Benno Wills Outline

WILLS AND TRUSTS with WENDEL Who takes your property when you die? It depends? I. Non Probate v. Probate A. Non-Probate -- the decedent has to take affirmative steps for the property to qualify as non-probate property. 1. Distribute property pursuant to Non-Probate instructions 2. Types of non-probate a. Joint-Tenancy -- Upon the death of one JT, his or her fractional share is extinguished and the shares of the surviving JT are recalculated b. Life insurance or other payment on death contracts – Common law was only life insurance contracts, but modern trend is to include any 3 rd party beneficiary contract with a payment on death clause c. Intervivos Trusts d. Legal life estates and remainders (not equitable) B. Probate – Can be testate or intestate. When person dies an administrator, executor, or personal representative is appointed to handle and distribute the probate estate. His job is to inventory the assets, deal with notice to creditors, and then finally distribute the assets. 1. Testate – When you die with a will you die testate. Person who writes the will is the testator or testatrix. Look to the will for instructions on distribution of assets. a. Keep in mind all assets may not be covered by will, those other assets will be distributed per intestate scheme. b. Three types of gift by will. i. Specific gift – only one item in the world matches it (my wedding ring) ii. General gifts – gifts with general pecuniary value (money, etc.) iii. Residuary gifts – “I give the rest, residue, and remainder of my estate to X.” With this type of clause you are likely to distribute all property by testate 2. Intestate – Property not disposed of via will, will be distributed pursuant to intestate succession (§ 6400) in the following order: a. Surviving Spouse or Registered Domestic Partner – How much the surviving spouse takes depend on the nature of the property (community v. separate) i. Community or Quasi-community property – Surviving spouse takes ALL of the decedent’s half. The surviving spouse’s half never gets into probate at all. A. Community property is any property acquired as a result of the earnings of either spouse during the marriage in a community property state. 1. The act of marriage does not change the nature of property that was previously acquired 1 2. Property acquired via gift, inheritance, or devise is not community property because it is not “earned.” B. Quasi-Community Property – This is property that was acquired in a non-community property state that would otherwise be classified as community property if living in a community property state at the time of acquisition. 1. This transmutation occurs at death or divorce if happens in a community property state 2. Treat the same as community property ii. Separate Property – Surviving spouse gets either of the following of the separate property: A. 100% -- when there is no surviving issue, parent or issue of parents B. 50% -- when there is one child*, or there is no issue, but surviving parent or surviving issue of parents  Child* is a surviving child or dead but survived by issue C. 33% -- when there is more than one child* b. Surviving Issue (See Below Re: Issue) – They take equally* APPLY_RECAPTURE c. Parents – Equally d. Issue of Parents – Equally i. Look out for Half-Bloods. At common law they take at a reduced fraction. Modern trend they take equally. e. Grandparents f. Issue of Grandparents g. Issue of predeceased spouse (dies while married) h. Next of kin i. Parentelic Line Appraoch – Go out by parentelic/collateral lines. Keep going until there is a live taker. Property is then distributed to the live takers in the closest parentelic line (distributed by proper approach, in CA per capita approach) ii. Degree of Relationship – Court the number of degrees between decent and person claiming property. Those with the closest degree take to the exclusion of other. A. Look for the closest common ancestor B. TIP - On the right count only males, on the left count only females iii. CA Approach – Degree of Relationship with a Parentelic Tiebreaker – Look to degree of relationship first, and then if possible to break ties do so with closest parentleic line trumping further ones. i. Parents of predeceased spouse j. Issue of parents of predeceased spouse k. Escheats to the state 2 IA. Qualifying as Issue – To qualify as issue you must first establish a parent-child relationship. In CA there are 10 ways to establish this relationship. A. Natural Married Parents – There is a virtually irrebutable presumption that the husband is the natural father and the wife is the natural mother. This establishes full inheritance rights from and through, in both directions. Keep eye out for domestic partner. B. Natural Un-Married Parents – Birth mother is presumed to be natural mother thus establishing full inheritance rights from and through, in both directions. But keep in mind if she abandons baby there may be issues as to maternity. With respect to the father, paternity must be shown to establish inheritance rights. 1. Establishing Arrow Down – There are 3 ways i. Court order entered during the father’s lifetime (burden of proof is preponderance of evidence) ii. Clear and convincing evidence that the father acknowledged the child during the father’s lifetime iii. Clear and convincing evidence (post-death) that dude is natural father 2. Establishing Arrow Up – Two elements i. Father or relative of father acknowledged child; and ii. Father or relative of father supported child NOTE – Anonymous sperm donor situation. Generally there is only one natural parent (mother). But if the procedure is not medically performed by an authorized doctor then apply normal rules for Natural Un-Married Parents C. Classic Adoption – Classic adoption creates full inheritance rights from and through, in both directions. Upon adoption there is complete severance of any rights with respect to the natural parents NOTE -- when an adult is adopted solely to qualify them under an existing testamentary scheme, then they do not get inheritance rights through, only get right from the adopted parent. Some courts do allow full rights. D. Post-Death Adoption – If one or both of the natural parents die and the child is adopted then upon adoption we create full inheritance rights from and through, in both direction with the adoptive parents. Ties with the natural parents are severed however, child can maintain arrow down from natural parent if they can show, with respect to the parent in question, that: 1. The child lived with the parent; and 2. The adoption took place after the death of either natural parent E. Step-Parent Adoption – When there is an adoption by a step-parent we create full inheritance rights from and through, in both directions with the adoptive parent. Ties with the natural parent of the same gender as the adoptive parent are cut however, child can maintain arrow down from the natural parent in question if they can show: 1. The adoption was by a step-parent; and 2. The child lived with the natural parent in question F. Non-Step-Parent Adoption – Again create full inheritance rights from and through in both directions with the adoptive parent. In this case, however we completely sever the ties with the natural parent of the same gender as the adoptive parent. Watch out for overlapping scenarios, if so then do what is best for the child. 3 G. Attempted Adoption – In this scenario no legal adoption actually occurred thus full inheritance rights with respect to the natural parents are not affected. However can establish an arrow down from the attemptive adoptive parent(s) if they can show: 1. A relationship between the child and the attemptive adoptive parent(s) was created during the child’s minority and continued throughout; and 2. there is clear and convincing evidence that the attemptive adoptive parent(s) would have adopted but for a legal barrier NOTE – For purposes of our class the only legal barrier discussed is that the natural parents must consent to the adoption of a minor. If the child is over 18 then no consent is needed therefore there are no barriers to adoption, thus this doctrine can not apply. H. Equitable Adoption – Child wants to inherit, says I was treated like child. If elements are met then child gets a little arrow down (only from, not from and through, “adoptive” parent(s)). Arrows with natural parents are not affected. 1. Elements i. An agreement between natural parents and “adoptive” parents ii. Full performance by natural parents evidenced by giving up the child iii. Full performance by the child evidenced by moving in with the “adoptive” parents and treating them as parents iv. Partial performance by adoptive parents evidenced by taking in the child and treating him/her as their own (this is considered partial performance because full performance would be to fill out paperwork and actually adopt the child) v. The “adoptive” parent must die intestate (with respect to the property at issue). If the adoptive parent has a will saying everything to my kids, then this doctrine does not apply. But, the court must determine donee’s intent and can use these elements to determine if “adopted” child was intended to get property. 2. CA – In CA there must be clear and convincing evidence of the intent to adopt in addition to all five elements 3. Potential Modern Trend – Whether the “adoptive” parents led the child to believe that he/she was a legally adopted member of the family I. Posthumously Born Child – Child is born after the father dies 1. If child is born alive within 280-300 days after father’s death then presume paternity and treat the child as alive from moment of conception in utero for purposes of inheritance. 2. If born more than 300 days, then burden shifts and presumed not to be child of husband. 