Wills and Trusts

INTRODUCTION AND TERMINOLOGY I. Introduction A. Issue: W HO GETS DECEDENT‘S PROPERTY WHEN DECEDENT DIES? B. Three public policy considerations: 1. Intent 2. Administrative Efficiency 3. Avoiding Fraud C. Statutory Provisions 1. Always skip Uniform Probate Code Provisions 2. Intestate/Testate: Refer to California Probate Code. 3. Trusts (Common Law Applies) a. If there is a California Statute on Point, it is only taught for general purposes. b. Remember, judicial doctrines may be changed at courts‘ whim as opposed to statutory provisions. D. Background on methods of making gifts: 1. Will: a. Disposition of property at time of death without consideration. b. A will assumes you have not otherwise arranged for the transfer of property at death. 2. Inter Vivos Gift a. Intent (to give a gift outright) b. Delivery (of property to donee) c. Acceptance (presumed acceptance by donee) 3. Trust: An express trust is a fiduciary relationship with respect to property, arising as a result of a manifestation of an intention to create that relationship and subjecting the person who holds title to the property to duties to deal with it for the benefit of charity or for one or more persons, at least one of whom is not the sole trustee. Jack L. White, II Page 1 of 75 II. Terminology A. Probate vs. Non-Probate 1. General a. Must determine whether decedent dies probate or non-probate b. There must be affirmative steps to opt out of probate: so, look to non-probate property first c. Non-probate: there is no reason to send inter vivos transfers through probate d. Probate: only testamentary transfers must go through probate 2. Probate a. Definitions: i. Property in which decedent transfers title. ii. Property that is not subject to probate policies. iii. A process the decedent‘s property goes through at death. iv. Probating a will: construing a will and giving effect to it. v. Normally, at death, property goes into probate. b. Who is the Actor? i. Various Names for the person appointed to take care of decedent‘s probate estate: (a) Executor/Executrix (b) Personal Representative (modern trend) ii. Role in Probate Property (responsible for distributing property) (a) To inventory and collect the assets of the decedent, (b) To manage the assets during administration (c) To receive and pay the claims of creditors and tax collectors, and (d) To distribute the remaining assets to those entitled 3. Non-Probate a. Examples (FOUR CLASSIC WAYS OF OPTING INTO NON-PROBATE): i. Joint Tenancy with Right of Survivorship (joint tenant‘s share is extinguished at death) ii. Possessory Estates & Future Interests iii. Life Insurance (a contract with a payment on death clause) (a) Common Law: Observes only Life Insurance Transfers (b) Modern Trend: Includes Payable-on-Death clause iv. Trusts (inter vivos) (a) Inter Vivos Trusts [ONLY OBSERVED METHOD OF NON-PROBATE PROPERTY TRANSFER] (b) Testamentary Trusts (c) UTATA Trusts b. Who gets non-probate property? i. Decedent dies Testate: Given pursuant to will. ii. Decedent dies Intestate: Intestate distribution. c. Spousal Protection Scheme (depends on domicile of the parties) i. In California, the scheme is community property. ii. Elective or Forced Share: Non-community property scheme. B. Testate vs. Intestate 1. Testate: with a will 2. Intestate: without a will 3. May die testate with respect to some property and intestate with respect to other property 4. Testator: person who executes will C. Different types of gifts through a will 1. Specific: unique, only 1 asset fits the description of what is being given 2. General a. A gift of a general pecuniary value (any $1 bill, or any 100 shares of stock) b. Demonstrative (hybrid between specific and general) i. Subset of General Gift so it is treated the same as all other general gifts ii. General gift from a specific source iii. Devises, typically of an amount of money, payable primarily from a particular source, fund, container iv. If that source fails or is inadequate, then pull the gift from the general assets of the estate. 3. Residuary (any property that is left over) a. A will covers all property accumulated up to the moment of death as long as it has a residuary clause. b. Whether a person dies testate or intestate depends on whether there is a residuary clause. Jack L. White, II Page 2 of 75 INTESTACY: AN ESTATE PLAN BY OPERATION OF LAW I. Intestate Successors: Spouse and Decedents A. Introduction: The persons protected or benefited by the statute generally include: 1. Consanguinity a. Those persons related to the intestate by blood, called relationship by consanguinity. b. This includes an intestate's descendants, ancestors and collateral relations. 2. Affinity a. Those persons related to the intestate by marriage, called relationship by affinity. b. The primary, and under most laws, the only person to inherit by affinity is the surviving spouse. c. In a few jurisdictions, others related by affinity (the spouse's consanguine relations) may inherit in order to avoid escheat. 3. A person not related by consanguinity or affinity, may be able to inherit if that person is adopted according to the adoption statutes. B. Types of Property 1. Community Property a. 100% of Deceased Spouse‘s ½ share of their community property b. Any property acquired during the marriage c. Earnings acquired during the marriage d. Community property more resembles tenancy in common than joint tenancy e. A deceased spouse may devise their portion of community property to whomever they please f. With no devise, community property goes to surviving spouse 2. Separate Property: any gifts a. 100%: if NO Issue (blood descendent), Parents, or Issue of Parents b. 50%: if 1 Child (or Issue of Predeceased Child survives); OR no issue, but Parent(s), or Issue of Parent(s) i. Child Definition: counted as alive if: (a) Living, OR (b) If dead but survived by issue ii. Issue: All blood descendants of an individual (children—grandchildren—great grandchildren) c. 33%: if MORE THAN 1 Child C. Order of Takers st 1. Surviving Spouse: Always the 1 taker 2. Issue of the Decedent 3. Recapture Doctrine §6402.5: Was there a Predeceasing Spouse? 4. Parents of the Decedent 5. Issue of Parents of the Decedent 6. Grandparents 7. Issue of Grandparents 8. Issue of Predeceased Spouse 9. Next of Kin 10. Parents or Issue of Parents of Predeceased Spouse 11. Escheats to the state if there is no one to give the property to. Jack L. White, II Page 3 of 75 D. Spouse Requirement - Issue: Who Qualifies as a Spouse? 1. Types a. Putative Spouse i. If you reasonably and in good faith believe that you are legally married, and later find that the marriage was not legal, you are still covered by the intestacy scheme. ii. Only one of the two spouses has to have that good faith belief. b. Termination (When is the marriage over) i. CA for purposes of community property: (a) Spouses are currently living apart (b) Subjective intent relationship is not to presume (c) Objectively, it appears it is not to presume ii. CA for purposes of probate: (a) You are a spouse until the final judgment of divorce (b) The marriage continues until the final judgment has been entered by the court c. Conventional Spouse 2. Survivorship Requirement a. Default Rule: i. To get out of the survivorship requirement, must override it by: (a) Must have a written instrument, AND (b) An express provision in it—qualifying it. ii. Must actually survive and legally survive. iii. Individual must survive decedent to take, absent an express provision otherwise. b. Issue: By how long do you have to survive? i. Common Law (a) Any amount of time—even one breath (b) Problems: (i.e. Policy considerations for having a survival requirement) (i) More Costs: costs and distribution from A‘s estate go to B‘s estate probate (ii) Want it to go to decedent because want her to benefit, but if she dies one second later, how much benefit will she get? (iii) Parents disagree: don‘t want families litigating (iv) Risk of Simultaneous Death and Double Probating (c) Modern Trend: irreversible cessation of brain activity ii. Probate Intestate: CA Survival Requirement and Modern Trend: no written instrument: (a) Clear and convincing evidence that the person survived the transferee by 120 hours (5 days) & (b) Does not apply to probate property or where: (i) There is a provision dealing with the issue of simultaneous death, (ii) There is a provision that the one person must survive the other for a stated period in order to take the property. (1) If the right of the beneficiary is conditional on survival, and it cannot be determined, then he is deemed as predeceased. (2) Property is divided into equal portions & distributed as if beneficiary had survived the other:  If 2 or more beneficiaries would have been entitled to the property had they survived each other, and  It CANNOT be determined whether they did or not. (c) Treat it as if the other predeceased the decedent (the party claiming they survived bears the burden, or otherwise treat them as if they predeceased). iii. Probate Testate or Non-Probate: (a) CA Survival Requirement if PROBATE TESTATE or NON-PROBATE, with a written instrument: (i) Clear and Convincing evidence that the beneficiary has survived the decedent, otherwise (ii) Claimant is deemed to have predeceased, unless a written instrument requires longer (b) Community property is treated the same as non probate (c) With simultaneous death, treat all property under §6402 & treat joint tenancy as tenancy in common. (d) Probate Testate: Clear and convincing, unless the written instrument requires otherwise. Jack L. White, II Page 4 of 75 E. Recapture Doctrine §6402.5: Was there a Predeceasing Spouse? 1. General a. If NO Issue: Was there a Predeceasing Spouse b. If NO, continue to Parent(s); if yes, we want to protect the heirs of the predeceased spouse (§6402.5 Recapture Doctrine). c. Definitions i. Recapture all of whatever the predeceased spouse took by virtue of the previous spouse‘s death. ii. Recapture portion of predeceased spouse‘s property gained by virtue of previous spouse‘s death. nd st iii. Recapture all of the QUALIFYING PROPERTY that the 2 spouse to die received by virtue of the 1 spouse‘s death (All A‘s property goes to A‘s parents and B‘s property goes to B‘s parents) nd d. Only applies to probate intestate property of the 2 spouse to die. st e. Doesn‘t matter if it was probate/non-probate or testate/intestate with respect to 1 deceased spouse. f. For purposes of the recapture doctrine, interest received through joint tenancy counts as acquired by virtue of the spouse‘s death. g. Remember i. Can only recapture non-probate or probate testate. nd ii. Only recapture if the 2 spouse dies intestate. 2. Qualifying Property: a. General i. Property attributable to the predeceased spouse ii. Only applies: (a) If the decedent dies INTESTATE and (b) If the decedent has re-characterized the property. b. Real vs. Personal Property i. Real Property: recapture it if the second spouse dies within 15 years of the predeceased spouse ii. Personal Property: recapture it if: nd (a) The 2 spouse dies within 5 years of the predeceased spouse, AND (b) The personal property has a written record of title or ownership, AND (c) The aggregate value must be at least 10K (because of cost of administration) c. Recapture and give to: i. Issue of Predeceasing Spouse ii. Parent of Predeceasing Spouse iii. Issue of Parent of Predeceasing Spouse iv. Then go back to scheme of § 6402 if none of the above are surviving and pretend § 6402.5 never existed (return to decedents next of kin) Jack L. White, II Page 5 of 75 F. Defining Descendants [ISSUE] 1. General Rule for Descendants (Issue of Decedent) a. Issue: How will Decedent‘s Probate property be distributed? b. If the Parent takes, their Issue CANNOT also take. c. The shares must be calculated equally. d. TRICK QUESTION: i. This scheme is based on blood relationships ii. Spouses of Issue CANNOT take at all. e. How are shares divided? i. 1 share for each living party, ii. 1 share for each party dead but survived by issue iii. The same in all 3 approaches f. 3 different approaches to this scenario i. Per Stirpes, ii. Per Capita, iii. Per Capita at Each Generation g. Always must look to the transferor‘s intent. So, will might opt out of the default. 2. Per Stirpes: a. General i. Not the default in CA ii. However, when see the phrase ―By Representation‖ or ―By Right of Representation,‖ this is what is used in CA. b. Three issues: st i. Where to make first division? - Always divide at the 1 tier (even if No live taker) ii. How many shares at that tier? iii. How to treat dropping shares? - By bloodline. 3. Per Capita By Representation: (CA USES THIS AS DEFAULT RULE) a. Three issues: st i. Where to make first division? - 1 tier where there is a live taker ii. How many shares at that tier? iii. How to treat dropping shares? - By Bloodline b. If you opt out of the Per Capita in your will, but the language is confusing then it will automatically go to the default rule. 4. Per Capita Each Generation: st a. Where to make first division? - 1 tier where there is a live taker b. How many shares at that tier? c. How to treat dropping shares? i. Pool or add up the dropping shares; ii. Then, divide that number by the number of eligible takers in the dropping tier Jack L. White, II Page 6 of 75 G. Ancestors & Collaterals 1. General a. Next of Kin b. No Surviving Spouse, Issue, Predeceasing Spouse, Parents, Issue of Parents, Grandparents, Issue of Grandparents, Go to next of kin 2. Three Approaches to determine Next of Kin: a. Parentelic: i. A parentelic line is a parent and their issue. ii. Line of descent from a Grandparent, or Great-Grandparent, or Great-Great-Grandparent iii. If there is no one in the parents line, it is exhausted and go to the Grandparent level and if no survivors and exhaust then go to the next level. iv. Find the top of the parentelic line the person is in, go there and count your way down b. Degree-of-Relationship: i. General (a) Counting the people between you and that relative (b) Find common relative, count the steps between the individual who died and the individual who claims they can take ii. Example: (a) Degree between you and Parent = 1 (b) Degree between you and GP = 2 iii. The closer person (the one with the lower degree of relationship number) takes. c. Degree of Relationship with Parentelic Tie Breaker: i. General (a) CA uses this approach (b) Go up the bloodline and distribute according to the degree of relationship. (c) If you have a tie in the degree of relationship then you go to the Parentelic to use as a tiebreaker. ii. Seminal Approach: if have tie in degree of relationship, go to this approach; (a) Find a Common Ancestor (b) Count the steps from the D up to the common ancestor (c) Count the Steps down to the surviving issue under that ancestor. iii. In equal degree but where there are 2 or more collateral kindred, those who claim through the nearest ancestor are preferred to those more remote. Jack L. White, II Page 7 of 75 II. Transfers to Children A. General 1. Issue = A series of parent and child relationships. 2. How to QUALIFY as issue: a. Natural Parent b. Adoption c. Half-Blood Scenarios: d. Posthumously Born Children: 3. How to CLASSIFY Issue—First must establish a Parent-Child Relationship: a. Natural (from and through, each way) i. Parents Married: Traditional Parent-Child Relationship ii. Parents Not Married b. Classic Adoption c. Post-Death Adoption d. Step-Parent Adoption e. Same Gender Adoption f. Attempted Adoption g. Equitable Adoption 4. Remember a. Maximum of 2 arrows up (parents inheriting from or through children); b. Many scenarios provide for more than 2 arrows down (children inheriting from or through parents) B. Adopted Children 1. Natural – Parents Married a. General i. Natural Parents—Mother and Father give Birth to their Natural Child. ii. Norm is that the Parents are Married b. Natural Parents cannot inherit from the Child c. Parent-Child Relationship with the Natural Parents is severed and the adopted child now has a ParentChild Relationship with the adopted child and the adopting parents. d. Child‘s Right to Inherit from Natural Parents: i. Adoption severs UNLESS: (a) Lived together as a family, and EITHER; (b) Stepparent adoption, OR (c) The adoption is after the death of either of the natural parents ii. Then the adoption will NOT sever the Parent-Child Relationship. iii. The child can still inherit from the Natural Parent (Natural Parent cannot necessarily still inherit from the child). 2. Natural – Parents not Married a. General i. Out of Wedlock ii. For parent to inherit, he or a relative must ACKNOWLEDGE AND SUPPORT the child. b. Rule i. If the child waits until the father dies to establish paternity, required to meet a ―clear and convincing‖ evidence standard. ii. Therefore, if a child wants to take from the father in a nontraditional relationship, he better bring an action during the father‘s lifetime c. Rule i. Nontraditional Relationship does NOT affect the ability of the child to inherit from the Parents. It DOES affect the ability of the Parents being able to inherit from the child. ii. If a child is born out of wedlock, neither a natural parent nor a relative of that parent inherits from or through the child on the basis of the parent and child relationship between that parent and the child UNLESS both of the following requirements are satisfied: (a) The parent OR a relative of the parent ACKNOWLEDGED the child. AND (b) The parent OR a relative of the parent contributed to the SUPPORT or the care of the child. d. Unfair to punish the child, so the child can inherit from and through the parent. Jack L. White, II Page 8 of 75 3. Classic Adoption a. Parents consenting to the adoption of their child, waive their right to inherit from the child. b. Both Parents Must Decide to give up Child c. One Parent cannot unilaterally decide to give up a child for adoption i. Even if the parents are not married ii. If one wants to give the child up for adoption & doesn‘t know where father is, must give Public Notice. d. Consent: Natural Parent must consent to an adoption 4. Post Death of Natural Parent a. DEATH: Stepparent comes in after death of an Natural Parent – Look for Death + Replacement b. Who can the Child inherit from or through? Both Natural Parents and Step-Parent or Adoptive Parent c. Who can inherit from the Child? Natural Parent still living and Step-Parent or Adoptive Parent d. Post-death adoption SEVERS the up arrow from the child to the natural parent as long as i. There was a relationship ii. That was involuntarily terminated e. The arrow down remains as long as there was a parent-child relationship, or it was impossible because the parent died before the child was born. f. CA: If the adoption is after the death of either parent (1 or both), analyze as a post-death adoption scenario 5. Step-Parent Scenario a. If it is the stepparent who adopts: i. Had to live together as a natural family before the adoption ii. Adopted by either: (a) The spouse (Natural Parent remain intact and the Step-Parent steps in as a spouse), or (b) After the death of either (one Natural Parent dead). iii. DIVORCE: If the Step-Parent adopts after divorce (a) Who can the Child inherit from or through? (i) Both Natural Parent and the Step-Parent (ii) Three arrows of property down (iii) Adoption doesn‘t sever parent-child relationship between the Natural Parent and the Child. (iv) Child given greater inheritance rights if adoption was by a Step-Parent or after the death of a natural parent (b) Who can inherit from the Child? (i) The Natural Parent who didn‘t give the Child up for adoption and the Step-Parent (ii) Two arrows up iv. The same-gender parent as the adopting parent is the parent whose relationship is affected. b. When Natural Parent can inherit from or through the adopted child: i. When child is adopted by a Stepparent or ii. By a surviving spouse (stepparent) of a natural parent. iii. Bottom Line: Adoption has to be by a stepparent. 6. Non-Step-Parent (SOMETIMES SAME-GENDER) Adoption a. The same-gender parent as the adopting parent is the parent whose relationship is affected. b. Gender of adopting parent kicks out the same gender of natural parent. c. Doesn‘t kick out the different gender. d. Hypo i. Natural Parent (M) and Natural Parent (F) divorce. ii. Adoptive Parent (M) wants Natural Parent (F), and Natural Parent (F) moves in with Adoptive Parent (M), but Adoptive Parent (M) doesn‘t want to marry. iii. Adoptive Parent (M) adopts the 4 kids and Natural Parent (M) consents. iv. How many parents can the kids inherit from? 2, C and G because P has stepped out—not three because C was not a spouse. v. How many parents can inherit from the kids? 2, C steps into Ps shoes. C became the natural father. e. Exception: Simultaneous Adoption i. Lulu and Geri adopt a kid—they are both women ii. Courts have admitted simultaneous adoption by both partners even though not adoption by a stepparent. Otherwise, Lulu would knock out Geri instead of Pete. iii. Pete must consent to the adoption. Jack L. White, II Page 9 of 75 7. Attempted Adoption: a. When foster parents want to adopt, but the Natural Parents won‘t consent OR when parents divorce and remarry, and a stepparent wants to adopt, but one of the Natural Parents won‘t consent. b. Only adds the arrow down – Does not effect the arrows up c. Statute: i. Simple Requirements (a) Meaningful parent-child relationship (b) Must begin while child is a minor (c) Must continue throughout their joint lives (d) Clear & Convincing evidence that Attempted Adoptive Parent / Foster Parent would have adopted, but for the legal barrier ii. Attempted Adoptive Parent cannot inherit from & through the child iii. CA courts split: Most say that once child reaches the age of majority, there is NO LEGAL BARRIER, so the adoptive parent must make a new attempt to adopt. d. How the statute effects the relationship: i. Permits the child to inherit from the Attempted Adoptive Parent / Foster Parent or Step-Parent, but for the legal barrier ii. However, Natural Parent only inherits from the child. iii. The other Natural Parent who consents to adoption waives their inheritance rights. 8. Equitable Adoption a. General i. That which ought to be done should be done: this is a contractual agreement. ii. This does NOT establish the issue of a Parent-Child Relationship. iii. It only establishes a breach of contract claim with an equitable remedy. b. Elements of Equitable Adoption Under a Contract Theory: i. Agreement to adopt between Adoptive Parent and Natural Parent ii. Performance by the parent = Giving up the child iii. Performance by the child = Child has to live in the home of the Adoptive Parent (if child moves in, the Natural Parent have also performed, consented) iv. Partial performance by Adoptive Parent (a) Only partial because didn‘t follow through on the adoption paperwork (b) Adoptive Parent did take the child in and treat the child as their own v. Adoptive Parent must die intestate (i.e. intestacy) (a) Allows child to inherit from the Adoptive Parent, but the Adoptive Parent can‘t inherit from the equitably adopted child. (b) There is much room for arguments Pro and Con in EXAM c. O‘Neal v. Wilkes: i. O‘Neil: Invalid CONTRACT, element #1 of above is not met. ii. Dissent & Liberal Modern Trend: If a child was lead to believe they were adopted, Equitable adoption would apply d. Who Takes? i. Parent cannot take from the child, because the parent had the responsibility to contract into appropriate adoption. ii. There is only a small arrow down, child can only inherit from, not through. iii. You can only inherit from the person, not through the person. e. No effect on the child  natural parent relationship if they, or relatives, acknowledged and supported the child. Jack L. White, II Page 10 of 75 C. Paternity Issues 1. Who is the Father? a. Identification of the father: Paternity Action burden of proof i. Preponderance of the evidence if father is still alive ii. Clear and convincing evidence if father is dead b. In California, paternity action may only be brought if it was virtually impossible to bring the action while the father was still alive 2. Half-Bloods a. General i. CA says to treat them equally. ii. Modern Trend and majority rule. b. Half-blood and whole-blood: i. Issue: Do they inherit the same? ii. CA Rule (a) Treat them equally (b) Example: (i) G and P married (have 4 kids; K,J,P,C), G and P divorce (ii) P marries L (P & L have kid; S) (iii) G and P and L die, P jr. dies c. You can only inherit through whatever relationship would give you the greatest share. d. Should S get a half share or a whole share? In CA should be treated equally. e. Case of rape: not the natural father. f. Child can only inherit through the line that would provide the greatest share. 