W _ T Outline- Wendel _Gomez_

Wills & Trusts Outline – Wendel – Fall 2004 I. Overview A. Issue in this course: Who gets your property when you die? 1. Answer: It depends (see below) B. Terminology: 1. Nonprobate property: Start with this on an exam. a. Property passing pursuant to the terms of an instrument other than a will, limited to: i. Joint tenancy property: D’s interest vanishes at death and survivor gets whole property once death certificate is filed. ii. Life insurance Ks: proceeds paid by insurance company to beneficiary upon receipt of death certificate. (Modern trend expands this to all Ks with payable-on-death clauses). 1. CA: MT…any K with 3PB POD clause iii. Legal life estates and remainders iv. Inter vivos trusts 2. Probate property: Default a. Property that passes under the decedent’s will or by intestacy. 3. Testate: died with a will a. Devisee: individual who takes real property under a will (although often used for real and personal property) b. Legatee: individual who takes personal property under a will 4. Intestate: died without a will (default) a. Any part of the estate of a decedent not effectively disposed of by a will passes to the D’s heirs as prescribed by the intestacy statute. i. Estate: probate property ii. Heirs: individuals who take under the intestate scheme 1 II. The Intestacy Scheme: An Estate Plan by Operation of Law A. Order of Taking Under Intestacy & How Much They Take… 1. Surviving Spouse/Domestic Partner: amount depends Any property not passing to the surviving spouse passes as follows… 2. Surviving issue of D: equally* 3. STOP and ask: was there a predeceased spouse? If so, plug in recapture doctrine. 4. Parent(s) of D: equally* 5. Issue of Parents: equally* 6. Grandparents: equally 7. Issue of grandparents: equally 8. Issue of predeceased spouse: equally 9. Next of kin 10. Parents or issue of parents of predeceased spouse: equally 11. Echeats to the State B. Spouse/Domestic Partner 1. How do they take? It depends upon whether the property is community property or separate property. a. CP/Quasi CP: take the one-half that went into probate i. CP: in a CP state, each spouse has a ½ interest in all property acquired by either spouse at the moment of acquisition, except for gifts or inheritance. ii. QP: if you acquired property during marriage in a non-CP state but a CP state would have characterized it as CP and you move to a CP state, it will be QCP. 1. Only apply QCP to separate property of the spouse who died, not that of the spouse who is still alive. iii. Example: W makes $10. $5 of it belongs to W and $5 belongs to G at the moment he makes it. When he dies, his $5 goes into probate. G takes all of it. b. Separate property: depends… i. 100%: if there are no surviving issue, parents, or issue of parents ii. 50%: if there is one surviving child* or no issue but P or issue of P 1. Child = child or issue of deceased child (count children not issue) iii. 33%: if there are more than one surviving child* 2. Who qualifies? a. Domestic Partners: CA statute (starting 1/1/05) gives domestic partners the same rights, obligations, etc. as spouses. b. Surviving Spouse: i. Survival Requirements: 1. Historically/CL: survived by a millisecond, proven by a preponderance of the evidence. 2. Legal survival requirement: depends… a. Intestate: survived by 120 hrs (5 days), proven by clear and convincing evidence. b. Testate/Non-probate: survived by a millisecond, proven by clear and convincing evidence. 2 i. Default, express writing can override this. 3. If a spouse cannot satisfy the survival requirement, she is treated as if she predeceased him. a. For JT property: transmute into TC by operation of law AND each spouse’s half goes into probate. 4. Example: Janus v. Tarasewicz ii. Spouse/DP: 1. Must be validly married (i.e. had a legal ceremony, only married to one person) or a putative spouse a. Putative spouse: a party that has a rx belief in good faith that the ceremony was valid is given the same status as a legally valid married spouse. 2. To end a marriage: Court must enter a final judgment in the matter for the purposes of wills and trusts. 3. In states that recognize CL marriage, cohabitating long enough may suffice. CA does not recognize CL marriage. 3. Recapture Doctrine a. Equity doctrine: When a second spouse dies, the first spouse’s family should get some of the property from the estate b/c you need to balance out the community’s wealth among both sides of the family. b. After determining surviving issue, recapture all of the qualifying property that the second spouse to die received by virtue of the first spouse’s death that falls into intestacy. i. Qualifying property: 1. Real property: recapture if first spouse died w/in 15 years 2. Personal property: recapture if first spouse died w/in 5 years AND the aggregate is over $10,000 AND there is a written record of ownership. c. Who may recapture and in what order? i. Issue of predeceased spouse ii. Parents of predeceased spouse iii. Issue of parents of predeceased spouse d. Variables to consider: i. Second spouse to die (can have more than one of these if the person remarried after the first spouse died) ii. Intestate property iii. No surviving spouse iv. No surviving issue C. Descendents 1. How do they take? a. Issue = all possible decedents, not just children b. Assuming someone qualifies as an issue, what does equally* mean? c. Issue take by representation i. Ask three questions: 1. Where do we make our first division? a. Divide at the 1st tier always; or b. 1st tier where there’s a live taker 2. How many shares do we divide the property into at that tier? (This is always the same.) a. One share per each party alive at that tier; and 3 b. One share per each party dead at that tier but survived by issue 3. How do we treat the “dropping” shares? a. Bloodline: drops by bloodline (everyone at the same degree doesn’t get equal shares) b. Pooling Approach: Add together dropping shares and then divide equally among the eligible takers. ii. Three approaches for each question: 1. Per stirpes: a. First tier always b. One share per each party alive/One share per each party dead but survived by issue c. Bloodline 2. Per Capita (CA approach, but will can say any of them – individual’s intent over default; also CA says “by representation” equals per stirpes) a. First tier w/live taker b. One share per each party alive/One share per each party dead but survived by issue c. Bloodline 3. Per capita at each generation a. First tier w/live taker b. One share per each party alive/One share per each party dead but survived by issue c. Pooling D. Ancestors and Collaterals (Next of Kin) 1. Three Approaches to Determining Next of Kin a. Parentelic: head of the line is great-grandparent and all descendants are in a parentellic line (parents, grandparents, etc.) i. Each parent is a head and then has his own line through his parents, grandparents, etc. ii. Keep going out by collateral lines until there is a live taker. 1. Anyone in D’s parents’ line; then grandparents’ line, etc. b. Degree of Relationship: count the degrees of relationship between D and the relative and those of closest degree (lower degree) take to the exclusion of those of a more remote degree (higher degree) i. Parent to child: one step; to grandchild: two steps, etc. c. Degree of Relationship w/parentelic tie breaker: CA approach i. When there is a tie, those in the closer parentelic line take ii. To do: Identify the head of the parentelic line of the person trying to take and count from decedent to the head. 1. When going to the right, count males 2. When going to the left, count females iii. Then count from taker to head iv. Add together (under pure degree, the one with the least would win) v. Winner is in closest parentelic line from decedent. 4 E. Transfers to Children 1. How do you qualify as an Issue? a. Issue = series of parent-child relationships. b. To establish inheritance rights, you must establish a parent-child relationship. i. Natural Ways to Establish a Parent-Child Relationship: 1. Parents Married: if a woman is married at the time she gives birth, there is a virtually irrebuttable presumption that the husband is the father. a. Child inherits from and through the parents; parents inherit from and through the child. NP NP C 2. Parents Not Married: Easier to prove mother; need paternity suit to prove father a. Prefer paternity suits brought inter vivos so during life the burden of proof is preponderance; after death it is clear and convincing. b. Child inherits from and through the parent; parent can only inherit from and through the child if the parent or a relative of the parent: i. Acknowledged the child; and ii. Contributed to the support or care of the child. NP * NP * * = 1) Ack 2) Support C iii. In cases of unjust enrichment (father inherits from a child he did not acknowledge but his mother did), ask for a constructive trust which is then given to the grandmother. ii. Legal Ways to Establish a Parent-Child Relationship (Adoption) 1. Classic Adoption: at the moment of adoption, there is a complete severance of the NP’s rights and a creation of the AP’s inheritance rights. a. Child inherits from and through APs; APs inherit from and through the child. NPs APs C 5 2. Post-Death Adoption: CA – exception to classic a. Parent cannot inherit from child, but child can inherit from NP if: i. Parent and child lived together at some time ii. Post-death of either NP (dead) NP NP * AP AP * = 1) Post-death 2) C & NP had lived together C 3. Step-Parent Adoption: (Exception #2 to classic) AP marries one of the NPs. a. Once the adoption takes place, the rights of the NP of the same gender of the AP are severed and inheritance rights are created btw the child and the AP. i. The child can still inherit from and through the NP, but the NP can no longer inherit from the child. b. To create rights with the AP, child must show: i. Step-parent (AP married NP) ii. C lived with the P for some period of time (married) NP * NP-----AP * = 1) Step-parent 2) C lived w/NP for some time C 4. Non-Step Parent Adoption (Same Gender Adoption): a. B/c the NP affected is the one of the same gender as the AP, NP must co-adopt with the AP b. Child inherits from and through NP and AP; and they inherit from and through child. Other NP must die or give up rights. NP* NP** AP** * = NP must die or give up rights **= NP/AP must adopt at same time or NP loses rights C 5. Attempted Adoption: a. Requirements: i. Relationship began during the child’s minority and continues through their joint lifetimes ii. Clear and convincing evidence that the AP would have adopted BUT FOR a legal barrier 1. Usually, NP refuses to consent to adoption b. Once the child turns 18 there is no legal barrier. In order to obtain inheritance rights, they must proceed with adoption and cannot invoke this doctrine. 