3. If father is not married to mother, then always must show paternity. J. Posthumously Conceived Child – Child is conceived after father is dead (frozen sperm). CA statute says child can get arrow down (unclear if full arrow or partial) if the following is met: 1. Burden is clear and convincing 2. Must be writing from decedent that says sperm can be used to conceive child 3. Writing must be signed 4. There must be one witness 4 5. Must be notice to the personal representative handling estate 6. Child must be conceived and in utero within 2 years of father’s death 7. Consent can be revoked only by a writing signed by father and one witness II. Doctrines that overlap with the intestacy scheme A. Recapture doctrine – This doctrine kicks in when the marital unit completely dies out, it does not allow all property to go to one side of the family 1. ONLY if there is no surviving spouse or no surviving issue, before going to parents we as “Is there a predeceased spouse?” 2. If the answer is “yes,” then we recapture all the qualifying property the second spouse received by virtue of the first spouse’s death. 3. What constitutes “qualifying property?” a. For real property it is qualifying if the spouse died within 15 years b. For personal property it is qualifying if: i. Spouse died within 5 years ii. There is a written record of ownership iii. The aggregate of the property that meats the first two requirements is $10,000 or more 4. Once there is qualifying property we recapture and give to qualifying taker, ONLY if there is a qualifying taker, in this order a. Issue of predeceased spouse b. Parent of predeceased spouse c. Issue of parent of predeceased spouse 5. REMEMBER – With regard to the second spouse who dies, the recapture doctrine only applies to their probate intestate property. Does not matter what kind of property with regard to the first spouse B. Survival Requirement – All takers above must be surviving. In order to determine surviving we look at actual and legal survival. 1. Actual survival is measured by: a. Common law is irreversible cessation of heart and lung activity b. Modern trend is irreversible cessation of brain activity 2. Legal survival in CA depends on the type of property a. Probate Intestate – Clear and convincing by 120 hours b. Probate Testate -- Clear and convincing by millisecond, unless the written instrument expressly requires longer c. Non-Probate -- Clear and Convincing by millisecond, unless the written instrument expressly requires longer 3. What about true simultaneous death with regard to Joint Tenancy? In this case we change the property to tenancy in common. C. Marriage Requirement – 1. To qualify as a spouse the couple must have a legal marriage ceremony or register as a domestic partner. EXCEPTION – Putative spouse -- if either party has a reasonable good faith belief that the marriage is valid, the party qualify as a putative spouse and is treated as spouses for intestate schemes 2. Cohabitants – Living together does not qualify you for anything in CA, but some states have common-law marriage 5 3. Separation of Marriage – The marriage is not terminated until order of final decree. Still treated as surviving spouse otherwise D. “Taking Equally” Per Stirpes Per Capita Per Capita Each Generation st st Where do we make Always at the 1 tier 1 Tier where there is 1st tier where there is the first division? a live taker a live taker How many shares at 1 share for each party 1 share for each party 1 share for each party that first divison? at that tier who is at that tier who is at that tier who is alive, and 1 share for alive, and 1 share for alive, and 1 share for each party who is each party who is each party who is dead by survived by dead by survived by dead by survived by issue issue issue How are we going to Bloodline – Simply Bloodline Pooling – Add up all treat the dropping take the share and dropping shares and shares? Dropping divide equally divide equally shares are those amongst children*. amongst eligible shares that are cut for Continue dropping takers. Eligible takers people who are dead until all gone. are all children* who but survived by issue. are in a bloodline that has actually dropped a share. 1. CA uses per capita as the default approach. 2. Can opt out of per capita if decedent adequately expresses intent to use a different approach. What is adequate expression? a. Must be clear, like “leave my property to my issue per stirpes.” b. If unclear then go back to default, like “leave my property to my issue per stirpes and per capita each generation.” c. “I leave my property to my issue by representation, or by right of representation.” In CA this means per stirpes, but in other states it means per capita. E. Expectancy Doctrine – While your parents are alive you are not an heir, you are an heir apparent. You have an expectancy interest. The general rule is that an expectancy is not a property interest so it can not be transferred. However, court will allow the transfer if it is fair and just to all the parties. F. Negative Disinheritance – Can one make sure a person does not get any of his property? 1. Common Law (and probably CA) – Person can not negatively disinherit someone by saying “Paul shall get nothing.” Person must affirmatively give away all property. Anything that falls into intestacy will simply follow normal intestate scheme. 2. Modern Trend – If intent is clear then treat such person as if they pre-deceased the donee. G. Advancement Doctrine – When we say “taking equally,” do inter-vivos gifts count against a person’s share? 6 1. Common Law – Inter-vivos gifts were presumed to count against a taker’s share of the intestate estate. To calculate testamentary share make a “hodgepot” and put all inter-vivos gifts and the probate estate in the pot. Then divide the entire pot equally and credit any advancements against their share. NOTE – If a taker (via advancements) has already received more than his fair share then he is not forced to give back, he simply does not take part in any testamentary distribution. 2. Modern Trend (CA) – There is a rebutable presumption that inter-vivos gifts do not constitute an advancement unless a writing indicates that the donor intended the gift to constitute an advancement. a. Writing Requirement – If created by the donor, it must be created contemporaneously with the gift. If created by the donee it can be created at any time. The writing does not need to be signed. NOTE – If donor makes a writing after the gift expressing intent for inter-vivos gifts to count as advancements, this writing will not qualify under the advancement doctrine but if the writing meets the requirements of a valid will it will be probated accordingly and be enforced. b. Predeceased Donee Senario – What if the donee predeceases the donor thus created a situation where the donee’s share of the donor’s estate is passing to the donee’s issue? The modern trend approach is that the advancement doctrine does not apply to the donee’s issue unless “the writing” expressly covers that contingency. In the common law we apply the doctrine and discount the share passing to issue. III. Who manages a minor’s property? A minor technically does not have the power to hold property so if minor is getting property from decedent it must be managed. A. Guardianship – This is the default and the property will be managed accordingly (split on common law or modern trend jurisdictions). To opt out of this default written instrument must be made by testator. 1. Common Law -- The guardians job is preserve the property and deliver to the minor when he reaches the age of majority. 2. Modern Trend – Modern trend has modified guardianship and transformed it into a conservatorship. The conservator takes title as trustee for the minor and has all the powers a trustee has over the property. B. Custodianship – Under the Uniform Gifts to Minors Act, if certain requirements are met a custodian will manage the minor’s property. This custodian has the discretionary power to use the property for the benefit of the minor. Upon the minor’s turning 21, the custodian must disperse any remaining property the minor. C. Trust – Finally money can be placed in a trust with a trustee. The trust controls the scope of the trustee’s power over the property. The trustee takes legal title to the property and does not need to give to minor until. IV. Bars to succession A. Homicide – State statutes determine how to treat homicide. If there is no statute on point then there are 3 approaches. In CA we have a statute on point. 1. No Statute on Point – a. Take normally, as if they did nothing wrong b. Don’t take anything, killer is treated as if they pre-deceased the testator 7 c. Take legal title of property as trustee holding property in a constructive trust for the real beneficiaries who hold equitable title 2. CA Statute – Only applies to felonious and intentional killings (watch out of involuntary manslaughter) a. General rule – If person intentionally and feloniously kills then they are treated as pre-deceased and do not take. This applies to all property (probate or non-probate). NOTE – This issue of who takes property is a civil issue not a criminal one. Look for different standards of proof and res judicada issues. Does this rule apply to intestacy? Yes. Also applies to wills. b. Joint Tenancy Situations – Homicide doctrine turns joint tenancy property into tenancy in common. Killer keeps his share but does not get to touch decedent’s share. B. Lapse Doctrine (only applies to probate-testate property) 1. General Rule -- If a beneficiary under a will predeceases the testator then the “testamentary gift” he is supposed to receive is deemed to have lapsed. It is basically treated as gone. The property will either fall into the residuary clause or intestacy. It will not pass to issue. 