3. Posthumous Children: a. General i. Common Law Rule – Within 280 days from death ii. Children are considered alive from the point of conception if it benefits them and they are born alive. b. Posthumously Born vs. Posthumously Conceived Children i. Posthumously Born child = child born within 280 days from conception and after Father‘s Death. ii. For more than 280 days, the burden is on the child to prove paternity. iii. Full parent-child relationship for a conceived child. c. Posthumously Conceived Children: OK until class closes i. Posthumously conceived treated differently because of Class Closing Doctrine ii. Posthumously Born Children: Treated as a full Parent-Child Relationship iii. Class Closing Doctrine: st (a) The open class closes upon the 1 person‘s possession of an interest (b) Example: (i) To A for Life, then to B‘s children and their heirs. (ii) A has LE when A dies, then B‘s Children take. (iii) B has one child, X. (iv) B‘s children have a vested interest subject to open until A dies because B could still have more children. (v) B has another Child, Y & A dies rd (vi) B has 3 child, Z, after A‘s death (vii) Who takes? Only X and Y. iv. In CA, if it is impossible for the child to establish paternity during the father‘s lifetime, the child may be able to prove it after father‘s death. d. Standard of Proof i. Preponderance of the evidence during life. ii. Clear and convincing evidence if he is dead. Jack L. White, II Page 11 of 75 4. Artificial Insemination of Sperm: where surrogacy occurs, or donor leaves sperm to person a. Can only go to devisee & can‘t be given away to anyone else even if there is a settlement of property b. Is a special type of property, must be regulated carefully c. What type of Parent-Child Relationship does this create for kids born after death of father by way of sperm donation? i. Have a natural mother ii. No parental relationship with father: because unfair to existing heirs d. Sperm donor has no relationship to the child. e. Legal protection only applies to those who use medical methods. When you apply the home method, the donor is the father. D. Managing a Minor‘s Property 1. Legal mechanisms for dealing with the fact that the person inheriting property may be a minor (from least to most flexible & from highest to lowest cost): a. Guardianship (DEFAULT) b. Custodianship c. Trust 2. How to Qualify as an Issue? a. Assuming child entitled to receive property, what is the problem? b. Child is a minor and does not have legal capacity to hold property. 3. Mechanisms a. Guardianship: without express instructions, court will appoint & need a written instrument to opt out. i. Can‘t use the income from the property to support the ward ii. Can‘t use the principal unless court order iii. No legal title, minimal inherent powers over the prop iv. High cost, much work—depleting the property through administrative costs b. Custodianship i. No court supervision ii. Can use the property for any purpose, as long as it is for the child‘s benefit iii. Requires invocation of Uniform Gift to Minors Act c. Trusteeship i. Even greater flexibility ii. Highest standard of care or duty—fiduciary duty iii. Higher expenses, trustee must be paid. iv. Trusteeship cannot be unilaterally terminated in favor of custodianship. 4. Preferences: a. If small gift: custodianship—must have written instrument b. If large gift: trusteeship—must have written instrument c. Worst: guardianship, but also the default Jack L. White, II Page 12 of 75 E. Advancements [ONLY APPLIES TO INTESTACY] 1. General a. Three ways to lose what one could possibly be taking [EXPECTANCY] i. Advancement: Issue take equally - based in equity ii. Homicide iii. Disclaimer b. Survival Requirement: makes one an heir apparent, because could die before the testator and can‘t therefore be an heir. 2. Expectancy a. Heirs Apparent i. Can‘t be an heir of a person before they die, you are an heir apparent. ii. Only have a property interest when the testator is alive iii. DO NOT hold a property interest, hold an EXPECTANCY. b. Expectancy is not a property interest, so it is not transferable. c. General Rule: Cannot sell an expectancy. d. A court of equity may enforce an agreement to transfer an expectancy if it is fair and reasonable under all of the circumstances. 3. Common Law: a. Doctrine of Advancement (Common Law): i. Must calculate every gift the Parents gave to the child and add them up; ii. Put them into a HOTCHPOT: (a) Take anything that qualifies as an advancement, (b) Add it back in to create the hotchpot. iii. Gifts to child inter vivos are presumed as advancements the child was to get at parent‘s death b. Remember, expectancy is not a property interest; c. But, the court of Equity will enforce a contract if equitable. 4. CA & Modern Trend of Advancement: a. Written Proof of Intent that Inter Vivos Transfers counted against the person‘s share at the time of death: i. The advancement doctrine does not arise unless written proof that the advancement was meant to be an advancement ii. Writing can be made by either the Donor or the Donee. iii. Different requirements depending on who does the writing (a) Donor (i) If Donor (parent) makes a writing, it needs to be contemporaneous with the giving of the gift. (ii) If not in a contemporaneous writing ( subsequent), it can still be put in the will. (iii) Decedent or Donor declares in a contemporaneous writing that it constitutes an advancement (b) Donee (i) If the Donee (child) does the writing, then it doesn‘t need to be contemporaneous. (ii) Heir acknowledges in writing that the gift is to be so deducted or is an advancement. iv. Must give the advancement effect through a document that qualifies as a valid will b. Scope: i. Advancement is a Probate Intestate Doctrine ii. If Testate, could do the same thing under the Satisfaction Doctrine iii. Absent express language otherwise, if the recipient of the advanced property fails to survive the decedent, the property is NOT taken into account in computing the intestate share to be received by the recipient‘s issue iv. If the writing indicates that the advancement applies to beneficiary and issue of beneficiary, then distribution will be in keeping with the intent v. If there is a proper writing, then go to the common law concept of the hotchpot. vi. Advancement does not count against issue, unless the writing expressly states as much. Jack L. White, II Page 13 of 75 5. Advancement Example: a. P gave 100K to C and 50K to D. J and contract got nothing b. Writings were made for both C and P, it said, ― we want kids to be treated equally.‖ i. P dies w/ Probate estate of 250K, and dies intestate ii. How should the property be divided among the 4 kids? (a) Assume all the requirements are met for Advancement for C and D. Intent was clear, contemporaneous writing, etc. (b) C = 100K; D = 50K; J = 0; contract = 0. Take the gifts that were advancements and add them together and put them in the Hotchpot = 150K total Advancements. (c) Add together the Hotchpot amount with the Probate Estate amount = 150 + 250 = 400K (d) There are 4 issue, and need to distribute equally. Combine the advancements back in to determine the true estate amount and credit. (e) C gets 0K; D gets 50K; J gets 100K; contract gets 100K c. LOOK OUT: when see ―words of advancement,‖ only look for the intent in the writing (could lead to litigation if unclear) 6. Debt owed to D by a beneficiary: a. A debt owed to the decedent is not charged against the intestate share of any person except the debtor. b. If the debtor fails to survive the decedent, the debt is not taken into account in computing the intestate share of the debtor's issue. 7. Opting Out Hypo: a. C gets 200K, D gets 50K, J gets 0, and contract gets 0K. There is 500K total in the Estate. Each should get 125 K, not including advancements. How should the property be divided? b. C got 75K more than she would have if she didn‘t ever get the advancement. She cannot be forced to give back 75K, Most likely she will defer and not participate in the distribution of the estate. She can Opt Out. c. If supposed to take 125K and C opts out, then cut her share out completely and Count shares ONLY of people participating . . . d. Instead of total Hotchpot 500K, it wil be 300K (-200K of C). Can count in shares of child who opts out of participating. Jack L. White, II Page 14 of 75 III. Bars to Succession A. Misconduct - Homicide 1. General a. Always ask: How did D die? b. Issue: Should you be allowed to take as a taker even if you killed the D? 2. Jurisdictions Split 3 ways: a. Title passes in spite of the crime because it is up to the legislature: i. Legislature punishes your crime with jail nd ii. Don‘t think it is fair to impose a 2 punishment b. CA Approach: i. Rule (a) A person who FELONIOUSLY and INTENTIONALLY kills the decedent is treated as if they predeceased the decedent (constructive death). (b) Matters if the murder is voluntary or involuntary in CA ii. Scope of Application: (a) The killer doesn‘t take, treat the killer as predeceased (b) Statute covers intestacy, testacy, and nonprobate; but one section of nonprobate is not covered in the statute (c) Covers: Joint Tenancy, Life Insurance Contracts, Trusts . . . (d) Doesn‘t cover Possessory Estates and Future Interests. Courts have to wrestle here. c. Hybrid: i. Title will pass but equity says you can‘t profit by your own wrongdoing ii. Set up CONSTRUCTIVE TRUST, which takes it away from the killer. iii. Constructive Trust = judicially created trust where the surviving spouse (i.e. killer) is the trustee who holds for the benefit of the beneficiaries, using it to prevent someone from being unjustly enriched 3. Right to Inherit Property is a Civil Issue: a. If someone is acquitted in a criminal trial, it doesn‘t determine the right to take. (i.e. OJ) b. Effect on children of the killer taking: Depends on whether the victim died testate or intestate. i. Testate: (a) Hypo (i) Victim died testate and Dad kills, do kids take? NO. (ii) Treat the killer as though he predeceased the victim and the property passes as such, meaning the gift would lapse (go to the kids) (b) Anti-Lapse Doctrine (does not apply in homicide) (i) §21110 – Anti-Lapse: (1) If person who predeceased is the appropriate degree of relation to the transferor and survived by issue (assuming no express gift) it says gift of issue of the predeceased beneficiary (2) Presume the intent is to devise to the predeceased beneficiary‘s children (absent homicide), absent intent otherwise. (3) If dead beneficiary dies before the testator (absent homicide), then presume that the testator would prefer the issue of the dead beneficiary to take. (4) The statute specifically states that the anti-lapse doctrine does not apply in cases of homicide (ii) Lapse: (1) Beneficiary identified in a written instrument predeceases the testator (2) i.e., To my sons, and if any of them predecease me, then to their issue (c) Kids get penalized because of the sins of their father (d) If the kids of the killer are taking under a will, they don‘t take. (e) The children of the killer get punished if the killer dies with a will; not if the killer dies without one. ii. Intestate: (a) Testator died intestate & Dad kills. Do kids take? st (b) Yes, if killer is 1 tier taker under Per Capita by Representation. c. Rule for Joint Tenants when one holder commits murder: i. It is severed and treat as predeceased, killer has no right of survivorship, ii. But the Joint Tenant is treated as a Tenant in Common and each party gets their separate halves. d. If liable in a civil proceeding (preponderance of the evidence), then killing may be deemed intentional. Jack L. White, II Page 15 of 75 B. Misconduct - §259 Elder Abuse: If you abuse an elder (clear and convincing), from whom you can inherit, then those inter vivos transfers can be used against you C. Disclaimer 1. General a. DISCLAIMERS: a person voluntarily chooses not to take his/her inheritance. b. Disclaimant is treated as if they had predeceased the decedent c. Can disclaim any type of property interest; any interest can be disclaimed (Probate, Nonprobate, Testate, or Intestate), good way to avoid double taxes. d. Knowing and voluntary declaration by the beneficiary 2. Statute: a. Unless Testator provides an express provision in case of a disclaimer, the interest disclaimed shall descend, go, be distributed, or continue to be held i. As to a present interest, as if the disclaimant had predeceased the creator of the interest or ii. As to a future interest, as if the disclaimant had died before the event determining that the taker of the interest had become finally ascertained and the taker interest indefeasibly vested. b. A disclaimer relates back to the date of death of the decedent or the determinative event 3. Protecting against abusive scenarios a. Rule: Disclaimer Affects the Per Capita Analysis Rule: i. Treat person who disclaimed as alive for purposes of determining where to make the division, ii. Then treat them as dead for purposes of distributing the shares (so that kids don‘t get unequal shares) iii. Designate person as live taker but can‘t take because he is predeceased iv. Example: B disclaims. (a) Per Capita: B=1/2, C=1/2 (b) If B considered to predecease because of disclaimer, then the split would be at D and D would receive 1/11, which is inappropriate use of the doctrine of disclaimer—policy; want the kids to take equally. (c) OTHERWISE: the party who received the advancement would pre-d the donor and the advancement would not count against the share going to the issue unless the written instrument expressly says the opposite. (d) Disclaiming an interest under a will, will not transform an interested witness into a disinterested 1. b. Rule: Disclaimer Cannot Eradicate the Effect of Advancements i. If Decedent dies with advancements having been committed to a beneficiary, the beneficiary cannot disclaim to avoid the effects of the advancement. ii. By disclaiming, the beneficiary cannot wipe out the advancement doctrine. iii. Treat beneficiary as alive for applying the advancement doctrine. iv. Then, treat them as dead for purposes of distributing shares. 4. Debt a. Cannot have a right to receive money, and disclaim in order to continue to receive government benefits, while not paying creditors. b. When the creditor is a private creditor, the beneficiary can never be deemed a recipient under the disclaimer doctrine. c. Involuntary creditors are treated the same as voluntary creditors. d. When the federal or state government is the creditor, a constructive trust is more likely the remedy. Jack L. White, II Page 16 of 75 FORMALITIES OF WILLS MENTAL CAPACITY I. Mental Capacity A. General: 1. Similar to contractual capacity, but lower threshhold 2. Testamentary capacity is lower than contractual capacity 3. Rationale: If you foolishly give away your own property, the state does not have to bear the burden. 4. Thresholds of Capacity a. Highest = Contractual Capacity DEFECTS IN CAPACITY b. Middle = Testamentary  Insane Delusion i. Execution of a will  Undue Influence ii. Strong presumption for (high burden on those challenging a will)  Fraud c. Lowest = Marriage (constitutional fundamental right) 5. Where there is a defect and causation, strike the portions of the will related to the defect 6. Revocation requires the same capacity as execution B. Requirements [FOR DETERMINING WHO TAKES YOUR PROPERTY WHEN YOU DIE] 1. Sound Mind - The Decedent must Understand: a. [The ability to know] the nature and extent of their property i. Refers to the capacity to understand if the decedent investigates, ii. Not whether the decedent is aware of all the details on a daily basis iii. Low threshold for testamentary capacity b. [The ability to know] the persons who are the natural object of the decedent‘s bounty i. Refers to the heirs apparent ii. Persons who would take if the decedent did not execute a will c. [The ability to know] that the disposition being made is testamentary: Refers to the nature of the testamentary act (EXECUTION/REVOCATION); and d. [The ability to know] how these elements relate so as to form an orderly plan for the disposition of the decedent‘s property. 2. Must be at least 18 yrs old C. This is a very soft, fact sensitive test for determining testamentary capacity 1. Presume the testator is mentally capable to make a will. 2. The burden is on the person challenging the will to prove the decedent was not mentally capable. 3. The focus when determining mental capacity is at the time the decedent executes the will. a. Evidence of a decedent‘s capacity immediately preceding and after execution of the will may be relevant. b. However, the focus is on the time of execution. D. Conservator for those who lack Capacity: 1. Get conservator for person who is incapable of looking after their own interests. 2. Even if you get a conservator it doesn‘t mean you lack mental capacity. 3. The mere appointment of a conservator DOES NOT INDICATE a lack of testamentary capacity Jack L. White, II Page 17 of 75 II. Insane Delusion A. Lack of Mental Capacity vs. Insane Delusion: 1. Lack of Capacity: a. To have a valid will, you need Mental Capacity b. Unable to enter into transaction. c. Entire will is void. 2. Insane Delusion: a. Even if you suffer from an insane delusion you could have mental capacity. b. Delusion and mistake are similar c. A belief the testator holds on to against all evidence and reason to the contrary. d. Only the part of the will caused by the insane delusion will fail. e. If the entire will is caused by an insane delusion, the entire will fails. f. Insane Delusion doctrine is generally not applied to religious/spiritual beliefs. B. General Insane Delusion Rules 1. Standard: HOW MUCH DO YOU WANT TO PROTECT THE TESTATOR‘S INTENT? a. Majority Rule: i. Reasonable Person ii. TARP IN THE TESTATOR‘S POSITION could not have come to the same conclusion (using a totality of the circumstances approach). iii. This approach is more protective of the Heirs Apparent (more invasive of testator’s intent) b. Minority Rule: i. No Factual Basis Test ii. If there is ANY FACTUAL EVIDENCE to support the belief, then, by definition, it cannot be an insane delusion because there is evidence to the contrary DEFECTS IN CAPACITY iii. This approach is more protective of the Testator‘s intent  Insane Delusion 2. Causation:  Undue Influence a. Issue: What is the standard of causation?  Fraud b. Must show that the Testator‘s belief actually affected the will. c. Alternatives i. California: ―But For‖ Insane Delusion, the Testator would not have disposed of his property otherwise. ii. ―Might have Affected‖ Testator‘s intent and the will. C. California Standards: 1. Rule a. ―Rational Basis‖ (ANY FACTUAL SUPPORT) for the Testator‘s belief, and b. ―But-For‖ the Insane Delusion, the Testator would not have left the property as he/she did. 2. Strike Suit a. General i. Assuming there is an Insane Delusion, this is the Remedy. ii. If there is an Unnatural Disposition of the Testator‘s property, then bring a strike suit, under the belief that the jury will give the family something iii. If a will totally cuts out the bounty of one‘s estate, based on mental capacity, insane delusion, Undue Influence, or fraud; file a STRIKE SUIT. iv. Strike out the portion of the will that is affected by the Insane Delusion v. If you see an Unnatural Disposition of property file a strike suit to get a percentage of the estate (10%) based on one of the doctrines of the will. vi. Barely meets the good-faith test. b. Permitting a No Contest Clause stops Strike suits c. Mechanics i. Plaintiff can likely receive at least 10% of the estate because the jury would only have to rule based on the preponderance of evidence standard. ii. Therefore, the Defendant would probably give the claimant 10% just to settle instead of paying a lawyer 20% to defend the claim. 3. More protective of the Testator in California Jack L. White, II Page 18 of 75 III. Undue Influence A. How to approach undue influence on the exam: 1. First look to see if there was an interested witness or an interested drafter, if that does not apply; 2. Use the presumption shifting doctrine; 3. Apply the four factor test (below); 4. Look for a No Contact Clause to stop a strike suit (A suit based on the fact that there is an unnatural disposition of property). B. General 1. Test: Whether control was exercised over mind of testator to overcome his free agency & free will & to substitute the will of another to cause the testator to do what she would not otherwise have done but for the control. rd 2. Where coercion, duress (even if not physical) from a 3 party is substituted for the intent of the testator. 3. Equity Concerns: should not profit from own wrongdoing 4. Soft Doctrine – Fact Sensitive DEFECTS IN CAPACITY C. Proof  Insane Delusion 1. General  Undue Influence a. Split of Authority  Fraud i. Higher Standard  Coercion ii. Lower Standard  Inappropriate Influence b. Don‘t have to prove that someone tried to talk the testator out of acting based on the insane delusion. 2. General Proof of Undue Influence: (not necessarily controlling) a. Susceptibility: Whether the testator was susceptible to undue influence b. Opportunity: Influencer had opportunity ELEMENTS OF UNDUE INFLUENCE c. Motive: Disposition / Intent  Unnatural Disposition d. Causation: Goes to the heart of undue influence  Coercion / Inappropriate Influence i. Did this influence affect the will?  Causation ii. Show that undue influence CAUSED decedent to give property away in a way she would not otherwise have done. iii. Example of NO causation: (a) M mentioned that she was going to cut these people out and also that she had cut them out. (b) Therefore, looks like it was not F‘s influence, but was what she actually wanted. (c) Burden of Proof is on the , by a preponderance of the evidence iv. Always the most difficult to prove Jack L. White, II Page 19 of 75 3. CALIFORNIA Proof of Undue Influence a. General i. 4 factor approach where burden of proof on  ii. 3 factor approach where if 3 are met, then burden shifts to the  b. Requirements (3-step) i. Confidential Relationship DOCTRINES TO SHOW (a) A medium threshold UNDUE INFLUENCE (b) A CONFIDENTIAL RELATIONSHIP between the  (party  Undue Influence accused of undue influence) and the testator (goes  Fraud in the Execution to susceptibility, opportunity, and motive).  