6 c. Does not affect rights of NPs b/c there’s been no adoption. d. Child can inherit from and through NPs and AAP; only NPs can inherit from and through child. NP NP AAP* * = Requirements above C 6. Equitable Adoption: you thought you had a valid adoption and equity will let it slide b/c you were close enough a. Requirements: i. Agmt btw NPs and APS ii. Performance by NPs in giving up custody iii. Performance by child by living in the home of APs iv. Partial performance by AP in taking the child in to the home and treating it as their child (but usually just not following through w/paperwork) v. Intestacy of AP b. Child can only inherit from the AAP; AAP cannot inherit from the child. NP NP AAP* from, but not through C 7. *Can have lots of arrows down but a maximum of 2 arrows up. c. Posthumous Children: child born after the father dies i. CL treats the child as alive from the day of conception ii. NPs are married, i.e. presumption that child is the husband’s 1. CL: If the child is born w/in a certain amount of days (280 – normal gestation period) of the husband’s death, don’t need to prove paternity. 2. MT: 300 days iii. NPs are not married: child must prove paternity iv. CA law may change to posthumously conceived child w/in one year of D’s death will have right to inherit from and through. d. Half-bloods i. CL: half-siblings are treated differently when a sibling dies ii. MT/CA: half-siblings are treated the same as full-blood siblings when a sibling dies. 2. Advancements a. Issue: should inter vivos gifts a decedent made to an heir count against the heir’s share of the decedent’s probate estate? i. CL: Rebuttable presumption that inter vivos gifts are advancements ii. MT: Rebuttable presumption that inter vivos gifts are NOT advancements 1. To opt out: put it in writing (does not need to qualify as a will) a. If the donor creates the writing: must be contemporaneous with the giving of the gift. b. If the donee creates the writing: no other requirements. 7 2. Advancement does not count against the share of a predeceased donee unless the writing says so. a. For example, if donee dies and her share would go to her child, the advancement does not count against what the child takes. 3. CA follows MT b. How does the advancement affect the shares taken? i. Hotchpot: All inter vivos gifts to the child are added back (on paper) into the parent’s probate intestate estate to create the “hotchpot.” 1. Then the hotchpot is divided equally among the decedent’s heirs. 2. Any advancement received by a child is counted against that child’s share of the hotchpot. 3. The child actually receives from the parent’s intestate estate only their share of the hotchpot minus any advancement the child has received. ii. Example: M has $500. She gives A $100 and L $300 w/a writing saying it counts as an advancement. 1. Start with actual probate estate: $500 2. Put back advancements: $300 + $500 = $800 3. Hotchpot = $800 4. Divide hotchpot btw heirs: $800/2 = $400 each 5. Credit advancement against share of hotchpot: $400 - $300 = $100 6. Distribute actual estate to other heir(s) accordingly: $400 7. Together they should equal the estate: $100 + $400 = $500. iii. If the advancement exceeds their share: the child does not need to give back any of the inter vivos gift to the probate estate, but he will not be permitted to share in the distribution of the estate and his share is divided among the other eligible takers. 3. Transfers of Expectancy a. Expectancy: assume (expect) to take from your parent’s estate when they die. You can only assume you will qualify as an heir b/c until death, you are only an heir apparent. To qualify, you must meet the survival requirement. b. An expectancy is not a property interest and thus cannot be transferred. i. A K to transfer an expectancy is not legally enforceable, but equity may make it enforceable if the K appears fair and reasonable under the circumstances. 4. Managing a Minor’s Property a. Technically, a minor lacks capacity to hold property. The law has devised options for managing property for a minor. b. Three Arrangements: i. Guardianship: Guardian preserves the property and only has authority to use the income generated by the property for the minor, absent court approval; involves supervision by the court leading to a high cost of administration. 1. Default for intestate 2. MT version is conservatorship: conservator takes title as trustee for the minor and has all the powers a trustee would have over the property. Usually must account to the court once a year. 8 ii. Custodianship: Custodian has the power to use the property in the best interest of the child; accounting is given to the child at 18; more efficient but most appropriate for small to medium sized gifts. 1. This is the Uniform Transfers to Minors Act iii. Trust: Terms in the trust control the trustee’s power and duty to account, when it terminates, etc. More flexible, but may have high up-front costs; good for large gifts. F. Bars to Succession 1. Homicide: a. CA has a statute on point when an heir kills the decedent: i. Legal title to the decedent’s property passes to the killer, but a constructive trust is imposed to prevent unjust enrichment, and the court orders the property to be distributed to the next in line to take. ii. For the killing to bar the killer from taking, the killing must be intentional and felonious. 1. This is important in manslaughter cases: killer is barred in voluntary manslaughter cases; he is not in involuntary cases. b. For property held in JT, most jurisdictions transmutate it by operation of law into TC. The killer keeps his half and the other half falls into probate. c. Does the killer’s issue take? i. Intestate: Killer is treated as if she predeceased the decedent and her issue take. ii. Testate: CA statute says that the anti-lapse doctrine does not apply to testate property in homicide situations. 1. Exception: an express gift over clause in the will 2. Elder Abuse a. A person is deemed to have predeceased the decedent if: i. By clear and convincing evidence, he is liable for: 1. Physical abuse, 2. Neglect, or 3. Fiduciary abuse of the decedent, who was an elder or dependent adult. ii. The person is found to have acted in bad faith. iii. The person has been found to have been reckless, oppressive, fraudulent, or malicious in the commission of any of these acts upon the decedent. iv. The decedent, at the time those acts occurred and thereafter until the time of his or her death, has been found to have been substantially unable to manage his or her financial resources or to resist fraud or undue influence. b. Rationale: protect elderly with diminished or weakened capacity from family members who try to take advantage of the situation and mistreat them. 3. Disclaimer a. Declining to accept a testamentary gift either in whole or in part. i. All gifts require intent, delivery and acceptance, including testamentary gifts b. Scope: i. CA/majority/MT: can disclaim all types of property (NP, probate-testate, intestate) ii. Traditional Rule: can only disclaim probate property c. Mechanics 9 i. If a party disclaims, the party is treated as if he predeceased the decedent. ii. Can you direct where the property will go? NO. Cannot attempt to exercise control over property you never had. iii. Requirements: 1. Can disclaim in whole or in part 2. Must be in writing 3. Must be done within nine months to avoid taxes iv. CA Mechanics: 1. Treat the disclaimer as being alive for the purpose of determining the generation at which the division of the estate is to be made. a. This is to avoid disclaiming for the purpose of getting larger shares for one’s children. 2. Treat the disclaimer as being alive for applying the advancement doctrine. a. This is to prevent disclaiming for the purpose of avoiding the advancement doctrine. d. Why disclaim? i. Post-mortem estate planning: tinker to try and let a certain party take more property ii. Avoid taxes e. Can creditors touch the disclaiming party’s share? i. General rule: No. Disclaimers are effective against a creditor’s claim. ii. MT exception: Cannot disclaim property a public creditor has a claim against. It does not invalidate the disclaimer, but the government has a right to reimbursement (can sue parties that took for constructive trust). 1. For example: the government, medicare 2. Troy v. Hart III. Formalities of Wills: Mental Capacity *A will does not take effect until you die. To opt out of intestacy, you must make a will… A. Mental Capacity 1. To execute or revoke a valid will, you must have testamentary capacity: a. Be 18 years of age b. Be of sound mind i. To have sound mind, you must have the ability to know: 1. The nature and extent of T’s property; 2. Persons who are the natural objects of T’s bounty (those who people think should take); 3. Disposition the T is making; and 4. How these elements relate so as to form an orderly plan for the disposition of the T’s property. *CA statute overlaps w/this w/very subtle differences. c. Testamentary capacity versus contractual and marriage capacity: i. Testamentary capacity is lower than contractual capacity b/c the consequences of an inter vivos action are possibly greater than a testamentary one. Need to protect people while they are alive. ii. Testamentary capacity is higher than marriage capacity b/c the State has less right to intervene b/c it is a fundamental right under the constitution. 10 2. *The appointment of a conservator in and of itself is not enough to show a lack of testamentary capacity. 3. Even if you have general testamentary capacity, there may be a defect: a. Insane Delusion b. Undue Influence c. Fraud B. Insane Delusion 1. Insane delusion is a false belief that is adhered to despite all evidence to the contrary. 2. Rule: a. Delusion renders a will invalid when: i. Majority: A delusion is insane even if there is some factual basis for it if a rational person in the testator’s situation could not have drawn the conclusion reached by the testator. (Average rx person approach) OR ii. Minority: If there is any factual basis for the conclusion, there is no insane delusion. (CA approach) b. And the insane delusion caused the T to leave the property as he did. i. As long as it MIGHT have affected the execution of the will, it will be stricken; OR ii. “But for” the delusion, the T would not left the property as he did. (CA approach) 3. Mistake: is susceptible to correction if the T is told the truth whereas an insane delusion is a belief not susceptible to correction by presenting the T w/evidence indicating the falsity of the belief. a. We don’t protect people from mistakes, as opposed to insane delusions, because it would create to high a cost of administration. 4. Remedy: Correct the will to the extent it is affected by the defect in capacity; strike affected portions or entire will, but will not re-write the will. a. Effect depends on the type of gift being stricken. There are three types of gifts: i. Specific: gift of one item and only matches that description (i.e. my wedding ring). ii. General: gift of general pecuniary value and satisfied by any item that matches that description (i.e. $1000). 1. Demonstrative: general gift from a specific source (treated as a general gift) iii. Residuary: gift of giving away all property or the rest of the property (i.e. “I give the remainder of my estate, all my property, etc.”). b. If you strike a specific or general gift (the gift fails), it goes to the residual clause; if you strike a residual gift, it goes to intestacy. If you strike the entire will, it goes to intestacy. i. Exception: if this will revoked a prior will, the prior will may stand. ii. Exception: Jurisdictions are split when only part of the residuary fails and there are other residuary takers. 