trust theory b. IN CALIFORNIA (sec. 275 & 282)-(1) For Per Capita Reasons (b1)BAthe [disclaiming] beneficiary is not treated as having predeceased the decedent for the purpose of determining the generation at which the division of the estate is to be made.@ (a) i.e.Btreat disclaiming heir as alive if it would make a difference as to where the first division would be made, but dead as to the actual number of shares to be divided. (2) For Advancement Purposes (b2)BAthe beneficiary of a disclaimed interest is not treated as having predeceased for the purpose of applying advancements.@ (a) i.e.Btreat as alive for purposes of creating a Hotchpot, but dead as to the distribution of the shares. c. Why would a person want to disclaim? (1) Post-mortem estate planningBtrying to tinker with who gets what after the decedent=s death (a) Hypo: If dad died intestate survived by mom and three sons, mom would normally only take 1/3 of the estate. If all three sons disclaim, mom will get the entire estate 10
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Wills & Trusts Outline (b) Hypo: If mom wanted to give each son $40,000, the sons would have to pay a tax on that gift. If mom disclaimed her portion of dad=s $120,000 estate, each son would get $40,000 and WOULD NOT have to pay a gift tax on the disclaimed property
XVI.
WILLS
A. Background 1. A Will is an ambulatory document meaning it is executed while alive, but DOES NOT become affective until death a. A Will is a traditional instrument used to opt out of intestacy 2. Functions of a Will relating to the PP of testator=s intent, efficiency and deterring fraud a. Channeling FunctionBwant to bring people to attorneys to make sure that the distribution of property is done correctly (1) If a Testamentary Instrument is NOT PROPERLY DRAFTED, to whom does the drafter owe a fiduciary duty? (a) Common LawBTestator only i) testator=s estate could sue on behalf of the testator (b) Middle Ground (Compromise)BAny 3rd party what is mentioned IN the testamentary instrument (c) Modern TrendBAny Intended 3rd Party Beneficiary i) CALIFORNIA APPROACH b. Protective FunctionBprotect against fraud c. Ritualistic FunctionBhelps to bring home the significance and finality of what the testator is doing d. Evidentiary Function 3. Specific Names of Types of Wills a. Mirrored WillsBWills that are virtually identical, usually between spouses (1) i.e.BAeverything to my surviving spouse, and if not then to the kids equally@ b. Conditional WillBwill is only valid if condition precedent occurs (1) How do we know if it is truly conditional or merely the reason why testator finally wrote a will? (a) Where is it a Holographic WillBpresume it is only an explanation for why the will was written i) HIGH threshold for actually finding a condition precedent (b) Where it is an Attested WillBstronger argument for a conditional will i) presumption drafter (lawyer) will carefully write the phrasing to reflect testator=s intent c. CodicilBacts as a supplement to a validly executed underlying will (1) MUST MEET ALL THE REQUIREMENTS OF A WILL (a) General RuleBhandwritten interlineations DO NOT qualify as valid holographic codicils i) UNLESS they are written on a holographic will in which the interlineations will ALWAYS qualify as valid holographic codicils (2) Must first have a valid underlying Will 4. Types of gifts in a Will include... a. SpecificBonly one item in the world matches the devisee (1) Look for Amy.....@ (a) Some Courts will say a gift is specific even if general language is used if the testator owned an item at the time of death that matches the 11
Wills & Trusts Outline description perfectly (2) If a specific gift fails, it will go to residual and if none, then to intestacy b. GeneralBgift of general monetary value that typically is measured with dollars (1) Look for Aa....:@ (a) If there is not a matching item in the testator=s estate, the personal representative has a legal duty to buy one in the market place i) money to buy item will come out of residuary first and then intestacy (2) If a general gift fails, it will go to residual and if none, then to intestacy c. DemonstrativeBgeneral gift given from a specific source (1) AI give W $2,000 out of my BoA savings account@ d. ResidualBgives away everything that is not specifically or generally given away (1) AI give the rest, residual and remainder of my estate@ (2) Safety net b/c it will catch any failed specific or general gifts (3) Split in jurisdictions over what happens when a residuary gift fails? (a) Common LawBFalls to intestacy (b) ModernlyBGift is redistributed among other residuary takers i) CA APPROACH!! In order to effectively challenge a will, a party MUST HAVE STANDING a. In order to challenge a will, a party must show that if their claim is successful, they will financially benefit either under the will or intestate scheme. Acts REQUIRING Testamentary Capacity a. Execution of a Will/Codicil b. Revocation of a Will c. Revival of a Will BEFORE a will can be probated, the estate must first pay creditors TESTAMENTARY CAPACITY AT THE TIME OF EXECUTION OF THE WILL a. Testamentary Capacity is... (1) LOWER than contract capacity b/c consequences of a bad decision are greater with respects to an intervivos action compared to a testamentary action which will only take affect after death (2) HIGHER than marriage capacity b/c marriage is a fundamental right to which the states must take a Ahands-off@ approach b. In order to have valid testamentary capacity, the testator MUST: (1) be at least 18 year old; and (2) have the ABILITY to know... (a) The nature and extent of their property (b) The natural objects of their bounty i) i.e.Bwho their heirs are (c) Nature of testamentary act (d) How these elements all relate to form an orderly disposition plan c. STRONG presumption that everyone has testamentary capacity (1) the appointment of a conservator in and of itself IS NOT enough to show a testator lacks testamentary capacity d. Testator may however have a defect in capacity. Although the court WILL NOT as a general rule correct a mere mistake, to the extent the will is affected by a defect in capacity, the court will strike the defect part and try to give affect to the remaining parts. Types of defects include: 12
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REQUIREMENTS FOR A VALID WILL
Wills & Trusts Outline (1) INSANE DELUSIONBa false sense of reality to which the testator adheres to against all contrary evidence and reason (a) Courts are split on the actual standard of insane delusion i) MajorityBdelusion is insane if a rational person in the testator=s situation COULD NOT have drawn the conclusion reached by the testator a) average reasonable person approach ii) MinorityBif there is ANY factual basis for the testator=s conclusion, the delusion is NOT insane a) any factual basis approach XVII. broader doctrine a) CALIFORNIA APPROACH (a) The insane delusion must also CAUSE the defect in the written instrument i) Courts are split on the actual standard of causation a) Minority--BUT FOR the insane delusion the will would not have contained the defect XVIII. Very strict in order to protect testator=s intent XIX. CALIFORNIA APPROACH a) Majority--the insane delusion MIGHT HAVE caused the defect in the will XX. looser, broader standard (a) Where there has been some life-altering event, the courts and jury are much more likely to find an insane delusion i) i.e.Bsurgery for cancer (b) In order to distinguish a MISTAKE from a DELUSION, the court often look to whether the belief is susceptible to correction. i) If yes....MISTAKE a) easiest proof is to have the testator agree with the correction prior to death ii) If no....DELUSION a) the party arguing insane delusion DOES NOT have to prove that someone tried to correct the faulty belief. (c) Parties usually have a HIGH probability of winning at the trial court level, but are often overturned at the appellate level. But because of the probability of winning the party will file a strike suit that is simply a threat to go to trial in order to try and settle for more money. i) Party can usually get 10-20% more out of the estate a) pay-off to not go through with trial UNDUE INFLUENCEB (a) Two Different views on defining undue influence i) CoercionBtemporally usually very short in time, generally only around the execution of the wull ii) Inappropriate InfluenceBtemporally longer and broader in time, provides for more of a relationship with the testator a) Allows the jury more opportunity and flexibility to substitute their own opinion (b) VERY fact sensitive, but Four different approaches to finding Undue Influence AT THE TIME THE WILL WAS EXECUTED 13
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Wills & Trusts Outline i) Three Element Approach... a) a rebuttal presumption of undue influence will arise if the part can show... XXI. A confidential relationship between the influencer and the testator XXII. Influencer was active in the procurement or execution of the will XXIII. Influencer unduly benefitted from the Will a) Split in jurisdiction over how to tell whether an influencer benefitted XXIV. ObjectivelyBlook at how much is taken in the Will vs. if the Will is declared invalid XXV. Subjective (CA APPROACH!!)Blook at how much is taken compared to the nature of the relationship a) This approach is preferred by plaintiffs b/c it is easier to prove XXVI. NO causation element a) If all elements are shown, the burden shift to the defendant to show there is no causation by a preponderance of the evidence Four Element Approach...party claiming undue influence must show a) Testator was Susceptible b) Influencer had the Motive c) Influencer had the Opportunity d) CausationBdid influencer=s action cause coercion? XXVII.Look to whether the testator explained their actions Interested DrafterBwhere an attorney or person owing a fiduciary duty takes a substantial GIFT under a client=s will, a presumption of undue influence arises a) GIFT IS VOID, but the presumption can be rebutted: XXVIII. if the interest drafter is married to (includes registered domestic partners), related by blood, or cohabitated with the client....b/c these relationships are considered Aobjects of natural bounty@ and therefore presumed not to be wrongful XXIX. If the instrument is reviewed by independent counsel who: 1) counsels the client about the nature of the intended transfer, 2) attempts to determine if there was any fraud, undue influence, etc, 3) signs an original certificate of independent review a) STATUTORY APPROACH to undue influence b) An Interested Drafter Includes... XXX. Person who drafted the instrument XXXI. Person related to or is a cohabitant with the drafter 14
i)
i)
Wills & Trusts Outline XXXII.Any partner/shareholder in a firm where the drafter works XXXIII. Person having a fiduciary relationship with the testator XXXIV. Person related by blood, marriage or employed by a person having a fiduciary relationship with the drafter i) Interested WitnessBsee below (1) FRAUDBAn intentional misrepresentation, made purposefully to influence the testator=s testamentary scheme, which causes the testator to dispose of their property in a way which they otherwise would not have. (a) RequirementsBparty claiming fraud must show the misrepresentation was made purposefully, knowingly and with the intent to change the testamentary scheme and the misrepresentation did cause a change to the testamentary scheme (b) TWO TYPES OF FRAUD i) Fraud in the InducementBintentional misrepresentation of a fact to induce the testator to execute or revoke a Will in reliance upon the misrepresentation a) temporally happens before the will is executed ii) Fraud in the ExecutionBintentional misrepresentation of the nature of the document that the testator is signing a) i.e.Bput in an extra provision knowing the testator will not notice it XXXV.fraud in only part of the will a) i.e.Btrick the testator into signing something they don=t know to be a will XXXVI. fraud in the WHOLE will (a) Possible Remedies i) Strike whole or part of the Will ii) Impose a constructive trust (1) TORTIOUS INTERFERENCE WITH EXPECTANCYBsuing a 3rd party for their wrongful conduct (a) Party claiming tortious interference needs only to show fraud or undue influence by the 3rd party (b) Some of the benefits of using this cause of action include... i) Longer statute of limitations ii) Tort based, so provides for punitive damages iii) WILL NOT affect a Will=s no-contest clause a) not challenging the Will, only suing the 3rd party To the extent that the defect doctrines may frustrate testator=s intent, there are things a testator can do to protect intent and avoid litigation over the Will (1) Write a statement explaining the reasoning behind actions (a) Be careful not to get too detailed b/c once a will is probate, it becomes a PUBLIC document. If the statement is in the will, any person cast in a disfavorable light may try to sue the estate for defamation. (b) If a statement is factually detailed, but wrong parties may try to claim complete lack of testamentary capacity, which would invalidate the Will (2) Place a no-contest clause in the Will 15
a.