Four Factor Test ii. Active in the Procurement  Three Factor test (a) Party accused of Undue Influence was ACTIVE IN THE  Interested Drafter PROCUREMENT OR EXECUTION of the will  Interested Witness Remedy (purging) (b) Courts take a broad approach to this factor  Strike Suit iii. Unduly Benefits (a) Show that  UNDULY BENEFITS (b) Subjectively, not based on intestacy c. BURDEN SHIFTING Provision i. Putting the burden on the  to show that there was no undue influence. ii. The Burden Shifts if the above three are met & the  must rebut the presumption of Undue Influence. iii. If  can prove all three factors, a presumption of undue influence arises and the burden of proof shifts to the  to prove, by a preponderance of the evidence, that there was no undue influence (causation). iv. Goes to OPPORTUNITY d. Exceptions: Creates irrebuttable presumption of Undue Influence, UNLESS rd i. Reviewed by 3 party attorney who counsels about the nature of intended transfer and signs and delivers to the Transferor ii. Related by blood or married iii. Cohabitant Jack L. White, II Page 20 of 75 D. Interested Drafter Provisions: 1. General a. Lawyers should not take money from their clients. b. This only applies to instruments that are executed before July of 1993. 2. No provision or provisions of any instrument shall be valid to make any donative transfer to any of the following: a. The person who drafted the instrument; b. Any person who is related by blood or marriage to, or co-habitant with or employee of the person who drafted the instrument. The term ―any person who is related by blood or marriage‖ includes: i. The drafter‘s spouse or pre-deceased spouse; ii. Relatives of the drafter or the drafter‘s spouse within the third degree; iii. Spouse of any person described above. c. Any partner, shareholder or employee of the drafter‘s law firm (drafter must have an ownership interest); d. Any person who has a fiduciary relationship with the testator who transcribed the instrument or causes it to be transcribed (i.e. dictates to person, etc.); e. Any person who is related by blood or marriage to, or co-habitant with or employee of the person who transcribed or caused the instrument to be transcribed. The term ―any person who is related by blood or marriage‖ includes: i. The transcriber‘s spouse or pre-deceased spouse; ii. Relatives of the transcriber‘s or the transcriber‘s spouse within the third degree; iii. Spouse of any person described above. f. Or, a care custodian of a dependent adult. 3. California Statute: a. When an attorney has drafted, or has caused to be transcribed, an instrument from which reaps a benefit, there is an almost irrebuttable presumption that there was undue influence. b. Exceptions: i. If there is a certificate of independent attorney review (a) Must counsel the testator about the nature of his/her transfer; and (b) Sign and deliver to the transferor and the drafter a certificate ii. If the attorney is related to / married to the testator, or iii. If the attorney is a cohabitant with the testator. 4. One CANNOT opt out of this provision by will 5. This provision also applies to non-probate property. Jack L. White, II Page 21 of 75 IV. Fraud [misrepresentation made knowingly & intentionally for the purpose of affecting the testamentary scheme] A. General (a lie made for the purpose of influencing the testamentary scheme) DEFECTS IN CAPACITY 1. Essence is intentional misrepresentation  Insane Delusion 2. Knowingly made,  Undue Influence 3. With the purpose of effecting the testator‘s testamentary scheme:  Fraud B. Elements to show Fraud: 1. Misrepresentation with Intent to effect the testamentary disposition 2. Causation 3. Strike the part of the will affected by Fraud, OR Place it in a Constructive Trust (equitable remedy) rd a. Only use Undue Influence or Fraud where 3 party is involved b. Disinheritance: Testator must affirmatively give away all property in order to disinherit someone. 4. Whoever is bringing the claim must have standing. C. Two Types 1. Fraud in the inducement: (OUTSIDE THE WILL) a. Concerns knowingly false statements made directly to the testator before the execution concerning material facts outside the will. b. Testator is doing what he wants to do for the wrong reasons because of the lie. c. Defendant misrepresents key facts to Testator, and d. The Testator relies upon the facts when formulating an estate plan 2. Fraud in the execution: (GOES TO THE WILL) a. Concerns a fraud perpetrated in the execution or misrepresentations as to the character or contents of the instrument. b. Intentionally tricking someone into signing something. c. The fraud must be made directly upon the testator: Fraud on the witnesses is not enough. d. Misrepresentation of contents not induced by the beneficiary is not ground for judicial relief, unless under the circumstances redress would be given for mistake alone. D. Tortious Interference with an Expectancy: DOCTRINES TO SHOW 1. General st UNDUE INFLUENCE a. Must bring probate claim 1  Undue Influence b. An intentional interference with an expected inheritance or  Fraud in the Execution gift as a valid cause of action.  Four Factor Test c.  must prove that the interference involved tortious  Three Factor test (wrongful) conduct: fraud, duress, or undue influence  Interested Drafter d. Cannot use to contest Mental Capacity  Interested Witness Remedy (purging) 2. Alternatives for those challenging the NCC to collecting if NCC is  Strike Suit held valid: a. Not a will contest but a suit for damages, a No Contest Clause does not apply b. Longer Statute of Limitation c. Punitive Damages, because it is an action in tort. d. Not a challenge to the will, so it avoids a no contest clause Jack L. White, II Page 22 of 75 E. No Contest Clause: 1. General a. Deters  from suing because it says that if they contest the will they will not get anything b. Challenger must be receiving something to give effect to a No Contest Clause c. Will get something in the will if they don‘t contest (e.g. buying them off). 2. Policy a. Bad because can be used as a shield to protect wrongdoers b. Good because they preserve Testator‘s intent 3. Split Jurisdictions a. How do jurisdictions feel about no contest clauses? Most recognize them but construe them narrowly b. What do narrowly interpreting jurisdictions look for? i. Probable Cause to support the claim. ii. Nature of the claim 4. California‘s position on No Contest Clauses: a. California will NOT enforce a No Contest Clause if those challenging the will have: i. Reasonable Cause (a) Reasonable Cause to support their claim, AND (b) The claim is limited to one of the following situations: (i) Forgery (ii) Revocation (iii) Interested Drafter (c) If you are proceeding here, you are talking about interested drafter statute. ii. Probable Cause (a) Probable Cause to support their claim, AND (b) Claim of wrongful conduct by someone active in the procurement and execution of the will (uninterested drafter, person instructing the drafter, witness) (c) If you are proceeding here, you are talking about the other possible wrongful conduct doctrines (i) Fraud, (ii) Undue Influence, and (iii) Interested Witness iii. This weakens the protection of the testator‘s intent. b. California & Disinheritance i. Cannot passively nullify a statutory provision for intestacy. ii. To cut out an heir, you must actively give your property away. iii. You cannot just execute a will that disinherits an heir. c. Petitions to construe the will are not challenges to the will. Jack L. White, II Page 23 of 75 F. Spouse Omitted from Premarital Will 1. Pretermitted Spouse Doctrine a. You assume that when someone executed a will then gets married they intend to give their new spouse a share but they just didn‘t get around to including the new spouse. b. New spouse takes the intestate share, but never more than ½ of the separate property. c. Most states rely upon their spousal protection provisions if a spouse is omitted by a premarital will. d. Although omission is not required no share is allowed if: i. The will or evidence indicates that the will was executed in contemplation of the marriage, or ii. The will expressly shows an intent to exclude the spouse from a subsequent marriage, or iii. The surviving spouse received transfers outside will intended to be in lieu of a testamentary gift. e. In addition, the automatic intestate share is limited to the portion of the estate not passing to devisees who are decedent's children or descendants of those children born before the marriage and who are not children of the surviving spouse. f. All others devisees are subject to pro rata abatement caused by the exercise of this provision. 2. If the soon to be wife is provided for, but not as a wife, then they can still take as a pretermitted spouse 3. Give the spouse their intestate share. a. Basic requirements: i. There is a valid testamentary instrument ii. Marriage after the execution of all of the testamentary instruments b. Therefore, if the spouse executes or amends any testamentary instrument after the marriage, then pretermitted spouse will apply. 4. Death without including the wife 5. Exceptions a. Intentionally left out of the testamentary instrument - EXPRESS on the face of the will b. Otherwise provided for outside the will and the intention is shown by statements, the amount, or other evidence, OR i. Otherwise provided for and the testator intended that gifts outside the will are in lieu of the will ii. Amount may be Relevant c. Agreement where spouse EXPRESSLY waives their right. 6. Share of the omitted spouse (like intestate) a. ½ of the community property b. ½ of the quasi-community property c. An intestate share of separate property, not to exceed ½ the value of the separate property in the estate. 7. Policy/Reasoning a. Spousal protection b. Example: case took an extreme view of this rational by finding a pretermitted spouse where there was not specific wording of an intention otherwise. c. Accidental omission, presumed intent of the testator Jack L. White, II Page 24 of 75 EXECUTION / REVOCATION I. BASICS Formalities  Writing A. Reasons for the Formalities:  Signature 1. RITUALISTIC FUNCTION:  Witnessed a. To impress upon the Testator the seriousness or finality of what he/she is doing b. Signing and witnesses for the formality of this function c. Protect intent PRIORITIES 2. EVIDENTIARY FUNCTION: W RITING SIGNATURE W ITNESSED a. To increase reliability, and 1. Evidentiary 1. Evidentiary b. Courts want the best evidence 1. Protective 2. Protective 2. Ritualistic c. Require a writing for this function 2. Evidentiary/Ritualistic 3. Ritualistic 3. Protective 3. PROTECTIVE FUNCTION: 3. Channeling 4. Channeling 4. Channeling a. Witnesses for this function b. Shows no undue influence, fraud, duress 4. CHANNELING FUNCTION: a. Creates uniformity in the document b. Prefer Testators to get an attorney because they have form documents which courts will recognize c. Reduces administrative costs, effect of the will shall be honored B. Wills Act Formalities (WAF): to properly execute a will the Testator must comply 1. Writing 2. Signed a. At the bottom (if subscription is required) b. By Testator or proxy (in Testator‘s presence and at his discretion) 3. Witnessed a. In the presence of 2 or more witnesses at the same time of signing b. Witnesses must sign and attest in front of the Testator. C. Curative Doctrines for Wills Act Formalities 1. Strict Compliance – If there is any doubt, strike the will. a. Strict Compliance as to each will requirement and function within the WAF. b. Avoids the ‗slippery slope of substantial compliance‘ 2. Modern Trend – Flexible Strict Compliance [CALIFORNIA‘S APPROACH] a. Asks the Question: Is the mere potential for fraud enough to defeat the proposed will? b. Maintains strict compliance, absent potential for fraud, which would be enough to defeat a will. 3. Substantial Compliance [SIX JURISDICTIONS] a. Keep the same number of requirements but be more lenient (Substantial Compliance) b. Reduce the number of statutory requirements, saying ones left are important (Strict Compliance for those) c. California: Valid (a judicial doctrine that can be argued in court): i. Clear and convincing evidence that the Testator INTENDED this to be his will. ii. Clear and convincing evidence that the Testator SUBSTANTIALLY COMPLIED with the WAF. d. Use if the will fails to satisfy the requirements for a proper wills Act Formalities under strict compliance. e. Don‘t end there, and try substantial compliance 4. Dispensing Power [NO JURISDICTION HAS ADOPTED THIS] a. Softer than Substantial Compliance b. Requirements: i. Clear and convincing evidence that the Testator INTENDED it to be his will, AND ii. No evidence of Fraud (actual, not potential) involved c. When requirements are met, testator may dispense of virtually any wills Act Requirements i. Must still have a WRITING ii. Most Courts are willing to overlook witnessing Jack L. White, II Page 25 of 75 D. Various Situations 1. Self Proving Affidavit: a. Strict vs. Substantial Compliance i. Under Strict Compliance, not part of the will ii. Under Substantial Compliance, it would be. b. Example: i. Witnesses signature which were only on a self-proving affidavit may be challenged as not literally complying with wills Act Formalities. ii. The court held that the signatures may have substantially complied, and that was enough to probate the will. c. Aspects i. Not part of the will ii. Not necessary for execution of the will iii. Dispenses with the need to call witnesses during probate iv. Must be notarized 2. Writing ―void‖ across a xerox copy: Not a valid revocation because it is not the will, only the copy st 3. Testator executes 3 page will, testator removes 1 page and substitutes new page: st a. Can substituted 1 page be probated? NO, not under Strict Compliance. b. Ripe for fraud. OK under Dispensing power, but do we want to go that far? Jack L. White, II Page 26 of 75 II. Attested wills A. General 1. 2 Step Analysis a. Look to statutory requirements (for writing, signature, witnessing) b. Look to compliance requirements (strict vs. substantial compliance) 2. California Requirements for Attested wills: Strict Compliance Jurisdiction a. Writing b. Signed by Testator, or i. By another in Testator‘s presence and at direction of the Testator, OR ii. By conservator pursuant to court order (no longer have to sign at the end) c. Witnessed i. By 2 persons at the same time that the Testator signs or acknowledges the instrument, and ii. Must understand the significance of the Testator‘s will (BUT DON‘T NEED TO KNOW THE WILL‘S CONTENT). B. Witnessing 1. Presence of the Witnesses at the Signing by the Testator: a. Witnesses still must be present, but don‘t have to be together i. Note that, in California, the signing by the testator or the testator's acknowledgment of the signature or of the will must occur in the joint presence of the witnesses. ii. In some states, the testator can sign in front of one witness and later acknowledge his signature before another, but this is not permitted in California. b. Can themselves sign separately c. But when the Testator signs or acknowledges the instrument, they must be in the line of sight or have a conscious presence: d. Acknowledgement of the signature of the will - The testator does NOT have to be present when the witnesses sign DOCTRINES TO SHOW 2. Line of Sight vs. Conscious Presence UNDUE INFLUENCE a. Conscious Presence (California)  Interested Witness Remedy (purging) i. General  Four Factor Test (a) Softening doctrine with Strict Compliance:  Three Factor test (b) Includes sight + sound based on the totality of the  Fraud in the Execution circumstances  Interested Drafter (c) More flexible totality of the circumstances approach  Strike Suit (d) Substantial compliance with line of sight ii. California Presence Rule Summary: (a) California does not require the witness to sign/acknowledge in the presence of the testator (b) Requires the testator to sign/acknowledge in the presence of the witnesses b. In the Line of Sight (Narrow) i. Testator can be seen (able to see the act of Testator signing the will) ii. Must actually see or be capable of seeing iii. Expanded (visually & temporally) and more flexible iv. Less potential for fraud v. Decreases costs of administration 3. Delayed Attestation by Witnesses: a. Traditional Rule: Attestation must be during the same ceremony b. Modern Trend within Strict Compliance (flexible strict compliance) i. Delayed attestation is okay as long as the statute does not mandate presence. ii. CA permits delayed attestation w/in 6 months to 1 year (w/in a reasonable time) after Testator signed iii. Witnesses do not have to sign in the presence of the testator. iv. Witnesses should sign while the memory of what they are signing is fresh within their recollection. Jack L. White, II Page 27 of 75 4. Special Witnessing a. Relevant Inquiries st i. 1 —what is the function of the witnesses? nd ii. 2 —what about presence? b. Telephonic Witness: i. Risks: (a) Erodes the Protective and Ritualistic functions (b) Potential for fraud & Increased risk of mistake (c) More Litigation and higher costs of Administration ii. Modern Rule: Telephonic Presence is not presence c. Video i. Under Strict Compliance: Video is NOT allowed by ALL courts. ii. Writing is Evidentiary: Video is like an oral will. iii. No jurisdiction has accepted video wills because of the failings of the ritualistic function. d. Bank Teller: If there is no personal contact with the Testator and no chance to test the Testator‘s capacity, then no. 5. The Interested Witness Doctrine a. California Rule [CALIFORNIA CONSTRUES THIS STATUTE NARROWLY] i. General (a) Need 2 witnesses that are Disinterested Witnesses. (b) Witnesses must be neutral at the time the will is executed. ii. An interested witness does not invalidate the will. Just Purge the Witness of his excess interest. iii. Statute only applies where the actual witness is the beneficiary. iv. If a Witness gets legal title as trustee or any fiduciary duty, then the Interested Witness statute doesn‘t apply. v. What if P is an interested witness, but will gives everything to P‘s wife? No reference applies this statute to family members of the Interested Witnesses. b. Rebuttable Presumption that the witness engaged in wrongful conduct (Undue Influence or Fraud) i. Burden of Proof is on the Interested Witness to persuade the trier of fact that he didn‘t take because of Undue Influence or Fraud. ii. If Interested Witness doesn‘t overcome the presumption: REMEDY? (a) Purge the Interested Witness of their excess interest (as compared to an amount under a prior will or intestacy). (b) If intestacy (& no prior will) excess is any amount above the intestate share of the heir in question nd (c) If prior will, excess is any amount in the 2 will greater than what the INTERESTED WITNESS would st have taken under the 1 will. iii. Rebut by showing no wrongdoing, or that they didn‘t know they were taking. c. Example of Purging Doctrine at Work: i. Will 1 gave A 5K, and will 2 gives A, 10K. ii. If A, the Interested Witness, cannot rebut the presumption of undue influence, she would get 5K because the Court would use the Purging Doctrine nd iii. The amount the interested witness would have gotten had the 2 will not been executed. d. Hypo: i. Mom leaves all estate to P (will)—residuary clause. ii. Mom has 4 sons, P is one of 2 witnesses to the will. iii. Problem: creates presumption that procured by undue influence. (a) If can‘t rebut this presumption purge ¾ because taking under intestacy & P has 3 other brothers. (b) Strike ¾ to fall to intestacy, but who will take under intestacy? All 4 sons, divide that ¾. iv. Would P take his ¼ and his portion of the ¾ under the intestacy scheme? (a) Put in a constructive trust. (b) Could also argue that it is an advancement. v. Catch all if you see unjust enrichment is to argue that the ¾ should be placed in a constructive trust (e.g. homicide) (a) Don‘t use if have definite guilty witness because it allows the witness to walk away with something, use (b) Strike the gift that that person is getting (c) Must assert Undue Influence under one of the other 3 ways. Jack L. White, II Page 28 of 75 C. Signature 1. What constitutes a signature? a. Most Jurisdictions: i. Any marking that the person INTENDS to constitute their signature qualifies as their signature. ii. Whatever the signatory intended to be his signature is his signature. iii. A stamp would likely not count. b. California Civil Code: where testator signs attested instrument with an ―X‖ one of the witnesses must print the name of the person who wrote the ―X‖ and then must write their own name next to it. i. If pre-typed ahead of time, because it is a civil code provision for the witness to write the name, and because we have a probate code provision, is good enough ii. Only time California probate used Substantial Compliance is in the above scenario, with a pre-typed signature. iii. California generally adopts Strict Compliance. iv. Witness does not have to sign in the testator‘s presence. v. If the signatory stops short on his own (Pat instead of Patrick), then it‘s okay; however if the signatory is stopped (dies before finishing) then it‘s not okay under Strict Compliance. 2. Someone else may sign for the testator: a. In the presence of the testator, and b. At the direction of the testator 3. Order of Signing: Does it matter who signs first - Witnesses or Testator? a. Common Law: i. Testator always had to sign first ii. It is implicit in the wills Act Formalities that the Testator must sign first b. Modern Rule: As long as no one leaves until the Testator has signed, doesn‘t matter who signs first 4. Provisions in the will that come after or below the Signature: a. California doesn‘t require that the signature be at the end (subscribed), BUT b. Temporal Requirement: i. Can‘t add a provision into the will after the will signed. ii. Any provision must be on the page before the testator signs to be considered a part of the will. c. Bottom Line: i. If the provision is added temporally before the Testator‘s signature, it doesn‘t matter if Testator‘s signature is below or above the signature line ii. Can probate it. 5. Incorrect Signatures - arguments to make to courts to try to get them to probate a. Traditional Outcome i. Require proper signatures ii. Strict Compliance b. Modern Approach i. Think of the execution ceremony as one ceremony ii. Testamentary intent is derived by looking at BOTH instruments iii. Treat the 2 documents as one and let it slide c. Misdescription Doctrine (exception to the rule on mistakes): i. Correct the mistake by ONLY striking the misdescribed portions of the will. ii. Can strike – Cannot rewrite (in an otherwise validly executed will). iii. Must see if you can still give the gift after striking the provision (be technical & mechanical). iv. A construction doctrine to resolve latent ambiguities. v. Problem: if Testator owns more than one piece of land. d. Scrivener‘s Error (one jurisdiction has adopted it in a non-Pavlinko setting): i. Takes a cynical view of the lawyer‘s role—he intentionally wanted the will to go thru probate intestate. ii. Attorney intentionally switched wills (scrivener‘s error) = fraud in the execution = a constructive trust e. Could also argue that 1 spouse has implied authority for the other. Jack L. White, II Page 29 of 75 III. Holographic Wills A. General 1. A will written by the Testator‘s hand and signed by the Testator (and, no one else). 2. There must be an expression of the Testator‘s intent. 3. Abolishes the witness requirement completely. 4. Only about ½ of jurisdictions recognize holographic wills (California Observes) B. Elements (to offset the absence of the witness requirement) 1. Must have a Writing, to offset the absence of the witness requirement. 2. Material provisions must be in Testator‘s handwriting (not everything) a. W HO takes what? Must be in Testator‘s handwriting b. W HAT property do they take? Must be in Testator‘s handwriting 3. Must be signed by the Testator 4. Testamentary Intent 5. Some jurisdictions require a holographic will to be dated. C. Issue in Holographic wills cases is ―W HETHER THE DOCUMENT HAS TESTAMENTARY INTENT?