1. Traditionally: gift falls to intestacy 2. MT: gift is re-distributed to other residuary takers (residuary to a residuary) a. CA follows MT 5. Rationale: if you have an insane delusion, the will does not represent your true intent. C. Undue Influence 1. What is it? Substituted intent, coercion, inappropriate influence… 11 2. Three Approaches: a. Inappropriate Influence (4 elements): i. T was susceptible to undue influence ii. Influencer had the disposition (motive) iii. Influencer had the opportunity to exercise undue influence iv. Causation, i.e. disposition is the result of the influence. b. (CA) Rebuttable Presumption (3 elements) i. Confidential relationship btw the T and the influencer ii. Influencer was active in the procurement or execution of the will (opportunity) iii. Influencer unduly benefits 1. Subjectively: factor in the nature of the relationship and how much are they taking and does this seem fair? (CA approach) 2. Objectively: how much would they take if it were not valid versus under the will? iv. Burden now shifts to the influencer to rebut by a preponderance. c. Statutory Rule: Interested Drafter statute i. Undue influence if you draft the will and take under it UNLESS 1. You are: married/DP; related; or co-habitant a. Because we presume you are the natural object of the bounty 2. OR you have a certificate of independent review a. Must be more than a scrivener b. Must counsel about the nature and consequences of the intended transfer c. Must make attempts to determine if the intended consequence is a result of fraud, menace, duress, or undue influence d. Must sign and deliver to the transferor w/a copy to the drafter. d. See also interested witness doctrine below… D. Fraud 1. To prove fraud: a. Intent to deceive (knowing misrepresentation) AND b. For the purpose of influencing the testamentary scheme c. Causation 2. Two types of fraud: a. Fraud in the inducement: occurs when a person misrepresents facts causing the T to execute a will in his favor, refrain from revoking a will, or to not execute a will. i. Goes to the set-up facts; will says what T wanted, but it was fraudulently induced. b. Fraud in the execution: occurs when a person misrepresents the character or contents of the instrument signed by the T, which does not in fact carry out the T’s intent. i. Goes to what the will says or the nature of the doc; can be in whole or in part. E. Miscellaneous other doctrines: 1. Ways to minimize attacks on your will: 12 a. Put in the will the reason why. Or put it in a letter so people don’t get embarrassed and fight to clear their names. b. No contest clauses: “Any beneficiary in the will who contests, takes nothing.” i. These are construed narrowly b/c they have a double edged sword (may protect T’s intent or shield a wrongdoer’s conduct). ii. Exceptions, i.e. will not apply no-contest clauses even if you lose: (CA approach) 1. If the claim is forgery, interested drafter, or revocation (FIR) and there was rx cause to support the claim; OR 2. The claim is against parties who were active in the procurement or execution of the will, i.e. drafter, person who directed drafter, or witness (Person) and there was probable cause to support the claim. FIR = Rx cause Person = PC iii. Action to construe the will does not qualify as contesting. It is not a challenge, just asking to know if you’d win or lose if you’d challenge. c. Don’t use a will. Instead put your estate plan into an inter vivos trust. 2. Tortious Interference with an Expectancy a. Bring a suit against and 3 rd party for fraud, duress, or undue influence. b. Rationale: no contest clause doesn’t apply; can get punitive damages; longer statute of limitations. 3. Standing to challenge a will a. If your claim is successful, you would financially benefit from the court’s ruling (through intestacy, another will, a prior will, etc.) b. In states with no DP law, partner will adopt the other one b/c first parents will have to challenge the adoption. IV. Formalities of Wills: Execution/Revocation/Components *Assuming you have testamentary capacity, you must have a validly executed will… A. Execution: 1. The execution requirements serve four functions: a. Channeling function: Channels people to attys who will make form wills, which has all the right boilerplate language in it so that it will be (i) valid; and (ii) the process will be efficient. b. Protective function: Protects decedent’s intent against fraud (Witnessing requirements) c. Ritualistic function: Brings home the significance and finality of the act of execution. (Signature requirements) d. Evidentiary function: Protects decedent’s intent against fraud. (Writing requirement, witnessing requirements) 2. Wendel likes to focus on the public policy concerns: protecting D’s intent; keeping the cost of administration low; deterring fraud. 3. The requirements for execution depend upon two variables: a. The statutory requirements b. The degree of judicial compliance regarding the statutory requirements. 4. The statutory requirements upon whether the will is attested or holographic. B. Execution of Attested Wills 1. An attested will is signed in the presence of witnesses. a. CL: (1) A writing; (2) Signed; and (3) Witnessed with hyper strict compliance. 13 i. The Wills Act Formality statute expanded these three into twelve. b. MT: change the number of statutory requirements OR the degree of compliance. CA reduced the number of statutory requirements. 2. CA statutory requirements: a. Writing; b. Signed by: i. The T OR in T’s name by another in T’s presence and by T’s direction OR by a conservator; c. Witnessed by: i. Two or more persons ii. Present at the same time that they iii. Witness either the signing OR acknowledging of the signature or the will 1. Both Ws must be present when T performs, but Ws do not need to be present when each other performs and T does not need to be present when Ws perform. iv. Who understand the instrument they sign is T’s will. d. Strict compliance with these requirements (although see flexible strict below). Looking at the requirements in greater detail… 3. Writing requirement: a. Videotaped wills: i. CL: does not qualify as a will b/c 1) there is a high potential for fraud b/c you can edit out parts and 2) it is missing the ritualistic function of signing ii. MT: no contested videotape has been probated to date (only those in which all parties of interest asked the ct to probate it). But the potential is out there… 4. Presence requirement: a. Two Approaches: i. CL Line of sight approach: the party who was witnessing had to actually see or had the opportunity to see if they had looked at the proper moment. ii. MT conscious presence approach: From the totality of the circumstances, the Ws comprehend that the T is signing/acknowledging the will. 1. CA follows the conscious presence approach, even though it could be argued that this is not strict compliance. b. Telephonic presence: No ct has allowed telephonic presence b/c the will could be switched. Physical presence is required. 5. Order of Signing: MT rule is that as long as all the parties are in the room and no one leaves, the order doesn’t matter. 6. Signature: a. CL/general rule: Any mark you intend to qualify as your signature is your signature. b. CA civil code rule: Where a party makes an X intending it to be his signature, the party must: i. Make it in the presence of a witness; and ii. Then the witness needs to write the name of the party who made the X, under the X, and then write his name as the name of the party who wrote the name of the party who made the X. c. Shortened version of T’s name: i. If T is interrupted and stops mid-name: no signature ii. If T voluntarily stops mid-name intending it to be his signature: signature. iii. *Turns on why he stopped. 14 d. Assistance with signature: If T asks for help, then another party can assist or sign for him in his presence and at his direction. e. Rubber stamp: Sufficient if T intends for it to qualify as his signature. Again, someone can do it for him if done in his presence and at direction. f. Additions after signature: i. CL: Signature must be subscribed, i.e. at the bottom of the page 1. If a jurisdiction has this requirement, cannot give effect to anything below the signature. 2. Addition made BEFORE signature: cannot give effect to the entire will. 3. Addition made AFTER signature: majority give effect to the rest of the will and just ignore that provision. ii. CA: no subscription requirement, focus is on when the addition was made 1. BEFORE: can give effect to the provision 2. AFTER: cannot give effect to the provision, unless it can qualify as a holographic codicil (see below) 7. Attestation Requirement a. Delayed Attestation: i. CL: Ws had to sign in the presence of T ii. CA: Ws DON’T have to sign in presence of T. 1. How long of a delay is permitted? a. A reasonable time period. b. Most courts say 3-6 months c. Some courts say they want to make sure the Ws have a vivid recollection of what they are attested to. Do they really remember what they are supposed to be signing? b. Disinterested witnesses: attesting witness is taking under the will i. CL: attesting Ws cannot be interested; three approaches to dealing with this situation: 1. Void the entire will if it was attested by an interested witness 2. Void the share going to the interested witness 3. Purge excess amount going to the interested witness in excess what he could have expected (from intestacy or prior will). ii. UPC: No interested witness doctrine; challenged under undue influence or fraud. iii. CA: interested witness creates a rebuttable presumption that the will is the result of misconduct. 1. If W rebuts: W takes the whole gift 2. If W cannot rebut: Purge approach 3. Proof of wrongful conduct: Strike the gift C. Curative Doctrines 1. Swapped Wills (In re Pavlinko) a. Two individuals (usually spouses) have mirror wills and each party accidentally signs the one intended for the other party. i. Mirror wills: all my property to my spouse, if she survives me, and if not to the kids. (Both say this.) b. General rule: Cannot validate will b/c mistakes are NOT corrected (hyper strict compliance). c. Minority approaches: 15 i. In re Snide approach: view it as one whole execution ceremony and validate the will (substantial compliance?). ii. Scrivener’s Error: correct a mistake by the attorney because if was intended, there was fraud in the execution which means the court would come to the rescue of the testator’s intent (harmless error). iii. Mis-description Error: “I give my house at 2387 Bordero to C” but T actually lives at 3287. Will was properly executed 1. This is actually a construction doctrine (if there is a validly executed will, we will take extrinsic evidence to prove the misdescription, the mis-description is stricken as little as possible and then the ct looks to see if there is enough left to give effect to the will.) 2. Some people tried to use this to fix an execution mistake, for example, strike the deceased spouse’s typed name throughout the will. a. Doesn’t really work b/c will refers to her “husband” 2. Judicial Standards of Compliance: a. “Hyper-strict” compliance: general rule i. Mistakes are NOT corrected ii. If you cannot find a valid will under strict compliance…try substantial compliance iii. Use strict compliance for multiple choice questions b. Substantial Compliance i. Two part test: 1. Clear and convincing evidence that the D intended this doc to be his or her will. 2. Clear and convincing evidence that the D substantially complied with the wills execution requirements ii. What is substantial? No bright line. c. Harmless Error: i. One part test: Clear and convincing evidence that the D intended this doc to be his or her will. ii. Courts were mostly focusing on this prong of substantial compliance anyway. iii. Initially called dispensing power b/c as long as the test was met, cts would dispense with all or some of the statutory requirements to give effect to D’s intent. 