2. Anti-Lapse – If the beneficiary that has predeceased the testator is related to the testator, and the beneficiary is survived by issue, then anti-lapse kicks in and his share does pass to his issue 3. Homicide Scenario – In CA a killer is treated as having pre-deceased the testator. Therefore, this will kick in the lapse doctrine. However, the CA statute specifically states not to apply the anti-lapse doctrine in a homicide situation. Therefore, if a killer is survived by issue and related to the person he killed, the killer is prevented from taking, and the killer’s issue will also not take. 4. NOTE – If decedent’s will states “all property to my 4 sons equally, but in the event one of them dies to their issue,” then even if one of the sons kills the decedent, the issue will take. Not because of anti-lapse, but because the will expressly provides it. C. Disclaimer – A legal renunciation. 1. General Rule – A party who disclaims is treated as if they predeceased 2. In order to disclaim, most disclaimer statutes require that the party do so in writing within nine months of decedent’s death. Party also, must not try to control or distribute the property in any manner. Just treat the party as predeceased and let the property flow naturally as it would using that treatment. 3. You can disclaim all or part 4. The disclaimer relates back to the date of decedent’s death 5. Per Capita and Disclaimer – For purposes of calculating shares treat a party who is disclaiming as alive, but treat them as dead when distributing the shares 6. Advancement and Disclaimer – If a party disclaims, then you treat them as alive for purposes of calculating the shares. But treat them as dead for purposes of distributing the shares 7. Creditors and Disclaimer – General rule is that you can disclaim for purposes of avoiding creditors (situation where you would get money, but you are in debt 8 so creditors would take it anyway). However, govt. plays by their own rules and court will impose constructive trust for govt. benefit if govt. is the creditor. WILLS I. Requirement for a valid will (2 major requirements: 1) General Testamentary Capacity, 2) Proper Execution) – Keep in mind that to challenge a will you must have standing (must show that you would get property if your challenge is successful). When trying to attack capacity it is helpful to show a triggering event. Also helps to show an un-natural disposition of assets. A. General Testamentary Capacity – This level of capacity is lower than contractual capacity but higher than capacity needed for marriage. For the average person there is a strong presumption that you have testamentary capacity. Must have this general testamentary capacity at the point of execution of the will. If there is no general testamentary capacity, then the whole will is void. Elements: 1. Must be 18 years of age 2. Must be of sound mind a. Must have the capacity to have a general understanding of the nature and extent of your property b. Must have the capacity to understand who are the natural objects of you bounty (family) c. Must have the capacity to understand the nature of the testamentary act you are performing (do you understand what you are signing) d. Must have the capacity to understand how the previous three relate together to form an orderly disposition of your assets. B. Defects in Capacity (Are these treated as void or lapsed?) – Even if you have general testamentary capacity you may still suffer from a defect in capacity. If a defect exists, simply void the part of the will that was effected by the defect. 1. Insane Delusion – This is contrasted with a mistake, we do not correct mistakes, but we do correct insane delusions. Keep in mind courts are more likely to apply insane delusion doctrine to things that are factual and provable (i.e. burning bush telling person to give money to church probably not going to be touched by courts). Two approaches to insane delusion. a. Majority Approach -- Even if there is some factual basis for the delusion, if an average reasonable person in the testator’s situation could not have reached the same conclusion, then it is an insane delusion and not just a mistake. b. Minority (CA) Approach – If there is any factual basis to support the conclusion then it is not an insane delusion. It may be a mistake, but the court does not correct mistakes. c. Causation/Standing – CA takes a “but for” approach saying that “but for” the delusion disposition would have been different. Other jurisdictions say it is enough to show that “might have effected the disposition.” 2. Undue Influence – Very fact sensitive. Even sex can be considered a tool for undue influence, more so in an untraditional relationship. There are four different approaches to finding undue influence at the time the will was executed. 9 a. Three Element Approach – If all elements are met then a reubtable presumption of undue influence will arise i. Confidential relationship between influencer and the testator (testator feels comfortable confiding in him, classic are attny/client or parent/child); and ii. The influencer was active in the procurement (drafting) or execution (signing/witness signing) of the will; and iii. The alleged influencer unduly benefits under the will A. Objective approach (CA) – Do they take more under the will than if there was no will B. Subjective – Look at how much they take under the will compared to the nature of the relationship b. Four Element Approach – Party claiming undue influence must show by a preponderance of the evidence: i. Testator was susceptible ii. Influencer had the motive/disposition to take advantage (typical motives are greed or revenge) iii. Influencer had the opportunity to take advantage iv. Causation (CA requires a “but for” causation) c. Interested Drafter Statute of CA – If drafter of will takes under will then there is an irrebutable presumption of undue influence. This is cast broadly to include members of your firm or family as well. There are two exceptions to the statute: i. If the interested drafter is related by blood, marriage, cohabitant, or domestic partner ii. If there is a certificate of independent review. d. Interested Witness Statute of CA – If a witness takes under a will, that will create a rebutable presumption of undue influence. If you can rebut the presumption then you take the entire gift under the will. If you can not rebut the presumption, then you purge the excess portion (that is any amount greater than the amount they would take if the instrument was invalid). That excess amount is treated as a failed gift. The standard to rebut is preponderance of the evidence. NOTE: If you can prove the witness actually engaged in wrongdoing under undue influence, fraud, or duress, then it is prudent to bring that cause of action to void the entire gift. 3. Fraud (trick) – Need to show intentional misrepresentation made with the purpose of influencing the testamentary scheme that causes the testator to distribute their property in such a way that they would not have otherwise. a. Two type of fraud i. Fraud in the inducement – Inducing the person to go down and have the will drafted in a particular way (telling them a lie about a beneficiary to get them to change the will) ii. Fraud in the execution – Intentionally misrepresenting the true nature of the document. Slipping in a document, or slipping yourself into the will. Or forging will. 10 b. Causation – In CA must show “but for” c. Remedy – Generally strike the portion of the will that was effected, possibly create a constructive trust 4. Duress – Overt coercion, think physical threat 5. Tortuous Interference by a 3 rd party -- Because of wrongful conduct by a 3 rd party, I didn’t get my expectancy. Most courts say you need to show undue influence, fraud, or duress. So what is the benefit of recognizing it as a separate cause of action? Damages can be different (can be punitive damages attached). Also you avoid no-contest clause. You are not challenging the will, you are suing the 3rd party that acted wrongfully. Also a longer statute of limitations. II. No-Contest Clause – Testator can place a no-contest clause in the will. CA has the following statute on point: A. If the challenge is one of general capacity (not delusion) or wrongdoing by a 3rd party (undue influence, duress, fraud) and you challenger wins, then the no-contest clause is tossed out and will not be enforced. If challenger loses, then no-contest clause is enforced. B. If any other challenge is made, the no-contest clause will be enforced against you, win or lose. There are two exceptions: 1. If you have reasonable cause to assert a claim of forgery, interested drafter, or revocation then the no-contest clause will not be enforced against you, win or lose 2. If you have probable cause to support a claim against anyone who was interested in the drafting or execution of the will, then the no-contest clause will not be enforced against you, win or lose. III. Proper Execution of Will – To properly execute a will there are two variables: A. Statutory requirements aka the Wills Act Formalities 1. Attested Wills – Generally attested wills must be 1) a writing, 2) signed, 3) and witnessed. In CA the statute is more specific: a. Must be a writing i. What about additional material written below the testator’s signature? In CA the writing does not need to be signed at the foot, so the question is when was the material added? If added before the testator signed then valid. If added after then no good unless meets requirements of holographic will. b. Signed by the testator (or by someone else in the testators name in the testator’s presence and direction; or signed by