‖ 1. How much should be written? CALIFORNIA REQUIREMENTS a. California: all of the material provisions  Writing b. Otherwise need all in Testator‘s handwriting  Material Provisions in Testator‘s Handwriting 2. Date Requirement  Signed a. Doesn‘t have to be dated, unless:  Evidences Testamentary Intent i. Another will (presumption against holographic) (a) There is another will with an inconsistent provision to the holographic will. (b) Then, PRESUME (rebuttably) that the holographic will is invalid as to the inconsistency unless the time of its execution can be established to be after the execution of the other will. ii. Capacity (presumption against holographic) (a) If can establish that the testator lacked capacity at any time during which the will might have been executed then PRESUME (rebuttably) that the holographic will was executed during that time. (b) Beneficiaries must then prove that the will was executed at a time when the testator had capacity. b. For both of the above, need only relative dating (maybe only referring to an event) c. Burden is on the party trying to prove the will Date not required, but potential problem in statute d. If two wills are both undated, send that portion of the property into intestacy. Jack L. White, II Page 30 of 75 D. Finding Testamentary Intent in Holographic will: 1. General a. Must adequately evidence Testamentary Intent b. Testamentary Intent: Testator intended this piece of paper to be his will, and to be probated as such. c. Toughest issue to deal with in holographic wills. 2. Approaches to Finding Testamentary Intent a. Strict Compliance i. Every material provision must be in writing. Look at the writing. ii. If there is anything on the face of the will that is not in the testator‘s handwriting, it is not probated. b. Contextual Approach (MORE FLEXIBLE APPROACH TO STRICT COMPLIANCE): i. To the extent the handwriting is ambiguous, look to the printed material to ascertain the testator‘s intent in context. ii. Expression of testator‘s intent can be in preprinted material, and the material provisions have to be in the testator‘s handwriting. iii. Cannot give effect to material provisions that are NOT in the testator‘s handwriting, but can find Testamentary Intent in the typed portion iv. Interlineation: (a) General Rule: (i) Any subsequent changes have to qualify as a valid will. (ii) A handwritten change to an attested will is not a valid attested will. (b) But if is a change to a subsequent will (non-attested change), then it is not a writing on a commercial form and would this be valid? c. California i. Testamentary intent may be set forth either: (a) In the testator‘s own handwriting, or (b) As part of a commercially printed form will ii. Issue: What about additional writing on a will drafted by an attorney. iii. California Rule for Form Will Interlineation: if it is a commercially printed will, then it can qualify as valid if interlineation performed on it. 3. Form Wills a. When you see a Form will, use Strict Compliance and Contextual Approach to analyze. b. Argue YES under the contextual approach, NO under Strict Compliance. 4. Conditional Language: a. Presumed to be language, explaining the purpose of drafting the will b. Presumption is not that the condition is a condition precedent to disposition of property c. Does not invalidate the will Jack L. White, II Page 31 of 75 IV. Revocation of Wills by Writing or Act A. Codicil: 1. A codicil is a properly executed will that amends a primary will but which might have to stand on its own if the "primary" will is not effective. 2. Requirements a. Has to qualify as a valid will b. Has to supplement or amend the will to some degree 3. Limited affect a. If codicil can be read as consistent then do it b. If codicil is knocked out, original will could be given effect, BUT c. If will is revoked then codicil is too (unless argue it is not a codicil, but a will), because the codicil is an attachment to the will. B. Subsequent will can revoke a prior will in 2 ways: 1. By Writing a. Two ways: i. Revoking the will EXPRESSLY ―I hereby revoke my prior will‖ or ii. With INCONSISTENT PROVISIONS. b. The writing must qualify as a valid will i. Traditional Attested ii. Holographic c. Expression of intent to revoke qualifies as a material provision. d. Must have capacity at execution 2. By Physical Act: a. Requires (destructive) act by the testator or someone else at the direction and in the presence of the testator, coupled with the intent to revoke (e.g. burned, torn, canceled, obliterated, or destroyed) i. Common Law: Act must affect the written words of the will ii. Modern Trend (judicial doctrine): (a) If act with appropriate intent is performed on the will, it doesn‘t have to affect the printed words. (b) California has no requirement that the revocation by act must affect the printed words. b. Must have capacity at execution C. Revocation through Presumption Doctrine 1. A third method, under the revocation by act heading: 2. Requirements: a. Will is last in the testator‘s Possession, AND b. Testator was competent until death, AND c. After the testator‘s death, neither the will nor duplicate original can be found, OR d. Even if the will is found, whatever is done to the will is presumed to have been done by the testator (e.g. defacing, lines)—permits partial revocation by act. i. Presume that the testator destroyed the will by act. ii. This is a relatively low presumption. 3. Rebuttable presumption a. Just, put forth a more plausible explanation for why we cannot find the will b. Fact sensitive c. If you can overcome the presumption, use the lost will doctrine. d. If you cannot overcome the presumption, it is a revoked will. D. Lost will Doctrine: can‘t find the will, so we presume it was NOT revoked 1. Legally the will is still in existence. 2. Testimony from the attorney and secretary who were both involved in tearing the will could be admitted. 3. If will is not revocable & can‘t be found, then use extrinsic evidence to prove it up and probate it—what it said. a. Distinguish between the Lost Will vs. Presumption Doctrine (that testator destroyed the will) b. Probate a will unless it is properly revoked E. Multiple wills: rare, but allowed. 1. Example: nd a. Execute a valid will giving car to A. 1 month later you execute a 2 valid will, giving coin collection to B. nd b. The 2 is a freestanding will. 2. Rule: Multiple Instruments as Multiple wills usually occur in cases where the underlying will doesn‘t have residuary Clauses. Jack L. White, II Page 32 of 75 F. Duplicate Originals: 2 or more original wills, properly executed by the testator and the witnesses 1. Key is how the revocation is achieved? a. General Rule: Revocation of 1 duplicate original revokes all. b. Revocation by act or subsequent will: ALL duplicate originals are revoked when 1 is (affirmatively) revoked c. Revocation by presumptions i. ALL duplicate originals are not revoked if ANY can be found. ii. Presumption Doctrine will NOT revoke duplicate originals, if one can be found, then testator dies probate, NOT if there is revocation by act, then revokes all of the wills and duplicates iii. Probably just lost the will. 2. CA Case Rule Exception: a. If there is a good reason for the testator not wanting to ask for the duplicate original from the person holding it then the presumption doctrine might revoke all the duplicate originals. b. No duplicate originals may be found for the revocation to be operative. G. Partial Revocation: 1. General [PARTIALLY DESTROYED, DEFACING THE WILL] a. If the will was last in the Testator‘s possession and after the testator dies it is discovered that there is an interlineation, effecting 1 beneficiary, presume the testator intended to revoke that specific devise. b. Apply the Presumption Doctrine: If the will is found in the testator‘s possession, then it will be assumed that the testator made the marking. c. Problems i. Too much opportunity for fraud ii. This is really a new gift 2. If jurisdiction recognizes partial revocation by act, can it increase a gift outside of the residuary clause? a. Majority (California) i. Residuary of the Residuary / Modern Trend ii. Any gifts that fail (or are revoked in part) fall to the residuary clause b. Minority i. Strict Compliance – The only place the partially revoked gift can go is to intestacy. ii. Only applies to intestacy. iii. 5K to intestacy and if want to opt out, should have a codicil. c. Uniform Probate Code (but no court) allows for an increase to a gift outside of the residuary clause. 3. Example - Valid will: I give total of 10K to S and J. The rest to T. a. S gets ½ b. Later decides to cross J out with pen c. Issue: Whether revocation was valid? d. Issue: Act or writing? ACT e. Partial Revocation? Yes f. Intent with pen? Yes g. How much does S get: increased gift from 5K to 10K. h. What if testator marked out the 10K and put in 5K? Don‘t have enough material provisions written. V. Revocation by Operation of Law A. Dissolution of Marriage: 1. Only cut out the ex-spouse, and only cuts them out as to probate property (identified in the will), not to nonprobate property (i.e., joint tenancy / recapture doctrine). 2. If will provides for ex-spouse & ex-spouse‘s issue, the issue still take, even though her gift is revoked. 3. A separation is NOT dissolution, but a final judgment of divorce is. B. Majority vs. Minority 1. Majority (California): Divorce revokes all provisions in a will in favor of a former spouse. 2. Minority: Revocation only occurs if it is accompanied by a property settlement. C. Only applies to wills (not inter vivos trust) 1. No reference to non-probate instruments. 2. Non-probate is a form of contract. D. Irrebuttable presumption that Testator intended to cut former spouse out UNLESS Testator executes a new will post-divorce E. Revival by Remarriage: Any provision revoked by Operation of Law is revived by the Testator‘s remarriage to the former spouse Jack L. White, II Page 33 of 75 VI. Probating a Revoked will A. Dependent Relative Revocation [JUDICIAL DOCTRINE] 1. General a. Ignoring the revocation because it was induced by mistake. b. If the testator purports to revoke his will upon a mistaken assumption of law or fact, the revocation is ineffective if the testator would not have revoked his will had he known the truth. c. Look to the failed alternative scheme to accommodate testator‘s intent FOCUS 2. Elements Testator‘s Intent a. Valid Revocation of a Valid Will How did Testator Revoke? b. Based upon a Mistake of Fact or Law i. There must be a close relationship between the actual revocation and the inducing mistake. ii. Evidence of mistake depends on how will was revoked c. CAUSATION: i. The Testator would not have revoked if the Testator in fact had known of the mistake ii. Spectrum Analysis: Choosing between intestacy and the old will (tie goes up) d. Scope of Dependent Relative Revocation: [depends on how you revoke the first will] i. By Act [USUALLY, A MISTAKE OF LAW] (a) The revocation must be coupled with a failed alternative plan of disposition (new will/codicil) (b) Not all jurisdictions require this element ii. By Writing [USUALLY, A MISTAKE OF FACT] (a) The mistake must be express in the revoking instrument (or, possibly, is established by clear & convincing evidence), and (b) Revocation by act is broader. The mistake must be a part of the revocation. e. For a WRITING, the mistake must be beyond the knowledge of the Testator 3. Example: a. Clause 5 of T‘s typewritten will provides: ―I bequeath the sum of 1K to my nephew, CB.‖ Testator crosses out the 1K and substitutes therefore 1.5K. Testator then writes her initials and the date in the right hand margin opposite this entry. After T‘s death some years later, her will is admitted to probate. CB contends that he is entitled to 1.5K or 1K. b. Is the interlineation valid? i. It is a new gift. ii. Must qualify as a valid codicil, not a traditional will because not according to the wills Act Formalities. iii. Handwritten interlineations on a holographic will are valid, but not on a traditional will. c. Could it be a valid holographic codicil? CALIFORNIA REQUIREMENTS i. Need material provisions in he Testator‘s handwriting & intent  Writing ii. To find out who, look at typewritten material.  Material Provisions in iii. Under contextual approach this still won‘t work because this Testator‘s Handwriting approach only says it is OK to look at the typewritten part to  Signed get Testator‘s intent, not to get material provisions.  Evidences Testamentary Intent iv. Not a valid holographic codicil. d. Dependent Relative Revocation? Elements met. i. Her true intent was to give more $, we either imply revocation and give effect to it (meaning heir would get nothing) or ignore it (meaning heir would get original amount in the will) ii. Spectrum Analysis (No DRR  DRR, moving by intent): The 1.5K she wrote in is closer to 1K iii. If Testator had known the truth, Testator would not have revoked. iv. Effect of 2 outcomes: See which of the 2 options is closer to the Testator‘s intent? 1K. Jack L. White, II Page 34 of 75 B. Revival [STATUTORY] 1. General [ONLY APPLIES WHEN YOU HAVE @ LEAST 2 VALID WILLS] a. Under certain circumstances you can revive a revoked will that has been revoked by a subsequent will. i. Revival: Have 2 wills, and revoke will #2, when you revoke the will #2, do you revive will #1? ii. General American Rule: When you execute will #2, you revoke will #1. nd b. Critical Question: How was the 2 will revoked? 2. Factual Scenario [W AS THERE INTENT TO REVIVE AND WHERE CAN WE LOOK FOR IT?]: a. Will #1 revoked by will #2 b. How was will #2 revoked? 3. After will #1 is revoked by will #2, what is the effect of will #3? a. Will #2 effectively revoked will #1 b. Can Revoke the Revoking will 2 ways: nd i. 2 will Revoked by Act - Take ANY EVIDENCE to show Intent to Revive nd rd ii. 2 will Revoked by Writing (a 3 will) - Intent to Revive must be express in the revoking will (will#3). Jack L. White, II Page 35 of 75 COMPONENTS OF A WILL I. W ILL-EXPANDING DOCTRINES: Looking Backwards to Expand the Scope of the will A. Integration of wills [into one instrument] 1. Identifies what is the will 2. Requirements a. All papers physically PRESENT AT THE TIME OF EXECUTION (most important requirement), AND b. INTENDED TO BE PART OF TESTATOR‘S WILL, are integrated as one instrument. B. Republication by Codicil [referring to a document that IS a valid will] 1. General a. Signing a valid codicil to a will republishes, or re-executes the will as of the date of the codicil b. Key Concept: Re-dates a prior valid will. c. The underlying will needs to be: (1) A valid instrument, (2) In existence at the time the codicil is made d. Must have a valid codicil and a valid will 2. Requirements a. VALID codicil b. Re-dates (re-executes) prior VALIDLY (underlying) executed will 3. Presumption a. Even though not express, there is a strong presumption of republishing the will, which re-dates the will. b. The presumption can be rebutted if the codicil is inconsistent with the testator‘s intent. st nd nd 4. If you re-execute a codicil to a 1 will, which was revoked by the 2 will, you revoke by implication the 2 will st and re-execute the 1 will. 5. Example: a. Will produced in 1977; Notebook produced in 1979—How will the Notebook get in? b. Republication by Codicil. If a codicil is made in 1980, the 1977 will is re-dated to 1980, making the 1979 notebook admissible, or incorporated by reference. 6. Exceptions a. Where it is inconsistent with a testator‘s overall intent, a court may decline to apply the doctrine of republication by codicil. b. Perhaps, lawyer‘s boilerplate language will rebut the presumption of intent to republish the previous will. c. If the codicil has an express clause redating will, apply the doctrine d. If the codicil is missing such a clause, don‘t apply the doctrine C. Incorporation by Reference [referring to a document that IS NOT a valid will] 1. General a. Does not make it a page of the instrument. b. You CAN incorporate typed material into a holographic will. 2. Requirements [VALID (CURRENT) WILL]: a. INTENT to Incorporate: Testator‘s intent to incorporate the document/writing. b. Document to be incorporated IS IN EXISTENCE at the time the will is executed. c. The document to be incorporated is IDENTIFIED/DESCRIBED in the will with REASONABLE CERTAINTY. 3. Incorporation by Reference vs. Republication by Codicil a. For Incorporation by reference, the first paper does not have to be a valid will, but what you are incorporating it into has to be a validly executed will st b. If it is a valid will, look to republication, if not, treat the second will as valid and incorporate the 1 . c. Republication by codicil can clear up problems of interested witnesses or Undue Influence (these create a presumption, do not invalidate) d. The difference between republication and incorporation is that for republication by codicil the first document has to be a validly executed will e. Rationale: labor saving device; if the document was already in existence, save labor and don‘t type it in, rather incorporate it by reference. f. Holographic wills: Cannot integrate typed material into a holographic will, it violates the holographic 4. Example: Typed will, which was not dated, signed, or witnessed had a written codicil on the bottom which was held to validate the typewritten portion and enabled to be probated. a. Integration: Make it one document, thus a page of the will b. This would not work because you cannot integrate type written material into a holographic will c. It would be allowing material terms that are not in the Testator‘s handwriting d. Can only incorporate the document, as it existed on the date the will was executed. Jack L. White, II Page 36 of 75 D. Uniform Probate Code‘s - Tangible Personal Property List Doctrine: 1. Can incorporate by reference a list that disposes of tangible personal property, even AFTER execution of the will as long as the will expresses the intent that the tangible property will be disposed of by that means. 2. California does NOT adopt the tangible personal property list doctrine Jack L. White, II Page 37 of 75 II. W ILL-EXPANDING DOCTRINES: Looking Forward to Expand the Scope of the will – ACTS OF INDEPENDENT SIGNIFICANCE A. General 1. Doctrine permitting extrinsic evidence to identify the will beneficiaries or property passing under the will. 2. The above 3 doctrines (integration, incorporation by reference, republication by codicil) look backward in time. 3. There is a potential overlap between Incorporation by Reference and Acts of Independent significance 4. The doctrine of independent significance permits certain evidence outside the will to be admitted to interpret the will if the evidentiary fact, be it an act or event, has significance other than to pass property at death. 5. The doctrine applies regardless of whether the testator or third persons can affect the act or event subsequent to the will's execution. 6. Example a. Compare a devise to my spouse, versus a devise of contents of shoe boxes to persons named on the box b. A "spouse" clearly has significance other than to pass property at death, but the "shoe boxes" appear to have no significance other than to pass the contents at death. 7. The degree of significance a devise is said to have, however, may depend on matters such as convenience versus whimsy and the degree of certainty from misuse. B. Basics of the Doctrine: This doctrine refers to events or things that occur in the future 1. Will references an act with its own valid inter vivos significance (especially if Testator has control) 2. Act is outside of the will 3. Act is independent of effect on testamentary disposition C. The Act 1. Identify the Act a. Does that act have lifetime motive? b. Does that act have significance apart from the affect it has on the Testator‘s will? (significance apart from the testamentary intent) c. If so, the gift will be upheld 2. Analyze the Act a. Must have a provision in the will which makes express reference to an ACT b. That act will have control over who takes the gift, or the size of the gift the identified beneficiary takes D. Examples of how it is more difficult to apply the doctrine to WHAT, instead of WHOM: 1. Leave A everything in the right hand desk drawer. a. Put things in to store and take things out to use. b. There is independent significance from testamentary intent c. Concern for fraud d. Constant change of Testator‘s intent 2. Safe Deposit Box a. Potential for fraud is low b. Concerns i. Fraud: safe deposit box will have less potential for fraud than in the drawer ii. If there is a potential for fraud, use Strict Compliance outlook on the issue c. Independent motive here, most courts agree Jack L. White, II Page 38 of 75 III. Contracts Relating to Wills A. General Requirements 1. Must have consideration (not a preexisting legal duty) a. Example: i. Mom is sick. D, her husband says he‘ll care for M if she agrees to leave her estate to him. ii. D will NOT have a breach of contract claim because spouses have a legal obligation to care and can‘t contract for thing you already have a legal obligation to do—kids don‘t have that legal obligation. b. Exception to consideration: rd i. Payment on Death Contracts involving a 3 party beneficiary ii. The spouse can give the consideration, not the beneficiaries 2. California Courts: a. Can still bring cases of oral agreements (especially if family member involved) if can show clear and convincing evidence of intent. b. Must be Enforceable in Equity c. Permits equitable claims based on oral agreements when the claimant is a family member. 3. Entering contract not to revoke does not invalidate a will B. A contract to make a will or devise or other instrument, or not to revoke a will or devise or other instrument, or to die intestate, if made after the effective date of this statute, can be established only by one of the following: 1. Provisions of a will or other instrument stating the MATERIAL PROVISIONS of the contract. 2. An EXPRESSED REFERENCE in a will or other instrument to a contract and extrinsic evidence proving the terms of the contract. 3. A WRITING SIGNED by the decedent evidencing the contract. 4. CLEAR AND CONVINCING EVIDENCE OF AN AGREEMENT BETWEEN THE DECEDENT AND THE CLAIMANT or a promise by the decedent to the claimant that is enforceable in equity. 