1. States which have accepted this approach have said you can’t dispense with the signature requirement. iv. Mere potential for fraud is usually enough for clear and convincing d. Flexible strict: fourth approach people don’t want to acknowledge? i. With the appropriate fact pattern, a court might bend the rules a bit. Arguably, conscious presence and delayed attestation are flexible approaches to statutory requirements. ii. Used when: 1. Low potential for fraud, or 2. Not a lot of people are fighting about it iii. CA is probably flexible strict… 1. But start with hyper strict 2. Then argue flexible strict 16 3. Then throw in a quick substantial compliance & harmless error argument (so far the CA courts have rejected these). e. Problems under dispensing power & substantial compliance: i. Telephonic presence: 1. Dispensing power: yes, validate the will b/c we can dispense with the witnesses as long as there is clear and convincing evidence that D intended doc to constitute his will. 2. Substantial compliance: can go either way ii. Order of signing: 1. Dispensing power: yes 2. Substantial compliance: yes iii. Patrick died after writing “Pat” 1. Dispensing power: yes 2. Substantial compliance: yes iv. Witness helps with the signing: 1. Dispensing power: clear and convincing evidence? Maybe he didn’t want to sign it…no. Still have to ask “why did it fail” and does the reason go to their intent? D. Holographic Wills 1. Key distinction: need not be witnessed (but it needs to be handwritten by D to offset this). 2. Only about half of the jurisdictions recognize holographics, mostly in the west and south, but including CA. 3. CA Requirements a. Writing b. Signed by the testator c. Material provisions in… d. The Testator’s handwriting 4. What are the material provisions? a. Who gets what b. Testamentary intent: individual intended this piece of paper to be his last will and testament. i. Must show temporarily that the individual intended the words to have significance in the future after he died. ii. Form wills: in CA, testamentary intent may be in the testator’s handwriting OR part of a commercially printed form will. 1. Handwritten interlineations: don’t qualify as a holographic will unless you can prove intent from the handwritten portions only. 2. Contextual approach: can try and argue that if the handwriting is ambiguous w/respect to the testamentary intent, look at the context in which the handwritten portions were made. 5. Must the will be dated? a. No, but it is invalid if: i. It cannot be proven to be executed after the date of another will; or ii. T lacked capacity at any time that the undated holographic will might have been executed unless it is established it was executed at a time he had capacity. 1. Creates a rebuttable presumption of execution during incapacity b. Can use relative dating, i.e. didn’t meet the person until a certain date 17 c. If T left two undated holographic wills, both are invalid, but you only invalidate the provisions inconsistent with the other will for non-dating issues. E. Conditional Will Doctrine 1. If it contains an effective condition precedent, the will only applies if the condition precedent occurs. 2. Need to ask, “was it intended to be a condition precedent or is it just the reason he finally sat down to write a will?” 3. Depends upon type of execution: a. For holographic wills: courts tend to construe it as merely the explanation for why you bothered to execute your will. b. For attorney prepared wills: courts tend to construe it as a condition b/c attorneys tend to ask questions and clarify T’s intent. F. Revocation 1. Assuming you have capacity and a properly executed will, does that mean we will automatically probate it? NO. You can revoke a will. 2. *General rule: whatever degree of compliance you put on the statutory execution requirements is the same you put on the revocation requirements. 3. Ways To Revoke A Will a. By subsequent writing, which qualifies as a valid will b. By physical act c. By presumption d. By operation of law 4. Revocation by subsequent writing a. Two ways a subsequent writing will revoke: i. Expressly: I hereby revoke my prior will. ii. Implicitly: Through inconsistency b/c you cannot give your property away twice and we presume the latter will controls. b. T may revoke to different degrees of revocation: i. A new will = completely replaces the prior will ii. A codicil = partially changes, amends, supplements, etc. the prior will 1. Revocation of a codicil has no effect on the underlying will. 2. Revocation of the underlying will also revokes the codicil. 5. Revocation by physical act: a. Requirements: i. The will is burned, torn, canceled, obliterated, or destroyed ii. With the intent and for the purpose of revoking it iii. By the testator OR another in T’s presence and at T’s direction iv. (Revocation is a testamentary act so T must have testamentary capacity) b. Can the “act” just be the act of writing? Yes….BUT: i. CL: Writing must affect the printed words ii. MT/UPC: Destructive act can affect any part of the will iii. CA: statute doesn’t reference either approach… 1. Assume CA follows the traditional approach b/c of silence, but argue both (lead with CL, then make MT argument). c. Pencil doctrine: many courts have held that if the destructive act is performed with a pencil, it lacks intent b/c it is tentative and thus there is no valid revocation. 6. Revocation by presumption a. Requirements: i. IF: 1. The will was last in T’s possession 18 2. The will is missing and 3. T had capacity up until the time of death ii. THEN: we presume T validly revoked by act (destroyed it with the intent to revoke), and that’s why we can’t find it. 1. This is a rebuttable presumption with a low threshold. a. If an heir who stands to benefit from the will not being found is someone who has access to the private papers immediately before or after T’s death, some courts have found this is enough to rebut. b. Rationale: Because of the execution requirement functions, the significance of the doc should be brought home and we presume T will put it in a safe place so we can find it after she dies. If we can’t, we presume she revoked it. c. Duplicate original: properly executed will, executed twice. i. Affirmative evidence of revocation by act: revokes both wills ii. By writing: revokes both wills iii. By presumption: Jurisdictions are split b/c knowing the atty has a copy might undercut the rationale behind this rule. 1. CA: presumption doctrine does not apply UNLESS none of the duplicates can be found. d. Lost wills doctrine: how do you probate a will you don’t have (if you rebut the presumption that it was revoked)? i. Extrinsic evidence from the attorney who prepared the will, witnesses, prior drafts, photocopies, etc. is admissible to prove the content of a lost will. Burden of proof is clear and convincing. e. Partial Revocation by Act (variation on presumption doctrine) i. Requirements: 1. If: a. The will was last in T’s possession and b. The will was found, but has a mark through a gift 2. Then: PRESUME he made the mark to revoke the gift; a. But: you can REBUT the presumption ii. Not recognized in all jurisdictions b/c: 1. Don’t recognize: high potential for fraud & b/c it essentially creates a new gift which require a codicil. 2. Recognize: there’s always potential for fraud & b/c it is falling to the residuary, we are not really changing T’s intent, just the application. iii. What if T left $100 to A & B and B gets crossed off? Where does B’s $50 dollars go: to A, the residuary, or intestacy? 1. Minority: don’t recognize the doctrine at all so the gift falls to intestacy. 2. Majority: gift falls to the residuary. 3. UPC: give it to A, but no ct to date has accepted this argument. 4. CA: recognizes partial revocation by act so as a general rule the gift would fall to the residuary. We don’t know if the cts would accept the UPC approach. 7. Revocation by Operation of Law a. *Applies only to divorce and termination of domestic partnership b. General Rule: Treat the party in question as predeceased with respect to all beneficial interests under the will. 19 c. Scope of the Doctrine i. Applies to probate-testate only OR non-probate? 1. Jurisdictions are split: a. Historically: only applies to the will b. MT: Applies to the will and non-probate c. CA: Applies to the will and non-probate property EXCEPT…it does not apply to life insurance policies. ii. Who is excluded? 1. Jurisdictions are split: a. CA: only applies to ex-spouse (relatives of ex are still qualified to take) b. Many states: applies to ex-spouse and his/her relatives. G. Revival 1. *Although, generally, a will is not effective until death, the one exception is for the purposes of revival. 2. T has a W1 which he implicitly revokes by subsequent writing when he executes W2. Then T tears up (revokes) W2. Did he intentionally revive W1 when he revoked W2 and will we give effect to the revocation? a. Jurisdictions are split: i. English Rule: W2 doesn’t revoke W1 unless it remains in effect until T dies b/c a will is not effective until death. ii. American Rule: A will is not effective until death EXCEPT for the purposes of revocation. To revive W1: 1. Majority/CA: W1 will be revived by an adequate showing that T intended it to be revived. a. The evidence considered turns on how T revoked W2: i. By act: ANY evidence ii. By writing: Intent to revive must be WRITTEN in W3 2. Minority: W1 must be re-executed with wills act formalities. 3. *This is only an issue in a fact pattern with at least 2 wills, but W2 could be a codicil. H. Dependent Relative Revocation (DRR) 1. *As a general rule: handwritten interlineations will not qualify as valid holographic codicils. a. But...holographic codicils to holographic wills are almost always valid b/c we can use all the requirements from the original. 2. Applying DRR gives FULL effect to the gift b/c we presume you intended to revive b/c of the mistake. i. If DRR is applied = full gift ii. If DRR is not applied = no gift iii. *Will never get the true intent, i.e. the changed gift. 3. Applies when there is: a. A valid revocation b. Based on a mistake (of fact OR law) c. T would not have revoked but for the mistake (often considering spectrum approach) d. The mistake must be of a nature that is beyond the T’s knowledge e. AND…if: i. The revocation was by act: there was a failed alternative plan of disposition (fancy wording for a failed codicil or new will); or 20 V. ii. The revocation was by writing: the mistake was set forth in the revocation writing. 