Wills & Trusts Outline A no-contest clause usually statesBa beneficiary who contests the will shall take nothing, or a token amount in lieu of the provisions made in the Will i) General RuleBno-contest clauses are valid, but narrowly construed (b) IN CALIFORNIA (sec. 21300)Ba non-contest clause is generally valid UNLESS a beneficiary has reasonable cause to support a claim of forgery, revocation, or interested drafter (F.I.R.R.) i) BUT...if a claim is against someone who is active in the procurement or execution of the will the no-contest clause WILL NOT be valid as long as the party can show probable cause of ANY CLAIM a) Person Aactive in procurement@ includes: XXXVII. drafter XXXVIII. someone who gave directors to the drafter XXXIX. witness a) Persons Aactive in procurement@ do not need to take a gift under the will, but ONLY NEED TO BENEFIT under the will XL. i.e.Bnamed as administrator, personal representative, etc. XLI. if the interested drafter IS TAKING A GIFT...sue under the interested drafter provision b/c only a standard of reasonable cause whereas the standard under the no-contest clause is probable cause a) Allows for other claims not listed in the general statute including: fraud, undue influence, etc. (1) Don=t Use a Will, Place all Property in a Trust (a) Test capacity at the time the trust was created (b) Revoke the trust if a beneficiary decides to sue PROPER EXECUTION...Turns on two variables of statutory compliance and degree of judicial compliance a. STATUTORY REQUIREMENTS(Wills Act Formality) (1) ATTESTED WILLSBCA statute (sec. 6110) requires there to be a writing, signed by the testator witnessed by two or more present at the same time the testator performs who sign the will AND who witness the testator signing or acknowledging his signature or the will AND understand that the instrument they attested is the testator=s will. (a) Requirements for an attested will help to serve the overall functions of a will i) WritingBbest serves the evidentiary function ii) SignedBbest serves the ritualistic function iii) WitnessedBbest serves the protective function a) ideally both witnesses are disinterested and can look for signs of coercion and undue influence (b) ASSUMPTION that a AWill@ is an attested will (c) Much of the litigation deals with whether the witnesses and testator were in each other=s Apresence@ during signing. 16 (a)
1.
Wills & Trusts Outline Various definitions of APresence@ a) Line of sight approach: witness must have actually seen or had the opportunity to see the testator signing had they looked at the proper moment XLII. Must see the pen and the signature a) Conscious Presence Approach: testator is present if through seeing, hearing or by being generally conscious of events they understand that the witness is in the act of signing b) CA ApproachBTestator is in the presence of the witness if from the totality of the circumstances the witnesses comprehend that the testator is signing the will XLIII. slight modification of conscious presence XLIV. Witnesses need to be in the testator=s presence during the ENTIRE signature or acknowledgment, but the testator DOES NOT have to be in the presence of the witnesses while they are attesting i) Telephonic Presence IS NOT SUFFICIENT!! a) witnesses/testator must be PHYSICALLY present b) May be argued under substantial compliance, harmless error doctrine. ii) If there is a fact pattern where someone leaves the room...THERE IS AN EXECUTION PROBLEM!! Is the order of signing significant? i) Common LawBYES...testator must sign/acknowledge COMPLETELY in the presence of the two witnesses before the witnesses can attest the will ii) Modern TrendBorder of signing is not as important AS LONG AS everyone is in the same room and no one leaves What constitutes a valid signature? i) Common LawBany mark the testator intends to qualify as their signature will be a valid signature a) Will apply 99% of the time b) Look to what a reasonable person in the testator=s position intended XLV. will NOT be a valid signature if the testator was merely interrupted someone (i.e.Bby death) i) What if the mark is an Ax@? a) CaliforniaBwhere an individual makes an Ax@ intending that to be their signature, the mark must be made is the presence of a witness who then must write the name of the testator under the Ax@ and then sign their own name under the written name of the testator XLVI. Civil Code that applies to ALL legal documents XLVII. b/c it is based in civil and not probate code...only need to have substantial compliance i) If a testator receives help signing from a third party, there is not a valid signature UNLESS it is in the testator=s presence and at i) 17
(a)
(b)
Wills & Trusts Outline his explicit discretion a) A third party can sign a testator=s will or affix a rubber stamp w/ the testator=s name as long as the help was asked for by the testator and done in the testator=s presence at the testator=s direction. Is additional material written below the testator=s signature valid? i) Common LawBNO. The testator must subscribe (sign at the bottom of the will), therefore any material after the signature WILL NOT be given affect and may even affect the rest of the will a) If material was added BEFORE the will was signed, the court will not give affect to ANYTHING in the will XLVIII. ENTIRE Will is Void a) If material was added AFTER the will was signed, majority of states will give affect to the rest of the will i) CaliforniaBbecause there is no subscription requirement, it becomes a temporal question: a) If the material was added before the testator signed the will, it is valid and will be given affect b) If the material was added AFTER the testator signed the will, it will NOT be given affect XLIX. UNLESS...the handwritten portion can qualify as a HOLOGRAPHIC WILL Does a Videotape constitute a Awriting@ i) Common LawBNO. Does not meet the hyper-strict requirement a) Cts concerned with lack of ritual and the ability to edit something out. L. No contested videotape as ever been probate...but some courts may probate if no one contests it Can there be delayed attestation by the witnesses (i.e.Bafter death of testator?) i) Common LawBNO, witnesses must sign in the testator=s presence, which requires the testator to be ALIVE ii) Modern TrendBeven a dead testator can have Apresence@ iii) CaliforniaBbecause there is no requirement that the witnesses attest in the testator=s presence, there is an implicit adoption of delayed attestation a) Most courts look to a reasonable time period (around 36 months) LI. TEST: do the witnesses really remember what they are suppose to be attesting? EXPANSION of Witness requirement i) A required 3rd witness is a super-numerary witness and used in jurisdictions trying to be extra-cautious and in cases where one of the witness may be found invalid ii) California Interested Witness Doctrine (sec. 6112)BIf there is an interested witness attesting the Will, there is a rebuttable presumption that there was some type of undue influence a) If the presumption CAN be rebutted by preponderance of 18
(a)
(a)
(a)
(a)
Wills & Trusts Outline the evidence, the witness will take the whole gift. If the presumption CANNOT be rebutted, the court will purge the excess portion of the gift LII. i.e.Bthe interested witness will only take the amount they would have taken under intestacy a) If the witness procured the Will by FRAUD, DURESS, etc the witness will take nothing HOLOGRAPHIC WILLS (sec. 6111)Brequires a writing with handwritten material provisions signed by the testator with the intent to create a last will and testament (a) Does NOT require witness=s signature (b) Testator=s IntentBthe decedent intended this writing to be a last will and testament i) defacto requirement of attested will, but not as large of an issue b/c there are other checks and balances (i.e.Bwitnesses) ii) Looking to surrounding facts to determine whether the testator intended the document to have importance in the future: a) If a sophisticated women always had legal documents formally drawn, a note on a 3x5 note card are only instructions on how she wants her will, not her actual will b) If a letter from father to son outlines distribution of property and the father writes Akeep this letter@ there is probably most importance to the letter and the father intended for it to be his will iii) Is INTENT a material provision that needs to be handwritten?? a) Not a problem in most states b/c they require the ENTIRE holographic will to be handwritten b) Contextual ApproachBif the handwriting is ambiguous, Ct will look tot he typed provisions to determine the context of the handwriting and look at whether there was testamentary intent c) CALIFORNIABintent may be set forth in testator=s own handwriting or as part of a COMMERCIALLY printed form will LIII. will NOT count if the form will is not commercially printed LIV. Internet wills ARE NOT commercially printed (a) Material Provisions include the Awho@ gets Awhat@ i) Some states require the entire Will to be handwritten ii) CaliforniaBallows for pre-printed Aform wills@ allowing for only the material provisions to be in the testator=s handwriting. (b) Signature MUST BE signed by the testator i) CANNOT have another person sign for the testator even if it was in the testators presence and at their direction (c) Is a Date requirement necessary?? NO, but...if the holographic will is undated.... i) Presumption of invalidity if there are concerns about testamentary capacity a) can be rebutted by preponderance of the evidence LV. do not need to establish an actual date, relative b) 19
(1)
Wills & Trusts Outline dating is allowed i) If there are Multiple wills, the undated holographic will is presumed INVALID as to any inconsistencies unless it can be relatively dated as being the most current will. a) if BOTH wills are undated holographic wills, the court will most likely strict apply the rule and say ALL inconsistences are invalid LVI. will most likely be settled by the beneficiaries Holographic Codicils to a Holographic Will i) Ct will often look to the original will for requirements to validate the codicil and count the original signature as valid for the codicil ii) Handwritten interlineations to a holographic will ALWAYS qualify as a holographic codicil
(a)
a.