5. CLEAR AND CONVINCING EVIDENCE OF AN AGREEMENT BETWEEN THE DECEDENT AND ANOTHER PERSON for the benefit of the claimant or a promise by the decedent to another person for the benefit of the claimant that is enforceable in equity. C. Creditors vs. Beneficiaries 1. Who takes first? a. Creditors b. Spousal Protection Scheme c. Beneficiaries 2. Beneficiary Interest Rule: a. Beneficiaries‘ interest is still good under contract law if the beneficiary dies before the Testator b. However, if contract beneficiary dies, his interest is no good under the will, which is probated and placed in constructive trust. c. Four different rationales for giving priority to the contract beneficiaries: i. The surviving spouse's marital rights attach only to property legally and equitably owned by the deceased spouse, and the will contract entered into before the marriage deprives the deceased spouse of equitable title and places it in the contract beneficiary. ii. When the surviving testator accepts benefits under the contractual will, an equitable trust is impressed upon the property in favor of the contract beneficiaries, and the testator is entitled to only a life estate in the property with the remainder going to the beneficiaries upon the testator's death. iii. California Rule: When the surviving testator accepts benefits under the contractual will, the testator becomes estopped from making a different disposition of the property, despite any subsequent marriage. iv. When the surviving testator breaches the will contract, the contract beneficiaries are entitled to judgment creditor status, thus giving them priority over the rights of the surviving spouse under the applicable state probate code. 3. The mere execution of a joint & mutual will does not yield to a presumption of a contract not to revoke. Jack L. White, II Page 39 of 75 D. Common settings in which contract arises: 1. Contract NOT to revoke a will (should be in writing, but unclear if CA would force that) a. Joint Wills i. Defined (a) One will signed by both and probated twice (b) Only produce one instrument for 2 different individuals ii. Although the ordinary joint bank deposit arrangement is not a true joint tenancy, the surviving party to the account has been permitted to take on the bases of contract or trust principles. iii. Contract not to revoke includes all property acquired by either spouse during the entirety of their lives. iv. Example: (a) Joint will scenario with contract not to revoke. st (b) Once the 1 wife dies, the husband does not change his will, because if he did the beneficiaries st would become creditors under the 1 contract not to revoke. (c) Therefore, he didn‘t change because his new wife would take a forced share before the beneficiaries would take under the will. v. California: No presumption arises that a joint will gives rise to a contract not to revoke nd vi. Can still probate a new (2 ) will, even though it is in breach of contract: different remedies available b. Mirror Wills: i. Two separate wills where spouses leave everything to one another and separate wills executed by two or more testators that contain substantially similar or "reciprocal" provisions. ii. Thus, a reciprocal/mirror will is an instrument executed by only one person but which is similar in its provisions to the terms of another testator's will. iii. A "mutual will" may refer to a reciprocal will or it may refer to a joint will or a reciprocal will executed in accordance with a contract ("mutuality" referring to a contract). rd iv. If she predeceases then to a 3 person whom they both agree upon in their wills. 2. Contract to MAKE (with respect to execution) a will (that Decedent would leave property to someone) a. A contracts with B to leave A‘s estate to B if B takes care of him for the rest of life. b. The will is executed and B decides not to perform his duties under the contract. c. A then rescinds the contract, then dies. B will still take under the will. E. Spousal Protection Schemes 1. General a. In Community Property States, you can only use the pretermitted spouse doctrine b. In Non-Community Property States, you can use either the pretermitted spouse doctrine or the forced/elective share doctrine 2. PRESUMED INTENT: Pretermitted Spouse Doctrine (community property jurisdictions) a. You assume that when someone executed a will then gets married they intend to give their new spouse a share but they just didn‘t get around to including the new spouse. b. New spouse takes the intestate share, but never more than ½ of the separate property. c. California: Give the surviving spouse his or her intestate share, but in no event to exceed 50% of the testator‘s separate property. d. Spouse needs protection at death & divorce. e. Can only claim if the omission occurred after the marriage, not if a new will occurred during the marriage 3. PROTECTION: Elective Share (non-community property jurisdictions) a. Protection extends to the surviving spouse immediately. b. Spouse gets protection during the marriage (1/3 or 1/2, depending on the jurisdiction) F. Dual Status of Contract: 1. Beneficiaries are either beneficiaries or they are contract claimants (creditors) 2. Example of the Dilemma: a. Testator enters into a contract with A, that will leave property to A. b. Testator executes a Will, that leaves Testator‘s property to A c. If Testator dies, no problem, HOWEVER, If A dies, A is not like any other beneficiary under a will, also a contract here—courts have not resolved the issue d. Now Testator gives all to X i. If contract, then it breaches contract. ii. Counter: only a breach if can show damages. e. If Testator contracts with A to leave all, and Testator then re-executes giving all to X, then A dies before Testator, it is not necessarily Testator‘s last will and testament. Could have re-executed. Jack L. White, II Page 40 of 75 G. California Approach: 1. Apply most of the wills related rules to non probate transfers (i.e. Payable-on-Death, Life insurance Contracts) 2. When the surviving testator accepts benefits under the contractual will, the testator becomes estopped from making a different disposition of the property, despite any subsequent marriage. 3. In other words, the contract beneficiaries prevail, to the detriment of the surviving spouse. Jack L. White, II Page 41 of 75 CONSTRUCTION PROBLEMS I. Admitting Extrinsic Evidence A. Common Law Plain Meaning Rule applied to Construction 1. Take the words of the will on their face 2. Start with this rule, but still look for ambiguity. B. Extrinsic Evidence Okay for Determining Execution 1. Courts will take extrinsic evidence going to the execution (validity) of the will 2. But, not going to construction of the will 3. Critical Question: Execution vs. Construction a. Execution (VALIDITY) i. If the question is ―is this a valid will‖ then will take any extrinsic evidence as needed to find Testator‘s intent in executing the will. ii. Validity: If the extrinsic evidence is offered to determine validity of will, extrinsic evidence is admitted. b. Construction: i. No extrinsic evidence with a valid will to see if the will should be altered ii. Construction Issue: If a question of construction then would not be honoring Testator‘s intent, the court may be rewriting. C. Ambiguities: Patent v. Latent 1. General a. In construing an instrument and need to decide whether to let in extrinsic evidence, first ask: what kind of ambiguity is it? b. 2 Types: Latent & Patent 2. Patent (no extrinsic evidence) a. A patent ambiguity is an uncertainty which appears on the face of the will. b. If patent ambiguity, the court didn‘t need extrinsic evidence to help construe the meaning because they could see it on its face. 3. Latent (extrinsic evidence) a. General i. A latent ambiguity is one which is not apparent on the face of the will but is disclosed by some fact collateral to it. ii. If latent would need extrinsic evidence to show the court that there was an ambiguity in the first place, then since already let it in, the court would use it to prove up the ambiguity (resolve the ambiguity) b. Subsets (not inclusive) i. Equivocation: Multiple objects match 1 description of an item. (a) Example: B leaves car to cousin Alicia. B has 3 cousins named Alicia. This is an equivocation. (b) A form of a Latent ambiguity. Will admit extrinsic evidence. ii. Personal Usage Exception (subset of latent ambiguity doctrine) (a) Although writing on its face given plain meaning is clear, if the Testator used writing in its phrase to mean something else courts will take Extrinsic Evidence to determine what it really means. (b) Example: Cigar shop (i) Testator called woman behind counter, Mrs. Moseley even though that wasn‘t her real name. (ii) The owner of the store‘s wife was really named Mrs. Moseley, whom Testator never met. (iii) Testator left Moseley money in his will (referring to the nicknamed woman, not the real one) (iv) Plain meaning would give the money to the wife, but (v) Personal Usage Exception admits the extrinsic evidence (vi) Generally, courts prefer to construe the words written in the will vs. rewriting the instrument (vii) Rule: Court doesn‘t correct scrivenor‘s errors iii. Misdescription Doctrine (a) Subset of latent ambiguity doctrine (b) Could cure by striking out the misdescription Jack L. White, II Page 42 of 75 D. California Rules: 1. General a. Resolves the tension between will (Probate) and Non Probate by treating them the same and apply will doctrines to the will-substitutes, unless provision or context otherwise requires b. Technical Words: i. Are not necessary to give effect to a disposition in an instrument. ii. They are to be considered as having been used in their technical sense unless: (a) Context clearly indicates a contrary intention, or (b) It satisfactorily appears that the instrument was drawn solely by the transferor and that the Transferor was unacquainted with the technical sense. c. Ordinary Grammatical Meaning: Give the words of an instrument their ordinary grammatical meaning, unless the intention to use them in another sense is clear and their intended meaning can be ascertained. 2. California Rule on Admitting Extrinsic Evidence a. Rejects the Latent/Patent Ambiguity distinction and the Plain Meaning Rule: b. IS THERE IS AN AMBIGUITY? When the words could have two or more meanings and uncertainty arises upon the face of the will, evidence which is relevant to prove the meaning is admissible. c. Is there language in the will that is reasonably susceptible of two or more interpretations? d. Only take extrinsic evidence that is consistent with one of the reasonable constructions or interpretations of the express language of the instrument. i. Courts prefer evidence regarding the circumstances surrounding the Testator at the time of execution ii. The court will not usually take alleged oral declarations of the Testator, unless; (a) It is an equivocation scenario, AND/OR (b) The alleged oral declarations were made to the scrivener. iii. Harder to fabricate circumstantial evidence, so it is more likely admissible. e. Example: i. Testator leaves Saturn to I because I is Testator‘s favorite student. There is an ambiguity. We can admit extrinsic evidence into the court. ii. Then B runs in and says that B was Testator‘s favorite student. B‘s extrinsic evidence is NOT consistent with the interpretation of ambiguity so it is INADMISSIBLE. E. Scrivenor‘s Error 1. Ericson: If a scrivener's error has misled the testator into executing a will on the belief that it will be valid notwithstanding the testator's subsequent marriage, extrinsic evidence of that error is admissible to establish the intent of the testator that his or her will be valid notwithstanding the subsequent marriage. 2. Requirements a. Show that there was error that was a result of the scrivenor‘s actions b. Show the effect it had on the testator‘s intent Jack L. White, II Page 43 of 75 II. Death of Beneficiary Before Death of Testator: Lapse [CHANGE IN THE BENEFICIARY] A. Lapse: 1. General a. Lapse Gift: If Beneficiary is alive at execution but dies before the testator dies, the gift fails. b. Void Gift: If Beneficiary is already dead at the time of execution, the gift fails. c. California: i. Anti-lapse applies to both void and lapse gifts ii. If part of the residue fails, the part that is still valid acts as residue to the residue. 2. Lapse applies to those who: a. Actually predecease the testator and b. Those treated as predeceasing the testator by i. Operation of Law—Divorce ii. Disclaimer iii. Homicide iv. Simultaneous Death 3. Apply anti-lapse first, then class gift doctrine B. Where to Apply the Anti-lapse Doctrine: applies to the who, in who takes 1. Presume the intent to devise to surviving issue of the predeceasing beneficiary where there is a . . . a. Lapsed or Void Gift (unless class) and the beneficiary is b. Related to the testator in the proper degree - What is the requisite degree of relationship in CA? i. Next of Kin of the Testator, OR ii. Next of Kin of the Surviving, Deceased, or Former Spouse iii. Rule: Spouses are not covered by Anti-lapse c. Survived by Issue . . . i. The issue take rather than having the gift lapse. ii. Therefore, apply anti-lapse d. No express contrary intent . . . unless 2. There is express contrary intent a. Intent: can be implicit in the overall testamentary scheme as well as in the express words i. Common Law View: ―if he survives me‖ language means there is a contrary intent to Anti-Lapse ii. Modern Trend & Uniform Probate Code: ―if he survives me‖ is NOT contrary intent to Anti-lapse and you could apply it. iii. California: (a) Go along with the Common Law view, but you could argue Modern Trend (b) Express contrary intent must be in the instrument making the gift. b. What constitutes a contrary intention? [fairly low threshold] i. Express language in the instrument expressing that anti-lapse not apply ii. Requirement that the initial transferee survive for a specific period of time after the death of the transferor. iii. Requirement that the initial transferee survive until a future time that is related to the probate of the transferor‘s will or administration of the estate of the transferor. 3. Rationale for Anti-Lapse: a. Presumed Intent b. Strongest because the intended beneficiary meets the degree of relationship requirement. c. Keeps it within the family 4. Anti-lapse applies to probate and non-probate property a. Trusts b. Payment on Death Contracts c. Life insurance d. Deeds Jack L. White, II Page 44 of 75 C. Class Gifts: can save them by anti-lapse 1. General a. If the devise is to a class of persons, and one member of the class predeceases the testator, the surviving members of the class divide the gift b. Determine the members of the class at the time of death of the transferor c. Class gifts have a built-in right of survivorship d. If you‘re not a class, but just a group, the gift falls into the residue e. Apply anti-lapse before class gifts, unless there is a void gift and the testator knew the gift was void at the time of execution. f. This is an irrebuttable presumption 2. California: Anti-lapse applies to both Class Gifts and Void Gifts, UNLESS a. If one member of a class predeceases the testator, that portion is evenly distributed among the other members of the class. b. It is a class gift that is void gift to one or more members of the class AND c. The testator knew the member(s) was dead at the time of execution. 3. Issue: Is this a Class gift? It is a question of T’s Intent . . . FACTORS: who and what (the gift) a. How the Beneficiaries are Identified i. Individually (specific, general), OR ii. Collectively (class) b. How the Gift is Identified i. Specific Shares (favoring non-class, OR e.g. I give 10K to each of the following . . .), OR ii. In the Aggregate (favoring class, e.g. I give the total of 10K to the following) iii. However, class members don‘t have to take equally—it is only one factor c. Common Characteristic—that ties or connects the people in question. i. If NO—individuals ii. If YES—class iii. If find a common characteristic look for evidence of any other members of the potential class that were excluded (if there were, argues against the class) d. Testator‘s Intent of the ―Overall Testamentary Scheme‖ i. Is it consistent with the overall testamentary scheme the testator had in mind when he made the gift? ii. If it is a Class Gift, implicitly it is like a Joint Tenancy with a built in right of survivorship iii. The gift is split equally between the surviving members of the class iv. The class is only set when see who survives the Testator. v. Children are not included in Class Gifts Jack L. White, II Page 45 of 75 III. Post Execution Changes in Property: Specific vs. General Devises [CHANGE IN THE PROPERTY] A. Types of Gifts (REPRISE) 1. Specific: unique, only 1 asset fits the description of what is being given [― MY‖] 2. General a. A gift of a general pecuniary value (any $1 bill, or any 100 shares of stock) b. Demonstrative (hybrid between specific and general) i. General gift from specific source: subset of general gift so treated the same as all other general gifts ii. Devises, typically of an amount of money, payable primarily from a particular source, fund, container iii. If that source fails or is inadequate, then pull the gift from the general assets of the estate. 3. Residuary (any property that is left over) a. A will covers all property accumulated up to the moment of death as long as it has a residuary clause. b. Whether a person dies testate or intestate depends on whether there is a residuary clause. c. Wills cover subsequently acquired property. B. Ademption by Extinction: 1. General a. Issue: When you transfer an item that you have already specifically devised, are you revoking the gift? b. Where there is a specific gift (ademption does NOT apply to residuary gift) c. Given after the testator‘s death, AND can execute a codicil to remedy 2. Identity Approach a. The item cannot be found . . . the gift is revoked. i. Irrebuttable presumption for ademption—no extrinsic evidence allowed to show Testator‘s intent ii. Court takes IDENTITY THEORY: ascertain the identity of the item from the written instrument and ask ―does the testator still own this?‖ b. Steps i. Identify the specific gift based on the language of the will ii. Go to the testator‘s estate and see if you can identify the item iii. If you can, beneficiary takes the item - If you can‘t, beneficiary takes nothing c. California: Involuntary Transfer i. To the extent there is an involuntary transfer (car is totaled), there is no difference in treatment ii. Assumes that testator understands ademption iii. Harsh Doctrine: efficiency (identity approach) is more important than intent C. Some Avoidance Doctrines: How to Avoid Ademption in California 1. Re-Classification a. Re-classify as general, rather than specific. b. Re-classify as demonstrative rather than specific. i. Then, you can find the same value of the gift elsewhere in the estate. ii. 100 shares of Bellig stock iii. If this is widely held, argue it‘s general and should be bought for you. 2. Gift is a CHANGE IN FORM NOT SUBSTANCE. a. Giving a CD from Wells Fargo, then close the account and shift to Washington Mutual. b. Although the gift gave away the Wells Fargo account, argue that it is not a change in the item (substance), but merely a change in form. c. Applies to both voluntary and involuntary changes. d. Courts construe narrowly, because it must be very similar form. 3. Construe the will at the time of death (exception) rather than the time of execution (general rule). a. Kind of overlaps with acts of independent significance. b. The language in the instrument is key in how the court will classify the devise. c. Where construing at time of death rather than at time of execution would result in a substantially more valuable gift to the beneficiary, some courts are disinclined to apply this avoidance doctrine. Jack L. White, II Page 46 of 75 D. California Ademption Softening Doctrines 1. General a. Any change initiated by someone other than the Testator is just a change in form and not substance. b. Doctrines that soften the harshness of ademption 2. Two Doctrines a. CONSERVATOR DOCTRINE: i. RULE: If the conservator (testator lacks capacity) sells the property then it is free from ademption. ii. Basically changes the gift to general (full value owed to the beneficiary) iii. Doesn‘t apply if, after the sale, conservatorship is terminated & transferor survives for a year thereafter. (a) Gives time to realize the termination of the conservatorship (b) Gives time to execute a codicil (c) If more than 1 year passes, treat it as if the testator ratified the conservator‘s action iv. Take the full value of the gift at time of sale. v. Doesn‘t matter if the transfer is voluntary or involuntary. b. OUTSTANDING BALANCE DOCTRINE: i. RULE: If there is a specific gift (that is not there) then that recipient has the right to the remaining property: ii. If there is a sale, and all of the proceeds have not been paid by the time of death, the outstanding balance still goes to the beneficiary. iii. How does this work? (a) You get any of the remaining specific gift AND. (b) Any of the outstanding proceeds (not the money that has already been paid). iv. As to the money received in hand, the gift is revoked (beneficiary has no rights) v. As to the outstanding balance, the gift is not revoked (beneficiary takes) vi. Voluntary vs. Involuntary does not matter vii. If there is anything left of the specific gift, (car is totaled) the beneficiary can take it. E. Specific Gifts of Stock Doctrine (California). 1. When there is a specific gift of stock then the beneficiary will get: a. The remaining stock not sold by the testator and any outstanding payments due on the stock sold. b. Does not get what has already been paid 2. Rule a. If the change is initiated by the CORPORATE ENTITY, then the beneficiary receives the benefit of the change b. If the change is initiated by the TESTATOR, then the beneficiary does not receive the benefit of the change 3. Example: In Will testator gives 100 shares of Amgen stock to B. testator sells 50 shares to P. If some of the specific gift is still in the Testator‘s possession then B gets the specific gift and also the outstanding payment due on the shares sold. 4. Example: 200 shares of Amgen to B. Abbotlab takes over Amgen and issues 3 shares for every 1 of Amgen. Testator now holds 600 shares. Amgen stock is gone. Specific gift to B of Amgen. a. What does B get? b. Ademption, or Counter: change initiated by Company and not the Testator, form not substance. F. Privately Held Stock Rule (specific gifts): 1. Judicial Doctrine 2. Hypothetical: Devise 200 shares of In & Out Stock, which does not exist in the testator‘s estate. 3. Executor cannot purchase In & Out Stock to pay beneficiary. 4. If executor was forced to purchase privately owned stock, then stockholder would make the price unnecessarily high, thereby bankrupting the estate. 5. Rule: All gifts of privately held stock are considered specific gifts, even if the language of the gift would not support it, leading to ademption. Jack L. White, II Page 47 of 75 G. ABATEMENT: insufficient assets to pay the debts: 1. General a. Abatement problems arise anytime an estates lacks, for whatever reason, sufficient funds to satisfy all devises in a will. b. Could occur if the estate is not as large as the testator believed or the creditors or pretermitted issues or spouse got to the pot first. c. In the absence of a specific order indicated in the testator's will, the order of abatement for personal (and in most states, real) property is as follows: i. Intestate property; ii. Residuary legacies; iii. General legacies; and iv. Specific legacies. d. For example, all intestate property would abate before any type of testamentary devise. e. Within each class of testamentary devise, the assets abate ratably. f. Within specific & general, cut out non-relatives first. 2. California: a. In the absence of any indication in the will as to how devises should abate or be reduced, devises ordinarily abate in the following order: i. Residuary devises are reduced first (some jurisdictions don‘t start with residuary if the wife is the named beneficiary), ii. General (and demonstrative) devises are reduced second, and (a) First to non-family members (b) Then to family members iii. Specific devises are the last to abate and are reduced pro rata. b. Some jurisdictions only cut the residuary first, unless it is inconsistent with the general testamentary scheme (i.e., if it appears that the testator is trying to devise all to the spouse) 3. The personal representative shall make payment in the following order: a. Costs and expenses of administration; b. Reasonable funeral expenses; c. Debts and taxes with preference under federal law; d. Reasonable and necessary medical and hospital expenses of the last illness of the decedent, including compensation of persons attending him; e. Debts and taxes with preference under other laws of this state; and, f. All other claims. g. No preference is given in the payment of any claim over any other claim of the same class, and a claim due and payable is not entitled to a preference over claims not due. H. EXONERATION-Specific gifts pass subject to any mortgages, deeds or trusts, etc. (no right of exoneration). 