4. Determine “but for” through the SPECTRUM APPROACH a. Create a spectrum with the 0 on one side and the original gift on the other…if: i. The new gift is closer to 0  don’t apply DRR ii. The new gift is closer to the original  apply DRR b. If the spectrum approach doesn’t work (for example, changing “the who”), use the HOLISTIC APPROACH. i. If they are related, better chance of applying it, but it is a FACT SENSITIVE determination. 5. Example by act: [Act and mistake of law usually go hand in hand] a. T’s will says “I give $100 to N.” He draws a line through the 100 and writes 10. For the $10 to be valid, it must qualify as a codicil. But the material provisions are not all in the T’s handwriting. Can N invoke DRR? i. Valid partial revocation by act? Yes. ii. Based on a mistake? Yes, mistake of law b/c he thought the new gift would be valid. iii. But for? Consider spectrum…here, $10 is closer to 0 so probably not. 6. Example by writing: [Writing and mistake of fact usually go hand in hand] a. T’s will says, “everything to A.” He thinks A died in an explosion and in a distraught state writes, “I hereby revoke my will b/c A is dead.” She is not dead. Can A invoke DRR? i. Valid revocation by writing? Yes. ii. Based on a mistake? Yes, mistake of fact b/c he thought she was dead. iii. But for? Spectrum doesn’t work, but can probably convince a ct that he did this but for the mistake. iv. Mistake is in the written instrument? Yes v. So…DRR applies. 1. BUT…if he had ripped up his will instead and told everyone it was b/c she was dead, then it would be a revocation by act and would need a failed alternative plan of disposition, so DRR would not apply. Components of a Will *Assuming you have a valid will when you die, we probate the will. But what constitutes the will? A. Doctrine of Integration 1. The pieces of paper that are included at the time of the execution and T intends to be the pages of his will constitute the will. [get wording from supplement] 2. Ways to expand the scope of the will: a. Republication by Codicil b. Incorporation by Reference c. Acts of Independent Significance B. Republication by Codicil 1. If you execute a codicil to a will, it republishes the will. a. Republishes: re-executes and re-dates the will to the date of the codicil. i. This allows you to fix problems in the execution (such as interested witnesses) 2. Two ways to republish by codicil: a. Expressly: clause in codicil says “I hereby re-execute and republish my will.” 21 b. Implicitly: in the absence of a clause, as a general rule a codicil will re-execute and republish AS LONG AS it is not inconsistent with T’s intent. C. Incorporation by Reference 1. What is it? Incorporation of other docs into the will that were not executed with wills act formalities and were not physically present at the time of execution, giving effect to the intent in the docs. 2. Requirements: a. Will must express intent to incorporate the doc b. Will must describe the doc c. Doc must be in existence at the time the will was executed. d. *Cts are strict with the third requirement, but tend to slide on the others. 3. If the fact pattern has two valid wills…probably republication; if not…maybe incorporation. D. Acts of Independent Significance 1. When a will references an act that occurs outside of the will and that act controls who takes or how much a named beneficiary will take, it will be permitted as long as it has its own significance independent of its effect upon the disposition of T’s property. 2. Consider three questions: a. What’s the act? b. What’s its inter vivos significance? c. What’s the potential for fraud? 3. Examples: a. I hereby bequeath everything in my right hand desk drawer to A. i. Is T putting things in the drawer to give away or just for storage? Cts often go item by item or look at the potential for fraud (i.e. A is first person in the house after T dies). b. I hereby give $1000 to the charity established in my brother’s will. i. Although he is using incorporation by reference, the independent significance is the disposition of his brother’s property so this would be ok. 1. Acts of writing can be independent acts. c. Providing for unborn children in a will. *Temporal considerations of expanding scope doctrines *Backwards looking: republication OR incorporation *Forwards looking: acts of independent significance E. Contracts Relating to Wills 1. Creditors take before heirs/devisees so they are determined before giving effect to the will. But what about frustrated “beneficiaries” who were left out of the will? Often people make Ks to make a will or not revoke a will and those left out will claim b/k. a. Concerns are potential for fraud & efficiency 2. K law does not require these kinds of Ks be in writing, but: a. MT: must be in writing and signed by D b. UPC: K to make a will or not to revoke may only be established by: i. Provisions of a will stating the provisions of the K; ii. Express reference in a will to a K; or iii. A writing signed by D evidencing the K. c. CA: A K to make a will/devise or not revoke or to die intestate can be established by one of the following: 22 i. Provisions of a will or other instrument stating the material provisions of the K; ii. An expressed reference in the will to a K and extrinsic evidence proving the terms of the K; iii. A writing signed by D evidencing the K; or iv. Clear and convincing evidence of an agmt btw D and the claimant (or a person for the benefit of the claimant) enforceable in equity. 3. *MUST SHOW CONSIDERATION TO PROVE UNDERLYING K a. Assume a K is valid if it is in a fact pattern. 4. Ks not to revoke a. Joint Wills: One will executed by multiple individuals (usually husband and wife) that is probated for both of them. i. Does the mere execution of joint wills imply an intention of a K not to revoke? b. Mirror Wills: Two wills with mirror dispositive provisions. i. Does the mere execution of a mutual/mirror will constitute a K not to revoke? 1. Old cases: Yes 2. MT: No, still have the right to revoke, change, etc. 3. CA: execution of joint or mutual wills does not create a presumption of a K not to revoke. c. Consideration is giving up the right to change your will, but the K is not enforceable until one party dies in compliance. i. What if the surviving spouse then remarries? Don’t we want to protect his new spouse? 1. Minority: K is NOT enforced. 2. Majority/CA: K not to revoke IS enforced, but only spousal protection is pretermitted b/c spouse gets CP protection. d. Scope of property in the K: How much of the property is subject to the K not to revoke? i. Majority: Absent express provisions to the contrary, cts generally apply it to all property acquired by the spouse, not just property owned when first spouse died. e. Extent of Second Spouse’s Right To Use the Property: i. Reasonable consumption f. Which will is probated? i. When there is a clear K not to revoke and the surviving spouse still executes a new will, probate the second will and the property goes to the beneficiaries under will #1 through a constructive trust. 5. Do you have to survive to bring a breach of contract claim? a. Jurisdictions are split…we don’t need an answer to this. VI. Construction of Wills, Trust, and Other Instruments (Wills related construction doctrines that apply to nonprobate instruments too) A. Admitting Extrinsic Evidence 1. General Principle: The will is the best evidence of the D’s intent. We should honor this intent and take a dim view of extrinsic evidence. a. Key: For what purpose would you admit the extrinsic evidence? 23 i. Construction of the will: generally, not admitted, unless you get through the hoops of ambiguity (see below) ii. Validity of the will: let it all in 2. Interpretation a. Three Doctrines: i. Plain Meaning Rule ii. MT approach iii. Scrivener’s Error b. Plain Meaning Rule: Where the words of the will are plain and clear, we will not take extrinsic evidence to construe their meaning. i. Exception: We will take extrinsic evidence if the words are ambiguous as long as it is a latent ambiguity. 1. Latent = would not come to the court’s attention until the court tries to apply the language to the facts in the real world. a. Example: an incorrect address b. Patent = ambiguity appears on the face of the will. For examples, I give 4 people each 33% of my property. 2. Most common examples of latent ambiguity at CL where extrinsic evidence was admitted (does not exclude other latent ambiguities): a. Misdescription: strike out the inconsistent language nad check to see if there is enough left to construe it and give effect to it. We cannot add words b/c we want courts construing wills, not re-writing them. b. Equivocation: Multiple people or objects meet the descriptions. Extrinsic evidence makes the term more specific, but does not add to the will. c. Personal Usage: T always referred to a person in an idiosyncratic manner. Extrinsic evidence shows T meant someone other than the person with the legal name of the legatee. c. MT: Rejects plain meaning rule and takes EE first to prove ambiguity as to T’s intent at the time of execution, regardless of patent or latent and then use EE to clear up the ambiguity. Is this right? i. Ambiguity: Express language in the will which is rx susceptible to two or more interpretations. (Cts will only take EE that is consistent with one of the rx interpretations of the ambiguous language.) d. Scrivener’s Error: i. If there is: 1. Clear and convincing evidence that the scrivener made a mistake; and 2. Clear and convincing evidence of the effect of the error on T’s intent ii. Then we will take EE to correct the mistake. iii. **CA HAS NOT ADOPTED THIS. e. What kind of EE? i. CL: Limited only evidence of the circumstances at time of execution ii. MT: Evidence of circumstances at time of execution AND alleged oral declarations made to the atty/drafter only. 24 B. Death of a Beneficiary Before the Death of the Testator: Lapse *A will is an ambulatory instrument – things can change btw when it is executed and when it is effective. 1. Failed Gifts: a. Void Gift: identified transferee was dead at time of execution b. Lapsed gift: transferee was alive at time of execution but predeceases T (actually predeceased or legally predeceased, i.e. homicide) c. Rationale: the gifts in the above situations fail b/c otherwise they might go to someone T didn’t know and/or didn’t like. But there are situations where this rationale doesn’t work…we have anti-lapse to save the gift (somewhat). 2. Lapse: a. CL: a specific or general devise falls to the residuary; a residuary devise falls to intestacy. If a share of the residuary lapses, it falls into intestacy. b. MT/CA: Anti-lapse applies; if it is not applicable, same as above except that if a share of the residuary fails, it is re-distributed among the other residuary takers. 