DEGREE OF JUDICIAL COMPLIANCE
(1) CLASSIC APPROACHBHyper-strict compliance sometime to the point of frustrating testator=s intent in order to promote efficiency. (a) In re Will of Ranney (Witnesses signed an affidavit attached to the will, but DID NOT sign the attestation clause at the end of the will.) i) Under common law...WOULD NOT MEET strict compliance (b) As a general rule, courts WILL NOT correct a mistake, but several MINORITY doctrines allow the court to play around with a Will i) New York Court (In re Snide)Bin mirrored wills, treat as one big execution ceremony if wills have been swapped a) i.e.Bif a husband and wife accidently sign each other=s wills, treat as one execution ceremony and validate both wills ii) Scrivener=s Error DoctrineBWhere there is clear and convincing evidence that there was a scrivener=s (drafter=s) error and clear and convincing evidence of its effect upon testator=s intent, extrinsic evidence is admissible to establish and correct the mistake a) Erickson v Erickson (lawyer mistakenly believed that testator=s will executed 2 days before the marriage would not be invalidated by the marriage) iii) Misdescription DoctrineBif there is a validly executed will, court will take extrinsic evidence to determine the extent of the misdescription, then strikes the words that contain the misdescription, and checks to see if enough words are remaining to give effect to testator=s intent a) court WILL NOT insert words or rewrite the will (c) Modern approach to strict compliance--courts have reduced the Aroadblock@ to execution either by reducing the number of statutory requirements, reducing the degree of judicial compliance, or a combination of both i) In California...the number of statutory requirements have been reduced, but they are still STRICTLY ENFORCED SECOND APPROACHBFLEXIBLE STRICT COMPLIANCE (a) If there is a low potential for fraud, the courts may be more willing to bend strict compliance, but don=t want to go completely to substantial 20
(2)
Wills & Trusts Outline compliance because that would only encourage litigation (b) EXAMPLES i) delayed attestationBflexible in witness requirement ii) Signing w/in rx timeBflexibility in order of signing (c) AWendelian terminology@ i) CALIFORNIA MOST LIKELY FALLS HERE!! MODERN TRENDBSUBSTANTIAL COMPLIANCE: court may probate the Will if there is clear and convincing evidence that the decedent intended a document to be his Will AND substantially complied with the execution of the will. (a) Raises the cost of administration, but better protects testator=s intent (b) Some courts say the mere POTENTIAL of fraud is enough to not meet the evidence requirements i) Family does not have to go as far as actually proving fraud a) HYPO: (H moves to Australia and makes a fortune, then dies suddenly. Lulu shows up arguing she is his fiancé and the will was mailed to the probate court) LVII. some courts would not allow Lulu to take b/c of the potential of fraud LVIII. other courts may allow her to take under substantial compliance....dark side b/c property may go to people the decedent never intended. (a) Adopted by the Uniform Probate code, but not by many states FOURTH APPROACHBEven less strict is the HARMLESS ERROR DOCTRINE which states that even if a document was not properly executed, it will be given affect if it can be shown by clear and convincing evidence that the decedent intended the document to constitute as a will, revocation, codicil, revival. (a) Eliminate the 2nd requirement of substantial compliance i) i.e.Bdecedent does not need to substantially comply with proper execution (b) Authorizes the court to Adispense@ with any and all statutory requirements that were not met as long as there is clear and convincing evidence of intent.
(3)
(1)
A.
REVOCATION OF A WILL
1. Requirements a. Revocation is a testamentary act requiring Testamentary Capacity b. Most courts will use the same degree of judicial compliance as an execution of a will Ways to Revoke a Will a. Subsequent Writing meeting the requirements of a Will (1) Two ways a subsequent writing can revoke: (a) ExpresslyBAI revoke my prior Will@ (b) ImplicitlyBnew Will revokes a prior will through inconsistencies i) a later will always controls (2) If a Will is COMPLETELY revoked, the subsequent writing is a NEW WILL (a) ALSO revokes all codicils dependent on the will (3) If a Will is only PARTIALLY revoked, the subsequent writing is a CODICIL (a) Ct still needs to resort to the old will b/c the new writing only supplements or provides additions 21
2.
Wills & Trusts Outline (b) b. A later revocation of a codicil DOES NOT AFFECT the underlying will.
a.
An Act (1) RequirementsBa destructive act performed on the will with the intent to revoke (a) Act can be done by the testator or by another person in the testator=s presence and at the testator=s direction i) Testator must be physically present...telephonic presence may not be valid a) UNLESS...Ct adopts substantial compliance/Harmless Error (b) DESTRUCTIVE ACTS i) Where must the act take place? a) Common LawBanything including writing on the Will may be destructive, but the act must affect the printed words b) UPC/Modern TrendBdestructive act can affect ANY part of the Will LIX. does not have to affect the printed words a) CaliforniaBstatues don=t say, so ARGUE BOTH!! i) If a destructive act/marking is made with a pencil, it LACKS THE INTENT to revoke a) act is not permanent enough (1) CAN perform an act revoking a will without providing for a new distribution scheme (a) Thompson v Royall (Attorney told testator to keep document as a guide for a future will, so testator wrote Anull and void@ on the back of the will) (2) Partial Revocation by ActBonly part of the will has been destroyed (a) If the Will is found and there is a partial revocation by act, and the Will was last in the testator=s possession it is presumed the mark was made with the testator=s intent for a partial revocation. i) Where does a partially revoked gift go? a) Strict ComplianceBintestacy b) Substantial ComplianceBmay go to the residuary clause or other member of class if a class gift LX. Most courts WILL not give to other class members b/c it is effectively a new gift that should require the testator to execute a codicil (a) NOT recognized by all jurisdictions b/c of the high potential for fraud i) i.e.Bdon=t know who made the mark a) BUT...Cts don=t know who made the mark on complete revocation by act either, but they allow it. Presumption (subset of revocation by act) (1) RequirementsBCt will PRESUME the testator validly revoked the will by act if the will cannot be found after testator=s death, the testator had capacity up until death, and the Will was last in the testator=s possession. (a) If the attorney doesn=t have the Will, but didn=t give it directly to the testator, must show a chain of custody. 22
Wills & Trusts Outline REBUTTABLE PRESUMPTION that can be overcome by any evidence showing a plausible alternative theory (a) HYPO: An heir stands to benefit from the Will not being found and has access to the private papers of the decedent either before or after the death and the Will cannot be found to probate i) Some courts say this is enough to rebut the presumption, while other courts would require more evidence of the heir tampering with the Will (3) If the presumption is rebutted, apply the LOST WILL DOCTRINE which states because the will is still legally in existence the Ct will take extrinsic evidence (from drafter/attorney, witnesses, prior drafts, etc) to recreate the terms of the will by clear and convincing evidence. i) disinterested witnesses are more believable than family members in recreating the terms. b. By Operation of Law (1) Historically/MajorityBDivorce revokes ONLY a will by operation of law (a) Some states will also revoke ALL GIFTS to the ex-spouses family members (2) California-- also includes the termination of a domestic partnership (a) (sec. 5600): APPLIES TO PROBATE AND NON-PROBATE i) EXCEPT--life insurance provisions ARE NOT revoked by divorce a) Testator must make an affirmative action to prevent exspouse from remaining a beneficiary (b) Will only exclude the ex-spouse i) Ex-spouses=s family members and issue are still qualified takers What if a testator has a Duplicate Original and the will in the testator=s possession cannot be found, but the duplicate can be found at the attorney=s office? a. If there are duplicate originals and AFFIRMATIVE evidence shows that one was revoked, all other originals are invalidated (1) Revocation by Presumption IS NOT affirmative evidence, so will it still invalidate all other duplicate originals? (a) Some CourtsBPresumption should apply if the original held by the testator cannot be found and all requirements are met. (b) CALIFORNIABpresumption doctrine will be applied if NONE of the originals can be found Doctrine of RevivalBa prior Will is revived a. At a minimum there needs to be TWO written instruments with a later revocation of the second will (1) English ApproachBA Will is only affective upon the death of the testator, therefore do not need to revive Will 1 because it was never revoked by Will 2, it was only Acovered-up@ (a) Will 2 only revokes Will 1 if it remains affective up until the death of the testator (2) American MinorityBrevival requires the prior will to be re-executed according to the Wills Act Formality (3) American Majority/California (sec. 6123)Bonly need to show the testator intended on revival 23 (2)
1.