1. General a. The common law recognized a rebuttable presumption that loans or liens held on property devised by will should be discharged because the personal estate benefitted from the loan. b. UPC reverses the presumption and provides that specific devises pass subject to any mortgage interest existing at the date of death, without right of exoneration, regardless of a general directive in the will to pay debts. 2. If there is a provision saying to pay off the liens and debts, this doesn‘t matter. 3. Common Law: Exonerated—Takes without the debt attached 4. California & Modern Trend a. Take subject to the debt b. Beneficiary only takes the equity 5. Bottom Line: Presumed intent that the B takes subject to the Debt. Jack L. White, II Page 48 of 75 I. SATISFACTION: 1. General a. Issue: Do inter vivos gifts count against the share that the beneficiary takes? b. Common Law: The doctrine provides that a general or residuary devise is adeemed in whole or in part when a testator makes an inter vivos gift to the devisee after the execution of the will. c. Testator's SUBJECTIVE INTENT in making the gift is key but frequently difficult to judicially establish. d. Courts use presumptions to settle the issue when evidence of intent is lacking. e. Applies to GENERAL GIFTS when you give money in Will and then give it inter vivos. f. Applies when the testator makes a transfer to a devisee AFTER executing the will g. If entitled to take under will but you take inter vivos instead, you can credit estate. 2. Advancements vs. Satisfaction a. Different from advancements, because testator dies intestate. b. Therefore, it applies to both heirs and other beneficiaries under the will. c. As with advancements, the purpose is to prevent a devisee from receiving a double share. d. Unlike advancements, satisfaction does not apply to issue of beneficiaries where beneficiary predeceases the testator. 3. Modern Trend: a. Does not apply unless there is a writing, by the transferor or transferee. b. If it is by the testator, then it has to be a contemporaneous writing. c. If the writing is by the transferee then it can be any writing. 4. Writing: a. The instrument creating the gift can stipulate that if any advancements are made, then they satisfy the testamentary intent, thereby invoking satisfaction; or b. At time of the donor‘s transfer, he can make a contemporaneous writing c. At any point in time, the donee can acknowledge that the gift is satisfying the donative intent. d. The donor can execute a codicil after the transfer Jack L. White, II Page 49 of 75 WILL SUBSTITUTES: AVOIDANCE OF PROBATE I. Contracts with Payable-on-Death Provisions NON-PROBATE DISTRIBUTION: A. General 1. Decedent‘s desire to pay certain people upon death (outside will) WILL SUBSTITUTES 2. At common law only insurance policies were valid.  Life Insurance B. How do you apply Payable-on-Death Provisions?  Joint Tenancy 1. Apply Wills law to Payable-on-Death clauses  Inter Vivos Trusts 2. Rule: A valid Payable-on-Death Contract (not subject to probate)  Possessory Estates & Future Interests Includes: a. A payment on death (Payable-on-Death) clause AND rd b. Payment to a 3 Party Beneficiary. 3. California a. Does not invalidate non-probate transfers on death simply because they do not comply with the requirement of the execution of wills. b. Includes all Payable-on-Death Contracts. c. Anti-lapse applies. 4. If there are only 2 parties then there is some gray area. 5. Payee has no present possessory interest, just a future interest C. Blockbuster Will: Will Controls All (no jurisdiction recognizes) 1. Issue: Will a probate instrument (will) control a non-probate instrument (P.O.D. contract)? 2. If contradictory clause in the Will subsequent to the Payable-on-Death contract, the subsequent will does NOT override the Payable-on-Death as a Blockbuster Will. 3. Reasoning: a. Allowing the blockbuster will negates all of the benefits of the will substitutes, like FAST PAYMENT, etc. b. This will be because the people that control the distribution of funds would have to wait until probate to find out who properly gets the funds. 4. UPC: Where the insurance policy expressly permits change of beneficiary in the will, then the non-probate instrument should be subject to an express reference in the will. 5. California does not recognize a blockbuster will. Jack L. White, II Page 50 of 75 II. Multiple-Party Bank Accounts A. California‘s presumption of inter vivos rights of the parties with a multiple party bank account: 1. Each party owns in proportion to their contributions, and 2. When one dies, all of the others have a right of survivorship. 3. Modern trend presumption is that the account works like a Payable-on-Death contract, unless there is clear and convincing evidence of a contrary intent to either of the above two. B. Analysis: 1. Start with the presumption (modern trend, above) 2. Need clear and convincing evidence that the testator intended one of the OTHER accounts. C. OTHER Accounts: 1. Joint tenancy bank account has all of the characteristics of a joint tenancy 2. Agency or Convenience Account: a. B has the power to withdraw on the account during D‘s life but is not entitled to the balance at death. b. The power for the agent to draw ends at D‘s death, but the banks might not know that D died and would be liable for allowing A to continue to withdraw. c. Only lasts until death or incompetency. d. Only to be used for the person for whom you are an agent. 3. P.O.D. Account: B does not have the power to draw on the account during D‘s life, but gets the balance upon D‘s death. D. Key: 1. Banks tend to steer people toward the depositor‘s card for joint tenancy. 2. Rationale: a. At Common Law the payment on death provision was invalid. b.  courts will look at extrinsic evidence to determine the depositor‘s intent at the time of the creation. 3. This is used for personal property (pension plans and stocks) where you can show that you were not given a choice by the bank. 4. Real Property: a. Extrinsic evidence is not allowed because in real property you are not forced into Joint Tenancy; b. You elect to take as a joint tenant. E. Modern Trend 1. Inter Vivos: Parties own in proportion to their respective contributions 2. Presume a right of survivorship 3. Ultimately, this leads to a modern trend rebuttable presumption of a Payment-on-Death contract 4. Must rebut by clear and convincing evidence of a contrary intent TYPES OF BANK ACCOUNTS Possible Intent Agency Account Payable-on-Death True Joint Tenancy Inter Vivos Property Interest 0 0 ½ Interest of the Whole Testamentary Property Interest 0  Probate Common Law: 0  Probate Modern Trend: 100% Beneficiary on Death Right of Survivorship  All Jack L. White, II Page 51 of 75 III. Characteristics of a Joint Tenancies in Land A. Equal interest (right to possess the whole) upon creation, B. The right of survivorship, at death the interest expires and the other tenant solely holds it, 1. Therefore, you cannot devise it by will. 2. This would not sever it into a tenancy in common, permitting this would allow a Blockbuster will. 3. You can convert the interest to a tenancy in common. C. Creditors of a Joint Tenant must seize the Joint Tenant‘s interest during life, because at death the Joint Tenant‘s interest vanishes and it is too late. UNITIES OF INTEREST     Possession Interest Title Time IV. Revocation Deeds of Land: Possessory Estates and Future Interests A. Revocable Deed 1. If it is functionally identical to a will should we make it pass all of the formalities of a will? 2. The problem is when the grantor retains the power to revoke. 3. Courts did not like revocable deeds B. Legal Life Estate: 1. One passed in a deed 2. Disfavored 3. Alternative – Do it in a trust 4. America still permits legal life estates 5. California: Revocable deeds are valid inter vivos transfers that do not have to comply with wills act formalities C. Modern Trend 1. Emphasize testator‘s intent 2. There is no greater potential for fraud 3. A revocable deed is okay 4. All vested remainders are contingent remainders until the testator dies. D. Common law courts said this was invalid, this is too testamentary in nature. Jack L. White, II Page 52 of 75 ESTATES IN LAND AND FUTURE INTERESTS Possessory Estate FEE SIMPLE ABSOLUTE ―and his heirs‖ 3. FEE SIMPLE DETERMINABLE ―as long as‖ ―while‖ ―until‖ ―during‖ FEE SIMPLE ON CONDITION SUBSEQUENT ―but if‖ … then ―provided that‖ … then ―however‖ … then owner may enter & reclaim LIFE ESTATE ―for life‖ FEE TAIL ―and the hers of her body‖ Reversion Remainder Reversion Remainder Possibility of Reverter (FSSEL) Executory Interest 1. 2. 3. 4. 1. 2. 3. 4. 1. 2. 3. Future Interest Grantor 3rd Party 1. 2. Notes Owner has the right to possess the property in question forever. While owner lives, heirs have: a. no property interest b. only expectancy c. no present right to possess property in the future Default estate (modern trend) Terminates immediately and automatically upon the occurrence of the condition If grantor holds FSA and does not convey the whole FSA, he is the default holder of the future interest (reverter) Condition cannot be illegal (e.g., suicide, re-marry) Possibility of termination of estate Present possession subject to condition. Estate terminates on owner‘s re-entry if subsequent condition occurs (if owner proves subsequent condition occured) Condition cannot be illegal (e.g., suicide, re-marry) Possibility of termination of estate, pending action of grantor Expires on death of life tenant Common law default estate Pur autre vie: a life estate measured by the life of another  transferable, inhertitable, and devisable while life tenant is alive  immediately expires when life tenant dies Series of life estates Limited to lineal descendants Can limit eligibility of heirs Not deviseable Inheritable Does not exist in current jurisprudence Exact term must be calculable on the 1st day of the estate Future Interest can be held by grantor or 3rd party Specified time period from date to date Date – Date is a Lease                           Rights present possession future possession devisable conveyable inheritable present possession (limited) future possession (limited) devisable conveyable inheritable present possession (limited) future possession (limited) devisable conveyable inheritable present possession future possession (limited) conveyable (limited) present possession future possession (within bloodline) inheritable (within bloodline) present possession (limited) future possession (limited) devisable (limited) conveyable (limited) inheritable (limited) Right of Entry (FSSEL) Executory Interest 1. 2. 3. 4. 5. 6. 1. 2. 3. 4. TERM OF YEARS (calculable 1 & last date) st Reversion Remainder Jack L. White, II Page 53 of 75 RESTRICTIONS ON THE POWER OF DISPOSITION: PROTECTION OF THE SPOUSE & FAMILY I. Prefatory Material A. Separate vs. Community 1. Separate Property takes its effect at time of DEATH 2. Community Property takes its effect at time of ACQUISITION B. The elective share is only 1/2 or 1/3 of the probate estate. C. Now states have moved to looking at the augmented elective estate, which goes after the non-probate estate. Rights of the Surviving Spouse A. Rights of Surviving Spouse to SUPPORT: In addition to main spousal scheme there are other probate administrations and other spousal and family protective mechanisms. 1. Public Pension Plans a. Social Security b. Only the surviving spouse can claim social security 2. Private Pension Plans a. Under Employee Retirement Income Security Act (ERISA), surviving spouse must have survivorship rights b. Waiver i. This can only be waived knowingly and voluntarily. ii. Premarital agreements cannot waive ERISA-covered pension rights. 3. Homestead a. The surviving spouse and maybe family members can claim the family home for his or her lifetime. b. Can be only an exemption, sometimes small or large (varies from jurisdiction to jurisdiction). c. Some jurisdictions give a life estate, or an allowance, or ownership for a time, etc. 4. Personal Property Set-Aside a. The surviving spouse (and possibly minor children) may have set aside certain tangible personal property of the decedent up to a certain value (homestead for personal property) b. Set aside from the decedent and from the creditors. i. Sometimes a statutory checklist ii. Sometimes a lump sum amount c. Essential to the maintenance of the homestead 5. Family Allowance a. Authorize the probate court to award a family allowance for maintenance and support of the surviving spouse (maybe dependent children). b. What standard of living will the allowance support? i. California: Lifestyle used to, OR ii. Reasonable standard of living c. Only lasts during probate d. Exempt from creditors and not counted against the devise. B. Historical Dower & Curtesy (not on exam) 1. General a. Marital Protection post-death of spouse b. If husband and wife have separate property, ownership is granted to the one who acquires property c. At marriage, woman lost her independent property interests to her husband d. Husband held undefeatable rights of courtesy over wife – gave husband the whole of the wife‘s estate e. Wife held undefeatable rights of dower–1/3 life estate in each parcel of real estate owned by the husband f. Dower & Courtesy are undefeatable, and do not apply to personal property (only real estate) g. Methods to defeat i. Creation of a trust ii. Start a corporation to buy property (stock would be personal property, not real estate) 2. Common law dower and curtesy were the historical spousal protection devices. 3. Qualifying Real Property a. Inheritable b. Devisable 4. Attaches to property owned at time of marriage or acquired during marriage (springing future interest). 5. States that retain the concept have expanded it to include personal property and have often enlarged the fractional interest in the estate from a life estate to one in fee. II. Jack L. White, II Page 54 of 75 C. Rights of Surviving Spouse to (elective) Share of Decedent‘s Property 1. Elective Share: a. Either take what they take under the will, or elected share based on statutory amount b. Two alternatives under which the surviving spouse can take: i. Take under the will ii. Take under the statute c. Applies to separate (acquired any time) and community (acquired during marriage) property 2. Basics of Elective Share a. Spouse can claim 1/3 or up to 1/2 of the decedent‘s estate. b. Elective share only applies to probate property so if testator wants to cut-off a spouse, the testator can change property from probate to non-probate. c. Augmented Estate: UPC elective share applies to probate and non-probate items, within 2 years. 3. Modern Trend a. UPC implemented a sliding scale for elective share. b. Spouse must earn share over time of marriage. c. The longer you are married, the more you get. D. Rights of Surviving Spouse in Community Property 1. General a. California uses instead of Elective Share b. Looks like tenancy in common c. If decedent dies intestate, surviving spouse takes his share of the community property 2. Some things remain separate: a. Inter vivos gifts b. Inheritance c. Devises 3. Putting a Spouse to an Election a. General i. This is a California doctrine - In essence it is a condition gift. ii. When the spouse tries to give away something that they do not own. iii. Trying to give away property that another spouse owns iv. In essence saying, ―if you want to take anything under my will you have to let me give away some of your property, if you don‘t then you will not take under my will.‖ v. Therefore, putting the surviving spouse to an election. b. Anytime the deceased spouse intentionally or unintentional is giving away the property of the surviving spouse you have the potential of putting that spouse to an election. c. If the surviving spouse asserts his or her right then they are in danger of forfeiting their right they take under the will. 4. Modern Trend: a. Construe devise against giving an election - Must have express language to put a spouse to an election b. You can no longer implicitly put a spouse to an election, but you can expressly put your spouse to an election. c. Now this is looked down on, and an ambiguity will presumptively be construed not to be an election. d. California: don‘t presume an election, unless express language. Presume giving away own portion. 5. Be Aware: Some jurisdictions still allow decedent to put a spouse to an election without expressly stating intent to do so. a. In these jurisdictions, anytime a deceased spouse gives away property of the surviving spouse, you have to put the spouse to an election. b. If language is ambiguous as to whether the spouse is giving away both their property, then construe it narrowly and assume he only meant his share of the property. 6. [IRC §1014(b)(6)] Double Step-Up (down) for Community Property Jurisdictions a. If decedent died after Dec 31, 1947: Community property owned by surviving spouse is deemed to have come from the decedent. So, surviving spouse‘s basis is the FMV @ time of death (w/stepped-up basis). b. In California, there is community property with right of survivorship i. Allows for double step-up ii. Also avoids probate, because of right of survivorship (also applies to stock transferred by writing) c. Example: Buy first house for 300K. Sell for 500K. Taxable Gain = 200K. Step-up basis to decedent joint tenant‘s share fair market value (250K). Jack L. White, II Page 55 of 75 E. Migrating Couples and Multi-State Property Holdings 1. Rule: a. Property characterization depends on where you are domiciled when the property is acquired b. But, spousal protection scheme used to distribute the property depends on the Jurisdiction where you reside at the time of death. c. Run the risk of falling through the cracks—should transmute the property before leave 2. Migrating from separate to community property state: Quasi-Community Property a. Property owned by the husband or wife acquired while domiciled in a separate property jurisdiction, which would have been characterized as community property if the couple had been domiciled in the community property state when the property was acquired b. Details i. Does not apply to real property located outside of community-property-state. ii. Does not turn all property into community property, only that of the first spouse to die. iii. Only applies to the property of the deceased spouse, not the property of the surviving spouse. iv. Not all Community Property jurisdictions recognize Quasi-Community Property—be careful. c. Example: P and G live in AZ. P dies with a Will leaving everything to L. 100K made in MO. AZ doesn‘t have quasi community prop, so separate property keeps its character when move into a community property jurisdiction. Spousal protection in AZ is Community Property, but P and G have no Community Property, only 100K in separate property = G gets nothing. 3. Migrating from community property to a separate property. a. The surviving spouse gets to double dip. b. The Uniform Disposition of Community Property Rights at Death Act i. Enacted in many separate property states ii. Community Property brought into the state (and all property-including land in the state-traceable to community property) remains community property for purposes of testamentary disposition iii. This is true, unless the spouses have agreed to convert it into separate property iv. Now there are laws in some jurisdictions that say if you move, the decedent half of the community property is not subject to the elective share. c. Example: Move from California to Missouri with $100,000 in cash. H dies and wills all of it to Pepperdine. Will gets to take $50,000 (under community property), then the other half goes to probate and, depending on the jurisdiction, the wife can take an elective share of the probate estate. Jack L. White, II Page 56 of 75 F. Spouse Omitted from Premarital Testamentary Instrument 1. General (pretermitted spouse doctrine  death without including the wife) a. Scenario i. Testator executes will ii. Testator marries iii. Testator dies without revoking/revising will b. Response i. Presume that when someone executed a Will then gets married they intend to give their new spouse a share but they just didn‘t get around to it. ii. Give the spouse their intestate share (up to 50%). 2. Basic requirements: a. There is a valid testamentary instrument: b. If the soon to be wife is provided for, but not as a wife, then they can still take as a pretermitted spouse marriage after the execution of all of the testamentary instruments c. Therefore, if the spouse executes or amends any testamentary instrument after the marriage, then pretermitted spouse will apply. 3. Rebuttable Presumption (three methods of rebutting) a. Clear intent to disinherit i. Intentionally left out of the testamentary instrument ii. Intent must be manifested with an eye toward the marriage – not as a friend, but as a spouse. iii. General disinheritance clause not in anticipation of marriage does not qualify as a clear manifestation of intent. iv. Express on the face of the will b. Transfer outside of the testamentary instrument (ONLY WILL OR REVOCABLE TRUST): i. Through a non-probate transfer, and ii. The intention is shown by (a) Statements of the decedent, (b) The amount of the transfer, or (c) Other evidence, OR c. Agreement where spouse EXPRESSLY waives their right. i. Otherwise provided for and the testator intended that gifts outside the Will are in lieu of the Will ii. Example: Prenuptial Agreement iii. Amount may be Relevant 4. California: Share of the omitted spouse (like intestate) a. ½ of the community property b. ½ of the quasi-community property c. Intestate share of separate property, not to exceed ½ of the value of the separate property in the estate 5. Policy/Reasoning a. Two Prongs: i. Although we don‘t usually correct mistakes, we do here. (a) Low potential for fraud; (b) Spousal protection ii. Look to the intent of the testator b. Accidental omission, presumed intent of the testator c. Example: case took an extreme view of this rational by finding a pretermitted spouse where there was not specific wording of an intention otherwise. Jack L. White, II Page 57 of 75 III. Rights of Issue Omitted from Testamentary Instruments A. Pretermitted Child 1. General a. Same as above with pretermitted spouse, b. Will executed then the birth of a child, c. Same presumption arises. 2. Basic requirements: a. There is a valid testamentary instrument b. A birth or adoption of a child c. Death without including the child 3. Issues a. Did Testator intend to disinherit the pretermitted child? b. Did Testator intend to provide but accidentally forgot? 4. Questions a. Is the fact the other parent gets a life estate enough to qualify as ―substantially all‖ of the estate? b. If this doctrine applies then the pretermitted child would get their intestate share. c. What if that is more than the other children get? d. Or would the pretermitted child take outright while the others get in trust? 