3. Two Ways to Save a Failing Gift: a. Anti-lapse: i. CL Requirements 1. Lapse 2. Predeceased B has to meet the degree of relationship (varies by state) 3. Predeceased B must have surviving issue 4. Then we presume the gift should go to the surviving issue as long as there is no contrary intent in the instrument making the gift. ii. CA Statute: 1. Lapsed OR void gift 2. Transferee survives T (survival requirement either by statute or in the instrument) 3. Transferee meets the degree of relationship: related to T or T’s current or former spouse 4. THEN…surviving issue of transferee take 5. UNLESS…the instrument expresses a contrary intention or substitute disposition (express gift overclause) iii. What constitutes express contrary intent? 1. An express survival requirement constitutes contrary intent except under the UPC (but no jurisdictions have followed this). iv. As a general rule, anti-lapse does not apply to spouses (not related to T or T’s current/former spouse), which can lead to harsh results. 1. Rationale: step-children might end up taking over natural kids. b. Class Gifts i. What is it? A gift to two or more individual as a class, not just to multiple individuals. It has a built in right of survivorship. 1. If a class member predeceases T, the surviving members share the total gift. ii. How to Determine Whether it is a Class Gift 25 1. What did T intend? 2. Courts have devised four variables to consider when ascertaining T’s intent: a. How does the instrument describe the individuals? i. By name: cuts against class gift ii. By aggregate: cuts for class gift b. How does the instrument describe the gift? i. By share: cuts against class gift ii. By aggregate: cuts for class gift c. Do they have a shared common characteristic? i. Yes: cuts for class gift, BUT once you id the shared common characteristic, most courts look to see if there are other individuals who share this characteristic who are not included. ii. No: cuts against class gift d. What is the T’s overall testamentary scheme? Consider two questions: i. What would happen to the gift if you did not save it and does that appear consistent with what T wanted? ii. Are express rights of survivorship clauses in other parts of the will? (Consistency in the instrument) iii. When you have a potential failed class gift, try and save it first with anti-lapse, then with class gift, UNLESS it was a void gift AND T knew the member was dead at the time of execution. iv. The MT residuary to a residuary rule treats every residuary as if it is tantamount to a class gift . C. Changes in Property Post Execution: Specific v. General Devises 1. What happens if a gift was transferred between time of execution and T’s death? a. General gift: PR has a legal duty to go out and buy the item and give it to B b. Specific gifts: Ademption 2. Ademption: a. CL/CA Identity Approach: When T dies, the PR looks for the specific gift in the probate estate. If he can identify it, it goes to the B. If not, an irrebuttable presumption arises that the gift was revoked. i. Rationale: put the burden on T to execute a codicil. b. MT: Presume D wanted B to take something and if D has bought a substitute item then B takes that and if there isn’t one, there is a strong presumption he’ll get the monetary value unless there is EE that D didn’t want him to take anything. 3. Avoidance: a. Classify the devise as a general or demonstrative gift rather than specific i. If the language of the gift is ambiguous, argue it was a general gift. If you can’t find a general gift, PR has a legal duty to go out and buy it. b. Classify it as a change in form rather than a change in substance: i. The gift is really there, the PR just has to look closer. For example, if the gift is all the money in my B of A checking account, but I decide to switch to Wash Mutual, it is still a checking account and it is rx to switch banks. ii. Many courts will look at the change in value when applying this. 26 4. 5. 6. 7. c. Construe the meaning of the will as of the time of death rather than as of the time of execution: i. Many courts will look at the change in value when applying this. For example, if the will said my car and the car owned at the time of execution was of similar value to the car owned at time of death, probably fits. If the car owned at time of death has a much greater value, might not. Outstanding Balance Doctrine (CA softening doctrine) a. Where ademption applies but T has not been fully compensated for the transfer, although B cannot get the gift, he gets the outstanding balance at the time of death. CA Conservatorship Doctrine: If the transfer occurs during the conservatorship, the ademption doctrine does apply and B gets the FMV of the gift. a. Exception: if (1) the conservatorship is ended and (2) T survives by more than one year, you cannot invoke this doctrine and ademption applies. b. Rationale: We assume T does not have capacity so we will not put a burden on him to execute a codicil. However, if the exception applies, we presume he ratified C’s actions b/c he had enough time to figure out what C did and execute a codicil. Gifts of Stock a. Changes to stock are made by a corporate entity, not by T. (For example, stock split) b. Approaches: i. CL: depends upon whether the gift was specific or general 1. Specific: give B the benefit of the change initiated by a corporate entity. 2. General: treat it like cash. ii. MT: Cannot treat stock like cash, it must be treated as a percentage interest in a corporate entity. Therefore, give B the benefit of the change initiated by a corporate entity. iii. CA/UPC: T must own shares that match the description in the instrument at the time of execution (not exact amount, but to the extent you have matching shares). Then B gets the benefit of the shares. If not, B only gets the initial description in the instrument. c. BUT: if requiring the PR to go out and buy a gift would risk the estate being hurt by inflated prices (i.e. general gift of stock for a privately held company), the general gift will be treated as a specific gift. Exoneration of Liens: gift of specific item with debt attached to it. a. Approaches: i. CL: Estate pays of the debt and B takes it free and clear. (Will diminish residuary). ii. MT: B takes subject to the debt. iii. CA: B takes subject to the debt, unless there is an express clause indicating that the debt is to be paid off. 1. Must be specific provision, not boilerplate provision in will telling PR to pay off all debts. 27 8. Abatement: creates a scheme to determine how to reduce the gifts when there are not enough assets to satisfy all gifts. a. Lose out in the following order: i. Residuary ii. General 1. First non-relatives, then relatives iii. Specific 1. First non-relatives, then relatives b. Rationale: The more specific the gift, the more important it was to you. (However, often the residuary taker was the one that T cared about the most.) c. CA courts have discretion to override the abatement scheme if they find it is inconsistent with T’s overall testamentary scheme. If T’s plan or purpose would be defeated by abatement, the shares of B’s abate as is necessary to effectuate the instrument, plan, or purpose. 9. Satisfaction: Similar to advancement; contemplates when an inter vivos gift to a B should count against his time of death gift. a. Only applies to general gifts. b. It must be of like nature to the gift in the will to even be an issue. c. When should it count? i. CL: depends upon the relationship ii. MT: there must be a writing saying that it should count as satisfaction, in one of the following forms: 1. By the donee; 2. By the donor contemporaneously; or 3. A statement in the instrument making the testamentary gift. d. When B predeceases T, does the inter vivos gift count against the share of whomever is next to take? i. Yes, UNLESS the writing says otherwise. ii. It also counts against the share of a contingent taker. VII. Will Substitutes: Avoidance of Probate (Non-Probate Property) A. Overview: 1. Why shouldn’t NP transfers have to comply with the Wills Act formalities? a. They are not testamentary transfers, but inter vivos transfers which pass, although possession is delayed until death. b. A will substitute is valid b/c although it looks like the property is passing at the time of death, it actually passed inter vivos. That’s why at CL only the four sufficed. i. Four NP transfers valid as will substitutes: 1. Joint Tenancy 2. Life insurance (now also Ks with 3PB POD clauses) 3. Life estate and remainder 4. Inter vivos trusts B. Contracts with Payable on Death Provisions 1. Approaches: a. CL: Only life insurance is a valid will substitute b/c the sole purpose of a life insurance K is to provide for death and the significance of what the T is doing is brought home. b. MT/CA: Any K with a 3PB POD clause is a valid will substitute 28 i. Should the B have to survive the T (K law has no survival requirement)? 1. CL: Continue to apply K law. 2. MT/CA: Apply wills related rules (survival, construction) to 3PB POD Ks. 2. Is a partnership agreement enforceable as a valid will substitute? a. CL: No. b. MT: Yes. 3. Does the intent expressed in a will override the intent in an insurance police? Which intent controls? a. Super Will Doctrine: the will controls i. *No jurisdiction has bought this argument b. No, the beauty of life insurance Ks is that the payment is almost immediate and it does not require going through probate. C. Joint Tenancy 1. Distinctive feature of JT: a. Right of survivorship: when one JT dies, his interest is extinguished and the other party owns it entirely. b. Can creditors reach interest in JT post-death? i. No, like a life estate, if you don’t bring the claim before you die, you’re out of luck. Must attach your rights to the property before the JT dies. c. A will does not sever JT. 2. Can also have JT w/respect to personal property, specifically, multiple party bank accounts. D. Multiple-Party Bank Accounts 1. There are three different reasons to add someone else’s name to your bank account, which make up three different kinds of intents and types of accounts: a. Agency/convenience account to pay bills, etc. b. Joint Tenancy c. POD 2. What kinds of interest do each type of bank account give the other party? Type of Bank Account Agency/convenience JT POD Inter Vivos Interest None 50% (if 2 people) None Time of Death Interest None 100% (rt of survivorship) 100% Probate or NP? Probate NP CL: Probate; MT: NP 3. Determining a decedent’s intent: a. Does the card at the bank calling it a JT express the intent? i. Banks force people to sign those b/c other kinds of accounts give them problems. ii. CL: card creates a presumption of JT, but the court will take EE to show T’s intent. 1. Standard varied btw clear & convincing and preponderance 2. Can consider subsequent conduct as well as intent expressed when he made the account. iii. MT: presume the parties own inter vivos in proportion to their contributions and at the time of death presume right of survivorship. 29 1. Rebuttable presumption: if there is clear and convincing evidence of another intent, go with this evidence, determine the intent, and treat the property accordingly. 