A.
REVIVAL OF A WILL
1.
Wills & Trusts Outline Evidence needed to show testator=s intent depends on how the later will was revoked.... i) If revoked by ACTBCt will take any evidence a) still need to have SOME affirmative evidence ii) If revoked by WRITINGBintent must be set expressly stated in a new valid writing. a) i.e.BTHIRD Will mentions Will one Doctrine of Dependent Relative Revocation (DRR)Beffectively ignores the revocation and gives full affect to the original gift, or treats the revoked will as being revived a. Requirements are base on how the Will was Revoked (1) If revoked by WRITING there must be a valid revocation based upon a mistake (fact or law), the testator would not have revoked but for the mistake, the mistake was set forth in the subsequent writing, and the mistake is beyond the testator=s knowledge (a) Usually find a mistake of fact (2) If revoked by ACT there must be a valid revocation based upon a mistake (fact or law), the testator would not have revoked but for the mistake, there is a failed alternative scheme of disposition, and the mistake is beyond the testator=s knowledge (a) Usually find a mistake of law i) i.e.BTestator tears up will 2 under the mistaken belief that a new/old will is valid. a) failed attempt at a codicil or writing b) failed attempt to revive a prior writing ii) Will also often apply when the testator has handwritten interlineations in his will a) generally, they DO NOT count as valid codicils b. Mistake must take place at the time or close to the time revocation took place (1) Timing of the mistake is often assumed by the court (2) Must also be beyond the knowledge of the testator (a) i.e.BCaroline=s death in the Congo is beyond W=s actual knowledge c. How do we determine CAUSATION (Abut for the mistake.....@) (1) Spectrum approachBSpectrum is made up of one side that gives affect to the revocation and another side that applies DRR. Look to where the testator=s TRUE INTENT lies to determine which extreme to apply. (a) revocation |-------------------------------------|DRR i) If testator=s TRUE INTENT is closer to revocation, beneficiary would get nothing. If intent is closer to DRR, beneficiary would get the original gift a) do not apply testator=s true intent b/c not valid under wills act formalities ii) If testator=s intent ends up in the middle...error on the side of making the original gift a) i.e.BAPPLY DRR (b) START HERE!! (2) Totality of the CircumstancesBlook to the totality of the circumstances to determine testator=s intent (a) often used when there was a change in a beneficiary and not a change in a gift 24 (a)
2.
Wills & Trusts Outline i) B. i.e.BW write Caroline out of his Will b/c he mistakenly believes her to be dead
COMPONENTS OF A WILL
1. General Rule of what constitutes a will is the Doctrine of Integration, which states the papers physically present at the time of execution and which the testator intends to be his Will are the pages that constitute the Will. a. EXCEPT...cannot integrate typed material into a holographic will (1) All material provisions need to be handwritten b. Once a Will has been validly executed, the court will go out of its way to protect testator=s intent c. A Will can be EXPANDED By...... (1) Republication by CodicilBa will is treated as re-executed and re-dated as of the date of the execution of the codicil, as long as it is not inconsistent with the testator=s intent (a) If redating HURTS the testator...Cts WILL NOT APPLY i) stronger argument if the codicil implicitly republishes the will (b) Republished in Two Ways i) ExpresslyBAI hereby republish my underlying will@ ii) Implicitly (c) Republication will serve to correct all previous execution problems that did not affect the underlying validity of testator=s intent i) Hypo: Will 1 give $1000 to C who is also a witness. W writes a codicil change the administrator and S & A were witnesses to the codicil a) C no longer has to worry about the interested witness doctrine b/c the will was republished (2) Incorporation by ReferenceBdocuments not present at the time of the execution of the will may be incorporated as long as the will expresses the intent to incorporate the document, the will identifies the document to be incorporated, and the document to be incorporated was in existence at the time the will/codicil was executed. (a) Court are more lenient on the first two requirements, but are very strict in requiring the document be in existence at the time of execution of the will by preponderance of the evidence i) Burden of proof is on the party seeking incorporation a) Clark v Greenhalge (Ct allowed notebook to be incorporated by reference, but should have been stricter in trying to determine which parts were written prior to execution and incorporating ONLY those parts) (b) Tangible Personal Property (UPC)Bas long as a Will expressly refers to a list of tangible personal property, the UPC does not care whether the list was made prior to or after execution of the will i) Effectively takes away 3rd requirement with respects to TANGIBLE PERSONAL PROPERTY ONLY! ii) NOT FOLLOWED BY CALIFORNIA!! (3) Acts of Independent SignificanceBA Will may refer to an act or event that is to occur outside of the will, and that act or event may control either who takes under the will or how much a beneficiary takes, as long as the references act has its own significance independent of its effect upon the will 25
Wills & Trusts Outline Effectively allows a testator to change the provisions of a will w/o executing a codicil (b) Very fact sensitive!! i) Court will be more strict if the potential for fraud is HIGH (c) Hypo: Testator leaves $10,000 to her sons-in-law and the Astuff in the garage@ to her nephew. Right before she dies, she buys a new lawn mower and also writes a letter giving a bracelet to her daughter i) Under acts of independent significance the nephew would get the lawn mower b/c it was found in the garage. a) Buying the lawn mower has intervivos significance of needing to cut the grass. ii) The daughter WOULD NOT take the bracelet b/c the letter has no independent intervivos significance other than distributing property a) testator should have executed a codicil!! (d) Temporally looks FORWARD in time to acts that may happen in the future CONTRACTS RELATING TO A WILL 1. Frustrated Beneficiaries may bring a breach of K claim if there was an agreement with the testator to write a will, or not revoke a will a. In California, a K to make or not revoke a Will is valid only if there is a writing signed by the decedent that evidences the terms of the agreement or there is clear and convincing evidence of an oral agreement between the parties, AND there is valid consideration for the K. (1) CA court previously limited oral Ks to family members only, but the concept was broadened by the CA legislature. (2) Consideration WILL NOT be found if there is a preestablished legal duty (a) i.e.Bhusband and wife have a legal duty to care for each other, therefore any Will K between them would need additional consideration b. If the Ct finds a breach of contract, the frustrated beneficiaries may take equitable title under a constructive trust doctrine (1) Ct uses to prevent unjust enrichment (2) Beneficiaries successful in their claim effectively become creditors, and will be one of the first takers in line. (a) May prevent a surviving spouse, or other beneficiaries from taking any of the estate c. If a breach of K IS NOT FOUND...the party claiming a breach may still be entitled to quantum meruit for an unpaid services rendered 2. Beneficiaries to the K relating to the will MUST PROVE THEIR OWN CLAIM a. Ct will not automatically find a breach in a K (1) cost of administration is too high 3. In a K NOT TO REVOKE, Consideration may simply be giving up the right NOT to revoke a. In this case...consideration is not provided under the death of one of the promising parties (1) K is not valid until one the parties dies UNLESS another form of consideration is given b. Hypo: Two spouses created mutual or joint wills stating the survivor will not do anything to disrupt provided distribution scheme. One spouse dies, and the second remarries. (1) Depending on the State=s Spousal Protection Doctrines the remarried spouse may have breach the K not to revoke. So what HAPPENS? 26 (a)
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Wills & Trusts Outline Split in Jurisdictions i) MinorityBspousal protection is more important than a K not to revoke ii) First in time statesBK has greater importance b/c it took place before the spousal protection kicked in a) Beneficiaries under the K become CREDITORS and take before the new spouse iii) CALIFORNIABnew wife has a weaker claim b/c she is already protected under community property. K will ultimately win out under two theories... a) EstoppelBonce the surviving spouse takes from the deceased spouse, they are estopped from denying the K not to revoke b) Life Estate TheoryBthe surviving spouse only takes a life estate in the property obtained from the deceased spouse with a remainder to the beneficiaries under the K not to revoke 4. Types of Wills and Concerns of Ks Relating to Wills a. Joint WillsBone will executed by two people, usually husband and wife (1) HYPO: If one spouse dies and the other re-writes the will, can the beneficiaries under the joint will sue for breach of K? (a) Historically: Yes (b) Modernly: Disfavored...Cts learn towards No b. Mutual WillsBexecution of two separate wills with mirrored provisions (1) Does the execution of mutual wills constitute an implicit K not to revoke? (a) Historically: Yes (b) Modernly: No c. IN CALFORNIA.....execution of a joint or mutual Will DOES NOT create a presumption of a K not to revoke (1) If the parties want to create a K not to revoke, must write the promise into the Will 5. SCOPE OF Ks RELATING TO WILLS... a. How much property is included? (1) Absent an expressed provision, K will apply to ALL property acquired by either spouse (a) Hypo: W & G execute mutual wills w/ K not to revoke. G dies one month later but W survives for another 10 years. i) ALL of W=s property is subjected to the K b. What is the surviving spouse=s right to consume the property? (1) Surviving spouse only has the right to use the property in a reasonable manner (a) i.e.BW does not have the right to start buying lavish gifts for Lulu after G=s death. CONSTRUCTION OF WILLSBonce the will is probated, the Ct will construe and give affect to the will 1. Use of Extrinsic Evidence: First question is for what purpose is the extrinsic evidence to be used? a. Validity of the WillBALWAYS take Extrinsic Evidence! b. Construction of the WillBonly take if the Court Allows... (1) HistoricallyBPlain Meaning Rule which states where the Will is plain and clear, 27 (a)