a conservator pursuant to a court order) i. What counts as a signature? A. General Rule – Any mark that the testator makes with the intent for the mark to be his signature, counts as a valid signature B. CA Statute – CA has a statute on point about an X as a signature. In CA the X must be in the presence of a witness, the witness then has to write the name of the person who wrote the X, then has to write his name. C. If someone holds the testator’s hand, probably no good unless the testator asks for it 11 D. What if testator writes part of his signature? If he voluntarily stops, then probably good because that is all he intends to write. If involuntarily stops, then probably no good because he probably intended to write more. E. What about rubber stamp or electronic signature? No good under strict compliance jurisdiction. F. Videotaped will probably no good c. Witnessed – There must be two or more witnesses, each of whom are: i. present at the same time witnessing the testator’s entire performance (this can be the testator signing the will, or acknowledging the signature, or acknowledging the will); and ii. the witnesses must sign the will and understand the instrument they are signing is the testator’s will  NOTE: The witnesses do not need to sign in the presence of each other or in the presence of the testator  NOTE: The testator must sign the will before the witnesses sign. There is one case that says the order does not matter as long as everyone signs before anyone has left the room  NOTE: Delayed attestation – In CA the witnesses can sign later, and outside of the presence of the testator. They must sign within a reasonable period in which they have a good recollection of what they are attesting to. Some courts have a bright line 90120 day rule. A. What does it mean for the testator to perform “in the presence of?” There are two tests depending on jurisdiction: 1. Line of sight – If you were to look at that time, you would be capable of seeing it. 2. Conscious Presence Test (CA) – From the totality of the circumstances the witnesses know that the testator has performed o Telephonic Presence is not sufficient to meet either test because you can not asses testator’s capacity. 2. Holographic Wills – This is an un-witnessed will. About half of jurisdictions allow these. CA does allow them. CA requirements are: a. Must be a writing b. Signed by the testator (not by some in his direction) c. Material provisions must be in the testator’s handwriting i. Material provision are “who gets what” d. Does not need to be dated, but if not dated then look out for two scenarios: 12 i. If the testator lacks testamentary capacity at any time during his life and the will is undated, there is a rebutable presumption that the will was executed while the person lacked capacity. Relative dating will work to rebut the presumption. ii. If there are any other wills, the other will prevails as to any inconsistencies. This can be rebuted if there is anything about the unsigned holographic will that permits you to give it a relative date later than the other will. This presumes that the other will is an attested will, if they are both unsigned holographic wills then it is unclear what will happen. e. The writing must express testamentary intent i. What constitutes testamentary intent? Testator must intend for this document to be his last will and testament, aka, for this document to be taken down to the court and probated. There are three different approaches to determine if testamentary intent is present: A. Traditional Approach – This approach treats testamentary intent as a material provision, thus it must be in the testator’s handwriting. The court will only look at things in the testator’s handwriting and ask, “Can testamentary intent be determined from this?” B. Contextual Approach – This approach also looks to the handwriting to determine testamentary intent. Only if the handwriting is ambiguous, then the court will look to the printed text to come to a conclusion C. CA Approach – Court will look at testator’s handwriting and printed words of a commercially printed form will to determine intent. 3. Codicil – This a document that qualifies as an attested will, or, if the jurisdiction permits, a holographic will, that amends the will a. How do we know if it is a will or a codicil? This comes down to testator’s intent. If intent is hard to determine look to residuary clause to guide you. If the last will has a residuary clause the presumption is that it completely replaces the prior will. If the last will does not have a residuary clause, but the previous one does, then the last one is most likely only a codicil. 4. Curative Doctrines: Generally courts will not correct mistakes, but look to these doctrines a. In Re Snide – When husband and wife have mirrored wills and sign each others by mistake. Then treat it as one execution ceremony and validate both wills b. Scrivener’s Error Doctrine -- Where 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 13 c. Misdesciption Doctrine – If we have an otherwise valid will with a misdescription, then the court will strike as little as you need to in order to get rid of the misdescription. If from what is left, the intent can be determined, then give effect to the gift. Court will not insert words or rewrite the will. i. I give my home at 3784 Bodero Lane. The address is wrong so strike the address and you are left with I give my home at Bordero Lane. ii. Under this doctrine if mirror wills are signed by husband and wife, then strike the first name of the person in the first paragraph of the will. B. Degree of Judicial Compliance 1. Strict Compliance – Traditional rule is strict compliance. If there is any deficiency in the execution ceremony, the document is not a valid will. CA is a strict compliance jurisdiction, but be careful because they also use delayed attestation doctrine and conscious presence test. 2. Substantial Compliance – 1) Must have clear and convincing evidence that the testator intended this document to be taken down and probated as their last will and testament, and 2) clear and convincing evidence that the testator substantially complied with the wills act formalities of the jurisdiction. 3. Harmless Error Doctrine/Dispensing Power – This doctrine allows courts to dispense with the statutory requirements as long as there is clear and convincing evidence that the testator intended this document to be taken down and probated as their last will and testament. IV. REVOCATION OF A WILL – There are four ways to revoke a will (writing, act, presumption, and operation of law). Revocation of a codicil does not affect the underlying will. But, revocation of a will does also revoke any relevant codicils. Also keep in mind there can be more than one free standing will if no provisions are inconsistent. A. Revocation by writing – A writing that qualifies as a valid will can either expressly or impliedly revoke a previous will. 1. Express – “I hereby revoke my prior will” 2. Impliedly – Where the new will has provisions that are inconsistent with the old will, the later will trumps the prior will B. Revocation by Act – This requires a destructive act, coupled with the intent to revoke. Remember the testator must have testamentary capacity when performing the act. 1. The act must be performed by the testator himself, or by another while the testator is present and the testator is directing 2. Common Law – Added requirement that the act must affect some of the printed words of the will 3. Modern Trend – As long as the destructive act effects any part of the will and is coupled with intent then it qualifies 4. CA – CA is silent on the issue of whether the act must effect the printed words, lead with common law and then discuss modern trend 5. The act of writing can qualify as revocation by act even if it does not qualify as a valid writing for purposes of revocation 14 6. PENCIL DOCTRINE – If a will, or part of a will is revoked by a line drawn though it, how do we know that the testator drew that line? If the will was in the testator’s possession, he had capacity until death and the line was drawn during that period, then we presume that the testator drew the line. The loose presumption can be rebuted with a plausible alternative theory. Some jurisdiction apply the pencil doctrine which says if the line was drawn with a pencil then we do not recognize it, not enough formality with pencil. C. Partial revocation by act – This is where just part of a will, like a specific gift, is revoked and possibly given to someone else. (CA will take either approach 2, 3 or 4) 1. Minority of jurisdictions would sent the revoked part to intestacy 2. Some jurisdictions would sent the revoked part to the residuary regardless of where the testator wanted it to go (Probably CA Approach) 3. Some jurisdictions will give the gift to the newly named party 4. Some jurisdictions will give the gift to the other members of the class if applicable D. Revocation by presumption – The occurs where the testator was the last person to have possession of the will, the testator had testamentary capacity throughout his possession period, and the will can not be found after his death. The rebutable presumption (with a low threshold) is that the testator has revoked the will. 1. To rebut, show a plausible alternative theory that the will was not revoked 2. If the lost will is to be probated, the lost will doctrine says that the court will take any extrinsic evidence to establish by clear and convincing the provisions of the will 3. Duplicate Wills – If there is affirmative evidence that testator revoked his will, then all duplicates are revoked as well. If, on the other hand, the testator’s will can not be found at death, but a duplicate is found then the presumption is that the will should be probated E. Revocation by operation of law – Upon divorce all gifts to the now ex-spouse are revoked. Treat the spouse as having pre-deceased the testator. In CA this doctrine only applies to the actual spouse and not to relatives of the spouse. Do we apply anti-lapse hence giving the gift to spouse’s issue? ANTI-LAPSE DOES NOT APPLY TO SPOUSE BECAUSE SHE IS NOT RELATED. 