5. Representing Minors, Unborns and Unascertained Beneficiaries: a. Some courts and statutes permit representatives, e.g., guardians ad litem, to provide the consent for minor or other incapacitated persons. b. Look to that person to provide for the best interest of the child B. Exceptions 1. Intentional Omission a. Expressly stated in the Will and/or Revocable Trust b. Evidenced in the testamentary instrument 2. Otherwise provided for and intended that to be lieu of taking under the will and/or revocable trust 3. Different from Pretermitted Spouse: a. Gave substantially all of the estate to other parent of the OMITTED child and b. At the time the decedent had 1 or more child c. This way, the testator has manifested intent to devise to surviving parent/spouse and let them provide for the children C. Omitted Child - Exception - California Rule on Mistaken Intent: 1. Child will get their intestate share if the D fails to provide for child for 1 of 2 reasons 2. Erroneous belief (applies to all testamentary instruments): a. Belief that the child is dead, OR b. Testator didn‘t know the child was the Testator‘s 3. If child qualifies as a pretermitted child, they take their intestate share Professional Responsibility Issues (California) A. Who can sue for malpractice? 1. Common Law: Have to be in privity with the attorney to sue for malpractice (client and the client‘s estate) 2. California and Modern Trend: [PRIVITY ABOLISHED] rd a. Allow 3 party beneficiary claims b. Anyone can sue attorney for malpractice c. No privity required to bring an action against the attorney (in tort or contract). rd d. A 3 party beneficiary can claim under negligence & breach of contract. B. Some jurisdictions only look to the estate planning document to determine who would have been an intended rd beneficiary to determine whether a 3 party has malpractice standing. IV. Jack L. White, II Page 58 of 75 TRUSTS: CREATION I. Introduction BUCKET A. Similarities Between Trusts & Gifts METAPHOR 1. Inter Vivos Gift  Trust a. Intent (to give a gift outright)  Settlor b. Delivery (of property to donee)  Beneficiary c. Acceptance (presumed acceptance by donee) 2. Trust as a gift a. A trust is an ongoing gift. b. A trust is a conditional gift. 3. A trust is a bifurcated inter vivos gift. INTER VIVOS GIFTS & TRUSTS a. Bifurcation of Title i. Trustee takes LEGAL title (burdensome interest). Inter Vivos Gifts Trusts ii. Beneficiary takes EQUITABLE title (beneficial interest). Intent to Gift Intent to Create b. Bifurcation of Interest Delivery Fund the Trust i. Possessory Interest (life estate) Acceptance ii. Future Interest (remainder) Ascertainable Beneficiaries c. Bifurcation of Property (or money) Writing (possibly) i. Principle ii. Interest-Income 4. Disbursement vs. Distribution a. Disbursement: Payment of Principle b. Distribution: Payment of Income B. What does settlor do? 1. Settlor gives to trustee who holds for a life beneficiary with a remainder in a possessory beneficiary. 2. Settlor puts the property in the trust 3. The Trustee holds legal title, and the beneficiary holds equitable title. a. Someone can wear all three hats if there is at least another trustee or another beneficiary. b. If not, there are not 2 different people holding the legal and equitable interest. 4. Sets forth terms & conditions of the trust. C. What does trustee do? 3 PHASES OF TRUST 1. Duty of a Trustee  Creation a. The trustee owes fiduciary duties (especially loyalty) to the beneficiaries.  Life i. The trustee has to produce income  Death ii. The beneficiaries‘ interest will be split, between the life estate and the remainder beneficiary (look to the intent of the settlor in the document). (a) The trustee must preserve the property, make it productive, and, where required by the trust instrument, pay the income to the beneficiary. (b) In investment decisions the trustee owes a duty of fairness to both classes of beneficiaries: (i) the income beneficiaries and (ii) the remaindermen. b. If the trustee dies another trustee will be appointed. i. A trust will not fail for want of a trustee. (a) A trustee cannot just walk away (b) Must have a court relieve him of the fiduciary duties in order to appoint a new trustee. ii. Exception: if it is clear that the provisions of the trust are personal to the person named as trustee, then the trust will be terminated. iii. This is very rare and the intention must be clear. c. Same person can wear both hats as trustee and settlor. 2. Key question with trusts: What rights do the beneficiaries (Life Estate and Remainder) have in the principle and/or the income from the trust? a. The purpose of the trust is whatever the settlor wants it to be. b. A trust is the most flexible legal instrument available. i. So ask what is the purpose of this trust ii. The purpose of why you would want to make a trust is unlimited. iii. We can‘t analyze the trust until we see the purposes of the trust. Jack L. White, II Page 59 of 75 II. Creation of a Trust A. Intent to Create a Trust 1. General a. No magic words needed nd rd b. Threshold: Any time 1 party gives property to a 2 party for the benefit of a 3 party rd 2. When 1 party transfers property to another party for the use and benefit of a 3 party, there is a valid trust a. Not a high threshold to find intent to create a trust b. Where Settlor is the trustee, the evidence to set up a trust is higher c. However, must show segregation of trust property 3. Must create the receptacle a. Trust is the receptacle: the terms and conditions of the trust b. Instrument that creates the receptacle is either a DECLARATION OF TRUST or a DEED OF TRUST. 4. Alternative forms of delivery a. Physical/Actual/Manual i. The courts prefer manual delivery, wherever possible TRUST REQUIREMENTS ii. It is the strongest form of evidence.  Intent to Create b. Constructive  Property (fund the trust) i. Give something that gives control over the property  Ascertainable Beneficiaries ii. E.g., handing over a key  Writing c. Symbolic i. Give something that represents the property ii. E.g., a written statement iii. Where there appears to be no evidence of fraud, mistake, imposition or undue influence, iv. The donee is the natural object of the donor‘s bounty v. There is a witness present and vi. There is a writing. 5. Issue: was there INTENT to impose a moral or legal obligation? a. Precatory Trust: i. More accurately, ―a gift with a wish‖ ii. Not a trust but a moral obligation unenforceable at law. iii. First argument against breach of fiduciary duty might be that it was not a trust, but a mere moral obligation unenforceable at law. iv. Basically the gift to a donee with the hope that they will use it for a specific purpose. v. There has to be some ambiguity that there was not truly an intent to create a trust. b. Doctrine of Merger: i. More accurately, ―a gratuitous promise to make a future gift‖ ii. Another argument against claim that trust has been created. iii. There exists no split between legal and equitable interest, if it is merged there is NO trust. iv. How do you take a gratuitous promise to make a future gift and make it look like a trust? (a) Change it to a declaration of trust (b) Make the settlor the trustee and the promisee the beneficiary v. Merger only occurs where there is an absence of another party who could enforce the fiduciary duty (sole trustee & sole beneficiary). vi. This applies where 1 person wears all 3 hats and there is no alternate trustee or alternate beneficiary. vii. One cannot hold himself to a fiduciary duty in court. 6. Solution: Re-characterize the gift with failed delivery into a present declaration of trust. a. When you see a scenario where there is an attempt to give a gift in the future and the giver dies, the taker would not give under the gift analysis because of failure of delivery. b. Say when the giver was writing a piece of paper with the promise on it he was making a trust where he was the trustee and when he died there should be a new trustee appointed and the gift should be given. c. The counter argument is that this is abolishing the delivery requirement Jack L. White, II Page 60 of 75 B. Necessity of Trust Property (fund the trust) 1. General a. Trust only arises when it is properly funded by the settlor and only applies to the property properly placed in the trust. b. Two aspects of trust property: i. Principle ii. Income c. Property only goes into a trust if it has been actually transferred to the trustee. d. Any property qualifies, as long as someone would generally accept it as property (called trust res/corpus). 2. Issue: Is future profit / expectancy sufficient to fund a trust? TRUST REQUIREMENTS a. Two problems that arise  Intent to Create i. Expectancy (may be received as a gift)  Property (fund the trust) ii. Future Interest (must be earned)  Ascertainable Beneficiaries b. Rule  Writing i. The general rule is no! ii. Future profits aren‘t an adequate property interest to create a trust. iii. But, once the profits are earned, if the intent to create is manifested (placing the property in an account), the trust is created AT THAT TIME. c. Exception: i. Person can ONLY assign future earnings from an existing contract in three situations. (a) Party making the gift of the future profits currently owns means of producing the future profits? (i) Gift (ii) Symbolic Delivery (iii) Assignment of Future Interest (b) Intent is expressed in writing, rather than orally: (i) Clearer manifestation of intent (ii) More convincing to courts, even though writing isn‘t required for passing of personal property. (c) Preventing Tax Evasion (i) Trying to shift profits to other family members who are in a lower tax bracket (ii) This would allow the settlor to fraudulently say that a trust created at an earlier time and then the profits would be taxed at a lower bracket and if he takes a loss then he can deduct it ii. If you have these criteria then the future profits will be a sufficient property interest because it would meet the requirements for a gift. (a) Possession of income producing property (b) Writing (c) Absent Fraud 3. Segregation of Trust Property a. Some courts look to segregation of trust property from non-trust property to show a trust has been funded b. Where beneficiaries are not family members, courts look harder for segregation. c. Where family members are involved, courts are less strict. Jack L. White, II Page 61 of 75 4. Failed Trust vs. Unjust Enrichment a. Resulting Trust (trust failed): i. A trust that arises by operation of law in one of two situations: (a) When an express trust fails or makes an incomplete disposition; or (b) Purchase Money Resulting Trust ii. Purchase Money Resulting Trusts: (a) Created when one person: (i) Pays the purchase price for property and (ii) Causes title to the property to be taken in the name of another person who is not a natural object of the bounty of the purchaser. (b) Why one would put up all the money and put title in someone else‘s name? (i) Gift (ii) Appoint her as Trustee (c) Items should have been in writing but they weren‘t, so look at relationship between 2 parties: (i) If the receiver is a natural object of bounty: (1) Rebuttably presume a gift (2) Burden is on the giver to establish otherwise (ii) If NOT natural object of bounty (1) Trustee presumed and failed trust. (2) However, the resulting trust is imposed and order G to give P the property. (d) Example: P puts down-payment on real property. Deed from P to G, but P has put up all the $. iii. Mechanics (a) Order the party holding the property to give the property back to the settlor (b) When you have failed trust you impose a resulting trust (a judicial remedy like the constructive trust), which gives the property back to the settlor. (c) Then the property goes into probate and then it matters whether there is a will (then to the residuary taker) or intestacy (falls normally). CONSTRUCTIVE TRUST b. Constructive Trust (someone was unjustly enriched): SCENARIOS i. You give the property to the failed beneficiaries, to prevent unjust enrichment.  Disclaimer ii. Requirements:  Homicide (a) A confidential or fiduciary relationship;  Interested Drafter Took (b) A promise, express or implied, by the transferee to the settlor;  Fraud (c) A transfer of property in reliance on the promise;  Undue Influence (d) Unjust enrichment of the transferee  Avoid Cheating on SOF c. Look to the unclean hands doctrine to see if either of the above will be  Breach of Contract in Will applied. Jack L. White, II Page 62 of 75 C. Necessity of Ascertainable Trust Beneficiaries 1. General a. Must be ascertainable, by personal name b. Must be able to determine who has standing to come into court and enforce the fiduciary duty. c. Ascertainable = ability to name the beneficiary personally 2. Arguments to save a trust where there are no clearly ascertainable beneficiaries a. Argue that a precatory trust (gift with a wish) was being created. b. Argue that a valid POWER OF APPOINTMENT was being created. TRUST REQUIREMENTS c. Unborn Children  Intent to Create i. Courts allow trusts to be created for unborn children.  Property (fund the trust) ii. If no children are born, there is a resulting trust.  Ascertainable Beneficiaries 3. Private Trusts  Writing a. General i. Although there are no ascertainable beneficiaries, this trust is set up for an honorable purpose (care for a tombstone or an animal). ii. The general rule that a trust will not fail for want of trustee does not apply to honorary trusts. iii. These trusts last only as long as the trustee ill perform the duty then the property will go into a resulting trust or a constructive trust. b. Honorary Trust i. Honorary Trust Elements: arises when a real trust fails for want of ascertainable beneficiaries (a) Purpose must be definite. (b) Purpose must be honorable (not capricious or illegal). (c) Trustee voluntarily accepts the wishes of the Testator. ii. Honorary trust scenarios (a) Person who cares for a grave (b) Person who cares for a pet c. Example: A dog can‘t enforce a fiduciary duty so the trust would fail, we would impose a resulting trust and the property would go back to the settlor. However in the case the court found an Honorary Trust. d. Honorary trust lasts only as long as the trustee will agree to carry out its terms and conditions. e. This trust fails for want of a trustee. 4. Public Trusts: a. Don‘t need ascertainable beneficiaries because public. b. Charitable Trusts: trusts set up for a charitable purpose Jack L. White, II Page 63 of 75 D. Necessity of Written Instrument 1. General a. First – When was the trust created?: Inter Vivos vs. Testamentary Trusts i. Look to when the trust was created (inter vivos vs. testamentary) ii. Testamentary must be in writing iii. Inter vivos property needs no writing, unless it is real property (not personal property) iv. Depends on when the trust was created, was it funded, or was it funded at death? b. Second – What type of property?: Real vs. Personal Property i. Look to what the trust conveys (real property vs. personal property) ii. Inter vivos transfers of real property must be in writing. iii. Transfer of personal property need not be in writing c. What does not need a writing: i. Inter vivos transfer of personal property ii. Judicially created trusts d. Try to save a gift for want of delivery by re-characterizing it as a declaration of trust. INSTRUMENTS THAT CREATE THE RECEPTACLE Deed of Trust Settlor does not HAVE to be the Trustee Can be Oral, but Usually not Exceptions  Real Property must be in writing (SOF)  Testamentary Trust: WAF must be met Declaration of Trust Settlor = Trustee Implies Oral Trust   Exceptions Real Property must be in writing (SOF) Testamentary Trust: Settlor = Trustee and wouldn‘t make sense 2. There is no requirement that it be in writing unless it is a trust giving away real property (under traditional Common Law rules). a. Statute of Frauds does not apply to trusts that the courts create (Constructive/Resulting Trust) b. Exception: i. Modern Trend ii. An oral trust funded with real property will be given effect either through a constructive/resulting trust, if equity demands (party seeking equitable relief cannot have ―unclean hands‖). iii. Therefore, the statute of frauds requirement is eroded. c. Common Law View: If the deed giving real property has no condition of giving property back, then evidence of an oral trust is barred and person who owns deed to the property keeps it. d. The absence of a writing requirement for personal property allows for creation of the equivalent of an oral will to dispose of personal property. Jack L. White, II Page 64 of 75 3. Testamentary Trust a. General i. Only funded when the settlor is dead. TRUST REQUIREMENTS ii. Then, typically the terms of the trust are in the will.  Intent to Create iii. All testamentary trusts MUST BE IN WRITING.  Property (fund the trust) iv. This is not a will substitute.  Ascertainable Beneficiaries v. If not completely in Writing (only in Testamentary Trusts)  Writing b. Secret and Semi-Secret Trusts: only arise if the real trust is failed: i. What is the difference between the two? (a) Secret Trust (nothing on the face of the will evidencing intent to create a trust): (i) Latent ambiguity in the instrument: take extrinsic evidence to prove the ambiguity (ii) Where testator states in will that he is giving property to specific person and then orally tells that person that he is to distribute it. (iii) The Will does not indicate a trust. (iv) Get a Constructive Trust when it fails (v) Because you can look at extrinsic evidence, you can identify who the identified beneficiaries are, so the constructive trust must be the result. (b) Semi-Secret (ambiguous on its face as to the terms of the will): (i) Patent ambiguity in the instrument: no extrinsic evidence (ii) Intent of trust apparent on the face of the instrument, but don‘t know the intended beneficiary. (iii) Get a Resulting Trust when it fails. (iv) Because you cannot look at extrinsic evidence, you cannot identify who the intended beneficiaries are, so resulting trust must be the result. ii. Modern Trend: (a) Because California throws out the distinction between latent and patent and we should accept extrinsic evidence in both situations. (b) If have evidence and know who beneficiaries are, then impose a constructive trust. 4. Inter Vivos: a. General i. To be a valid will substitute is has to be a valid inter vivos trust ii. The only property that that avoids probate is the property in this trust at the time of death. b. Personal Property i. Can have an oral Inter Vivos trusts for personal property ii. The transfer of personal property into the trust DOES NOT have to be in writing iii. But if it is a deed of trust situation then there needs to be delivery. c. Real Property i. Inter Vivos that MUST be in Writing: Real Property ii. The transfer of real property MUST be in writing. (a) The court cannot look at the oral evidence because the Statute of Frauds states that these transactions have to be in writing. (b) When imposing an equitable remedy (constructive or resulting trust) watch for unclean hands. d. Purchase Payment Resulting Trust: i. General (a) Item should have been in writing but were not, so look at the relationship between the 2 parties: (b) A buys land but has title put in B's name. In the latter situation, courts presume a gift when there is a gratuitous transfer to one who is the natural object of such a transfer, e.g., wife or other close relation, but presume a trust when it is a transfer to a legal stranger rather than a close relation. ii. Natural Object of Bounty (a) If the receiver is a natural object of bounty: (i) Rebuttably presume a gift (ii) Burden is on the giver to establish otherwise (b) If NOT natural object of bounty (i) Trustee presumed and failed trust. (ii) Rebuttable presumption that a trust was created and the settlor is the beneficiary. (iii) However, the resulting trust is imposed and order G to give P the property. iii. Example: P puts down-payment on real property. Deed from P to G, but P has put up all the money. Why one would put up all the money and put title in someone else‘s name? (Gift or Trustee) Jack L. White, II Page 65 of 75 III. Revocable Trusts A. General 1. Allowed in all jurisdictions. 2. Wearing 3 hats a. One person can be the settlor, trustee, and life beneficiary of a revocable trust. b. Meaning someone can wear all three hats (settlor, trustee, and life beneficiary) with the power to revoke and have someone hold only a remainder interest—put condition on survivorship. c. There must be another beneficiary or another trustee 3. Inter vivos revocable trust for personal property could theoretically be created although it would be difficult to prove that someone held a remainder interest. B. Two Arguments 1. Argument #1: something really passes (a contingent remainder), although if the remaindermen ever sues on a breach of the fiduciary duty the trustee will simply claim that he revoked. 2. Argument #2: because the writings involved are similar to a will, this does apply to the underlying WAFs C. Farkas v. Williams 1. F was the settlor, the trustee, and the life beneficiary, with the remainder to Williams 2. F also retained the power to revoke. 3. Williams really didn‘t take anything (except for a ―Farkas‖ – power to sue for breach of fiduciary duty, like a chose in action) because Farkas can do whatever he wanted with the property. 4. Held, revocable trust was valid even though it doesn‘t comply with WAF D. Presumption: Revocable or Irrevocable - Default Rule when a trust is SILENT as to revocability (KNOW BOTH): TRUST REQUIREMENTS 1. Common Law + General Rule  Intent to Create a. Presumption is that the trust is irrevocable (unless express)  Property (fund the trust) b. Assumed the settlor didn‘t expressly say it was revocable then it  Ascertainable Beneficiaries should not be.  Writing 2. California + Modern Trend a. Presumed to be revocable. b. Assume that because virtually every settlor puts in a clause stating that the trust is revocable, it is more likely that the clause has been left out by mistake rather than intentionally. E. Revocation (must be express, except in California) 1. For generally revocable trusts, you can only revoke in compliance with the wills revocation doctrines, absent contrary terms in the trust. a. Revocation by Act b. Revocation by Writing c. Revocation by the Presumption Doctrine d. Revocation by Operation of Law i. However, Revocation by operation of law (divorce) only applies to wills, not inter vivos trusts. ii. But, it does apply to testamentary trusts. 2. Methods of Revocation a. Method of revocation depends on the settlor‘s intent b. If the settlor prescribes a specific method of revocation, it can only be revoked by that method. 3. Presumption Doctrine (reprise): a. If the trust instrument was last in the control of the Settlor, and the trust instrument cannot be found, presume the trust was revoked. b. Exception i. When the trust instrument provides for an express method of revocation, the presumption doctrine does not apply. ii. Pilafras: Where the trust terms provide that it could only have been revoked or modified by a writing delivered to the trustee, no presumption of revocation applies because it could not be revoked by act. c. Applies to inter vivos, testamentary and UTATA trusts. d. Counter-Argument: This is just boilerplate language. e. Lost Trust Doctrine i. If the trust is lost apply the lost trust doctrine, like a will. ii. A valid trust is lost, extrinsic evidence is allowed to determine the terms of the trust. Jack L. White, II Page 66 of 75 4. Revocation by Operation of Law: a. For the purpose of applying revocation by operation of law do we treat it as a testamentary trust or an inter vivos trust? i. Inter vivos: (a) As far as probate administration it falls under here, which would be non-probate and would not be a revocation. (b) Divorce does not revoke an inter vivos trust because it is not a part of the will. ii. Testamentary Trust: (a) Revocation by operation of law (divorce) applies because all wills related doctrines apply to testamentary trusts. (b) The settlor believes that the will and the trust are a part of one testamentary scheme. (c) Therefore, it is treated as such and a former husband is not allowed to recover under the probate property doctrine of operation by law. b. UTATA Trust: i. Totally Unfunded: Courts hold that because the time and manner in which the will and trust are created, that they are related components of a single testamentary scheme and therefore, revocation by operation of law should apply ii. Partially Funded before Death: Revocation Doctrine arguably does not apply because part of the trust was created inter vivos. Jack L. White, II Page 67 of 75 TRUSTS: LIFE I. 3 TYPES OF TRUSTS FOCUS ON CREATION  Inter Vivos  Testamentary Discretionary Trusts  UTATA A. General 1. Inquiry: What is the extent of the beneficiary‘s interest in the trust (income & principle). 