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Wills & Trusts Outline the Ct will NOT take extrinsic evidence to affect the plain meaning. (a) The court DOES TAKE EVIDENCE where there is a latent ambiguity meaning where the meaning does not become clear until the court tries to apply the Will. i) Three common types of Latent Ambiguities a) Misdescription ErrorBCt will strike out the incorrect language and check to see if enough remains to give affect to the Will LXI. The court WILL NOT insert words a) EquivocationBmultiple people or objects meet the description in the Will b) Personal UsageBtestator=s personal usage of a name isn=t the actual name of the person intended LXII. slight variation of equivocation (a) The court WILL NOT take evidence explaining a patent ambiguity meaning an ambiguity on the face of the will i) i.e.Btestator gives 33% of his property to more than three people (1) Modern CALIFORNIA APPROACHBCan admit all extrinsic evidence to show the court there is ANY ambiguity in the will as long as the evidence goes to one of the possible reasonable interpretations and only have to deal with the timing around execution (a) Modern ambiguityBthere is expressed language in the will which is reasonably susceptible to two or more interpretations (b) Types of extrinsic evidence allowed i) Evidence of the circumstances surrounding the testator at the time of execution a) STRONG PREFERENCE FOR THIS!! ii) Allege oral declarations a) Historically not allowed b/c of highly likelihood for fraud b) Modernly used by the courts to analyze the oral declaration to the attorney who drafted the will a. Scrivener=s Error DoctrineBExtrinsic evidence will be taken to establish and correct a mistake if there is: 1) clear and convincing evidence the scrivener (drafter) made a mistake; and 2) clear and convincing evidence of testator=s intent. (1) Erickson v Erickson (drafter incorrectly told testator that his marriage would have no affect on the will he executed two days before. The marriage in fact voided the Will and left his new wife unprovided for. By following this doctrine the Ct effectively ignore the statute) (2) NOT ADOPTED BY ANYONE BUT CONNECTICUT (a) Not followed by CA....but could make a good faith argument Death of Beneficiary BEFORE Death of Testator (** APPLIES TO WILLS, TRUSTS AND OTHER NON-PROBATE INSTRUMENTS**) a. If a beneficiary/transferee is dead at the time the testator executed a Will, there is a void gift. If the beneficiary/transferee was alive at the time of execution, but dies before the testator, there is a lapsed gift. (1) A lapsed or void gift FAILS... (a) If the gift was specific or general the failed gift will fall to the residuary clause. (b) If the ENTIRE residuary clause fails, the gift falls to intestacy 28
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Wills & Trusts Outline If only PART of the residuary fail, there is a split in the jurisdictions over where the gift should go i) Common LawBgift falls to intestacy ii) Modern TrendBgift is redistributed among other residuary takers a) de facto class gift!! b) CALIFORNIA APPROACH A LAPSED GIFT may not fail though, if it can be saved through one of two ways... (1) Anti-Lapse DoctrineBwe presume a testator would want a lapsed gift to go to the issue of the predeceased beneficiary as long as: 1) the predeceased beneficiary meets the required degree of relationship to the testator; 2) the predeceased beneficiary has surviving issue that also survived the testator; and 3)there is no expressed contrary intent in the instrument making the gift. (a) Rebuttable presumption (b) Types of relationships i) Focuses on blood relationships a) In most jurisdictions...a spouse DOES NOT count! LXIII. Jackson v Schultz (Bogus Ct opinion where the Ct actually rewrites the Will changing Aand her heirs@ to Aor her heirs@ in order to prevent the property escheating to the state. Failed gift could not be saved b/c a wife doesn=t meet the degree of relationship.) (a) Contrary Intent i) Does an expressed survival requirement in an instrument qualify as a contrary intent? a) Common LawBYES LXIV. very low threshold, followed by most jurisdictions a) Modern TrendBNO LXV. higher threshold, but NOT ADOPTED by many jurisdictions i) Ct will find contrary intent if the instrument contains an express gift over clause which states where the gift goes in case of failure (a) Under common law anti-lapse doctrine DID NOT include void gifts (b) CALIFORNIA (Sec. 21110b-c) i) Applies to BOTH lapsed and void gifts ii) Doctrine also applies if the beneficiary is treated as being predeceased a) i.e.Bhomicide or disclaimer (1) Class GiftsBa gift to two or more individuals that intrinsically include a right of survivorship. The right of survivorship means that is the gift fails as to one member of the class, the failing share does not Afall@ out of the class, but rather is re-divided among the other class members. (a) Four VARIABLES to distinguish a class gift from an individual gift: i) How does the instrument describe the beneficiaries? a) By Name....against class gift b) By aggregate group....for class gift ii) How is the gift described? a) Divided into shares....against class gift b) As aggregate whole...for class gift 29 (c)
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Wills & Trusts Outline Do the individuals have a shared common characteristic? a) No...against class gift b) Yes....maybe for class gift, but still need to look whether other individuals sharing this characteristic were excluded LXVI. If others were excluded, there is a stronger argument that there was NOT a class gift i) Testator=s overall testamentary schemeBlook at what would happen if the gift was not saved and whether the testator properly constructed a right of survivorship elsewhere in the will. (a) VERY fact sensitive and hard to predict a. ALWAYS apply anti-lapse BEFORE Class gift UNLESS: 1) the gift to the individual was a void gift in a class setting; and 2) the testator actually knew the class member was dead at the time of execution. (1) HYPO: W dies while driving along the 101 and after his funeral his Mom writes a will leaving her property Ato her sons.@ (a) Apply exception here which means the gift is redistributed among the remaining brother and W=s issue DO NOT TAKE under anti-lapse. Changes in PROPERTY After Execution of the Will (**APPLIES TO ALL WILLS, TRUSTS, AND OTHER TESTAMENTARY INSTRUMENTS) a. Will does not take affect until death, but is construed at the time of execution b. If there is a Change to a Specific Gift... (1) Ademption DoctrineBWhere there is a specific gift in the Will that has been later transferred or cannot be identified: (a) Common Law identity approach states that there is a irrebuttable presumption that the gift was revoked i) Burden is on the testator to execute another will (or codicil or trust) after the transfer to demonstrate their intent that the beneficiary should still receive something. ii) Does not matter if the transfer was voluntary or involuntary a) i.e.Bif W gives H the vanagon, but it is destroyed while driving home. The gift cannot be identified, so H will take nothing. iii) CALIFORNIA APPROACH...but there are a few softening doctrines a) Outstanding Balance Doctrine (Sec. 21133a) which states where the ademption doctrine applies, but the testator has not been fully compensated for the transfer, the beneficiary will get the outstanding balance owed at the time of the testator=s death. LXVII. Beneficiary will still ALWAYS get any part of the specific gift that still remains LXVIII. Includes any insurance payouts from damage to a gift THAT HAVE NOT BEEN PAID to the testator a) Conservatorship Doctrine (Sec. 21134a)Bademption doctrine will NOT apply if the transfer took place during a conservatorship LXIX. Testator cannot execute a new testamentary instrument if they do not have capacity LXX. Beneficiary would receive the fair market value of 30 iii)
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Wills & Trusts Outline the gift LXXI. SOFTENING WILL NOT APPLY IF...the conservatorship has ended and more than a year has passed (ademption will prevent beneficiary from taking) i) VERY STRICT....but there are some ways to AVOID ADEMPTION a) Argue gift is ambiguous and should be classified as either general or demonstrative LXXII. Ademption will not apply if gift is not specific a) Argue the gift was a CHANGE IN FORM not a change in substance LXXIII. Gift is really there....administrator just needs to look harder LXXIV. Cts will be more reluctant to allow this argument if there is a substantial change in value a) Argue the Will should be construed at time of death LXXV. compared to the general rule that a Will is construed as of the time of execution (a) Modern Trend rebuttable presumption the testator still wanted the beneficiary to take something i) Ct will take evidence to rebut the presumption ii) Beneficiary will take whatever looks to be a substitute item or will get the monetary equivalent of the gift a. If there is a change to a general gift, the personal representative in the estate has a legal duty to go out and buy the item Gifts of Stock a. Cts typically have trouble w/ gifts of stock because of the variety of possible changes (1) Hypo: Stock split after execution but before death of the testator (2:1 and testator owned 100 shares) (a) Common LawBdepends on whether the stock was given specifically or generally i) If given specifically, the Ct will give the beneficiary the benefit of the change a) i.e.Bbeneficiary would receive all 200 shares ii) If given generally, the Ct will treat the stock as cash and the beneficiary DOES NOT get the benefit a) i.e.Bsimilar to cash gifts b/c the Ct will never adjust for inflation (b) Modern TrendBALWAYS give the beneficiary the benefit i) Stock is not like cash, but rather a % ownership in the corporation which would decline if the split was not granted to the beneficiary (c) California Sec 21132 (UPC)BCt looks to whether the testator owned shares matching the testamentary instrument at the time of execution i) If the testator DID own matching shares...beneficiary gets the benefit of change if it was initiated by the corporation a) i.e.Bbeneficiary would not get additional shares purchased by the testator after the execution of the instrument ii) If the testator DID NOT own matching shares, but later buys shares after execution the beneficiary only gets the description in 31