2. This is CA’s approach???? E. Multiple-Party Deeds 1. General Rule: Courts will not accept EE for deeds saying JT, absent evidence across the board of pressure to use the JT language. a. Why? There is generally no pressure to do this like in a bank situation. b. In CA, this is a CP issue and we won’t go here… F. Legal Life Estates and Remainders (Deeds) 1. Should we permit revocable deeds if they are not executed with the Wills Act formalities? a. CL: No, these are testamentary in nature. b. MT/CA: Yes, a contingent remainder is still a property interest which is transferred inter vivos. VIII. Restrictions on the Power of Disposition: Protection of the Family A. Rights of the Surviving Spouse 1. How do we protect a non-wage earning spouse when the wage earner dies? a. Two forms of protection: i. Support; and 1. For a limited amount of time, often for life, but there is no property interest to transfer at his/her death. ii. A share of the deceased spouse’s property 1. Reflects the concept that marriage is about a partnership and you should have a share of whatever marital property was acquired during the marriage. 2. Jurisdictionally, CP and non-CP states different regarding protection: a. CP states (8 or 9, including CA) i. Working definition: presumes property acquired during the marriage is CP unless it was a gift, devise, or inheritance. Both spouses own it equally at the moment of acquisition. ii. At time of death: CP is like TC…split it 50/50. Surviving spouse holds his/her half and deceased spouse’s half goes into probate. b. Separate/Non-CP states i. Working definition: property acquired before and during marriage is SP. Marriage doesn’t change the characterization of property. ii. At time of death: surviving spouse gets an elective/forced share 3. Elective/Forced Shares (in non-CP states only) a. Overview: i. At the discretion of the surviving spouse: she must elect to take it , but if she wants it, she can force the estate to give her the fractional share. ii. Applies to all assets no matter when D acquired them. (Anna Nicole Smith would have been better in an SP state.) iii. If the spouse takes some under the will, the forced share is first funded from what she takes under the will, and then more through the forced share. 30 b. Approaches: i. Historically: 1/3 to ½ of D’s probate estate (varies by jurisdiction, family situation, etc.) 1. MT developed out of the fact that a T could put all of his assets in a non-probate instrument, which the forced share cannot touch… ii. MT: Augmented Estate: 1/3 to ½ of D’s non-probate estate, including gifts made w/in 2 years of death. iii. UPC: A spouse needs to earn an elective share…in the first year of marriage she gets 2%, then the next year 4%, etc. 1. Some argue this is just CP w/o calling it that. 4. Four Issues in CP states: a. Putting a spouse to an election: A conditional gift to a spouse giving her all the property on the condition that she lets him give some of her interest away. i. HYPO: W & G own the phat pad as CP. W promises to give L the phat pad. His will says, “I give all of the phat pad to L and the rest of my property to G as long as she agrees to the phat pad, otherwise the rest of my property to Pepperdine.” ii. Spouse decides which option is more financially beneficial. iii. What should the threshold of evidence be to put a spouse to an election, i.e. how clear must D’s intent be? 1. Historically: low threshold 2. MT: high threshold b/c this happens accidentally and a no contest clause issue can arise (see below) iv. What if there is a no contest clause and you assert your rights (to your interest in the CP)? Does that breach the clause? 1. Yes. Where T has adequately expressed intent to give away more property than he owns and the spouse asserts rights to stop that, it frustrates T’s intent/estate plan and constitutes a breach of the no contest clause (even if she has every legal right to do so). 2. A challenge claiming property falls within CP, not SP is a contest 3. Alternative: bring a suit to construe the terms of the will (how much is he actually trying to give away). b. Tax Considerations/Double Stepped Up Basis Doctrine *Makes more sense for couples to hold property as CP b/c the death of one leads to a stepped up basis for both…WHAT? I don’t get this… i. Taxes under JT: 1. Selling price minus surviving spouse basis + stepped up D’s basis = gain to pay taxes on. 2. HYPO: W & G buy a house for $100,000. It appreciates to 1.1 million…so they have 1 million in gain. W dies. a. Total basis = $100,000; Individual basis = $50,000 each. b. D’s share receives a stepped up basis for tax purposes. D’s basis is $550,000 and G’s basis is $50,000, for a combined $600,000. c. G sells it for a gain of $500,000, which is taxed. ii. Taxes under CP: Double Stepped Up Basis 1. Same hypo as above. 2. When W dies, both have stepped up basis and when she sells it, she does not have to pay taxes on it. 31 c. CP with right of survivorship: i. CA has created a new form of property called CP with right of survivorship for any kind of asset. (Unclear if IRS will allow it, but supposedly they are recognizing it in AZ.) ii. The CP prong gives the double stepped up basis and the right of survivorship avoids probate. iii. Must use proper language in the instrument: “we hold it as CP with the right of survivorship.” 5. Migrating Spouses (btw CP and SP states) a. *Classify an asset at the place where the couple was domiciled at the time they acquired it. b. *Time of death protection is classified by where the D was domiciled at the time of death. c. Moving from an SP state to a CP state: i. Protection: Quasi-CP Doctrine: Look at the SP of the deceased spouse and if the CP state would have classified it as CP when it was acquired, then we will classify it as QCP and treat it as CP. ii. HYPO: W and G lived, married and retired in an SP state. W was the only wage earner. They move to a CP state with a net worth of $100,000. W dies the next day. G gets half; the other half goes into probate. iii. Not all CP states recognize this, but CA does. d. Moving from a CP state to a SP state: i. Protection: Uniform Law: Surviving spouse has no elective share rights in the CP assets of the deceased spouse. ii. HYPO: Same as above, but they live in a CP state and move to an SP state. G owns her ½ immediately; if she were allowed to get the forced share, she would get 1/3 to ½ of W’s ½ and anyone W named in his will would be left with ¼ of the total assets. iii. Not all SP states recognize this. 6. Support Protections a. At CL: i. Dower: wife gets a life estate in 1/3 of the qualifying real property that the husband held during the marriage. 1. Qualifying real property: interest that the spouse could pass at time of death. a. Fee simple, TC: Ok b. Life estate, JT: Not ok 2. Once the interest attached (inchoate interest), the property could not be sold free and clear of the interest w/o permission from the spouse. Dower cannot be defeated by a unilateral action of one spouse. ii. Curtesy: similar protective doctrine to a dower for a husband, except he gets a life estate in ALL of the wife’s qualifying real property ONLY IF children are born of the marriage. iii. These are rarely recognized b/c the inchoate interests burdened the land. b. 5 forms of support that every spouse is entitled to: i. Social Security: surviving spouse has the right to the deceased spouse’s social security benefits. 1. Cannot be transferred 2. Spouse gets them for her life 32 ii. Private Pension Plans: 1. ERISA says they are non-transferable unless the spouse consents to the transfer iii. Homestead: surviving spouse has the right to occupy the homestead 1. Varies by jurisdiction a. UPC: 15K b. Others: Life estate in the primary residence iv. Personal Property Set-Aside: 1. Two Types: a. Pick what you want up to a certain amount of value; or b. Check list of certain types of property spouse is entitled to v. Family Allowance: allowance to live off of 1. Two issues: (vary by jurisdiction) a. For how long? Not for life. Typically… i. A year OR ii. As long as probate is open (b/c probate ties up assets). b. How much? i. Tied to standard of living OR ii. Fixed amount 7. To Share: a. *In CP states, the protection comes at the moment the dollar is earned and no more protection is provided at the time of death. These doctrines apply in SP states only. I don’t think this is true based on later notes!! Clarify. b. Pretermitted Spouse/Domestic Partner: i. Classic scenario: T executes a will before marriage with no mention of spouse. Typical steps: 1. Execution of a will or inter vivos revocable trust 2. Marriage 3. Death without changing the will or IV revocable trust 4. Then…presumption arises… ii. OOPS DOCTRINE: Based on a presumption that the T accidentally disinherited the spouse. Unless you jump through the hoops of intentionally disinheriting your spouse, we will presume you didn’t intend to b/c it is unnatural not to take care of a surviving spouse. 1. Rebuttable presumption of accidental disinheritance: Ways to rebut… a. If intentional disinheritance is shown in the will: no extrinsic evidence is allowed. b. If a gift outside the will was intended to be in lieu of taking under the will: any kind of evidence (amt, oral declarations, etc.) is allowed. c. Surviving spouse waived his/her right to claim pretermitted spouse (classically, in a pre-nup) iii. Disinheritance Clauses: 33 1. General Rule: a general disinheritance clause does not rebut the presumption unless you had an eye towards marrying the person b/c you did not feel the angst of disinheriting your spouse. iv. Where the person who happens to be your spouse takes under the will, it doesn’t knock them out of contention for pretermitted spouse protection unless the gift was made with an eye to the donee being your spouse. The will must fail to provide for the spouse IN THEIR CAPACITY as spouse. 1. Court may take extrinsic evidence in this situation. 2. HYPO: W will says residual to G, but a gift to L. G finds out about him and L and divorces him. He marries L, then dies. Can L claim pretermitted spouse? Yes, b/c the gift was not made with an eye towards marrying her. v. If you qualify as a pretermitted spouse in CA, what do you get? 1. Your intestate share, but in no event more than half of the separate property. 2. Pool probate and some NP and get your share from that pool of property. B. Rights of Issue Omitted from Testamentary Instruments 1. Pretermitted Child: a. OOPS DOCTRINE: presume T did not intentionally disinherit his child, but that he didn’t get a change to amend the instrument (will or IV revocable trust) before death. We make this presumption because it is natural to take care of and provide for your family. i. Rebuttable Presumption: limited to three ways… 1. If intentional disinheritance is shown in the will: no extrinsic evidence is allowed. 2. If a gift outside the will was intended to be in lieu of taking under the will: any kind of evidence (amt, oral declarations, etc.) is allowed. 3. D had one or more children at the time the will was executed and gave substantially all of the estate to the other parent of the omitted child. 2. Omitted Child Statute (CA): If at the time of execution, D failed to provide for a living child in the testamentary instrument solely b/c he believed the child to be dead or was unaware of the birth of the child, the child shall receive his intestate share (from combined assts of will and IV revocable trust). a. General Disinheritance Clause: will not override the statute. C. Professional Responsibility Issues 1. Breach of K; or a. CL: Only the PR can sue on behalf of the T; 3PB cannot sue in a donative K b. MT: Any intended 3PB has standing to sue 2. Tort claim (negligence) a. CL: Only the PR can sue on behalf of the T b/c attorney did not owe a duty to anyone else. b. MT: B can sue b/c the attorney owes a duty to anyone who can foreseeably be harmed. 