1. In CA this doctrine applies to wills and revocable non-probate property. However, life insurance policies are explicitly excluded from this doctrine. 2. For revocation of gifts in will, this is an irrebutable presumption. For other non-probate property it is rebutable with a clear and convincing evidence. And it does not apply to life insurance policies. V. REVIVAL – Where you have a will and then execute a subsequent will or codicil, that subsequent instrument revokes all or part of the prior instrument. If the subsequent instrument is revoked, does that revive the previously revoked portions of the prior instrument? There is a presumption against intestacy, but that alone is not enough to revive. A. English Rule (Traditional Approach) – A handful of jurisdictions say that a will is only valid at the time the testator dies. Therefore nothing needs to be revived because we look at the valid instruments at the time of death B. American Approach – When the subsequent instrument is executed the prior inconsistent instruments are revoked at that time. Two approaches to revival: 15 1. Instrument must be re-executed to be revived 2. As long as the testator intended revival, it will be revived (CA and Majority approach). What evidence of intent? a. If will 2 is revoked by act then any evidence of intent will be accepted b. If will 2 is revoked by writing (remember, the writing must qualify as a valid will/codicil), then the evidence must be in the terms of that instrument VI. DEPENDENT RELATIVE REVOCATION -- Where you have a valid revocation, based upon mistake, and the testator would not have revoked but for the mistake, ignore the revocation. We have to show that there was a mistake. A. Elements 1. Must be a valid revocation; and 2. The revocation is based on a mistake; and 3. The testator would not have revoked but for the mistake a. For this element we use a sliding scale aka the spectrum. On one end of the spectrum is the gift that would occur by applying DRR, and on the end is the gift that would occur by not applying DRR (most of the time 0). Then look at the testator’s true intent and determine which side it is closer to. b. When the beneficiary is changed as opposed to the amount of gift, then we don’t really use the spectrum. Use totality of circumstances to determine whether or not to apply DRR. If the two beneficiaries are related then apply it. 4. The fourth element depends on how the revocation was done a. If revocation by act then there must be an alternative plan of disposition that fails (basically an attempt at another will or codicil that fails) b. If revocation by writing then the mistake must be set forth in the terms of the writing itself AND the mistake must be beyond the testator’s knowledge.  Should the testator know the truth? Whether or not someone is dead is generally not within the testator’s knowledge. But if mistakenly thought they already gave a gift to someone, that is within the testator’s knowledge.  There is one CA case that says the mistake need not be set forth in the terms of the writing (I revoke this gift to Judy because she is dead as opposed to I revoke this gift to Judy) as long as there is clear and convincing evidence of the mistake. This is a CA case but don’t lead with it. VII. SCOPE OF THE WILL – What Constitutes the Will? A. General Rule – The Doctrine of Integration -- All pieces of paper physically present at the time of execution, which the testator intends to be part of the will, are part of the will. 1. Doctrines that expand the scope a. Republication by Codicil – When a codicil is executed, the will is republished at the time of execution of the codicil. This will re-date the will and can also overcome problems with the original will, such as invalid 16 execution or attestation. What if the underlying will was invalid because there were no witnesses? Courts will automatically assume this, unless it will create inequitable results aka be inconsistent with the testator’s intent. b. Incorporation by Reference – (1) Where the will expresses the intent to incorporate a document outside the will, and (2) describes it with reasonable certainty, then (3) as long as that document is in existence at the time the will is executed, that document is incorporated into the will. Technically, that document is not made a page of the will. But the document will be incorporated and its intent will be given effect c. Acts of Independent Significance – Where the will makes expressed reference to acts or events which have independent significance (independent of a testamentary gift), then give effect to the gift.  The general rule is that you construe a will at the time of execution. So a gift may say my car to Mark. At the time of execution I had a Honda, but then sold it and bought a Toyota. Does Mark get the Toyota? Look to see if the act that changed the gift is for independent reasons. I bought a new car because I wanted to or because the other broke down, not to change the gift to Mark. Otherwise need to execute a codicil or new will.  Examples: I give everything in this drawer to Mark. Argue if things should really be in that drawer, was there a lock on it, etc.  I give my car to the beneficiaries in my wife’s will. This is ok because beneficiaries change because of reasons independent of my intent to give testamentary gifts. But, if wife’s will is in existence at the time, then argue incorporation by reference first. d. Contracts relating to a will – A person makes a contract that says if you do this, then when I die you get half my property. If it is not a valid will, then who takes the property? i. Uniform Probate Code allows for three ways to recognize a contract relating to a will (basically need writing signed by decedent, no oral contracts) A. Provisions of the will state the provisions of the contract B. The contract has been referenced in the will C. There is a writing signed by the decedent evidencing the contract ii. In CA we take writing as well as clear and convincing evidence of oral agreement iii. If the contract qualifies then move then the person takes as a creditor at the front of the line. iv. If it does not qualify as a contract argue quantum meruit, or if a family member, then equitable estoppel. v. joint wills – This is one instrument for two people. In CA there is not presumption not to revoke. If you want a contract to not revoke then make one. Same with mirror wills. VIII. PROBATE – What does it mean to probate the property? A. Do we take extrinsic evidence to determine testator’s intent? 17 1. Extrinsic evidence that goes to the validity of the will (whether the will is valid or not) is always accepted. 2. Common law Approach: a. First use the plain meaning approach. If there is an ambiguity then determine what kind. b. Patent: Ambiguity is plain on the face. I give my property ½ A, ½ to B, and ½ to C. The court will not take extrinsic evidence, and will deal with the problem on their own. c. Latent: Words of the will seem clear on their face, but when applied to the real world there is a problem. I give my car to my favorite student, Mr. Ashrafi. I give my house at 12510 Bordero Lane. In these types of cases, extrinsic evidence will be allowed to resolve. At common law there are three types of latent defects: i. Equivocation -- when two or more people or objects match the description of what appeared to be clear language in the will. ii. Personal Usage Exception -- Really only one person matches the description, but the way the testator is personally using the word leads to an ambiguity. Testator called a women Ms. Mosley, and wanted to give her the gift but the real Ms. Moseley wants to take the gift. iii. Mis-description – Do we just strike, or do also use extrinsic evidence under the common law? Two houses on Bordero Lane 1234 and 6789. 3. Modern Trend and CA Approach: a. Do not start with the plain meaning of the words. Instead start by construing the words relative to the circumstances surrounding the testator at the time of execution. This increases the chance of find an ambiguity.  What constitutes an ambiguity? If the language in the will, which in light of the circumstances surrounding the testator is reasonably susceptible to two or more interpretations, then you have an ambiguity b. If an ambiguity, then do not distinguish between latent and patent. Always take extrinsic evidence that is consistent with the reasonable interpretations. 4. What type of extrinsic evidence is best? We prefer circumstantial evidence to direct evidence (oral declarations). However, oral declarations from the scriveners will get more respect. 5. Scrivener’s error – If there is no ambiguity then still may be able to get extrinsic evidence in by this doctrine. You have to show that there was a scrivener’s error, by clear and convincing evidence. And clear and convincing evidence of its effect on testator’s intent. So you must show what their real intent was, and what their intent was after the mistake. CA does not adopt this but you can make the argument. B. Changes in Beneficiaries 1. Failed Gifts – There are two kind of failed gifts: 18 a. Lapse – The beneficiary is alive at the time of execution but dies before the testator. b. Void – The beneficiary is dead at the time of execution 2. If you have a failed specific or general gift it will fall into the residuary clause. 