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Wills & Trusts Outline the will a) i.e.Badministrator would only be required to purchase 100 shares for the beneficiary (2) Cts are often suspicious of general gifts of privately held stock in cases where shares ARE NOT owned by the testator (a) If purchasing the stock would subject the estate to UNFAIR PRICING, all gifts of privately held stock are deemed to be specific i) SO....if stock is NOT found in the testator=s estate, the gift is adeemed and the beneficiary receives nothing Exoneration of Liens DoctrineBComes into play where a specific gift (of real or personal property) has a debt attached to it a. Common LawBbeneficiary takes the gift free and CLEAR OF the debt (1) Estate is required to pay off the debt (a) diminishes the property in the residuary clause b. Modern TrendBbeneficiary is presumed to take the gift SUBJECT TO the debt unless there is an expressed clause in the testamentary instrument specifying the debt is to be paid off (1) Specification must go beyond the general boilerplate debt paying provision (2) CALIFORNIA APPROACH Abatement DoctrineBIf the testator gives away more in his/her Will than he/she has to give, the doctrine of abatement provides for which gifts are to be reduced first. a. General Scheme (1) Residuary gifts are cut first; (2) General gifts are cut second, but non-relatives are cut before relatives; (3) Specific gifts are cut law, but non-relatives are cut before relatives. b. There is a general presumption that specific gifts are the most important, however there are times when a testator places the most important heir in the residuary clause believing most of the estate will be left over. (1) Some State will ALLOW the Ct to override the abatement scheme (a) CALIFORNIA (sec. 21400 & 21402)Bif the purpose of the transfer would be defeated by abatement, the shares are abated as necessary to effectuate the instrument (2) Other States will NEVER ALLOW the Ct to override abatement SatisfactionBdetermines when an intervivos gift should count against an devised general gift a. Common LawBIf the property transferred intervivos were of LIKE NATURE to the gift provided for in the testamentary instrument, a rebuttable presumption arises that the testator wanted the intervivos gift to count against the devisee=s share b. Modern TrendBIntervivos gifts are presumed NOT to be in satisfaction absent a writing stating the intervivos gift satisfies the testamentary instrument (similar to advancement doctrine under intestacy) (1) Three Possible Types of Writings (a) By DONEE (b) By DONOR at the time the gift was made (c) Statement in the instrument making the testamentary gift (2) In case a beneficiary is predeceased, satisfaction WILL ALSO APPLY to surviving issue that take as long as the writing does not state otherwise (a) opposite from advancement which requires an affirmative statement before being applied to surviving issue c. Applies ONLY TO GENERAL GIFTS 32
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Wills & Trusts Outline A. WILL SUBSTITUTESBIs an instrument that validly conveys property at death without having to comply with the Wills Act Formality. 1. There are four different types of Will substitutes that give immediate intervivos interests to the beneficiary a. Trust b. Life Estate with remainderBtypically in deeds and not seen as testamentary b/c property interests are transferred intervivos (1) Does a revocable deed still count as a valid Will Substitute? (a) Common LawBNO, b/c the property interest does not vest until the transferor is dead, the transfer is testatmentary i) NOT a valid Will substitute, therefore the deed must comply with the Wills Act Formalities (b) Modern TrendBYES, Contingent remainder is still a valid property interest that passes intervivos i) VALID Will substitute c. Life Insurance (Modernly includes Payable-on-Death Contracts) (1) Common LawBONLY included Life Insurance contracts b/c similar to a will, its sole purpose was to provide for a beneficiary after the testator=s death (2) Modern Trend/CALIFORNIA Sec. 5000BAny K with a third party beneficiary POD clause is a valid will substitute (a) Should the beneficiary have to survive the testator?? i) Contract Law ApproachBNO, if the beneficiary does not survive the testator, the payout will go into the beneficiary=s estate ii) Wills ApproachBYes, there is a general survival requirement because the will substitute is subjected to the same construction rules as a Will a) i.e.Bif the beneficiary DOES NOT survive, it will be a lapsed gift d. Joint TenancyBunder the right of survivorship, the testator=s interest is extinguished immediately upon death (1) Creditor=s cannot reach the testator=s share UNLESS their interest was attached before death or the other JT signed the debt papers (2) JT is not as simple when dealing with PERSONAL PROPERTY (a) Common Law--Three different types of Bank Accounts i) Agency/Convenience AccountB2nd party has NO intervivos interest and gets no interest upon the death of the primary a) 2nd party placed on account only to help the testator pay bills and manage money. b) Agent can ONLY act as an agent up until the primary becomes incapacitated LXXVI. UNLESS...the agent also has a durable power of attorney i) Joint Tenancy AccountB2nd party has a proportional intervivos interest and will take the entire account upon the death of the primary under a right of survivorship a) Historically a name on a signature card would create the presumption of JT LXXVII. Ct allowed extrinsic evidence to rebut presumption and demonstrate primary=s intent b/c 33
Wills & Trusts Outline the banks were FORCING people into this option LXXVIII. Ct looks at primary=s intent at the time the name was added to the signature card i) Payable-on-Death AccountB2nd party has NO intervivos interest but will take the entire account upon the death of the primary under a right of survivorship a) Historically NOT a legal option b/c it was not an insurance contract (a) Modern TrendBpresume that intervivos the parties own the account in proportion to their contribution, with a right of survivorship upon the death of the fellow JT. i) Can be rebutted by clear and convincing evidence showing a contrary intent ii) i.e.Bif one JT contribute nothing to the acct, it is basically a POD acct. (1) Extrinsic Evidence WILL NOT BE TAKEN in other JT arrangements UNLESS there is evidence that the parties were forced into the JT arrangement (a) i.e.Breal estate brokers usually do not force people into JT deeds 1. Can a Will Substitute be revoked by operation of law?? a. Historically: NO-- revocation by operation of law only covered Wills b. In CALIFORNIA: revocation by operation of law covers all wills and will substitutes (1) BUT....Life Insurance Contracts have been excepted out (a) i.e.Ba life insurance K is not revoked by operation of law, there must be some affirmative act by the testator removing their ex-spouse as a beneficiary (b) BUT...can a life insurance policy be revoked by revocation by subsequent writing (i.e.BTestator writes a will giving the insurance payouts to a different person) i) NO....there are no ASuper Wills@ allowing the testator to override a non-probate instrument LIMITATIONS ON THE TESTAMENTARY POWER TO TRANSFER 1. Two ways to protect a Non-Wage Earning Spouse a. Spouse takes a SHARE of the decedent=s property through one of two ways (1) COMMUNITY PROPERTY (CALIFORNIA)Bspouse automatically takes half of the property earned during marriage UNLESS it is a gift, devise, or inheritance (a) Upon death of a spouse, the community property is separated into tenants at common i) If spouse dies testate, their half is distributed according to the will ii) If spouse dies intestate, the surviving spouse will take all of their share, leaving them ownership of ALL community property (b) The surviving spouse is afforded NO EXTRA PROTECTION at the death of the other spouse (c) Four Underlying Issues At Time of Death i) Deceased spouse may Put a Spouse to an Election in which the deceased spouse conditions a devise to the surviving spouse on the surviving spouse agreeing to the deceased spouse being permitted to give away some of the surviving spouse=s property a) Hypo: W and G own the phat pad in community property. 34
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Wills & Trusts Outline W dies with a Will giving ALL of the phat pad to L and rest to G as long as she agrees L gets the phat pad, and if not then to Pepperdine. LXXIX. W is forcing G to make a choice between keeping the house and getting a larger share of the estate a) Basically a conditional gift b) What is the threshold of evidence proving an election? LXXX. Common LawBvery low...only need to show testator was giving away property legally owned by the spouse LXXXI. Modern TrendBCLEAR intent must be shown that the testator gave away property he didn=t own a) A surviving spouse electing to NOT go with the testator=s scheme VIOLATES a no-contest clause and the spouse will take NOTHING under the instrument. LXXXII. May still get the community property if it falls to intestacy LXXXIII. Surviving spouse should first ask the court to construe so as to NOT find an election Stepped-Up Basis....used to determine amount of taxes to be paid on an appreciated asset. a) Hypo: W and G bought a house for $100,000, making each of their basis $50,000. The house appreciates to $1,100,000 and W dies LXXXIV. Scenario 1BW and G pay taxes on the FULL amount LXXXV. Scenario 2BTitle was originally taken as JT. When on JT dies, only his share is stepped up...making W=s share $550,000 and G=s share $50,000. Taxes are only paid on $500,000 after subtracting the original purchase price LXXXVI. Scenario 3BTitle was originally taken as community property. BOTH interests get stepped up to the fair market value...meaning W and G pay NOTHING in taxes Community Property with Right of SurvivorshipBspouses may elect to hold property this way in order to get the Stepped up benefit while protecting the right of survivorship. a) MUST USE THIS LANGUAGE when taking title b) Can be applied to ANY asset Migrating SpousesBcharacterize an assets based upon the law of the state where the parties are domiciled at the time the asset is acquired, BUT the time of death property is determined by the domicile of the parities at the time of death of the first spouse a) Going from Separate to Community Property StateBunder a quasi-community property theory call the property community IF it would have been community property 35