2. Focus on the language of the trust with respect to how it tells the trustee to distribute the income. 3. Bifurcation (Property can be bifurcated in Income and Principal) a. So the question arises, what are the life beneficiaries and the remainder beneficiaries entitled to? b. What is the extent of my interest in the principle; and, what is my interest in the remainder? 4. It actually limits the extent of the beneficiary's rights to the amounts the trustee decides to give him, with the rest going over to others eventually. B. Duties of the Trustee 1. Mandatory a. The trustee must distribute all the income [―Shall pay the income‖] TRUST REQUIREMENTS b. Not a support trust—because beneficiaries can transfer their interest st  Intent to Create c. If mandatory with respect to principle, NOT a trust—focus on income 1  Property (fund the trust) d. Beneficiaries interest will always either be mandatory or discretionary.  Ascertainable Beneficiaries e. Life tenant‘s interest in the income is usually mandatory.  Writing f. Beneficiary has a right to demand distribution or disbursement. 2. Discretionary a. General i. The trustee has discretion over payment of either the income or the principal or both (typical situation: mandatory payment of income and discretionary regarding the principal) ii. In a discretionary trust, the trustee is given discretion whether to apply or withhold payments of income or principal to a beneficiary. iii. Discretion relates to more than just the time and manner of payment iv. Life tenant‘s interest in the principle is usually discretionary. v. Beneficiary has no right to demand distribution, but can sue for abuse of discretion. b. Duties of Discretionary Trustee (minimum defaults): i. Duty of Inquiry: (a) Trustee must check on beneficiaries to see how they are doing (b) If there was adequate inquiry, doubts are resolved in favor of the trustee, and the opposite is true ii. Duty of Good Faith (subjectively) and Reasonableness (objectively) (a) Trustee has to act in good faith (subjective) in regards to the terms of the trust. (b) Courts focus on good faith element (c) Therefore, can qualify it by ―sole and absolute discretion,‖ but can‘t get rid of both elements, therefore, good faith remains as an element. c. Trustee has to act reasonably (objective) i. Standard for reasonableness (a) Trustee supposed to ensure that beneficiary has reasonable ―comfort maintenance and support‖: (i) Look to the beneficiary‘s standard of living at the time of the settlor‘s death (ii) The trustee must inquire on status of the beneficiaries (at the time they became beneficiary) (iii) The court will only step in if there is an abuse of discretion (b) Trustee CANNOT have ―sole and absolute discretion‖ because it would be a precatory trust (i) Really, absolute discretion would be a precatory trust (ii) This is not truly absolute discretion it is just a high standard (iii) Courts focus almost absolutely Good Faith ii. May the trustee consider the beneficiary‘s other sources of income when they are not specifically covered in the instrument? (a) Majority: There is a presumption that the settlor intended the beneficiary to receive the benefits regardless of the beneficiaries other sources of income (b) The purpose of the trust was to keep the beneficiary at the same standard of living (c) Argue that they are beneficiaries and should take something d. Exculpatory Clauses i. Courts do not like these clauses (similar to no contest clause) ii. These WILL BE ENFORCED if there was no Undue Influence involved in the drafting of the instrument (at times the trustee is present or actually drafts the instrument) Jack L. White, II Page 68 of 75 II. Creditors‘ Rights A. Spendthrift Trusts 1. General Rule: a. A creditor can reach a beneficiary‘s interest in a trust because the creditor steps into the shoes of a beneficiary. b. A creditor can reach a property interest if the property interest is transferable. c. A beneficiary‘s interest in a trust is freely transferable, so it can be reached by a creditor. d. The creditor steps into the shoes of the beneficiary, and acquires the same, but no greater, rights. 2. Rights of Creditors a. What are the rights of the creditors of an income beneficiary of a spendthrift trust? b. Creditors cannot reach the beneficiary's interest in the sense of selling it as a means of realizing upon and anticipating his future rights. c. However, the restraint on alienation doesn‘t apply to income after it has been paid out to the beneficiary. d. Thus, the property in the beneficiary's hands after distribution is no longer protected by the spendthrift clause and is subject to the claims of his creditors. e. However, the creditors have to catch the beneficiary before he spends it. 3. Spendthrift Trust Defined: a. A spendthrift trust is one in which a valid restraint on alienation is imposed expressly or impliedly by the terms of the trust, providing that i. The beneficiary cannot transfer his interest voluntarily and ii. That his creditors cannot reach it for the satisfaction of their claims. b. A trust where the beneficiary cannot transfer his interest. c. Doesn‘t allow creditors to step into the beneficiary‘s shoes. d. Thus, the beneficiary cannot sell or give away his right to future income (voluntary alienation) and his creditors cannot reach these rights (involuntary alienation). e. Trustee is only allowed to give property to the beneficiary. f. All jurisdictions recognize spendthrift trusts, but put a ceiling on how much can be protected. 4. Involuntary vs. Voluntary Restraint on Alienation a. General i. Settlor can prohibit voluntary transfers and not involuntary transfers. ii. But, a settlor cannot prohibit involuntary transfers only. b. Restraint on Involuntary Alienation Only-Invalid i. A restraint that prohibits creditors from reaching a beneficiary's interest, but does not prohibit the beneficiary from voluntarily alienating his interest, violates public policy. ii. If the beneficiary could give his interest away, but his creditors could not reach it, it would violate the basic rule that creditors can reach any interest the debtor can alienate. iii. Nonetheless, in a few cases the restraint on involuntary alienation alone has been upheld. c. Discretionary Trust: i. Cannot force the beneficiary to give money unless the trustee abuses his discretion. ii. Alternative to spendthrift clause. iii. Discretionary trust may be a better alternative to a spendthrift trust (to protect against creditors taking), because the creditor would have to prove abuse of discretion. 5. Creditors not subject to spendthrift clauses: a. Former Spouses Entitled to Alimony; b. Children Entitled to Child Support; c. Government (tax purposes); d. Creditors who Provide of Basic Necessity (food, medical, housing); e. Tort Creditors because they are involuntary creditors (like children). 6. Spray/Sprinkle Trust: a. Hybrid (Discretionary/Mandatory) i. Mandatory that the funds be paid out, but discretionary as to who gets the property. ii. Can be discretionary as to invading the principal b. Creditor can step into the shoes of the beneficiary, but you must look at whether the trust is mandatory or discretionary. c. Mandatory vs. Discretionary i. Mandatory: Creditor entitled to take in the place of the beneficiary, because taker can demand. ii. Discretionary: Creditor not entitled to take, unless the trustee abuses his discretion. Jack L. White, II Page 69 of 75 B. Settlor as Beneficiary 1. General a. An important exception to the validity of spendthrift restraints is that the settlor cannot protect his own retained interests from his creditors by the inclusion of a spendthrift provision. b. Determine who is the beneficiary: TRUST REQUIREMENTS i. Non-settlor (a) Spendthrift  Intent to Create (b) Discretionary  Property (fund the trust) ii. Settlor  Ascertainable Beneficiaries (a) No Spendthrift  Writing (b) Discretionary has no effect c. If S transfers to T in trust to pay income to S for life, remainder to B, and the trust includes a spendthrift clause, S's creditors can reach S's right to the income just as if the spendthrift clause had not been included. d. Rationale: If this weren‘t true, debtors could easily avoid their creditors & retain income from their property 2. Support Trusts = De Facto Spendthrift Trust: a. A trust the settlor sets up for the benefit of himself b. A beneficiary of a support trust cannot transfer his interest. c. What is necessary for a support trust: i. Amount Paid: (a) Trust should say ―all of the income & whatever portion of principle that Trustee shall deem appropriate for the support of the beneficiary.‖ (b) There must be a restriction on the amount dispersed to amount necessary for support. ii. Intent is not controlling; 3. Where the settlor is the beneficiary: a. Settlor Alive: i. Where a settlor creates a trust for his own benefit, if the settlor is alive, the settlor‘s creditors have a right to all of the property in the trust. ii. The maximum amount which the trustee could pay to the settlor or apply for his benefit. iii. Spendthrift Clauses are inapplicable in a case where the beneficiary = the settlor. iv. Creditor can force the beneficiary to pay to the full extent of the beneficiary/settlor‘s interest. v. Want to prevent settlor from creating a trust to avoid creditors. b. Settlor Dead: i. Modern Trend (California Rule) ii. Permits creditors of a settlor who is the beneficiary of a revocable inter vivos trust to still go after the trust assets after settlor/beneficiary is dead. iii. Should still acknowledge the probate estate first. 4. Breach of Duty of Self-Dealing a. There is a breach because there is a near absolute duty against what is called "self-dealing" by a trustee. b. Absent approval by the settlor in creating the trust or consent of all beneficiaries after full disclosure, if the trustee deals with the trustee there is a breach and it can either be set aside or the trustee is liable for damages regardless of fairness or causation. Jack L. White, II Page 70 of 75 III. Pour-Over Wills / UTATA A. Pour-Over 1. A pour-over devise is a provision in a will that directs the distribution of property into a trust. 2. Scenario a. I give the rest, residue, and remainder of my property to the holder of the trust to be executed within the terms of the trust. b. The usual fact situation was this: i. T established an inter vivos revocable trust. ii. T then executed a will devising the residue of her estate to the trustees of the inter vivos trust to hold under the terms of the trust instrument as amended on the date of T's death. iii. Subsequently, T amended the trust and then died. 3. Validation of Pour-Over Clause a. Pour-over clause is invalid, unless it is validated because it is a disposition of probate property without Wills Acts Formalities b. Methods of Validation i. Incorporation by Reference ii. Acts of Independent Significance iii. UTATA 4. Poured over property = controlled by the trust instrument, which controls the disposition of probate property. 5. Pour-over statutes exist in one form or other in all or nearly all states. 6. The UPC and Uniform Act's version validates a devise when the trust is amendable or revocable or even if the trust is actually amended after the execution of the will or the testator's death. 7. The devise is valid notwithstanding the existence, size or character of the corpus of the trust during the testator's lifetime. B. UTATA (Uniform Testamentary Additions to Trusts Act) Trusts 1. General a. Gives the testator/settlor the best of both worlds. b. If you set up the trust shell inter vivos and have a pour-over clause in your will, even if the trust is not funded, it will be held to be a testamentary/inter vivos hybrid trust c. How is a UTATA trust treated? i. For purposes of probate court supervision, treat it like an inter vivos trust. ii. For purposes of revocation by operation of law (& other doctrines), treat it like a testamentary trust. (a) Testator/settlor thought of the 2 as one integrated testamentary scheme (b) As long as the trust is wholly unfunded at time of death d. Look at the doctrine to be applied to determine which one. e. Subsequent amendments to the trust will be given full effect, even if you don‘t amend the will. f. If you don‘t qualify as a UTATA Trust, Acts of Independent Significance, or Incorporation by Reference, then pour-over property falls to intestacy. g. If not funded at death, treat it as testamentary and send it through probate. 2. Requirements: a. The will references the trust, b. The trust terms are in existence in a SEPARATE written instrument, and c. Signed i. The trust instrument has to be executed (signed) prior to or concurrently with the execution of the will. ii. If the trust is not signed or if you execute the trust instrument after execution of the will, then you must fall back to the common law analysis. 3. Benefits a. No Inter Vivos Funding Requirement: Trust can be totally unfunded until death; b. Treated as an inter vivos trust (not subject to probate court supervision); and c. Subsequent amendments to the trust given effect even if will isn‘t re-executed. Jack L. White, II Page 71 of 75 C. Common Law: 1. General a. Default to the common law pour over doctrines in the event that the UTATA fails (for reasons such as the execution requirement) to try and save the trust. b. What happens if you execute an amendment to a trust after the will is executed? i. Incorporation by Reference ii. Acts of Independent Significance: c. If UTATA fails, come back to the common law methods of validating a pour-over clause. 2. Incorporation by Reference (you would have to execute a new will every time you amend the trust): a. Requirements i. INTENT to Incorporate: Testator‘s intent to incorporate the document/writing. ii. Document to be incorporated IS IN EXISTENCE at the time the will is executed. iii. The document to be incorporated is IDENTIFIED/DESCRIBED in the will with REASONABLE CERTAINTY. b. Issues i. Subsequent amendments to the trust are not valid unless you re-execute the Will. ii. This is a testamentary trust because the trust isn‘t funded until death. (a) Subject to probate court supervision for the life of the trust (b) High cost of administration iii. Use Incorporation by Reference when there is a receptacle and NO FUNDING INTER VIVOS. 3. Acts of Independent Significance (no requirement that trust be in existence at the time the will is executed, so the amended trust takes effect): a. General i. Act or writing has to have significance separate from the will/probate process. ii. A writing, other than the will can control the probate property as long as it has its own motive. iii. Its own motive will mean that the trust already is funded with property inter vivos. iv. Must have its own inter vivos funding, and still have property in it at time of death v. The trust is already managing its own inter vivos property. Need not be funded at time of execution. vi. Can permit both the property funded before death and after death to be considered as inter vivos because of UTATA. b. Basics of the Doctrine: This doctrine refers to events or things that occur in the future i. Will references an act with its own valid inter vivos significance (especially if Testator has control) ii. Act is outside of the will iii. Act is independent of effect on testamentary disposition c. Requirements i. Trust must be funded with some property inter vivos. ii. Act of independent significance is the trustee managing the trust property (funding the trust). iii. No requirement that the trust be in existence at the time the will is executed. iv. Poured over assets from the will after death is treated as testamentary trust property (with probate court supervision). v. Property transferred inter vivos is considered inter vivos trust property. Jack L. White, II Page 72 of 75 POWERS OF APPOINTMENT: BUILDING FLEXIBILITY INTO THE ESTATE PLAN I. Introduction A. General 1. The appointive property is the property or property interest subject to a power of appointment. 2. The property interest subject to appointment need not be an absolute-ownership interest. 3. Powers of appointment put flexibility into the donor's original disposition to allow it to be molded to meet changing conditions. 4. Power of appointment requires no ascertainable beneficiaries 5. No need for a trust to create a power of appointment 6. Power of Appointment is a (purely) discretionary power: a. Power holder does not have to exercise the power. b. Power holder does not have a fiduciary duty. B. Definitions 1. A power of appointment is the authority, held by a nonowner, to designate recipients of beneficial interests in or powers of appointment over the appointive property. 2. A power of appointment is an authority created in, or reserved by a donee to designate, within the limits prescribed by the donor, the persons who shall take the property and the manner in which they can take it. C. Two Variables that settlor can dictate: 1. General vs. Special (in whose hands can it be exercised) a. General: only exercised in a finite class of people i. In own power ii. For estate iii. For creditors or creditors of your estate iv. For own benefit b. Special: exercisable for a broader range of people i. Power to appoint property to anyone but the power holder ii. Anything that is not a general power 2. Inter Vivos vs. Testamentary (when can it be exercised) a. Inter Vivos Power of Appointment i. With an inter vivos power of appointment, the holder may over react to the first major change ii. May appoint the property too soon, having too little or even none left if and when later changes occur. iii. Must be exercised during the power holder‘s life. iv. Gives the broadest power. b. Testamentary Power of Appointment i. A testamentary power of appointment forces the holder to wait longer before executing the power. ii. To the extent the idea behind the power is to give the holder flexibility to take into consideration changes in circumstances, the testamentary power forces the holder to take the maximum amount of changes into consideration. iii. Must be in writing. Only exercisable through a will. iv. Helps the Settlor control power holder so that the power holder can survey the entire situation before exercising the power. Jack L. White, II Page 73 of 75 CHARITABLE TRUSTS I. Nature of Charitable Trusts A. General 1. Not subject to the rule against perpetuities. 2. Nature of Charitable Purposes: To qualify as a charitable trust, the trust must be: a. Public: i. For the purpose of the community at large, not ascertainable beneficiaries. ii. As long as the indirect benefits helps the community at large, then it is a public purpose; b. Must have a charitable purpose: 3. Look at intent of the Testator through the language of the trust. B. Charitable Purposes 1. Relief of poverty; 2. Advancement of education; 3. Advancement of religion; 4. Promotion of health; 5. Governmental or municipal purposes; and 6. Other Purposes the accomplishment of which is beneficial to the community. 7. This is very narrowly construed. It only applies relative to the other 5 provisions. C. Who has standing to sue based on breach of fiduciary duty? 1. Common Law: State Attorney General (on behalf of the community at large); 2. Modernly: Broaden concept to those who have some direct interest in the charitable trust. Modification of Charitable Trusts: Cy Pres A. Doctrine of Cy Pres: 1. If the settlor has a general charitable purpose with a specific charitable purpose named which becomes impossible, impracticable, or illegal to carry out, then find a specific purpose ―as near‖ to the specific purpose within the general charitable purpose and the trust will not fail. 2. Impossibility/Impracticability: Inefficient use of charitable money does not make it impossible or impracticable to achieve a specific charitable purpose. B. Doctrine of Administrative Deviation: 1. If the purpose of the trust is frustrated because of the administration of the trust, then appoint a new trustee to administer the trust. 2. Use this to protect the settlor‘s intent. C. For Exam: 1. If purpose frustrated because of administration, apply Administrative Deviation. 2. If purpose frustrated because of a substantive change, apply Cy Pres. 3. If Administrative Deviation and Cy Pres do not apply, then a resulting trust is created, unless there is an express provision that provides for failed charitable trusts. II. Jack L. White, II Page 74 of 75 TRUSTS: MODIFICATION & TERMINATION OF TRUSTS I. General Rule: A trust terminates when the trust says it ends. A. Settlor‘s intent tells you when a trust ends. B. Exception: If the settlor and all the beneficiaries agree, an irrevocable trust may be modified or terminated early. C. A trustee‘s consent is not required. D. Revocable Trusts: Settlor can terminate at any time without the beneficiary‘s consent. Modification - After Settlor‘s Death: A. Common Law: Modification requires: 1. UNFORESEEN CHANGE IN CIRCUMSTANCES (courts use a low threshold for determining unforeseen change); 2. Which frustrates the settlor‘s intent (MATERIALLY/SUBSTANTIALLY); and 3. All the beneficiaries CONSENT to the modification. (No matter how remote his interest). B. Modification is furthering settlor‘s intent, while termination is frustrating the settlor‘s intent. C. A way to get around a modification problem is to give a power of appointment. D. Modern Trend: Narrowed the group of people who must consent to modification. 1. If a beneficiary is too remote, then no consent is required. 2. In California, a single beneficiary acting alone can ask a court to modify a trust. E. Who Represents Unborn/Unascertained Beneficiaries – Two Judicial Doctrines: 1. Guardian ad litem: a. Court appoints a guardian. b. Modern Trend: A guardian ad litem should take into consideration familial situation. 2. Virtual Representation: Other kids already born can represent the whole class of children. Termination of Trust: The interested parties once the settlor dies is the trustee and beneficiary. A. Concern that a trustee would always vigorously oppose early termination because of loss of trustee‘s fees, therefore, there is the Claflin Doctrine. B. Claflin Doctrine (Common Law): A trust cannot be terminated prior to the time fixed for termination even if all the beneficiaries consent if: 1. Even if Irrevocable a. Settlors & all beneficiaries consent: terminate b. Settlors & all trustees consent: terminate 2. If revocable: look for unfulfilled material purpose a. Termination would be contrary to a material purpose of the settlor. b. If there is disagreement: terminate when there is an unfulfilled material purpose c. At Common Law, there are 4 Material Purposes i. Spendthrift Trust; ii. Discretionary Trust (primarily to income proponent); iii. Support Trust (de facto spendthrift); iv. Principal can‘t be taken until beneficiary reaches a certain age. C. Modern trend in CA: A court can terminate a trust early upon petition of one beneficiary as long as the other beneficiaries are not adversely affected. 1. Court determines whether to terminate or not. 2. Court uses the totality of the circumstances test. II. III. Jack L. White, II Page 75 of 75