3. If the entire residuary gift fails then it goes into intestacy. 4. If part of the residuary gift fails then jurisdictions are split: a. Common law – The part that failed falls into intestacy b. Modern Trend – Treat the residuary as a class gift and the part that fails goes to the other beneficiaries in the residuary clause 2. Saving Failed gifts – There are two ways to save a failed gift. a. Anti-lapse -- You must have a beneficiary who pre-deceases the testator. The beneficiary must be sufficiently related to the testator. The beneficiary has to be survived by issue. Then we presume the testator would not want the gift to fail and would prefer the gift to go to the issue of the beneficiary, unless there is an expressed contrary intent in the instrument making the gift. A. Lapse Requirement – Lapse occurs when party actually dies or constructively dies (treated as dead) before testator i. Common law – Anti-lapse only applies to lapsed gifts, not void gifts. ii. Modern Trend – Apply anti-lapse to both lapsed and void gifts, but not class gifts that are void and the testator had knowledge of death. (CA) B. Requisite degree of relationship. In CA the beneficiary must be related to the testator or the testator’s current or former (death or divorce) spouse. No specificity on degree of relationship. Very broad. Keep in mind that the actual spouse does not qualify. C. Survived by issue – Issue must survive testator by 120 hours D. Contrary intent – There is a low threshold for this. Any expressed survival requirement or any gift-over clause is sufficient. book states these are not sufficient under the modern trend, only under common law? CA is common law for this. 3. Class Gifts – Class gift is a gift to more than one individual that intrinsically includes a right of survivorship. If a gift fails to one member, it will be redistributed among the remaining class members. In CA, does Anti-Lapse trump class gift right of survivorship? a. When it is a class gift? -- We look at circumstantial evidence of the testator’s intent at the time of execution. Did the testator want this group to be treated as having a built in right of survivorship. b. Four Key Factors (not elements) i. Common characteristics – do all of the takers have common characteristics. And are there other member with the same common characteristics that were not included? ii. How are the beneficiaries described – are they described by name or by group 19 iii. How is the gift described – in the aggregate or in specific share amounts. Aggregate leans towards class. iv. If we do not treat it as a class gift, thus if is a failed gift, then where does it go – we want it to be consistent with the testator’s overall scheme C. Changes in property 1. Characterization of the gift – There are 3 basic types of gifts a. Specific Gift – There is only one item that satisfies the gift. I give my 1983 Volkswagon to Alice. b. General Gift – Usually a gift of pecuniary value that is satisfied with any item that fits the description of the gift. Classic example is money.  Demonstrative gifts are general gifts from a specific source and are treated as general gifts. I give $1000 from my BofA checking account c. Residuary Gifts – Gifts that give away all property that has not otherwise been given away 2. Ademption – Where a specific gift can no longer be found in the testator’s estate has the gift been revoked? a. Common Law and CA (Identity Approach) – If the executor can not identify the item in the estate there is an irrebutable presumption that the gift was revoked i. No distinction at common law between voluntary and involuntary transfer b. Modern Trend – Presumption is that testator wanted the beneficiary to take something so give them a substitute item if there is one, if not, then give them the monetary value 3. Avoidance Doctrines – Because ademption is harsh the common law recognizes these avoidance doctrines 1. Characterize the gift as general, not specific – Ademption only applies specific gifts, so if court is convinced that it is a general gift, then the executor has a legal duty to go out and acquire the property and make the transfer 2. Change in form not substance – Look for substitute item and convince court that they are really the same substance, just different form. The greater the change in value, the harder to argue. Court says change from checking account to CD is change in substance 3. Construe at the time of death – Generally will is construed at the time of execution, argue that it should be construed at the time of death 4. Conservatorship/Power of attorney exception to Ademption (Softening Doctrine in CA) – If the testator was incapacitated during life and property changed under the watch of a conservator (voluntarily or involuntarily) then ademption doctrine does not apply. The beneficiary receives the general pecuniary value of the gift. Basically all specific gifts are converted to general gifts. The exception is if the conservatorship ends and the testator does not execute a codicil within one year. 20 5. Outstanding Balance Doctrine (Softening Doctrine in CA) – If a specific gift is transferred either voluntarily or involuntarily, and at the time of death there is an outstanding balance due to the testator as a result of the transfer, the beneficiary gets to take the outstanding balance. 6. Stocks – 1. Common Law – If the gift is specific and the change is due to a stock split, the beneficiary takes the additional shares. If the gift of stock is a general gift the beneficiary does not take the additional shares. 2. Modern Trend – Do not distinguish between general or specific, the intent is to give away a percentage interest in a company, so adjust of splits. 3. CA – Look to see if the testator owned an identically matching amount of stock that was named in the will. If so then give the benefits of splits to the beneficiary as if it was a specific gift. Basically follow common law approach. The only hiccup is when testator owns 100 shares and says I give a 100 shares. This looks like general gift but since the testator owned an identically matching item, treat it as a specific gift. 4. The general rule is that if a general gift is not in the estate, an executor must go out and acquire it. This is not the case for gifts of closely held stock, treat them as specific gifts. D. Misc. Construction Doctrines 1. Satisfaction (Testamentary version of advancement) – Does an intervivos gift court against a beneficiaries testamentary share? a. At common law intervivos gifts did count as satisfaction to family members, but not as to non-family members. b. Modern Trend and CA – Intervivos gifts do not count as advancements against the testamentary share unless there is a writing stating otherwise. The writing can be the will itself, or a writing by the donor at the time of the intervivos gift, or a writing by the donee created anytime. c. In CA, do we apply the satisfaction doctrine to donee’s issue in, or to another taker under a gift-over clause? Yes we do, this is opposite to what we do under the advancement doctrine. 2. Exoneration of liens – I give my house. House worth 500K but 490K mortgage. a. At common law beneficiary takes free and clear, meaning the estate pays off the mortgage unless otherwise noted by testator. b. Modern trend says beneficiary takes subject to the accompanying debt unless otherwise noted by testator. 3. Abatement – What happens if there is not enough to satisfy all gifts? a. General approach – Satisfy the gifts in this order: Specific, General, and then residuary. b. CA – Courts follow the general order, but they can alter it based on equities (look for wife in residuary). Also, courts distinguish between relatives and non-relatives in dealing with specific and general gifts. Cut the non-relatives first. IX. LIMITATIONS ON TESTEMENTARY POWERS TO TRANSFER 21 A. Five Protections in every jurisdiction 1. Public Pension Plans -- Social Security – Only spouse can claim social security. This is a life interest, support not ownership. 2. Private Pension Plans – ERISA, pension benefits, only spouse can claim, unless there is a voluntary and knowing waiver. Usually life interest, support not ownership. 3. Homestead – Can claim a place to live, some jurisdictions is the whole house, other jurisdictions give a set amount of money. Usually get homestead for life. 4. Personal Property Set Aside – Some set amount of personal property is set aside (these trump creditors and/or wills). 5. Family allowance – This allowance only lasts until probate closes. Is this a set amount or is it adjusted to standard of living? Jurisdictions are split. B. Separate Property States – When one spouse dies, the other spouse has the choice to take their “elective share.” What is the elective share? At common law the elective share is typically 1/3 of the decedent’s probate estate. C. Community Property States – In community property states, any property acquired as a result of the earnings of either spouse during the marriage in a community property state are called community property and are owned 50/50 at the time earned. 1. Putting a spouse to an election – This is where 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. At common law they assumed putting a spouse to an election whenever the deceased spouse gave away property belonging to surviving spouse. Modernly court want more clear intent of putting a spouse to an election. Can be expressed “I give all of the phat pad to Lulu and if Jerri agrees then every else to Jerri.” Can also be via a no-contest clause. 