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Wills & Trusts Outline had the property been acquired in a community property state LXXXVII. Treat the same as community property LXXXVIII. Only apply to the SEPARATE PROPERTY of the DECEASED spouse LXXXIX. Not recognized by all community property states...but CA DOES USE IT! a) Going from Community Property to Separate Property states, the spouse DOES NOT LOSE their right to 2 of all community property, but under uniform law the surviving spouse HAS NO ELECTIVE SHARE RIGHT to the decedent=s share of the community property XC. prevent=s a spouse from taking 3/4 of the entire estate if not provided for by the deceased spouse (1) SEPARATE PROPERTY STATESBspouse has no interest in the property the moment it is acquired (a) Property will always remain separate, the act of getting married DOES NOT change the characterization of the property (b) Because spouse gets no interest upon the acquisition of the property, the state wants to make sure the spouse is properly taken care of at the termination of the marriage. (Death of a spouse) i) Elective/Forced ShareBat their discretion, a surviving spouse can elect to take 2-1/3 of the decedent=s PROBATE property no matter how long the marriage lasted a) INCLUDES ALL OF PROPERTY back until decedent=s birth and DOES NOT MATTER if the decedent died testate or intestate b) Elective share is generally first funded by property the surviving spouse was already taking under the will XCI. If not sufficient...the remaining amount will be made up with other property from the estate i) Modern Common Law--Augmented Estate (UPC)Ballows a surviving spouse to taken an elective share from probate AND MOST NON-PROBATE property, including gifts made by decedents up to two years prior death a) WHY???.....decedents were trying to circumvent the elective share by putting all their property into nonprobate arrangements b) Not adopted by all jurisdictions ii) MODERNLYBan elective share needs to be EARNED by the surviving spouse ,meaning share taken is proportional to the length of the marriage a) i.e.Bfirst year of marriage a spouse can only elect 2% of decedent=s property, and % goes up incrementally until a full share is earned after 15 yrs of marriage A spouse may also get SUPPORT from a deceased spouse=s property (1) Early COMMON LAWBhardly used if ever (a) Surviving Wife could take a Dower which was a life estate in 1/3 of the qualifying real property which the husband held during marriage i) Qualifying Real Property is any interest which the spouse could 36
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Wills & Trusts Outline pass on at time of death a) i.e.Ba farm held in JT with a brother DOES NOT qualify b/c the husband cannot pass it on at his death ii) Once an interest attaches, it cannot be defeated by transferring of the property UNLESS the wife also signs the deed transferring the property a) Hypo: W buy Malibuacres and then marries G. W later sells Malibuacres and then dies. XCII. G can STILL CLAIM HER DOWER (a) Surviving Husband could take a Curtsey which is a life estate in ALL of the wife=s qualifying real property as long as children were born of the marriage i) Qualifying Real Property is any interest which the spouse could pass on at time of death a) Husband takes more property than the wife would, but has the additional requirement of having children ii) Once an interest attaches, it cannot be defeated by transferring of the property UNLESS the husband also signs the deed transferring the property (1) MODERN TRENDBBesides giving the spouse a SHARE through community property or elective share, there are also FIVE FORMS OF SPOUSAL SUPPORT (a) Social SecurityBsurviving spouse has a life estate to the decedent=s social security benefits i) i.e.Bdecedent CANNOT devise their SS rights to another person (b) Private Pension Plans (ERISA)BSurviving spouse takes a life estate in the benefits of decedent=s private pension fund UNLESS they have agreed to transfer the benefits to another person. (c) HomesteadBsurviving spouse has the right to occupy the family home for his or her lifetime i) Takes homestead share BEFORE creditors ii) Amount available varies by jurisdiction a) UPC only allows $15,000 b) Some states allow a full life estate (d) Personal Property Set-AsideBallows surviving spouse to set aside decedent=s certain tangible personal property up to a certain amount i) Items set-aside as exempted from creditors ii) Some states provide a checklist of available items, while other provide a maximum monetary limit (e) Family AllowanceBsurviving spouse is awarded an allowed by the probate court i) Allowance only lasts for a short period, usually a year or as long as probate remains open ii) Some states provide only a flat allowance while others will tailor the allowance to the standard of living enjoyed before the decedent=s death PRETERMITTED SPOUSE/DOMESTIC PARTNER DOCTRINEBArises when a testator executes a will then marries (or registers), but subsequently dies without changing ANYTHING in their Will or intervivos trust to provide for their spouse. There is a rebuttable presumption 37
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Wills & Trusts Outline that the omission was accidental and the testator wanted to amend the will to provide for the spouse. a. Rebuttable Presumption Can ONLY be overcome by three ways (1) Intentional disinheritance of the spouse is shown IN THE WILL (a) Extrinsic Evidence WILL NOT be taken (b) A general disinheritance clause is NOT sufficient i) the clause was written before the marriage and one cannot disinherit someone before they know the person or the role that person will play in their life (2) Testator provided for the spouse outside of the will and intended that taking to be in lieu of a testamentary taking (a) Ct will take virtually any extrinsic evidence to show intend, as long as there was a gift OUTSIDE of the Will (3) Surviving Spouse waives the right to claim pretermitted status (a) Classically found in a prenuptial agreement b. If a surviving spouse claims succeeds in obtaining pretermitted status, they will take their intestate share of the decedent=s estate, but in any event no more than 2 of decedent=s personal property. (1) i.e.Bin CALIFORNIA surviving spouse would take ALL of the decedent=s community property and a share of the decedent=s separate property (2) Money to pay for the surviving spouse=s pretermitted share will come from BOTH Probate and Non-Probate assets c. Length of marriage DOES NOT MATTER! d. Hypo: W=s will provides $10,000 for Lulu as a Agood friend.@ Later in W=s life he ends up marrying Lulu and then dies. Can she claim pretermitted if the she is mentioned in W=s Will? (1) When the person who later happens to be your spouse takes under the Will, they are not precluded from claiming pretermitted status UNLESS the testator made the gift with an eye of marrying that person. PRETERMITTED CHILD DOCTRINEBArises when a testator executes a will then has a child, but subsequently dies without changing ANYTHING in their Will OR Intervivos Trust to provide for their new child. There is a rebuttable presumption that the omission was accidental and the testator wanted to amend the will to provide for the child. a. Rebuttable Presumption can be overcome ONLY by Three Ways: (1) Intentional disinheritance of the child is shown IN THE WILL (a) Extrinsic Evidence WILL NOT be taken (b) A general disinheritance clause is NOT sufficient i) the clause was written before the child was born and one cannot disinherit someone before they know the person (2) Testator provided for the child outside of the will and intended that taking to be in lieu of a testamentary taking (a) Ct will take virtually any extrinsic evidence to show intend, as long as there was a gift OUTSIDE of the Will (3) Testator previously had one or more children and still gave substantially all of the estate to the other parent of the child not provided for. (a) By having other children the testator has already made the grave decision of not providing for any of their children in his/her will (b) Presumption that the surviving parent will use the estate for the care and support of the family (c) Cts have a hard time deciding what is Asubstantial@ 38
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Wills & Trusts Outline i) i.e.Bis a Life Estate to a parent substantial?? b. If a child succeeds in claiming pretermitted status, they will receive a share in the estate equal to their share under intestacy (1) Again, the money to pay for the share is taken out of BOTH Probate and NonProbate Assets c. Underlying Issues the Ct doesn=t like (1) A pretermitted child may be treated differently from other children in the family. (a) Azcunce v Estate of Azcunce (P was the 4th child of a testator who was not provided for in the will establishing a trust. It P was able to claim pretermitted status, she would have gotten her share of the estate now while her siblings would have to wait until the death of their mother as provided in the trust. Ct didn=t want to treat children differently so found P could not claim pretermitted status b/c the testator executed a codicil after her birth which re-dated the will) d. Applies EQUALLY to adopted children 3. OMITTED CHILD DOCTRINE (CA Sec 21622)BIf the testator failed to provide for a LIVING child in their testamentary instrument solely because they believed the child was dead or was unaware of the birth of the child, the child share receive a share in the estate equal to their share under intestacy. a. Again, the money to pay for the share is taken out of BOTH Probate and Non-Probate Assets b. In light of this doctrine, the attorney should always ask about the possibility of other children TRUSTSBa three party gift A. Background 1. Types of Trusts a. Intervivos Trust (1) Only one to avoid probate b. Testamentary Trust (1) Created by a Will c. UTATA Trust 2. Terminology a. SettlorBthe person who is creating a trust for the benefit of a third party b. TrusteeBperson who hold legal title to the trust property, and manages the property for the duration of the trust (1) Owes a fiduciary duty to all beneficiaries (a) A trustee cannot change the trust property i) Jimenez v Lee (Dad liable for breach of fiduciary duty when he changes stock held in trustee for his daughter) (b) There is also a duty to act in good faith, inquire AND follow up where the trustee is making a discretionary decision i) Marsman Case (Beneficiary ended up having to sell his house b/c he couldn=t afford it. Because he had a discretionary interest in the principle of the trust and the Trustee did not inquire into his financial health, the beneficiary could sue for breach of fiduciary duty) (c) Exculpatory ClauseBprovides some protection to the trustee in case of a breach of fiduciary duty i) similar to a Ano-contest clause@ ii) Will not be enforced if the Ct finds there was some abuse of duty 39