3. Compromise position in both of these situations: many courts do not like to open the doors as widely as the MT approaches so they limit standing to any frustrated beneficiary mentioned in the will. 34 IX. Trusts: Creation, Types, and Characteristics A. Overview: 1. What is a trust? a. Think of it as a bucket that is created once something is put in it. b. It is just another type of gift…developed out of the law of IV gifts, not wills. But it is a bifurcated, ongoing gift for the benefit of another (sometimes). 2. Parties to a trust: a. Donor = Settlor b. Donee = Trustee & Beneficiary 3. A trust is a thrice bifurcated gift: a. Bifurcate the legal interest from the equitable interest b. Bifurcate the principal from the income c. Bifurcate the possessory estate from the future interest 4. Dead hand control: Settlor’s intent controls the trust and he can put any restrictions on the gift that he wants in the trust. 5. Two types of trusts: a. Inter vivos: S was alive when trust was created b. Testamentary: terms are in the will and the property is transferred into the trust after S’s death. B. Creation of Trusts 1. Creation of a trust is a two-step process: can occur simultaneously a. Reduced to writing is the set-up… i. Terms = instructions to trustee regarding when to reach into the bucket and give beneficiaries their interest b. Trust is fully created once it is funded. i. Fund = transfer legal title to the trustee c. Trust ends when it is empty. 2. Creation Requirements: a. Intent: to vest the beneficial interest in a 3 rd party. Intent is evident when one party gives property to a second party for the benefit of a third party. i. Same party can where multiple hats, but… 1. Merger doctrine: the legal and equitable interests merge if not other party holds one of these interests. When they merge, the trust is terminated by operation of law despite S’s intent. a. One party can wear all three hats without implicating merger doctrine if there are multiple trustees or beneficiaries. 2. Even in inter vivos revocable trusts where the settlor wears all three hats, it should not be subject to Wills Act formalities b/c future interest holder still has a contingent remainder which passes inter vivos. ii. Expression of intent can be called two things: 1. Declaration: Settlor is the trustee 2. Deed of trust: Third party is the trustee iii. Watch out for: 1. Precatory Language: “A to B with the hope he will use it for C.” a. Only creates a moral obligation, not a legal obligation. It’s a gift with a wish. 35 b. Low threshold to create a trust when the settlor is a different person than the trustee, but clear precatory language is still not enough. 2. A Failed Gift: The intended beneficiary of a failed gift often try to re-characterize it as an inter vivos gift, making the donor the settlor. a. Courts will often raise the required evidence of intent to create the trust when the settlor is also the claim trustee (especially when he is dead). Will require circumstantial evidence that settlor behaved like a trustee. b. A few courts have bought this argument, especially where the Bs are family members… b. Delivery of Trust Property: The trust must be funded, i.e. legal title must be delivered to the trustee. i. Property: Anything you can think of constitutes property, EXCEPT: 1. Future Profits: For the purposes of trust law, future profits are not an adequate property interest (Brainard case) 2. Expectancy: the general rule is that expectancies are not a property interest ii. Delivery: 1. If the trustee is not the settlor: some sort of delivery is required (actual, constructive, or symbolic) 2. If the trustee is the settlor: a. Personal property: if there is clear evidence showing creation of a trust and clear evidence of the property, some courts will presume the declaration was also the funding. i. BUT…some courts want to see the settlor separate the trust property from other property. b. Real property: The writing must be delivered; basically deliver the paper from yourself as the settlor to yourself as trustee. c. Beneficiaries must be ascertainable (identifiable): Must be able to identify those receiving the equitable interest. i. Their names do not need to be in the trust, but there needs to be a formula for identification b/c we need to know who has standing to come into court and enforce the fiduciary duty. ii. Exceptions: 1. Unborn Children 2. Honorary Trust doctrine a. Elements: i. Where a trust fails for want of ascertainable beneficiaries; and ii. The trust is honorary (not illegal, capricious, arbitrary); iii. As long as the intended trustee agrees to honor the terms of the trust, the court will look the other way and not declare the failure of the trust. b. If the trustee fails to honor the terms of the trust, the trust fails and the resulting trust doctrine (see below) kicks in. 36 c. If the trustee fails, the court will not appoint a new trustee b/c it is not technically a trust. d. Classic example: a “trust” to use money for maintaining a grave sight. d. Writing: Sometimes as a function of other laws i. IV gifts: 1. Must comply with the Statute of frauds… a. Real property: yes, writing required b. Personal property: no writing required ii. Testamentary trust: 1. Must comply with the Statute of Wills a. Writing required iii. What do we do if the settlor fails to meet the writing requirement? 1. CL: Statute of Frauds proscribes admission of parol evidence to vary the terms of the writing. Instead, it turns on whether it was a secret trust or a semi-secret trust. a. Secret trust: there is nothing in the language of the will that hints that the individual is taking in a fiduciary capacity. i. Requires extrinsic evidence to determine Bs ii. Save with a constructive trust (see below) b. Semi-secret trust: something in the language in the will hints that the person was only supposed to take in a fiduciary capacity. i. No extrinsic evidence is allowed so there is no way of identifying Bs. ii. Save with a resulting trust (see bleow) 2. MT: where an inter vivos trust fails for want of a writing, impose a constructive trust for both secret and semi-secret trusts IF ∏ is not guilty of unclean hands. iv. When a testamentary trust fails for want of a writing 3. What is the effect of the death of a trustee on a trust? a. “A trust will not fail for want of a trustee.” 4. If a trust fails at ANY point in time in whole or in part, what do we do? a. For example: W gives $5 to N for the benefit of his friends. Bs are not ascertainable. Where does the $5 go? Courts have created remedies which arise by operation of law (are not actually trusts)… b. Resulting Trust Doctrine: As a matter of equity, the party holding the property gives the property back to the settlor. If the settlor is dead, the property goes back to the settlor’s estate. i. Purchase Money Resulting Trust: 1. HYPO: W buys a house in Malibu using all of his own money, but he puts it in Lulu’s name. It could be a gift to Lulu or she could be a trustee. 2. If the person is not a family member: rebuttable presumption that the person is taking as a trustee (and if the person refuses to behave like a trustee, the court will impose a resulting trust). 3. If the person is a family member: rebuttable presumption that the person is taking a gift. 37 c. Constructive Trust: The property goes to the intended beneficiaries or the person with the strongest equitable claim to avoid unjust enrichment of the attempted trustee. 5. Other (weak) arguments for saving a failing trust: a. Precatory trust b. Inter vivos gift C. Revocable Trusts 1. Assuming you have a valid IV trust, the first thing you look for is whether it is revocable or not… a. Testamentary trusts: irrevocable b/c they are funded at death b. Inter vivos: i. Majority: default is irrevocable, but this can be altered by adequately expressing your intent. ii. Minority/CA: default is revocable, but this can be altered by adequately expressing your intent. 2. How do you revoke a trust? Depends… a. Where the settlor expressly expresses a method of revocation in the trust instrument, that, and only that method, will suffice. b. If the settlor does not express an express method of revocation in the instrument, then anything that adequately expresses the intent to revoke suffices, including oral states and the wills revocation methods. D. Discretionary (versus Mandatory) Trusts 1. Assuming you have a valid inter vivos trust that has not been revoked, what is the extent of the Bs’ interest in the principal and the income? 2. Types of interest: a. Mandatory: trustee must distribute interest to the Bs b. Discretionary: interest is distributed to Bs at the trustee’s discretion i. Trustee first has a duty to inquire into the B’s situation and needs. This requires the trustee follow-up with the B. ii. Then he must decide whether to distribute the interest. He must be reasonable (objective standard) and act in good faith (subjective standard). 1. Settlor may modify these standards and give the trustee more guidance. BUT…even where S appears to give the trustee sole and absolute discretion, it cannot be so complete b/c otherwise there would be no fiduciary duty and thus no trust. But this eliminates the reasonable/objective part of the standard. a. Two steps: i. Look to see if the default standard has been modified ii. Look to see if S has added an additional standard, i.e. a purpose for the trust. iii. Exculpatory clauses: like no-contest clauses…included to prevent frivolous lawsuits. 1. If it looks like the clause was put in by improper influence, strike it down. If not, usually ok. c. Sprinkle or Spray Trust: trustee must distribute ALL of the interest, but he has discretion as to how he will distribute it among the beneficiaries. i. From the top down it is mandatory; from the bottom up it is discretionary. 38 E. Creditors’ Rights 1. To what extent can creditors reach a B’s property in trust? a. Assume B is not the settlor… b. General Rule: If B could voluntarily transfer the property, a creditor can force him to involuntarily transfer it to the creditor. 2. Does a B have the right to transfer his interest? a. General Rule: Yes. b. Exception: No, when there is a spendthrift clause. The clause says, “B cannot voluntarily or involuntarily transfer his interest.” i. This is done to prevent creditors from reaching the interest. But as soon as the interest is in B’s hand, the creditors can get it. 3. What does it mean to say you can reach B’s interest? You step into B’s shoes and acquire the same rights, but no greater rights, than B. 4. Every jurisdiction has a limited number of creditors who can pierce the spendthrift clause b/c their claims supercede public policy. a. 4 types of creditors who can pierce the spendthrift clause: i. Spouses entitled to alimony ii. Children entitled to child support (stronger claim b/c they did not choose to enter into a relationship with their parents) iii. Creditors who provide basic necessities (housing, food, medical, etc….fact sensitive…won’t go here) iv. Federal government for taxes 39