2. Migrating Couples a. Quasi-community property – Separate property that would have been characterized as community property if the couple had been domiciled in a community property jurisdiction at the time of acquisition. This characterization only applies at death. It is still an individual’s separate property until death of the owner. b. Reverse migration – When a couple earns 100K in a community property state and then moves to a separate state. That property is not recharacterized. When one spouse dies only their 50K share goes into probate. Does the surviving other spouse get to take their elective share on top? Depends on jurisdiction, some say no right to claim elective share in community property. D. Other Doctrines 1. Pretermitted Spouse Doctrine – Where the testator (1) marries after executing all testamentary instruments (wills and revocable trusts), and (2) dies without revising any of the instruments to provide for the spouse, the presumption is that the testator accidentally disinherited his spouse and he meant to provide for her but died before doing so. This goes for wills, trusts, and other instruments. a. What does spouse get? In CA, spouse gets her intestate share with a cap on separate property (no more than ½ separate property). 22 b. Where is this funded from? In CA, we do not follow the abatement doctrine, instead we take from all takers equally pro-rata. c. This presumption can only be rebutted in three ways: i. The decedent intentionally disinherited the spouse, and that intent is expressed in the instrument (will, trust, or other) ii. If testator has provided for the spouse in a transfer outside of the will and the testator intended the transfer outside of the will be lieu of the spouse taking under the will. Historically this would be a non-probate transfer. For intent here can look at basically any evidence iii. Spouse has made a valid agreement waiving rights (pre-nuptial agreement) d. Nuance – If the surviving spouse is included in one of the instruments but was put in prior to marriage, unless the testator thought that the person was going to be his spouse when he executed the instrument, such gift will not prevent the surviving spouse from utilizing the doctrine. 2. Pretermitted Child Doctrine – Where the testator (1) has a child after executing all testamentary instruments (wills and revocable trusts), and (2) dies without revising any of the instruments to provide for the child, the presumption is that the testator accidentally disinherited his child and he meant to provide for him but died before doing so. This goes for wills, trusts, and other instruments. a. What does child get? In CA, the child gets his intestate share of the combined assets of probate and revocable trusts. And they get it right when probate ends. b. This presumption can only be rebutted in three ways: i. The decedent intentionally disinherited the child, and that intent is expressed in the instrument (will, trust, or other) ii. If testator has provided for the child in a transfer outside of the will and the testator intended the transfer outside of the will be lieu of the child taking under the will. Historically this would be a nonprobate transfer. For intent here can look at basically any evidence. iii. If that the decedent had one or more child at the time of execution and substantially all to the other parent of the omitted child. c. Does a pretermitted child have standing to sue the attorney for malpractice? Common law no, but modern trend says as long as the child was an intended beneficiary then he has standing to sue. 3. Accidentally Omitted Child Doctrine -- If at the time of decedent’s execution of all of decedent’s testamentary instruments (will and intervivos trusts), the decedent failed to provide for the child because he wrongfully believed the child was dead or unaware of existence, then the child gets intestate share. a. This is not rebutable X. JOINT BANK ACCOUNTS A. Common law had three different types of multi-party bank accounts: 23 1. True Joint Tenancy – Intervivos it would be 50-50 and at death the survivor gets 100. 2. Agency or Convenience – Intervivos it would be 0 – 100 and at death the survivor gets 0. 3. Payment on death – Intervivos it would be 0 – 100 and at death the survivor gets 100 (watch for modern trend v. common law approach). a. Common law – These accounts would not avoid probate, the money would go into probate and follow the will or intestate b. Modern Trend – These accounts have a right of survivorship and will avoid probate B. Common Law Presumption -- Presumption of true joint tenancy but can use clear and convincing evidence to show the intent of the decedent to form one of the other types of accounts. Court says can look at evidence of how the account is treated even after it was set up. C. Modern Trend and CA -- We presume the parties own the funds in proportion to the contributions that they made, and at death we presume a right of survivorship. But if clear and convincing evidence of alternative intent then treat the property accordingly. XI. OTHER WAYS TO AVOID PROBATE A. Life Insurance Contracts avoid probate B. Contracts with payment on death clause. 1. Common law did not allow contracts with a payment on death clause (except life insurance contracts) to avoid probate. 2. Modern trend and CA will allow all contracts with a payment on death clause to avoid probate. C. Do wills or contract rules apply with regard to lapse? 1. Common Law says that normal contracts law apply in that a beneficiary does not need to survive to get the benefit. It just flows into their estate via contract rights. 2. Modern trend and CA says that we apply wills doctrines to life insurance contracts and to other payment on death contracts. This means that if the beneficiary is dead the “gift” will lapse. D. SUPERWILL -- Superwill doctrine – Modern trend movement that says we should permit a subsequently executed will to override the provisions of a non-probate because true intent should control. No Jurisdiction has adopted this yet. XII. TRUSTS A. A trust is thrice bifurcated 1. Bifurcate the parties – Legal Title to the Trustee, and Equitable Title to the Beneficiaries 2. Bifurcate the gift – Principle/Corpus/Res, and Income 3. Bifurcate the duration of the gift – Possessory estates and future interests B. Four requirements for a valid trust 1. Intent to create a trust – This is when one party transfers property to another party with the intent to vest the beneficial interest in a third party. a. Using the Magic Words (trust/trustee) is typically enough to show intent 24 b. Precatory Trust – This arises where there is an outright gift from donor to donee, but the donor includes some language that expresses the hope or wish (but no legal obligation) that the property be used for the benefit of another. This is not a trust, just a gift with a hope. The key turns on donor’s intent. Where the language is ambiguous the court will take into account circumstances surrounding the situation (parol evidence) c. Failed Gifts – Where the donor has the intent to make an intervivos gift, but fails to deliver that gift (then dies), the gift itself will fail for want of delivery. The donee may try to save the gift by arguing that the donor intended to create a trust and delivered the property to himself as trustee. Because a trust will not fail for want of trustee, the donee asks the court to appoint a successor trustee to deliver the property. i. If the settlor is the trustee, as in the case of the failed gift turned trust, then the threshold to create the trust is high. The settlor must have treated the property differently as trustee. 2. Funding of the trust – some property must be transferred to the trustee. Two key components are (1) the act of funding, and (2) what type of property interest qualifies a. Act of funding – When the settlor and trustee are different parties, funding is much more simple. When the settlor and trustee are the same party the court sets a higher threshold. b. What property qualifies? – The general rule is that anything one thinks of as a property interest qualifies. There are two areas that give courts trouble: i. Expectancies – Do not qualify. I put the money I expect to inherit into trust. Is this treated differently that future profits? ii. Future Profits – Majority of courts say that future profits are not an adequate property interest for fund a trust. But they are adequate for an intervivos gift. May turn on whether or not there is a writing, or whether or not the settlor owns the means for creating the future profits. Generally, the trust is created when the profits are earned and treated consistently with the trust instrument. 3. Ascertainable beneficiaries – Must be able to name them or objectively determine who they are. Court needs to know who has standing enforce trust. a. Courts generally uphold unborn children as beneficiaries. b. Charitable Trusts – These work the opposite of regular trusts in that they are only valid where there is no ascertainable beneficiary. Beneficiary should be society c. Honorary Trusts – Trusts for the benefit of pets or to maintain a gravesite should fail for want of ascertainable beneficiary. However, an honorary trust can be maintained if: (1) The purpose of the trust is distinct/definite and honorable and not arbitrary or capricious; and (2) the trustee is willing to honor the terms of the trust. If the trustee dies or stops honoring the terms then a resulting trust is imposed. 