Wills & Trusts Outline or confidential relationship (2) AA Trust Will Not Fail For Want Of a Trustee@ (a) Upon the death of a trustee, the Ct will appoint another c. BeneficiaryBperson holding equitable title to the property in the trust (1) Interests can be broken into THREE TYPES (a) MandatoryBtrustee MUST distribute the property to the beneficiary (b) Sprinkle/SprayBtrustee MUST distribute all of the property, but has some discretion over which beneficiaries will receive the property i) i.e.Btrustee Ashall distribute quarterly all of the income among the children as he deems appropriate@ (c) DiscretionaryBtrustee has discretion over when to distribute the income/principle or how much to distribute. i) Default rule is that a trustee must act reasonably and with good faith in making a discretionary decision a) ReasonableBobjective standard b) Good FaithBsubjective standard ii) Settlor CAN CHANGE the default standard a) ASole and uncontrolled discretion@ will still require the trustee act with good faith iii) If there is a breach, beneficiary can sue for abuse of discretion d. Corpus/ResBproperty that is held in trust 3. Parties involved in a Trust CAN WEAR MULTIPLE HATS a. BUT....if the settlor is also the trustee, there must also be a co-trustee or a cobeneficiary b. Merger DoctrineBif the same party is the sole trustee and the sole beneficiary, legal and equitable interest will merge for lack of a fiduciary duty (1) Trust will terminate by operation of law 4. Conceptually, think of a trust as a BUCKET which is Bifurcated in THREE WAYS a. Donee is bifurcated into Trustee and Beneficiary (1) Trustee takes LEGAL title (2) Beneficiary takes EQUITABLE title b. Beneficiary=s Interest can be bifurcated into Present and Future (1) Present interest is usually a life estate c. Trust property is bifurcated into Principle and Income 5. A trust is the MOST FLEXIBLE legal document available, so it truly reflects settlor=s intent a. Settlor can have as much Dead-Hand Control as they want over their property CREATION OF A TRUST 1. Requirements: To have a valid trust: 1) the settlor must have the intent to create a trust, 2) the trust must be funded, 3) the trust must have ascertainable beneficiaries, and 4) the terms of the trust must be in writing if the trust includes real property or is testamentary. a. Intent to VEST the beneficial interest in the third party (1) Magic Words to look forB A gives property to B for the benefit of C (a) If the Ct finds evidence of proper terminology, they will assume the settlor intended to create a trust (b) Deed of TrustBExpression of intent to create the trust where the trustee is someone other than the settlor (c) Declaration of TrustBExpression of intent to create the trust by the settlor who will also be the trustee (d) CAN BE ORAL!! 40
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Wills & Trusts Outline Precatory TrustBarises where there is an outright gift from a donor to donee, but the donor includes some language that expresses hope but no legal obligation that the property be used fort the benefit of another. (a) DOES NOT COUNT AS INTENT (b) a precatory trust IS NOT A REAL TRUST b/c the person has not vested a beneficial interest in the third party i) B only has a moral obligation to use the gift for the benefit of C (3) A FAILED Intervivos giftBcannot be saved by re-characterizing the donor=s intent as an intent to declare a trust (a) Cts are most concerned about this where the settlor is also the trustee i) Hebrew University v Nye (Women wanted to donate her husband=s library to the university in his name, but the Ct found it was a failed gift and she lacked the intent to create a Trust) (b) Where the donee has relied on the failed gift, the court may impose a constructive trust to prevent unjust enrichment Trust must be FUNDEDBtrust property must be delivered to the trustee (1) Anything can fund a trust, included intangible property worth only a penny (a) EXCEPT...... i) Future profitsBnot an adequate property interest in the law of trusts although they are property interests in other areas a) i.e.BW cannot give his expected profits from his book yet to be published to Lulu b) Some CourtsBwill allow future profits to fund a trust where the donor currently owns the means of producing the profits ii) Future InheritanceBnot an adequate property interest in the law of Trusts a) some courts may choose to enforce however based on equity (2) If the settlor is also the trustee, delivery of personal property will be presumed in the declaration of the trust if there is clear evidence showing creation of the trust and clear evidence of the property (a) Cts like to see whether the settlor has separated the trust property from other property (b) Will have some type of delivery for any REAL property b/c of the necessity of a writing (3) If the settlor IS NOT the trustee, Cts will look for delivery similar to an intervivos gift. (a) Actual delivery is REQUIRED if possible, but if not, symbolic or constructive delivery must be found i) Symbolic deliveryBgiving of something that symbolizes the gift (i.e.Btitle to a car) ii) Constructive deliveryBgiving of something that control a gift (i.e.Bkeys to a locked truck) (4) Once a trust has been funded, it remains OPEN for the settlor to deliver more property (5) A trust is created upon being FUNDED..not being established Beneficiaries must be Ascertainable (1) Beneficiaries are ascertainable if there is an OBJECTIVE way to identify them 41 (2)
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Wills & Trusts Outline and determine who as standing to sue the trustee for breach of fiduciary duty (a) EXCEPTB i) Trusts in favor of settlor=s unborn children are upheld despite the fact that the unborn children are not ascertainable when the trust is created. a) PP of encouraging settlors to creates such trusts ii) Honorary Trust DoctrineB1)where a trust fails for want of an ascertainable beneficiary, 2) and the trust is honorary, as long as the intended trustee agrees to honor the terms of the trust the Ct will look the other way and NOT declare the failure of the trust a) If the trustee does not agree to the terms, or the trustee agrees but later dies, the Ct WILL NOT appoint a new trustee. Trust will fail and Ct will apply the resulting trust doctrine b) In re Searight=s Estate (B/c the settlor had an honorary intent in trying to provide care for her dog, the Ct invoked the Honorary Trust Doctrine) c) Classic ExampleBtrust for the care of a grave site (b) Clark v Campell (Settlor did not create a valid trust b/c her Afriends@ were not ascertainable) Writing?? (1) Intervivos TrustBa writing is only necessary if the trust contains REAL PROPERTY (a) not a function of trust law, but a function of the Statute of Frauds i) Where there is not a valid writing for a trust involving real property a) Common LawBTrust fails b/c not in compliance with the Statute of Frauds b) Modern TrendBimpose a Resulting Trust as long as P does not have unclean hands XCIII. Hieble v Hieble (Mom transfers her house to her son on the condition that she doesn=t survive her cancer. Mom survives, but son refuses to give the house back. Under CL b/c it was an oral trust, it is not valid, but modernly the son would hold the house in a constructive trust b/c the mom=s hands were clean) XCIV. Unclean HandsBtransfer of real property to avoid taxes (1) Testamentary TrustBbecause it is established and funded by a Will, it must ALWAYS be in writing to comply with the Statute of Wills (a) Where a testamentary trust fails for want of a writing... i) COMMON LAW--the Ct remedy will turn on whether it is a Secret or Semi-Secret Trust a) Secret TrustBnothing in the words of the Will indicated the individual is taking as a trustee in a fiduciary capacity XCV. Ct will impose a Constructive Trust a) Semi-Secret TrustBsome indication in the Will that the individual was only suppose to take as a trustee in a 42
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Wills & Trusts Outline fiduciary capacity Ct will impose a Resulting Trust i) MODERN TREND (minority)BCt will impose a Constructive Trust in either a secret or semi-secret trust 1. If a trust is NOT VALIDLY CREATED, there are several court created remediesB a. Resulting Trust DoctrineBas a matter of equity, if a trust fails in part or in whole, the property is returned to the settlor or the settlor=s estate (1) NOT A VALID TRUST (2) Special Type of resulting trust known as a Purchase Money Resulting Trust where a person buys property with their own money, but places title in the name of a second party. (a) Where the second party IS NOT a family memberBthere is a rebuttal presumption they take only as a trustee i) If they refuse to behave as a trustee, the court will impose a RESULTING TRUST (b) Where the second party IS a family memberBthere is a rebuttable presumption that the property is a gift b. Constructive TrustBas a matter equity in order to prevent unjust enrichment, trustee will hold the property for the benefit of the intended beneficiaries (1) NOT A VALID TRUST A. Assuming there is a valid Trust....first want to inquire on whether the trust is REVOCABLE 1. Testamentary TrustBall testamentary trusts are irrevocable b/c they are funded upon the death of the settlor a. EXCEPT where the settlor has given the power of appointment to another person (1) includes the power to revoke a testamentary trust 2. Intervivos TrustsB a. Common Law--Not revocable UNLESS there is an expressed clause in the instrument showing the settlor intended the trust to be revocable b. Modern Trend (CALIFORNIA)Bpresume an intervivos trust to be REVOCABLE unless the writing expresses otherwise (1) requirements for revoking a trust (a) If a settlor expressed a method of revocation in the instrument establishing the trust, ONLY that method can effectively revoke the trust (b) If a settlor DID NOT express a method of revocation, anything that expresses the intent to revoke will effectively revoke the trust i) includes ALL methods for revoking a will, but could also be an oral statement If argument for revocation by presumption FAILS...not sure if a Ct would impose a Lost Trust doctrine i) May have to be in writing if the trust contained real property Creditor=s Rights 1. Creditor of a SettlorBcreditors of a settlor can reach the settlor=s interest to the full extent that the trustee could use the trust for the benefit of the settlor a. Spendthrift clauses are null and void as to the settlor (1) against public policy to permit settlor to hide assets from creditors Creditor of a BeneficiaryBa creditor can reach an individual=s property if that individual can voluntarily transfer their interest in the trust. a. Creditor steps into the shoes of the beneficiary and will usurp ALL but no more of their rights 43
Wills & Trusts Outline i.e.Bcreditor can force mandatory payments and can sue a trustee for abuse of discretion IF that abuse was towards the ORIGINAL BENEFICIARY EXCEPT where a settlor has included a spendthrift clause which restricts the beneficiaries right to transfer the trust property (1) B/c the beneficiary cannot transfer their interest, the creditors cannot step into their shoes. (a) BUT once the property interest is paid out it is NOT subject to the terms of the trust and can be attacked by creditors. (2) Spendthrift clause limits BOTH voluntary and involuntary transfers (a) Settlor can choose to limit only voluntary transfers, but cannot chose to limit only involuntary transfers b/c it is against PP Some Creditors ARE NOT SUBJECT TO SPENDTHRIFT CLAUSES (a) Spouses entitled to alimony (b) Children entitled to child support Adopted more often than spouses b/c children did not voluntarily enter into relationship Creditors who provide basic necessities (includes housing, food, medical expenses) Gov=t for tax purposes (1)
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