25 4. Writing (maybe) – Whether a trust must be in writing is not a function of trust law, but rather a function of the statute of frauds and/or a function of wills act formalities. a. Intervivos trust of personal property need not be in writing. b. Testamentary trust must be writing pursuant to the wills act. Where a testamentary trust fails for want of a writing, the issue is whether relief should be a constructive trust or a resulting trust. The answer turns on whether it is a secret trust or semi-secret trust. i. Secret trust – A secret trust is one where on the face the will it appears as unambiguous outright gift. The court must take extrinsic evidence to determine if the devisee was supposed to take as trustee. If so, a constructive trust will be imposed and property goes to intended beneficiary. ii. Semi-Secret Trust – Here, something on in the express of the will that hints at the fact that the devisee was supposed to take as trustee. Here the courts will not take extrinsic evidence to determine the intended beneficiaries and instead impose a resulting trust giving the property back to the dead settlor. It will usually fall residuary or intestacy. c. Any trust involving real property must be in writing pursuant to the statute of frauds. i. Constructive Trust – Where settlor transfers deed to trustee but fails to include in the deed that the transfer is for the benefit of third parties, the common law said the trustee is now the owner free of trust. Modern trend says that is unjust enrichment and imposes a constructive trust to distribute the real property pursuant to intent of settlor. Just common law for us, or modern trend as well? C. Resulting Trust – If a trust fails in whole or in part at creation or at any point during, a resulting trust will be imposed and property will be given back from the trustee to the settlor or the settlor’s estate. XIII. BENEFICIARY’S INTEREST A. Trust property is bifurcated between income and principal. Asses the beneficiary’s interest separately for each income interest and/or principal interest as either mandatory or discretionary. 1. Mandatory – Look for the term shall. If no distribution then sue for breech of trust. No issue here. 2. Discretionary – Trustee has discretion to distribute property pursuant to his fiduciary duty. What is that duty? a. First duty is to inquire about the beneficiary’s status and needs. If the trustee fails then that is deemed a breach of duty. b. Next the trustee must exercise discretion in good faith and reasonably. i. Good Faith – This is a subjective standard, he has to honestly think he is acting in the best interest of the beneficiaries ii. Act reasonably – This is an objective standard to act as a reasonable trustee would act. The settlor can modify this duty with 26 expressed language stating “sole and absolute discretion.” The courts take this language to virtually eliminate the duty to act reasonably, but the trustee must still act in goof faith. c. Settlor’s intent – The trustee should also take into account any specific guidelines setting forth settlor’s purpose i. If the settlor gave a standard like maintain comfort, or support then that means the standard they had become accustomed to before becoming a beneficiary 3. Sprinkle/Spray Trust – This trust requires payment to a group of individuals where the trustee has discretion as to how much each individual receives. This is a hybrid trust. XIV. CREDITOR’S RIGHTS/SPENDTHRFT CLAUSE A. General Rule – A creditor can reach any person’s property to the extent their interest is transferable 1. Is interest in a trust transferable? – Yes, as a general rule an interest in a trust is transferable therefore a creditor can step into the beneficiary’s shoes and acquire the same rights, but no greater rights then the beneficiary. a. If mandatory then easy to force distribution b. If discretionary then trustee must still decide based on beneficiary. Creditor can sue, but is suing for breach of fiduciary duty to the beneficiary. B. Spendthrift Clause – A spendthrift clause expressly restricts the beneficiary’s ability to transfer the interest (voluntarily or involuntarily). If the clause only limits involuntary transfers then the clause is null and void. The effect of this clause is that creditors can no longer step into the beneficiary’s shoes because the interest in non-transferable. There are four creditors that can pierce the spendthrift clause. 1. Spouses entitled to alimony 2. Children entitled to child-support 3. Creditors who provided basic necessities 4. The federal government 5. Tort Judgment Creditor (From BarBri) C. Settlor as beneficiary – Where the settlor puts property in trust for his own benefit, a spendthrift clause will not serve as a shield to any creditors. In addition, in this type of trust a creditor can step in to the beneficiary’s shoes and force both mandatory and discretionary payments. D. Support Trusts -- Just give enough for support. The key is not the presence of the word support, but rather the formula for distribution. The trustee shall distribute as much income, and if necessary principle, as necessary for the beneficiary’s support. A support trust automatically implies a spendthrift clause. It is a support trust if the amount to distributed is limited to the amount necessary for support. XV. MODIFICATION/TERMINATION OF TRUSTS A. Termination by settlor – 1. A settlor can terminate a revocable trust by adequately expressing the intent to revoke. All the ways to revoke a will are valid, but those are not the only ways. 27 2. If the trust provides for a particular method of terminating, and the court determines that is the only way to terminate, then that will trump. Classic example is to limit termination to delivery of instrument to trustee. 3. In CA if a trust is silent as to revocability, it is presumed to be revocable. B. Modification of trust – (is it the same for modification and termination in that if all beneficiaries and trustee consent, it should be ok because no one is going to sue?) Common law the settlor has no interest. Why can he override the trustee then? 1. Common Law -- If there is an unforeseen change in circumstance which is materially frustrating settlor’s intent, and all the beneficiaries consent, the trustee could petition the court and the court would probably modify the trust. Common law set a high threshold for this modification doctrine. Does Trustee need to consent? Book says no. 2. Modern Trend – As long as you have all parties consent, the court will be more likely grant a modification. Court will try to promote settlor’s intent. C. Natural termination – A trust is terminated when the principal is disbursed (aka the bucket is empty) D. Pre-mature termination – Always need the consent of all beneficiaries 1. At common law if the trustee and all parties with an interest (all beneficiaries and settlor only if he retained an interest) consent, then the trust can be terminated early. 2. If the trustee tries to block the termination then: a. If the settlor is alive the trustee can block termination subject to being trumped by the settlor. The settlor can consent and override the blockage by trustee. b. If the settlor is dead the Claflin doctrine kicks in, the trustee can not block the termination unless he can show there is an unfulfilled material purpose to the trust. There are four generally accepted material purposes: i. If the trust has a spendthrift clause ii. If it is a support trust iii. If it is a discretionary trust iv. If it is a trust where property is not to be disbursed until a beneficiary reaches a specific age. E. Doctrine of virtual representation – Where the interest of unborn beneficiaries are identical to those of living adult beneficiaries, the living adult beneficiaries can speak for the unborn. F. Merger Doctrine – At common law the settlor had no standing if he did not maintain an interest. Therefore, if there is one trustee and one beneficiary, and they are the same, then the legal and equitable title merge and the trust is terminated. XVI. POUR-OVER WILLS A. A pour-over will contains express language giving all or some of decedent’s probate property to an intervivos trust. Before a pour-over clause can be given effect, it must be validated. What if you say my property to X trust? Is that different to my property to be distributed pursuant to the terms of X trust? 1. Incorporation by reference – Here the decedent is incorporating the trust instrument into the will thus creating a testamentary trust that is subject to court 28 supervision. Example: all property to the “puppy trust trustee to hold and distribute pursuant to the terms of the trust.” For this to be valid: a. Elements: i. The will must express the intent to incorporate the document ii. The will must describe the document with reasonable certainty iii. The document, not the trust itself, was in existence at the time the will was created b. Problems i. No amendments to the trust can be made because the trust document will be incorporated as it existed when the will was executed ii. Because you are incorporating the trust into the will, the court will supervise the trust 2. Acts of independent significance – The act referenced in the will is the reference to the trust. The question becomes whether the trust has its own independent significance apart for its effect on the decedents probate property. The independent significance is to hold and manage the trust property. a. Elements i. Trust must be funded intervivos; and ii. Trust must have property in it at the time of decedent’s death. b. Problems i. Some courts treat the pour-over property as a testamentary trust and supervise it 3. UTATA – The pour over clause will be valid as long as three requirements are met: a. Elements i. The will must identify the trust; and ii. The terms of the trust must be set forth in a written instrument other than the will; and iii. The trust instrument must be executed/signed before or concurrently with the execution of the will b. Basically this is the same as incorporation by reference, but the trust document must be signed c. Under UTATA: i. Trust is not subject to court supervision ii. Trust does not need to be funded intervivos iii. Subsequent amendments are honored. 29